Philips may unveil more cost cuts

By Harro ten Wolde

AMSTERDAM (Reuters) - Philips Electronics (PHG.AS) is expected to post a loss when it reports quarterly earnings, but the biggest question hanging over the company is whether deeper restructuring measures are needed.

Chief Executive Gerard Kleisterlee prepared investors for further cost cuts last month when he said sales were not likely to recover and additional measure may be needed for the group to stay healthy, said Rabo Securities analyst Philip Scholte.

"What we have seen so far from Philips is that as misery continues and no recovery is visible yet, it will cut costs further," Scholte said, referring to the healthcare unit and the more cyclical products in its lighting business, where it is a global leader.

So far Europe's biggest consumer electronics producer has detailed plans for 6,000 job cuts in 2009 on top of 3,000 announced in 2008.

It is targeting more than 500 million euros (429.6 million pounds) in annualised cost savings by the end of this year.

The group is expected to report a second-quarter loss before interest, taxes and amortisation (EBITA) of 79 million euro, compared with a 396 million euro profit a year earlier and a 74 million euro loss in the first quarter.

The Healthcare unit, which competes against General Electric (GE.N) and Siemens (SIEGn.DE), still faces uncertainties and may need further restructuring within a business generating a third of total group sales, analysts say.

"Near-term trends remain challenging, with U.S. hospital volumes still down in the latest May data and hospital capital expenditure surveys showing no improvement," Deutsche Bank analyst Martin Wilkie said in a note.