Philips' Third Quarter Results 2012


Philips reports third-quarter comparable sales growth of 5% to EUR 6.1 billion; EBITA of EUR 450 million

October 22, 2012

• Comparable sales up 5%, with all three sectors contributing to growth
• Sales in growth geographies up 10% on a comparable basis, now representing 36% of total revenue
• Reported EBITA of EUR 450 million, or 7.3% of sales
• Net income of EUR 170 million
• Free cash flow of EUR 395 million

 

Q3 financials: Strong growth at Healthcare and growth businesses in Consumer Lifestyle. Profit margin improvements for the Group led by Consumer Lifestyle and Healthcare.

 

Healthcare comparable sales grew by 7%, led by double-digit growth at Imaging Systems and high-single-digit growth at Home Healthcare Solutions. In growth geographies, comparable sales increased by 14%. Currency-comparable order intake increased by 6% year-on-year. Reported EBITA margin for the quarter was 13.5%.

 

Consumer Lifestyle comparable sales increased by 3%, driven by double-digit growth in the combined growth businesses, i.e. Personal Care, Health & Wellness and Domestic Appliances. These sales increases were partly offset by a decline at Lifestyle Entertainment. Reported EBITA margin for the quarter was 8.5%.

 

Lighting comparable sales increased by 4%, with double-digit growth at Lumileds and Automotive and low-single-digit growth at Light Sources & Electronics. LED-based sales grew by 51% and now account for 24% of total Lighting sales. Reported EBITA margin for the quarter was 2.2%, reflecting higher restructuring and acquisition-related charges as well as a loss on the sale of industrial assets. Excluding these items, EBITA amounted to 7.0%.

 

We have completed 63% of our EUR 2 billion share buy-back program since the start of the program in July 2011.

 

Accelerate! program continues to make good progress

 

Our multi-year change and performance improvement program Accelerate! continues to make good progress. Philips employees across the globe are becoming more entrepreneurial, resulting in stronger growth for the company, an encouraging sign in a weak global economy. We continued to extend the number of LEAN End-to-End transformations in the last quarter, paving the way for a simplified and more efficient future IT platform. Additionally, we started a program to improve procurement effectiveness and see significant opportunities to reduce the cost of goods and improve gross margins in 2013 and beyond.

 

Our actions to deliver on our overhead cost-reduction program are on track. Cumulative savings amounted to EUR 306 million through the third quarter of 2012. We recently communicated that we have increased our overhead cost savings target to EUR 1.1 billion. The increased savings will require a step-up in restructuring charges this year. We now expect restructuring and acquisition-related charges of approximately EUR 300 million in the fourth quarter of 2012.

 

CEO quote:

 

Philips’ operational and financial performance in the third quarter demonstrates further progress on our path towards our 2013 financial targets, driven by our transformation program Accelerate!. Our investments in building meaningful innovative solutions to meet the needs of our customers in local markets are positively impacting our growth and performance. Improvements in our operational excellence and agility are positioning the company for better performance in the coming years. The recently announced additional cost savings, as well as our actions to drive higher savings from procurement, further underpin our profitability potential.

 

Group sales growth in the quarter of 5%, together with the cost productivity improvements we have made, enabled us to deliver an EBITA margin of 9.2%, excluding non-operational charges.

 

Our Healthcare business continues to perform well as comparable sales grew 7% and order intake increased by 6%. The growth businesses in Consumer Lifestyle posted another solid quarter, delivering a double-digit revenue increase. In Lighting, LED-based sales continued to show strong momentum with comparable sales growth of over 50%, which requires us to accelerate the rationalization of our conventional lighting industrial footprint.

 

We continue to experience strong economic headwinds on a global scale, which affect growth going forward. Our Accelerate! program is helping to mitigate some of these pressures, and we have full confidence in our ability to continue improving the operational and financial performance of the company.

 

Frans van Houten,  CEO of Royal Philips Electronics

 

 

 

Quarterly Report

 

Presentation

 

Conference call and audio webcast

A conference call with Frans van Houten, CEO, and Ron Wirahadiraksa, CFO, to discuss the results, will start at 10.00AM CET. A live audio webcast of the conference call will be available through the link below.

Q3 2012 conference call audio webcast

 

More information about Frans van Houten and Ron Wirahadiraksa:

Click here for Mr. van Houten's CV and images

Click here for Mr. Wirahadiraksa's CV and images

Al Faisaliah Medical Systems joint venture

Philips has entered into a joint venture with Al Faisaliah Medical Systems in Saudi Arabia, continuing the company’s expansion in fast-growing markets such as the Middle East. In addition, Philips has entered into its first partnership solutions agreement in the region with Burjeel Hospital, a new 196-bed facility in Abu Dhabi.

