Philips said on Tuesday that its full-year net income dropped 67% as the company lags behind its financial plan due to currency impacts and lower demand.
The 123-year-old company, which makes electronics ranging from healthcare scanners to lighting bulbs, reported a net income of €134 million for the twelve months ended December 31, down from the €412 million reported in 2013. Revenue was €6.54 billion versus €6.4 billion a year earlier, while per-share earnings dropped from €0.44 to €0.15.
The disappointing news come as the company prepares to dispose of its lighting business in order to put more efforts in its higher-margin healtcare unit. The company said is on the right track to reach a deal and has lined up potential buyers for the unit, which is valued at around €2 billion.
The company estimated that the sale, which is expected during the first half of the year, would reflect in around €300 million to €400 million restructuring costs during this year. Philips also said there will most likely be more separation-related costs in 2016.
“The fourth quarter underscored a challenging 2014 for Philips. Our transformation efforts continued to show good results, even as we addressed performance issues,” said Chief Executive Officer Frans van Houten.
The companys performance was driven by sluggish sales in China and Russia, Mr. Houten said, while also outlining higher-than-expected foreign exchange impact, especially in emerging markets.
Mr. Houten also said Philips will mostly likely miss its 2016 targets for sales and earnings growth as current performance is 1% behind schedule.
One of Philips healthcare facilities was temporary closed down after an inspection from the Food and Drug Administration in April 2014. The FDA cited issues in the general area of manufacturing process controls as the reason for the closure, which was initially estimated to cost the company around €180 million.
However, due to further delays that figure increased to €225 million. Eventually the facility started operating at reduced capacity in October.
In line with its plan to focus on its healthcare division, Philips announced last month it had agreed to acquire US-based medical device maker Volcano in a €800 million cash deal, marking the companys largest healthcare-related purchase in seven years.
Philips gained 0.19% on Monday and closed at €26.80 in Amsterdam. On Tuesday the stock lost 6.21% to 25.14 at 15:32 GMT, marking a one-year decrease of 5.06%. The company is valued at €25.05 billion.
According to the Financial Times, the 23 analysts offering 12-month price targets for Philips have a median target of €25.00, with a high estimate of €33.00 and a low estimate of €21.00.
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