First Quarter Results 2014


Philips reports Q1 sales of EUR 5 billion and operational results of EUR 368 million

April 22, 2014

  • Group comparable sales growth flat, with sales in growth geographies up 5%
  • Healthcare comparable equipment order intake up 1%
  • Currency negatively impacted sales by 5% and EBITA by 1.8 percentage points of sales
  • EBITA of EUR 314 million, compared to EUR 402 million in Q1 2013
  • EBITA excluding restructuring and acquisition-related charges amounted to EUR 368
    million, or 7.3% of sales, compared to 8.0% in Q1 2013
  • Net income of EUR 137 million, compared to EUR 162 million in Q1 2013
  • Free cash outflow of EUR 72 million, excluding a EUR 273 million pension contribution
    related to the de-risking of the Dutch pension plan
  • Inventories improved by 0.6 percentage points to 14.9% of sales
  • Company reiterates commitment to 2016 financial targets

 

Frans van Houten, CEO:


"Our first-quarter financial results reflect a challenging start to the year. Significant currency impact, market headwinds in, among others, China and Russia, and the business impact of the voluntary suspension at our healthcare production facility in Cleveland resulted in flat comparable sales growth and a decline in EBITA as a percentage of sales of 130 basis points. We recorded a lower level of profitability at Healthcare, whereas Lighting and Consumer Lifestyle continued to deliver a year-on-year operational margin improvement.

 

At Lighting, LED-based sales grew by 37%, and we are encouraged by the positive reception given by our customers to our broad range of new connected lighting solutions demonstrated at the Light + Building trade fair in Germany. Consumer Lifestyle grew 7%, with a particularly strong performance at Floor Care and Air Purifiers. At Healthcare, we see encouraging developments in our order book and increasing opportunities for multi-year deals.

 

Our multi-year transformation program Accelerate! continues to show strong traction, driven by a solid innovation pipeline, investments in future growth and a company-wide focus on improved operational and financial performance. We are also taking comprehensive measures to raise the efficacy of our quality management system to Philips Excellence standards in close collaboration with industry experts. Our overhead cost reduction program and our Design for Excellence program are on track, thus helping to partly offset the negative currency impact.

 

Looking ahead, 2014 will be a challenging year, but we remain very confident of achieving our 2016 mid-term financial targets."

 

Q1 financials overview:

Philips first quarter results 2014 | Earnings Report

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Healthcare comparable sales showed a 2% decline year-on-year. Home Healthcare Solutions posted mid-single-digit growth, while Customer Services and Patient Care & Clinical Informatics achieved low-single-digit growth. Imaging Systems recorded a double-digit decline. In growth geographies, comparable sales showed a mid-singledigit decline. Currency-comparable equipment order intake increased by 1% year-on-year, with Patient Care & Clinical Informatics recording double-digit growth, while Imaging Systems posted a mid-single-digit decline. EBITA margin excluding restructuring and acquisition-related charges declined to 8.8%, a decrease of 1.7 percentage points year-on-year.

 

Consumer Lifestyle comparable sales increased by 7%, with high-single-digit growth at Domestic Appliances and mid-single-digit growth at Health & Wellness and Personal Care. In growth geographies, comparable sales showed a double-digit increase, while mature geographies achieved low-single-digit growth. EBITA margin excluding restructuring and acquisition-related charges increased to 10.6%, a year-on-year improvement of 0.7 percentage points.

 

Lighting comparable sales were flat year-on-year. Lumileds and Automotive achieved double-digit growth, while Light Sources & Electronics and Professional Lighting Solutions posted a low-single-digit decline and Consumer Luminaires recorded a high-single-digit decline. LED-based sales grew by 37% compared to Q1 2013 and now represent 33% of total Lighting sales. In growth geographies, comparable sales (excluding OEM Lumileds showed a low-single-digit increase. EBITA margin excluding restructuring and acquisition-related charges was 9.0%, a yearon- year improvement of 0.6 percentage points.

 

As of the end of March, Philips had completed 14% of the EUR 1.5 billion share buy-back program.

 

 

 

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.