Philips and Corindus distribution agreement

(Infographic)To expand its offering in the fast-growing imageguided intervention and therapy market, Philips has become the exclusive distributor of Corindus’ CorPath 200 System, the world’s first robotic-assisted system for minimally invasive treatments of obstructed coronary arteries.

Philips and Isala Klinieken partnership

Philips and Isala Klinieken, a major Dutch hospital with close to 1,000 beds and 5,500 employees, have entered into a multi-year collaboration for the acquisition, use and maintenance of medical equipment as well as the improvement of the hospital’s care processes. This is to date the largest partnership solutions agreement for Philips in the Netherlands.

Philips HomeCooker in partnership with Jamie Oliver

Philips launched the HomeCooker, the first in a new range of kitchen appliances that have been co-developed in a multi-year partnership with world renowned chef Jamie Oliver. 

  

SENSEO Sarista

Philips and D.E. Master Blenders 1753 introduced the SENSEO Sarista. A premium single- and multi-serve coffee system, it prepares coffee straight from fresh beans, aiming at a growing segment of the coffee market.

2012 Australian International Design competition

At the 2012 Australian International Design competition, Philips received two awards for the Sonicare DiamondClean power toothbrush and the QuickClean Juicer.

Philips lights Miami Tower and The Bay Lights

In the US, Philips lit up two iconic projects with LED solutions: the exterior of Florida’s Miami Tower and The Bay Lights, the world’s largest LED light sculpture on the San Francisco’s Bay Bridge. 

 

LED Lamps for the Rezidor Hotel Group

Building on Philips market leadership, Philips Lighting will deliver more than 200.000 high quality, energy saving Master LED lamps to the Rezidor Hotel Group, which includes well-known brands such as Radisson. The project will be implemented in Europe over the next year.

Philips supersector leader in the Dow Jones Sustainability Index

For a second consecutive year, Philips achieved the status of supersector leader in the Personal and Household Goods category of the 2012 Dow Jones Sustainability Index (DJSI). The result highlights Philips’ leadership in sustainability, which is an integral part of the company’s health and well-being strategy.

For further information, please contact:

Joost Akkermans
Corporate Communications
Tel: +31 20 5977 406
E-mail: joost.akkermans@philips.com 

 

Steve Klink
Philips Corporate Communications
Tel: +31 20 597 7415
Email: steve.klink@philips.com 

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About Royal Philips Electronics

Royal Philips Electronics (NYSE: PHG, AEX: PHIA) is a diversified health and well-being company, focused on improving people’s lives through meaningful innovation in the areas of Healthcare, Consumer Lifestyle and Lighting. Headquartered in the Netherlands, Philips posted 2011 sales of EUR 22.6 billion and employs approximately 121,000 employees with sales and services in more than 100 countries. The company is a leader in cardiac care, acute care and home healthcare, energy efficient lighting solutions and new lighting applications, as well as male shaving and grooming, home and portable entertainment and oral healthcare. News from Philips is located at www.philips.com/newscenter.

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Forward-looking statements

This document and the related oral presentation, including responses to questions following the presentation, contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forward-looking statements include statements made about our strategy, estimates of sales growth, future EBITA and future developments in our organic business. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements.

 

These factors include but are not limited to domestic and global economic and business conditions, developments within the euro zone, the successful implementation of our strategy and our ability to realize the benefits of this strategy, our ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs and actuarial assumptions, raw materials and employee costs, our ability to identify and complete successful acquisitions and to integrate those acquisitions into our business, our ability to successfully exit certain businesses or restructure our operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition. As a result, Philips’ actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Risk management chapter included in our Annual Report 2011.

 

Third-party market share data
Statements regarding market share, including those regarding Philips’ competitive position, contained in this document are based on outside sources such as research institutes, industry and dealer panels in combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated.

 

Use of non-GAAP information
In presenting and discussing the Philips Group’s financial position, operating results and cash flows, management uses certain non-GAAP financial measures. These non-GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. A reconciliation of such measures to the most directly comparable IFRS measures is contained in this document. Further information on non-GAAP measures can be found in our Annual Report 2011.

 

Use of fair-value measurements
In presenting the Philips Group’s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices do not exist, we estimated the fair values using appropriate valuation models, and when observable market data are not available, we used unobservable inputs. They require management to make significant assumptions with respect to future developments, which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in our 2011 financial statements. Independent valuations may have been obtained to support management’s determination of fair values.

 

All amounts in millions of euros unless otherwise stated; data included are unaudited. Financial reporting is in accordance with IFRS, unless otherwise stated.

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