Philips’ Third Quarter Results 2006

Monday, October 16, 2006

High-margin divisions report comparable sales growth of 8% and EBIT increase of 12%

Group net income was EUR 4.2 billion in the third quarter



Sales increased by 1% in the third quarter to EUR 6,313 million. Adjusted for the effects of currency movements and consolidation changes, comparable sales increased by 5%, driven by strong growth in the high-margin Medical Systems, DAP and Lighting divisions, partly offset by some decline at CE as a consequence of the division’s focus on margin improvement.

EBIT in the quarter amounted to EUR 290 million, before changes in estimation methodology for asbestos-related product liabilities, which resulted in a charge, net of insurance recoveries, of EUR 265 million. In Q3 2005, EBIT of EUR 353 million included a gain of EUR 136 million due to the completion of the TPV deal. Excluding this gain, Medical Systems, Lighting, DAP and CE delivered strong increases in profitability compared to Q3 2005.



Financial income and expenses resulted in income of EUR 32 million, including gains of EUR 97 million from TSMC, compared to income of EUR 190 million in Q3 2005. Last year’s figure included a gain of EUR 233 million on the sale of the remaining stakes in Atos Origin and Great Nordic.



Unconsolidated companies recorded a loss of EUR81million, which was wholly attributable to lower results from LG.PhilipsLCD. Q3 2005 income of EUR 929 million included a gain on the sale of shares in TSMC (EUR 460 million) and a sale of shares and dilution gain at LG.PhilipsLCD totaling EUR 310 million.



Net income of EUR 4,242 million (EUR 3.57 per share) compared to EUR 1,436 million (EUR 1.14 per share) in the corresponding period of 2005. Income from discontinued operations was EUR 4,241 million, mainly due to the estimated gain on the sale of the Semiconductors division. Income from continuing operations in Q3 2005 included EUR 1,003 million from the sale of various stakes and a dilution gain at LG.PhilipsLCD.



Cash flow from operating activities increased from EUR 246 million in Q3 2005 to EUR 678 million. Compared to Q3 2005, inventories as a percentage of sales improved by 0.2% to 12.7%.



Gerard Kleisterlee,

Philips’ President and CEO:

“It was a good quarter for Philips. We were able to build on our strong performance in the first half of the year and deliver on our promise of continuing to grow our high-margin businesses. We also posted a significant year-on-year improvement in the performance of our main operating divisions.



The third quarter also marked a big step forward for Philips as we completed, as planned, the sale of a majority stake in our Semiconductors business. With our portfolio now more sharply focused on healthcare and lifestyle markets, we’re increasingly well-placed to deliver sustainable, profitable growth from our strong innovation and technology base.”


Financial report
* 2006 - Third Quarterly Report: www.philips.com/mt/cc/q32006results/report

Presentation
* 2006 - Presentation Third Quarter: www.philips.com/mt/cc/q32006results/presentation


Audio webcast

The third quarter results conference call with Pierre-Jean Sivignon, CFO, will start at 10:00 CET. Replay will be made available via audio webcast at approximately 12:30 CET and will be available for a year.
* Third quarter results 2006 conference call: www.philips.com/mt/cc/q32006results/audiowebcast

About Royal Philips Electronics

Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is a global leader in healthcare, lifestyle and technology, delivering products, services and solutions through the brand promise of “sense and simplicity”. Headquartered in the Netherlands, Philips employs approximately 126,000 employees in more than 60 countries worldwide. With sales of EUR 30.4 billion in 2005, the company is a market leader in medical diagnostic imaging and patient monitoring systems, energy efficient lighting solutions, personal care and home appliances, as well as consumer electronics. News from Philips is located at www.philips.com/newscenter.

Forward-looking statements

This release may contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.

Contact Information

Gerd Götz

Philips Corporate Communications

Royal Philips Electronics of the Netherlands

Contact via E-mail