Philips’ Annual Results 2005

Monday, January 23, 2006

* Philips reports full-year net income of EUR 2,868 million.
* Fourth-quarter net income of EUR 332 million.

Full-year net income increased to EUR 2,868 million (EUR 2.29 per share), compared to the EUR 2,836 million (EUR 2.22 per share) reported for 2004.

In-the-quarter net income amounted to EUR 332 million (EUR 0.28 per share), compared to net income of EUR 498 million (EUR 0.39 per share) in the corresponding period of 2004, mainly driven by incidental results from unconsolidated companies and the advancement of a tax charge related to TSMC.



Full-year sales reached EUR 30,395 million, representing 4% comparable growth compared to 2004 sales of EUR 29,346 million, excluding sales of Mobile Display Systems, which has been treated as a discontinued operation in both 2004 (EUR973million) and 2005 (EUR 653 million). Fourth-quarter sales increased to EUR9,518million, 6% above Q4 2004. Adjusted for the upward effect of currency movements and consolidation changes, comparable sales increased by 4%. All five operating divisions contributed to the comparable sales growth, led by Medical Systems, Semiconductors and Consumer Electronics.



Income from operations for full-year 2005 amounted to EUR 1,779 million, a EUR 193 million increase compared with 2004. In Q4 2005, income from operations amounted to EUR 971 million, compared to EUR 15 million in the same period of 2004. Q4 2004 included a non-cash impairment charge of EUR576million for MedQuist. Q4 2005 showed significant improvement in income from operations at Semiconductors and benefited from a EUR 187 million release of a provision for post-retirement medical benefits, partly offset by charges of EUR 46 million relating to certain billing issues at MedQuist.



In the quarter, financial income and expenses resulted in income of EUR23million, compared to income of EUR 417 million in Q4 2004, which included a EUR 440 million gain on the sale of shares in Vivendi Universal and ASML.



Income from unconsolidated companies decreased from EUR 198 million in Q4 2004 to a loss of EUR 70 million, mainly due to charges of EUR 458 million related to LG.Philips Displays.



Cash flow from operating activities of EUR1,889million was slightly higher than in Q4 2004. Net inventories as a percentage of sales increased compared to Q4 2004, largely due to currency effects.


Gerard Kleisterlee, Philips’ President and CEO:

“On the back of a strong product line-up, we accelerated growth and increased profitability. We also executed our management agenda for the year, making Philips a more focused group, able to deliver a consistent performance while continuing its transformation into a market-driven healthcare, lifestyle and technology company.



With a clear view to creating shareholder value during 2005 we took measured steps, balancing investment in growth with returning capital to shareholders. We initiated two share repurchase programs alongside two acquisitions aimed at giving us a solid footing in the key emerging growth markets of healthcare IT and solid-state lighting. We also put in place the right fundamentals to create a more competitive Semiconductors business with our decision to create a separate legal structure. We gained some good momentum this year, and are confident of meeting our targets.”


* Click here to read the 2005 Fourth Quarterly Report: www.philips.com/mt/2005results/cc/report

About Royal Philips Electronics

Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is one of the world’s biggest electronics companies and Europe’s largest, with sales of EUR 30.4 billion in 2005. With activities in the three interlocking domains of healthcare, lifestyle and technology and 159,200 employees in more than 60 countries, it has market leadership positions in medical diagnostic imaging and patient monitoring, color television sets, electric shavers, lighting and silicon system solutions. 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

Jeannet Harpe

Philips Corporate Communications

Royal Philips Electronics

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