Koninklijke Philips Electronics NV ADR Earnings Call Insights: Capital Allocation Policy and Potential Factory Closures

Koninklijke Philips Electronics NV ADR (NYSE:PHG) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Capital Allocation Policy

Andreas Willi – JPMorgan Cazenove: My first question is on your capital allocation going forward. You’re coming towards the end of the buyback. You generated good cash flow. You have made good progress on the operational turnaround. Should we expect Philips to become more active again on M&A? Or is the focus still very much internal as we go into ’13? The second question is on your margin target for 2013. Given that the Consumer Lifestyle – as the Lifestyle and Entertainment business moves into discontinued operations, should you not have lifted the target slightly or is that too small of a difference for you to adjust this?

Frans van Houten – CEO, Royal Philips Electronics: On the capital allocation policy, that remains unchanged focus on maintaining our credit rating and being very prudent. We will first complete our share buyback program as it stands. We’re at 73% so we still have a piece to finish in the first half of 2013 and we will continue to be focused on our ACCELERATE! operational improvement program. At this time, I don’t want any distractions in our organization and basically continuing to focus on organic improvement, we can imagine that there are questions out there, about what is afterwards – what is coming beyond 2013? At this point in time we prefer to focus on our improvement program and we can anticipate a further elucidation to the market at the end of 2013. With regard to the margin targets, the group targets are going to be unchanged in relation to the sale of the Audio, Video, Multimedia and Accessory business to Funai. I hope that answers your questions.