Philips raises earnings targets, buys back shares

Reuters with
Philips' growth impacted by 'restless' world: CEO

Global economic difficulties will persist and could affect Dutch electronics giant Philips, the group's CEO told CNBC Tuesday after raising its financial targets and announcing a share buyback.

Philips has been selling off much of its consumer electronics business over the past 18 months - divesting its television, audio and video operations as it struggled to compete with lower-cost Asian manufacturers, to focus on more profitable home appliances, lighting and healthcare.

It now derives more than 40 percent of its sales and 70 percent of its EBITA from healthcare.

Philips announced a new 1.5 billion euro share buyback program over the next two to three years and set new mid-term sales and profit margin targets for the period up to 2016.

Shares of the company were down 2 percent however after the group warned that economic difficulties would persist.

"We are flagging on-going concerns around the economy and headwinds and this affects healthcare driven by North America and the reform that's going on there and Europe because of the economic situation there," Frans van Houten told CNBC's "Worldwide Exchange."

He added that the situation was no better in emerging markets, where an economic decline has been exacerbated by fears over the Federal Reserve's plan to taper monetary stimulus.

"Think about all the currency movements going on - the Indian rupee moving up and down, the rupiah in Indonesia up and down so the world is very much restless and that affects of course the short-term possibilities to grow," he said.

Despite this, Van Houten said in the long-run he was optimistic "the world is heading in the right direction."

The financial targets included comparable sales growth on a compound annual growth rate basis of between 4-6 percent, and earnings before interest, tax and amortization (EBITA) margins of 11-12 percent for the group.

It also set EBITA margins of 9-11 percent for the lighting division, 16-17 percent for the healthcare business, and 11-13 percent for the consumer division.

Reuters contributed to this story.