Philips Electronics raised its cost-cutting target to 1.1 billion euros ($1.4 billion) and said it would axe a further 2,200 jobs as it battles a tough economic backdrop and pension costs.
The group, which had previously targeted 800 million euros of cost savings, announced the plan on Tuesday ahead of an investor event in London. Last year it announced 4,500 job cuts.
“The identified additional overhead cost reduction measures will help us mitigate the effects of macro-economic headwinds and changes in pension-cost accounting, while making us a more agile innovation company serving our customers effectively across the world,” said Chief Executive Frans van Houten.
Europe’s largest consumer electronics producer, the world’s biggest lighting maker and a top-three maker of hospital equipment reported bumper second-quarter earnings in July, giving investors hope that a drastic overhaul of the business, Van Houten started just over a year ago, is starting to pay off.
In his first year at the top, Van Houten started overhauling the company where he worked most of his life, including trying to change the corporate culture which he says isn’t entrepreneurial enough.
In his first year s CEO, he issued two profit warnings, reset financial targets, cut thousands of jobs, replaced his entire top executive team and, eventually, hived off the loss-making TV business.
After two quarters of better-than-expected results, Van Houten told Reuters in July that the firm is now in “sustainable recovery mode,” although he wouldn’t rule out taking further measures to cut costs.
As expected, Philips didn’t give a detailed outlook for the remainder of the year on Tuesday, but reiterated it is set to meet its previous guidance for sales growth of between 4 and 6 percent in 2013, an EBITA margins of 10 to 12 percent and a return on invested capital of 12 to 14 percent. ($1 = 0.7821 euros)