Amsterdam: Royal Philips Electronics NV, the world’s largest lighting maker and one of Europe’s largest medical equipment and electronics manufacturers, expects to more than double its profitability by 2010 as it streamlines the company into three main divisions.
Chief Executive Gerard Kleisterlee also outlined ambitions to step up the pace of acquisitions in its chosen fields: healthcare, lighting and consumer lifestyles. He said the company was focusing on expanding in emerging markets, with Asia at the centre of its strategy.
Integrating units into three consolidated sectors will save an estimated $205 million to $274 million (Rs 820 crore to 1096 crore) in costs by 2010 through such measures as tightening management, combining warehouses and improving logistics efficiency, Kleisterlee told reporters. A plan for further cost reduction will be finalized this year, he said.
The consolidation could lead to shifting some employees, but no job cuts, the company said. By 2010, Philips expects the earnings before interest, taxes and amortization margin of its current businesses to exceed 10% from its current level of 7.5% which it said was on course.
“Philips expects EBITA per common share to more than double by 2010 from the level expected in 2007,” the company said.
It also said it aims to deliver a minimum of 6% comparable annual average sales growth for the two-year period through 2010. Philips shares gained 3.9% to $40.60 in Amsterdam.
Philips, which makes high-end medical equipment, energy-saving light bulbs and household appliances like shavers and televisions, sold its semiconductor division last year. The company has been steadily departing markets where it doesn’t hold a first or second-place position, notably divesting its mobile phones operations after being eclipsed by Nokia Corp.
The restructuring was the latest step in Philips’ reorganization that began in 2001, a period of outsourcing many of its manufacturing units and shedding businesses over which it lacked full management control.
In the last two years it has invested $6.4 billion in acquisitions in its increasingly focused core areas, especially technology and innovation, Kleisterlee said.
Expansion would focus on high-growth areas, such as health and well-being industries at a time of aging populations, and in strong geographic areas, especially, China, India and Latin America.
Uncertain financial markets were a boon to companies like Philips, interested in making acquisitions and with cash available to spend, Kleisterlee said, as falling prices bring more companies within reach.