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Gerard Kleisterlee: Philips Electronics to Slow Share Buyback as core profit down

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 13, 2008

Royal Philips Electronics NV reported Monday that its third-quarter net income was 357 million euros or 0.37 euro per share, including 302 million gain on the sale of the remaining stake in TSMC. In the previous year, the company’s net income was 331 million euros or 0.30 euro per share.

Income from continuing operations was 347 million euros, slightly higher than 346 million euros a year ago. Sales were 6.33 billion euros, lower than sales of 6.47 billion euros recorded in the previous year. Looking ahead, the company expects to record charges of up to 230 million euros in the fourth quarter.

Targeted Acquisitions

Net income climbed to 357 million euros, or 37 cents a share, from 331 million euros, or 30 cents, a year earlier. Nine analysts surveyed by Bloomberg News had a median profit estimate of 352 million euros.

Kleisterlee, 62, sold most of Philips’s semiconductor assets to focus on the lighting and health-care businesses, which have more predictable earnings. The company spent 3.6 billion euros to buy medical-equipment maker Respironics Inc. in March and $2.7 billion on Genlyte Group Inc. in January.

Philips booked a gain of 302 million euros in the quarter from selling its remaining shares in Taiwan Semiconductor. Net income also included 241 million euros of expenses to cover asbestos-related claims against a U.S. subsidiary.

Philips, also the world’s largest maker of patient- monitoring systems, will selectively raise prices as it focuses on protecting its margins over revenue, Sivignon said in an interview with Bloomberg Television.

Philips will reduce the pace of purchases because of “the risks and opportunities presented by the deterioration of the economy and the financial market turbulence,” the Amsterdam- based company said in a statement today. Third-quarter sales fell 2 percent to 6.3 billion euros, missing the median estimate from 12 analysts of 6.71 billion euros. Net income rose 7.9 percent on the sale of shares of Taiwan Semiconductor Manufacturing Co.

“For the time being, we seem to have returned from the edge of the abyss and should now see some badly needed stability in the markets,” said Andrew Turnbull, senior sales manager at ODL Securities.

“And although these moves are likely to have resuscitated our failing banks from collapse, it is very unlikely that we will be saved from the clutching grips of recession and housing market deflation.”

Gerard Kleisterlee, President and CEO of Royal Philips Electronics said “While Philips too cannot isolate itself from increasingly adverse economic circumstances, it is encouraging to see that the portfolio we have built over the past few years does indeed show the resilience we expected from it.

I am particularly delighted that Consumer Lifestyle, the sector most prone to swings in consumer demand, was able to improve its EBITA margin excluding restructuring to 5.9% of sales as a result of the sector’s relentless focus on profitability – accepting that strategic and portfolio management decisions may negatively impact short-term top-line growth.

Some of our Healthcare and Lighting businesses were also impacted by lower demand, but I am pleased we continued to grow in key businesses such as Patient Monitoring, Clinical Care Systems, Home Healthcare Solutions and of course in Green lighting solutions and Solid State Lighting. While neither of these sectors is immune to economic turmoil, I feel confident both will hold up well during this period.”

Gerard Kleisterlee bio (Profile)

President/Chief Executive Officer (CEO) and Chairman of the Board of Management and the Group Management Committee

President/CEO and Chairman of the Board of Management since April 2001, member of the Board of Management since April 2000 and member of the Group Management Committee since January 1999

Corporate responsibilities: Strategy and business development, Communications, Internal Audit, Human Resources Management, Legal/Compliance/GBP, Technology Management, Marketing

Gerard Kleisterlee joined Philips’ Medical Systems division in 1974, where he held a number of positions in manufacturing management. From 1981 to 1986 he was the General Manager of Philips’ Professional Audio Product Group. Mr. Kleisterlee joined Philips Components in 1986 as Industrial Director for Display Components and was appointed Managing Director of Philips Display Components worldwide in 1994. He became President of Philips Taiwan and Regional Manager for Philips Components in Asia-Pacific in 1996. From September 1997 to June 1998 he was also responsible for all activities of the Philips Group in China.

Mr. Kleisterlee returned to Europe in 1999 as CEO of Philips’ Components division and was appointed a member of the Group Management Committee since January 1, 1999, and Executive Vice-President of Philips and a member of the Board of Management since April 1, 2000. He was appointed Chief Operation Officer of Philips on September 1, 2000. On April 30, 2001, he was appointed President & Chief Executive Officer of Philips and Chairman of the Board of Management and the Group Management Committee.

Mr. Kleisterlee, who was born in Germany in 1946, attended Eindhoven Technical University in the Netherlands and graduated with a degree in Electronic Engineering. He received an honorary doctorate from the Catholic University of Leuven, Belgium in 2005.

Memberships

Mr. Kleisterlee is an active member of the European Table of Industrialists since 2001 and is a member of its Executive Committee since 2007, chairing also its Competitiveness Working Group. He is also a member of the Asia Business Council and the Trans Atlantic Business Dialogue (TABD). Mr Kleisterlee also serves as a member of the Dutch Innovation Platform, which is chaired by the Prime Minister of the Netherlands. Since July 2001 he is Chairman of the Supervisory Board of the Eindhoven Technical University. In November 2007 Mr. Kleisterlee joined the Executive Committee of the IMD in Lausanne.

Mr Kleisterlee is a member of the Supervisory Board of De Nederlandsche Bank NV since July 2006. He is also the Chairman of the Foundation of the Cancer Centre Amsterdam and a member of the Supervisory Board of the Rotterdam Philharmonic Orchestra.

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