Philips Chief Van Houten Searches for Additional Cost Savings

Royal Philips Electronics NV, the world’s largest lighting company, will look for more cost reductions, in addition to an 800 million-euro ($1 billion) savings program initiated last year.

“We need to make sure the way we work is suitable for the 21th century,” Chief Executive Officer Frans van Houten said in a presentation at an investor day in Boston. “We will continue to look at additional cost-savings opportunities.”

The CEO, who took the helm in April last year, initiated an 800 million-euro savings program in October, involving 4,500 job cuts. A quarter of the targeted headcount reduction was completed by the first quarter of this year, he said.

The program in place, called Path to Value, will cut spending at the headquarters, in infrastructure, information technology and real estate. Today the company said it set a target to reduce information technology costs by 250 million euros in the next four years with measures such as outsourcing and reducing the number of software programs.

Van Houten has set a target for sales growth of 4 percent to 6 percent by 2013, assuming gross domestic product increasing at 3 percent to 4 percent a year. The target for earnings before interest, taxes and amortization as a proportion of sales by 2013 is 10 to 12 percent.

“There is still a lot to do to hit the 2013 goals,” Van Houten said in the presentation. At the end of the first quarter profitability was at 9.8 percent.

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