Philips Reiterates Targets, Looking at Takeovers

Dutch Philips Electronics, confirming its financial targets at its annual shareholders' meeting on Thursday, said it is looking at takeovers and ways to return excess cash to shareholders.

"We are currently reviewing a number of possible acquisitions and it is our clearly stated policy and practice to return excess cash to shareholders," Philips Chief Executive Gerard Kleisterlee said.

Philips' targets for 2007, first issued in January, are to increase revenues by 5 to 6% in 2007, and generate a core operating profit margin before amortisation of 7.5% of revenues.

Philips, the world's biggest lighting maker, a top three hospital equipment maker and Europe's biggest consumer electronics producer, is looking to use its big cash pile of many billions of euros to acquire companies with strong management, high profit margins and good market positions.

"The company will also have to deliver a return on capital above the cost of capital in that specific sector," said Kleisterlee, who asked shareholders to have a little patience with Philips over spending the cash pile it has built with the sale of non-core companies and stakes in associate companies.

"We want acquisitions to be accretive to earnings within approximately two years, and to have earned back the purchase price completely within seven years," Kleisterlee said.

Philips, which had a net cash position of 2.2 billion euros ($2.94 billion) by the end of 2006, is expected to cash in on another 10 billion euros this year and next with the sale of its remaining stakes in South Korean flat LCD display maker LG.Philips LCD and Taiwanese contract chip maker TSMC.