Philips first quarter 2005 net income down €433

18 April 2005

Philips recorded net income of 117 million (0.09 per share), compared with net income of 550 million (0.43 per share) in the corresponding period of 2004. The 433 million decrease in net income was due to a 435 million lower contribution from unconsolidated companies. . Analysts disagree on whether the net income drop was expected. The medical unit performed below expectations and the semiconductor unit slightly better than expected.

Sales amounted to 6,635 million and were flat compared to Q1 2004. The weaker US dollar and dollar-related currencies, as well as various divestments, had a downward effect of 2%. On a comparable basis, sales increased by 2%.

Income from operations amounted to 193 million, compared to 218 million in the same period of 2004.

Financial income and expenses resulted in an expense of 48 million, compared with an expense of 66 million in Q1 2004.

Unconsolidated companies contributed 22 million to net income. In Q1 2004, results from unconsolidated companies amounted to 457 million, which included a dilution gain of 156 million on Philips' participation in Atos Origin. LG.Philips LCD's contribution to net income was a loss of 34 million, compared to a profit of 215 million in Q1 2004.

Cash flow from operating activities was an outflow of 351 million. In Q1 2004, cash inflow from operating activities totalled 404 million.

Inventories as a percentage of sales amounted to 11.9%, compared to 12.1% in Q1 2004.

"It's encouraging to see another solid quarter, with steady performance and profitability in all our main businesses," said Gerard Kleisterlee, Philips' President and CEO. "I am pleased with the progress being made in Consumer Electronics, reflecting the successful implementation of our Business Renewal Program. The cyclicality of the technology sector had a negative impact, especially on our results from unconsolidated companies.

Overall, we are on track with our management agenda. Our strong pipeline of market-driven, innovative products should position us well going forward."

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