posted by Bina | Monday, July 16, 2007
Royal Philips Electronics, Europe’s largest consumer electronics manufacturer, will have amassed a €15bn to €20bn ($27bn) warchest within the next three years to finance acquisitions, buy back shares and bolster dividends.
Announcing second-quarter results on Monday, the 116-year old Dutch company revealed further details of plans to offload stakes in a range of non-core companies and restructure its balance sheet by taking on more debt.
Pierre-Jean Sivignon, chief financial officer, said this would involve reducing its stake in LG.Philips LCD, the South Korean electronics group, from 32.9 per cent to less than 20 per cent “as a first step” once a lock-up period expires on July 22.
Philips – which is also the world’s largest lighting maker and one of the top three manufacturers of hospital equipment – is also looking to sell all or part of its 19.9 per cent stake in NXP, Europe’s third-largest chipmaker.
It will also sell its remaining 8.1 per cent holding in chipmaker Taiwan Semiconductor Manufacturing (TSMC) before 2010, having already reduced its stake in the last quarter from 16.2 per cent.
The proposed asset sales are part of Philips’ wholesale withdrawal from the semiconductor business amid a renewed focus on its core businesses of consumer electronics, domestic appliances, lighting and medical systems. No details of potential acquisitions were made available by the company.
According to the company, as of June 11, its 32.9 per cent stake in LG.Philips LCD was worth just over €4bn; its holding in TSMC, €3.4bn; and its NXP stake, €854m.
Philips already holds €6.2bn in cash and plans to increase its leverage “to an appropriate level” in the future, something Mr Sivignon said cleared the way to raising an additional €3bn-€4bn in debt.
It is already engaged in a €4bn share buyback programme and plans to keep its dividend yield “north of 2 per cent” with a dividend payout ratio of between 40-50 per cent, Mr Sivignon said.
Philips reported a sharp gain in second-quarter net income to €1.57bn, from €301m in the same period last year, largely due to a one-off gain of €1.22bn from the sale of 8.2 per cent of TSMC.
Earnings before interest, tax and amortisation – its preferred measure of performance – were €389m, equivalent to 6.4 per cent of sales, up from 4.5 per cent of sales in the same period last year. It argues this measure offers a more accurate account of operations given the company’s asset disposal and M&A activities.
Revenues dropped 4.4 per cent to €6.1bn, marginally below analysts’ expectations, as a stronger than expected performance by its domestic appliances operations failed to compensate for disappointing earnings from its medical and consumer electronics operations.
Domestic appliances, which makes shavers, electric toothbrushes and coffee machines, reported 14 per cent growth in sales. Sales at consumer electronics dropped 11 per cent.
Philips said it expected to meet its targets of 5-6 per cent average annual sales growth and ebitda of at least 7.5 per cent of sales in 2007.
Shares in Philips were 1 per cent lower at €32.03 in early afternoon trading.
Announcing second-quarter results on Monday, the 116-year old Dutch company revealed further details of plans to offload stakes in a range of non-core companies and restructure its balance sheet by taking on more debt.
Pierre-Jean Sivignon, chief financial officer, said this would involve reducing its stake in LG.Philips LCD, the South Korean electronics group, from 32.9 per cent to less than 20 per cent “as a first step” once a lock-up period expires on July 22.
Philips – which is also the world’s largest lighting maker and one of the top three manufacturers of hospital equipment – is also looking to sell all or part of its 19.9 per cent stake in NXP, Europe’s third-largest chipmaker.
It will also sell its remaining 8.1 per cent holding in chipmaker Taiwan Semiconductor Manufacturing (TSMC) before 2010, having already reduced its stake in the last quarter from 16.2 per cent.
The proposed asset sales are part of Philips’ wholesale withdrawal from the semiconductor business amid a renewed focus on its core businesses of consumer electronics, domestic appliances, lighting and medical systems. No details of potential acquisitions were made available by the company.
According to the company, as of June 11, its 32.9 per cent stake in LG.Philips LCD was worth just over €4bn; its holding in TSMC, €3.4bn; and its NXP stake, €854m.
Philips already holds €6.2bn in cash and plans to increase its leverage “to an appropriate level” in the future, something Mr Sivignon said cleared the way to raising an additional €3bn-€4bn in debt.
It is already engaged in a €4bn share buyback programme and plans to keep its dividend yield “north of 2 per cent” with a dividend payout ratio of between 40-50 per cent, Mr Sivignon said.
Philips reported a sharp gain in second-quarter net income to €1.57bn, from €301m in the same period last year, largely due to a one-off gain of €1.22bn from the sale of 8.2 per cent of TSMC.
Earnings before interest, tax and amortisation – its preferred measure of performance – were €389m, equivalent to 6.4 per cent of sales, up from 4.5 per cent of sales in the same period last year. It argues this measure offers a more accurate account of operations given the company’s asset disposal and M&A activities.
Revenues dropped 4.4 per cent to €6.1bn, marginally below analysts’ expectations, as a stronger than expected performance by its domestic appliances operations failed to compensate for disappointing earnings from its medical and consumer electronics operations.
Domestic appliances, which makes shavers, electric toothbrushes and coffee machines, reported 14 per cent growth in sales. Sales at consumer electronics dropped 11 per cent.
Philips said it expected to meet its targets of 5-6 per cent average annual sales growth and ebitda of at least 7.5 per cent of sales in 2007.
Shares in Philips were 1 per cent lower at €32.03 in early afternoon trading.
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