Philips remains Europe's largest consumer electronics firm but it reported an 85% decline in net third quarter profit
Philips, the Dutch electronics group, has underscored the harsh prospects for European industry by cutting 4,500 jobs as part of an ?800m (�698m) savings programme.
Its came as the European commission prepared to release a report on Tuesday showing EU industrial firms lagging further behind US and Asian competitors in research and innovation.
M�ire Geoghegan-Quinn, commissioner for research, innovation and science, told the Guardian: "We are facing an innovation emergency. We need much more innovation in Europe, and we need it fast, otherwise we risk being left behind in the global R&D race."
Germany's central bank added to the sense of crisis in the real economy by forecasting a cold winter for manufacturing as orders for German firms from outside the EU are set to dwindle. It said in its monthly report that economic prospects had darkened.
Philips remains Europe's largest consumer electronics firm and a global leader in lighting but it reported an 85% decline in third quarter net profit to ?74m, from ?524m a year earlier. Sales were down 1.3% to ?5.39bn.
Frans van Houten, chief executive, said: "We are not yet satisfied with our current financial performance given the ongoing economic challenges, especially in Europe, and operational issues and risks. We do not expect to realise a material performance improvement in the near term."
He said the 4,500 job losses, including 1,400 in the Netherlands, were "a regrettable but inevitable step to improve our operating model to become more agile, lean and competitive" and would provide 60% of the ?800m planned savings. Much of this, he suggested, would be reinvested in innovation.
Philips highlighted the relative decline of European industry by showing falling earnings at its two main divisions for higher growth ? lighting and healthcare. Operating profit at the former almost halved to ?110m and fell at the latter from ?282m to ?261m.
It no longer even counts the television business as a continuing operation since it is trying to dispose of 70% of it in a joint venture with China's TPV. But negotiations to offload the TV business were taking longer than expected, it said.
Van Houten reiterated commitments to 3-4% sales growth and 10-12% operating margins by mid-2013 but admitted that the firm had a long way to go. It made a net ?1.3bn loss in the second quarter, has issued two profit warnings in seven months and is losing market share to low-cost Asian rivals. Its shares, down almost 40% this year, fell a further 2% in Amsterdam.
The latest "EU R&D investment scoreboard" for 2011 shows European companies' investments in innovation up 6.1% in 2010 but those of US firms up 10% and of Chinese firms up 29.5%. Global R&D investment went up 4% last year after falling 1.9% in 2009.
Fifteen European companies figure in the first 50 globally, with Swiss pharmaceutical firm Roche in top spot followed by its US rival Pfizer. Only two British companies ? GlaxoSmithKline (16th) and AstraZeneca (29th) ? make it into the top 50.
More than two-thirds of EU R&D investment comes from Germany, the UK and France, with German firms, led by car-makers, showing the highest growth (8.1%) and UK companies (5.8%) outperforming French ones (3.8%).
The EU scoreboard shows signs of recovery in 2010 but Geoghegan-Quinn said the fact that firms were still lagging behind competitors showed conditions for business had to be improved further. The EU has a longstanding target for investment in innovation of 3% of GDP.
As the economic prospects darken, some carmakers are cutting back production and/or overtime at their European plants in the current quarter and the Bundesbank, the German central bank, said manufacturing would be hit hard by significantly weakened demand.
Source: http://www.guardian.co.uk/world/2011/oct/17/philips-job-cuts-european-industry
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