Bloomberg News

Philips to Buy Back $2 Billion in Shares, Extend Efficiency Plan

September 17, 2013

Royal Philips NV (PHIA), the world’s biggest lightbulb maker, will buyback 1.5 billion euros ($2 billion) of shares and Chief Executive Officer Frans Van Houten pledged to extend an efficiency drive to bolster margins.

The maker of scanners, electric toothbrushes and lighting set a target for cumulative annual sales growth of 4 percent to 6 percent from 2014 to 2016, with an earnings before interest, taxes and amortization margin of 11 percent to 12 percent. That compares with a previous target of 10 percent to 12 percent.

Van Houten, who became CEO in 2011, is pushing Philips toward more profitable LED lighting as the industry moves away from traditional bulbs, while phasing out the audio and video devices that are the Amsterdam-based company’s heritage.

“Philips is a diversified technology company,” said van Houten. “Together these businesses have significant unlocked potential, and we see substantial opportunities for profitable growth for 2016 and beyond.”

The 122-year-old company is in the midst of a program called Accelerate!, which includes cutting 6,700 jobs and trimming 1.1 billion euros in costs by 2014. At an analyst and investor meeting today, van Houten will also outline an investment strategy to enhance growth and harness more efficiency.

Philips targets an Ebita margin of 16 percent to 17 percent at the medical unit which makes hospital scanners and other medical equipment. The consumer unit, which makes electric shavers, coffee machines and rice cookers is expected to have profitability of 11 percent to 13 percent, with lighting generating a margin of 9 percent to 11 percent.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net


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