Business Standard

Philips Improves Margins

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BSCAL

Although Philips has managed to maintain market share in all its product categories, sluggish demand has led to an insignificant 6.59 per cent growth in revenues. Besides volumes, sales revenues also received a shot in the arm from rising colour television sales.

Despite increased competition, operating margins have increased from 5.34 per cent to 7.16 per cent. Even without the `other income' component, margins at the operational level have improved.

This could be largely due to the company toning down its marketing and advertising expenditure, which was very high last year. But a doubling of the interest burden to Rs 21.71 crore has put some pressure on the company's gross profit margins.

 

Philips, despite being able to maintain market share and its improved performance for the first half, has failed to impress investors, and the stock languishes close to its fifty-two- week low of Rs 90.

High costs of borrowings, a sluggish demand growth and a high import content in its various consumer electronic products, has prompted analysts to state that margins will continue to be under pressure for the remaining part of the year. However, things could get interesting if the parent decides to utilise Philips India as a possible manufacturing base for its audio and video business.

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First Published: Aug 21 1996 | 12:00 AM IST

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