Founded 120 years ago, Philips has a long history of trying to stay in step with the times.
The Dutch group is still the world’s biggest lighting maker and Europe’s biggest consumer electronics maker, but it is facing tough new challenges.
A surprise write-down on acquisitions in both lighting and healthcare dragged the group to a 1.3 billion euro ($1.8 billion) second quarter net loss.
Weak economic growth in Europe and America was partly to blame, but Philips CEO Frans van Houten told Reuters there was plenty to be positive about.
“We see 4 – 6 percent growth, 10-12 percent EBITA and 12 – 14 percent return on invested capital. We do that only on the basis of confidence in our portfolio in health, lighting and lifestyle. When we look at the core businesses there we are actually in Q2 able to grow in aggregate in double digit.”
But Van Houten acknowledged the current economic environment was “uncertain.”
He said a 500 million euro cost saving program would be implemented over the next three years.
A 2 billion euro share buy-back would also take place over 12 months following a 30 percent fall in the company’s share price over a similar period.
“Philips needs to become more agile, more entrepreneurial and more accountable and the accelerate program that we have launched in the last few months is to do exactly that. On the one hand we will step up investment and innovation and in customer phasing activities that will drive growth and at the same time we are taking down complexity making things less bureaucratic and able to compete faster
But analysts say Philips has struggled to compete with the low-cost makers of consumer electronics in Asia. After three months at the helm Van Houten’s next moves will be closely watched.”
Bottom line: Philips CEO is upbeat despite the Dutch firm posting a surprise 1.3 billion euro ($1.8 billion) quarterly net loss, due to weak consumer demand in Europe and the United States.