Philips Announces Buyback

Amsterdam -- Royal Philips Electronics NV reported better-than-expected second-quarter earnings and revenue growth on sales of medical scanners. The company also announced a 1.5 billion-euro ($ 1.89 billion) stock buyback.

Earnings before interest and tax increased to 367 million euros compared with the 316 million-euro median estimate of analysts. Sales also rose 10 percent to 7.6 billion euros. However, net income fell to 301 million euros because Philips had a gain from selling Navteq Corp. shares last year.

Chief Executive Officer, Gerard Kleisterlee, 59, has announced more than $ 4 billion of acquisitions in the past year to spur earnings growth at the medical systems, appliances and lighting divisions. Last month, Amsterdam-based Philips said it aims to sell a majority stake in its semiconductor division, Europe's third-largest chipmaker, this year.

“The buyback is a clear positive and earnings at medical were comforting, it's where future growth will have to come from,'' said Corne van Zeijl, a fund manager at SNS Asset Management in Den Bosch, Netherlands, which oversees about $ 1 billion in stocks, including Philips shares.

These sales were the highest second-quarter revenue since 2002 and earnings at four of Philips's five main divisions gained in the quarter.

“We expect this growth to continue in the second half of the year, although, given the particularly strong second half of 2005, at a slightly slower pace," the company said.

The company forecast “high single-digit" sales growth, excluding currency swings and acquisitions, in 2006 for the medical systems unit. Operating margins at the unit are still expected to improve in the second half of the year from 2005.

Philips as a whole aims for an operating profit margin of 7 percent to 10 percent by the end of the year. Philips also targets sales growth of 5 percent to 6 percent this year and beyond, excluding currency moves, purchases and divestments.

Philips also announced that the planned 1.5 billion-euro stock buyback will be executed during the coming 18 months. It follows a buyback worth another 1.5 billion euros completed in February.

"The share buyback program illustrates confidence in the future," said Eric de Graaf, an analyst at Petercam in Amsterdam.

Philips had "a good quarter and we are on track with the management agenda," Chief Financial Officer Pierre-Jean Sivignon said on a conference call.