The domestic appliance unit of Philips Electronics will grow by an average 7 percent a year and become a substantially larger business within the group, the Dutch electronics firm said. Annual growth of 7 percent during the next 5 years is faster than the company-wide target of 5 percent to 6 percent, and will be driven by coffee machines.
DAP (domestic appliances), which generated 6.6 percent of total Philips revenues in the first 9 months of 2005, is the world's biggest electric shavers producer. It has had success in recent years with its Senseo budget espresso machines, of which it has sold 10 million units in 2005 alone. DAP's 9-month revenues were 1.4 billion euros (approx. U.S. $1.65 billion).
"Over the next 5 years, we expect DAP to become a substantially bigger and more valuable division at Philips, with a long-term average annual organic growth rate of roughly 7 percent," said Andrea Ragnetti, the CEO of the unit.
New activities from which DAP hopes to benefit are personal health and wellness products, an emerging activity in which Philips hopes to combine its expertise in personal care products, hospital equipment, lighting, and semiconductors.
CEO Gerard Kleisterlee told Reuters the scope of that new unit is broad and includes fitness-related devices, skincare, home monitoring, and electronic aids to cope with long-term illness. Heart defibrillators, babycare and some tanning equipment with Philips lamps are also part of the new unit, and water purification will be included.
Revenue growth in recent years has been below its new target, dipping 1 percent in 2004, after growing 3 percent in 2003 and 6 percent in 2002. However, Ragnetti pointed at the first 9 months of 2005 when growth accelerated to over 6 percent, driven by new product introductions.
According to the company, an estimated 35 percent of its 2005 sales were from products that were introduced over the last year, such as new vacuum cleaners and irons. Its new SmartTouchXL electric shaver will surpass initial sales expectations of 1.7 million units by at least 20 percent by the end of 2005, Ragnetti said.
Philips reiterated it sees income from operations of between 15 percent to 16 percent a year at DAP. It foresees a cost reduction of 3 percent of sales by the end of 2006 compared with 2004. (Reuters)
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