Recovering sales of chips and consumer electronics helped Philips Electronics report strong quarterly profit yesterday. The firm forecast continued revenue and earnings growth in the second half of the year.

But the group's shares slipped amid investor concern that strong profits contributed by affiliates in Asia, such as thin display screen venture LG.Philips LCD, may melt away as competition intensifies.

Analysts also pointed to weaker earnings at the medical systems business. Shares in Philips, which trailed the DJ Stoxx European technology sector index, have fallen 15 per cent since April. Europe's top consumer electronics maker said its second-quarter net profit jumped to €616 million from €42 million a year ago, as sales rose 11 per cent to €7.28 billion.

"Sales growth is strong, but ... pressure on price competition remains also quite strong, because margins do not improve in line with very strong organic growth in the business," said Fortis analyst Mr Rene Verhoef, who has a "buy" rating on the shares.

Philips, which has been shifting away from less profitable businesses, had been expected to book net profit of €521 million for the quarter. - (Reuters)