Philips lifts targets, to return $2 billion to shareholders

Tue Sep 17, 2013 6:10am EDT
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By Sara Webb

AMSTERDAM (Reuters) - Philips (PHG.AS: Quote) raised most of its financial targets and announced plans to return 1.5 billion euros ($2 billion) to shareholders, saying it would reap the benefits of a two-year revamp to focus on healthcare, lighting and consumer appliances.

However, the Dutch group warned of tough conditions in many of its markets and the new goals fell short of some analysts' hopes, sending its shares lower in early Tuesday trading.

"(The) new targets appear a little conservative," Morgan Stanley analysts said in a research note, adding there had been hopes for a share buyback closer to 2 billion euros.

Over the past two years, Philips has sold off much of its consumer electronics business - divesting its television, audio and video operations where it was struggling to compete with lower-cost Asian manufacturers, to focus on more profitable home appliances such as soup mixers and electric toothbrushes, as well as lighting for homes and offices, and healthcare.

Healthcare has become a particularly important market, with demand for new ultrasound and scanning products helping it to become the leading medical equipment supplier in the United States and a top-three producer of hospital equipment worldwide.

The group said on Tuesday it was targeting a margin of 11-12 percent on earnings before interest, tax and amortisation (EBITA) for 2014-2016, compared with the 10-12 percent it is aiming for this financial year.

It is also targeting a return on invested capital of at least 14 percent, compared with this year's 12-14 percent.

"We see substantial opportunities for profitable growth for 2016 and beyond," Chief Executive Frans van Houten said.   Continued...

The logo of Philips is seen at the company's entrance in Brussels September 11, 2012. REUTERS/Francois Lenoir