Studio Press

In the first quarter, Philips recorded net income of EUR 160 million compared with net income of EUR 117 million in the corresponding period of 2005. The increase was primarily attributable to improved performance of the main divisions, particularly Semiconductors and Lighting. Sales increased strongly to EUR 7,374 million, 14% above Q1 2005. Adjusted for the effects of currency movements and consolidation changes, comparable sales increased by 10%, driven by strong growth in all main divisions. EBIT amounted to EUR 335 million, compared to EUR 207 million in the same period of last year. The increase was largely driven by higher sales and improved business performance, particularly in the Semiconductors and Lighting divisions, and a EUR 30 million gain on the sale of the CryptoTec encryption business reported under Other Activities. Financial income and expenses resulted in an expense of EUR 23 million, an improvement of EUR 25 million compared to Q1 2005. This improvement mainly resulted from a EUR 20 million revaluation of the option on the convertible bond issued by TPV. Unconsolidated companies recorded a loss of EUR 36 million, compared to a profit of EUR 22 million in Q1 2005. In Q1 2005, income from TSMC of EUR 71 million was reported under results relating to unconsolidated companies. From 2006, a change in accounting treatment means that Philips no longer recognizes income from TSMC but rather will recognize a dividend, which will be reported in Q2 2006 under financial income and expense. Cash outflow from operating activities increased to EUR 867 million, compared to EUR 332 million in Q1 2005. The increase was entirely due to EUR 582 million additional funding for the UK pension fund. Inventories as a percentage of sales amounted to 12.3%, marginally higher than in Q1 2005. Gerard Kleisterlee, Philips’ President and CEO was quoted as saying, “We’re pleased that we are keeping our momentum, with strong growth and solid performance across all our main divisions. A strong customer focus, together with innovative products, helped expand our already strong position within healthcare, lifestyle and technology. We also see that our recent acquisitions are starting to make a contribution to our top and bottom line. Demand for our medical IT solutions was strong in the first quarter, and Lumileds contributed to a continued good performance in Lighting. With the first acquisition in our Consumer Health & Wellness business announced in the first quarter, followed by an additional acquisition in our Medical Systems business, we are consistently building our portfolio to become increasingly geared to profitable growth.”