Philips Ncd Scaled Down On Poor Sales, Income

Philips India's non-convertible debentures (NCD) have been downgraded due to a drop in sales and total income and a squeeze in margins during the accounting year ended December 1996. The rating for its Rs 30-crore NCD issue has been scaled down to AA minus from AA plus by Credit Analysis & Research Ltd (Care).

The downgrading follows a 2.3 per cent decline in income and a 9.6 per cent drop in sales of its consumer electronics division.

PIL, a subsidiary of Philips NV Holland, is facing tough competition from new international brands and is operating under tight liquidity conditions. Its profit from operations declined sharply from 2.2 per cent of turnover in financial year 1995 to 0.1 per cent in financial year 1996.

 

The company is made up of five divisions -lighting, consumer electronics, industrial electronics, electronic components and plastic and metal products. Despite stiff competition, Care said the company efficiently managed its working capital during 1996 and unlocked substantial funds from its inventories and debtors.

Though the company is in the process of re-engineering its operations, pressure on margins is likely to continue due to intense competition.

A market leader in lamps and luminaries, audio products and electronic components, the company has a significant share in black & white and colour televisions and domestic appliances. The lighting and consumer electronic divisions accounted for about 85 per cent of Philips India's total income in financial year 1996.

Philips India will reorganise its business portfolio and restructure operations in the country during the current year, but there is no major investment on anvil. The company will stick to its core competencies and focus on emerging digital technology and related products, K R Ehrnreich, president and chief executive officer, Philips India Ltd, said after the 67th annual general meeting in Calcutta on Tuesday.

"As there is a worldwide shift towards digitalisation of consumer electronic products, this would be our key area of interest as the emerging markets would be driven by this," Ehrnreich said. He added: "We have to do more with less, that is enhance our capacity utilisation in India."

Philips India net profit slumped by 64 per cent at Rs 8.06 crore for the year ended December 31, 1996.

Philips India chairman D N Ghosh said the inability to curtail some of the investments taken up in 1995, high interest rates, increase in depreciation amid sluggish market conditions had affected the company's performance and compelled a decision to shelve the Rs 300-crore expansion plan. "Now we are focusing on each of our business segments which will yield maximum profits," he said.