Philips Electronics announces 2Q profit

Philips Electronics has announced a second-quarter net profit of €42m, despite general expectations of a loss, with sales dropping due to weak consumer spending and the impact of the SARS outbreak.

The electronics conglomerate stuck to all its restructuring objectives but has not issued a full-year earnings forecast.

It has warned that continued low consumer confidence would hurt sales of its consumer electronics operation - the largest in Europe.

Philips said it still expected its key chip unit to return to profitability in the fourth quarter after two facilities have been shut down. The second-quarter loss for that unit was cut to €139m.

Philips' largest division, the consumer electronics business, suffered the most from weak consumer spending, with currency-adjusted sales falling five percent.

Chief Executive Gerard Kleisterlee said in a statement "Focus on costs and asset management clearly remains the best course, given the fragile market conditions".

Philips' surprise net profit after two years of almost continuous losses compares with a net loss of €1.36bn in the second quarter of 2002.

Philips shares rose in early trading, up 1.66% at €18.95, slightly outperforming a barely higher Dutch blue-chip index.