Q1 2014 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 

Philips first quarter results 2014 Infographic

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Philips and MEDSI enter new healthcare technology partnership in Russia

 Philips, as a leading provider of innovative healthcare solutions, and MEDSI, Russia’s largest network of private clinics, have signed a memorandum of understanding for a multi-year partnership that will provide MEDSI hospitals with the latest Philips healthcare equipment and technology, hospital management and consultancy services.

Philips has introduced new imaging innovations

 To meet the growing demand for digital imaging solutions in growth geographies and expand access to affordable care, Philips has introduced several new imaging innovations, such as the Ingenia CX MRI and the PrimaryDiagnost DR and DuraDiagnost x-ray solutions, which deliver excellent image quality, reliability, ease of use, and efficient workflows.  

Philips Airfryer in more than 100 countries

 Continuing the geographical expansion of Philips’ product innovations, the Philips Airfryer is now
available in more than 100 countries. Philips is now the world’s number one low-fat fryer brand.  

Philips extended Oral Healthcare leadership in North America

 Philips’ leadership position in oral healthcare in North America was further strengthened with extended
distribution of the latest high-end propositions. Philips also introduced a refreshed Philips Sonicare
for Kids range, which was elected the preferred oral healthcare solution by parents who are also dental
professionals.

Philips launched LED 40W-equivalent transparent bulb

 Philips launched an LED 40W-equivalent transparent bulb, which is the first to mimic the look
and shape of a traditional bulb using an innovative design that gives a filament-like light effect. The bulb
offers perfect light distribution and is 85% more energy-efficient than incandescent bulbs.

Philips broadened its Philips Hue portfolio

 Expanding its leadership in connected lighting for the home, Philips broadened its Philips Hue portfolio. It
introduced Philips Hue lux, a bright white light-only version of Philips Hue, as well as the world’s first 3Dprinted luminaires and Philips Hue tap, an innovative kinetic wireless switch.

Philips received 47 iF design awards

 Philips has been recognized with an impressive total of 47 awards in the 2014 iF design awards’ product
category, including an unprecedented four Gold winners: the Sonicare DiamondClean Black Edition,
Lifeline GoSafe, Metronomis LED range and DesignLine LED TV.  

Philips established an Innovation Hub for Africa in Nairobi

 Underlining its commitment to locally relevant innovations, Philips established an Innovation Hub for Africa in Nairobi (Kenya), which will enable the cocreation of new solutions, business models and partnerships to provide meaningful innovations and address key challenges in the continent.

For further information, please contact:

Steve Klink
Philips Group Communications
Tel: +31 6 10888824
E-mail: steve.klink@philips.com
 
Joost Akkermans
Philips Group Communications
Tel.: +31 6 3175 8996
E-mail: joost.akkermans@philips.com

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About Royal Philips:

Royal Philips (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 2013 sales of EUR 23.3 billion and employs approximately 112,000 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 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 forwardlooking statements. For a discussion of factors that could cause future results to differ from such forwardlooking statements, see the Risk management chapter included in our Annual Report 2013.

 

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 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 these non-GAAP 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 2013.

 

Use of fair-value measurements


In presenting the Philips Group 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 or observable market data are not readily available, fair values are estimated using appropriate valuation models and unobservable inputs. Such fair value estimates 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 Annual Report 2013. Independent valuations may have been obtained to support management’s determination of fair values.

All amounts are in millions of euros unless otherwise stated. All reported data is unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 2013, unless otherwise stated.


Prior-period financials have been restated for two voluntary accounting policy changes applied as of January 1, 2014. The first voluntary accounting policy change relates to a reclassification of cost by function in the income statement. Company-wide overhead and indirect Business function costs will be brought more in line with the actual activities performed in our markets. This change has no net effect on Income from operations. The second voluntary accounting policy change relates to a change in the presentation in the cash flow statement. Interest paid and received and income taxes paid previously disclosed outside the statement are as of 2014 disclosed inside the cash flow statement, part of cash flows from operating activities. This change has no effect on the net cash used for operating activities. An overview of the revised full year 2012 and 2013 figures per quarter is available on the Philips website, in the Investor Relations section.

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