Third Quarter Results 2015 - Philips
26 oktober, 2015
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Third-quarter highlights
* Comparable sales up 2%, driven by North America, Asia Pacific and Central & Eastern Europe
* Currency-comparable order intake up 2%, driven by 6% growth in North America
* EBITA, excluding restructuring and acquisition-related charges and other items, amounted to EUR 570 million, or 9.8% of sales, compared to 9.1% of sales in Q3 2014
* EBITA totaled EUR 429 million, or 7.4% of sales, compared to a loss of EUR 62 million in Q3 2014
* Net income amounted to EUR 324 million, compared to a net loss of EUR 103 million in Q3 2014
* Free cash flow of EUR 58 million, compared to EUR 155 million in Q3 2014
* Philips provides update on Lumileds transaction
* Philips Lighting separation process on track
Frans van Houten, CEO:
"Philips delivered improved results for the third quarter of 2015, confirming that our operational performance continues to strengthen, despite deteriorating macro-economic conditions in a number of markets, most notably in China.
Healthcare comparable sales and order intake increased, driven by North America. Operational results also improved year-on-year, despite the impact of China and foreign exchange headwinds. Consumer Lifestyle again delivered a strong performance, with a significant product mix improvement
driven by high growth in Health & Wellness and Personal Care. Lighting continued its trend of year-on-year performance improvement, driven by strong growth in our LED businesses, while we continue to actively manage the conventional lighting market decline.
For full-year 2015, we continue to expect modest comparable sales growth and an improvement of our operational performance."
Accelerate! and Separation Update
"Our Accelerate! program continues to drive operational improvements across the organization. In Healthcare, for example, this resulted in reduced manufacturing cycle times and inventory in our Image-Guided Therapy facility in the Netherlands. In Consumer Lifestyle, we simplified the order
fulfillment process in Spain, resulting in improved customer service. In Lighting, a new go-to-market model and customized offerings in Indonesia enhanced our business-to-government sales capabilities, resulting in street-lighting orders from five major cities."
Overhead cost savings amounted to EUR 33 million in the third quarter. The Design for Excellence (DfX) program generated EUR 107 million of incremental procurement savings in the quarter. The End2End improvement program achieved EUR 63 million in productivity gains.
Philips is on schedule to complete the separation of the Lighting business in the first half of 2016. As previously stated, Philips is reviewing all strategic options for Philips Lighting, including an initial public offering and a private sale. The company now expects the related separation
costs to come in at the lower end of EUR 200-300 million for 2015 and remain within that range in 2016.
Update on sale of majority stake in Lumileds to GO Scale Capital
In the course of seeking regulatory approvals regarding the sale of an 80.1% interest in Lumileds to a consortium led by GO Scale Capital, the Committee on Foreign Investment in the United States (CFIUS) has expressed certain unforeseen concerns. Philips and GO Scale Capital will continue to
engage with CFIUS and will take all reasonable steps to address its concerns, but given these, the closing of the transaction is uncertain.
Q3 2015 Financial and Operational Overview
Healthcare
Healthcare comparable sales grew 3% year-on-year and currency-comparable order intake was up 2%. Excluding restructuring and acquisition-related charges and other items, the EBITA margin increased by 30 basis points to 12.3%, driven largely by cost productivity. This was partly offset by
negative currency impact, higher investments for growth initiatives, and increases in Quality & Regulatory spend.
"We are encouraged by continued sales growth and the positive order intake across the majority of our markets. Our focus on delivering meaningful innovations that enhance patient care and improve efficiencies continues to pay off, for example with the introduction of HeartModel, an ultrasound
tool with anatomical intelligence, designed to enhance diagnosis and planning in cardiology."
Consumer Lifestyle
Consumer Lifestyle comparable sales increased by 6% year-on-year, with double-digit growth at Health & Wellness and Personal Care. The EBITA margin, excluding restructuring and acquisition-related charges and other items, increased by 190 basis points to 12.5% year-on-year.
"We delivered significant EBITA gains in Consumer Lifestyle, as well as strong growth. This resulted in market share expansion across a number of product categories and geographies. For instance in Oral Healthcare, innovations including the Philips Sonicare DiamondClean Amethyst and Philips
Sonicare AirFloss Ultra saw high-double-digit growth."
Lighting
Lighting continued its operational improvement, with the EBITA margin, excluding restructuring and acquisition-related charges and other items, increasing by 40 basis points to 9.5% year-on-year. LED lighting comparable sales grew 24% and LED margins improved. LED sales now represent 44% of
total Lighting sales, compared to 36% in Q3 2014. In line with industry trends, conventional lamps sales declined by 15%, resulting in an overall comparable sales decrease of 3% year-on-year.
"We are pleased with another quarter of strong performance from our LED business, which now represents close to half of Lighting sales. We continue to introduce LED innovations to customers. For example, Philips will outfit 32 Accenture offices with more than 140,000 LED-based products in
India. The upgrade will enable significant energy savings and create a more pleasant work environment. Simultaneously, we will continue to proactively manage the conventional lighting market decline, allowing us to deliver improvements to Lighting EBITA margins."
Innovation, Group & Services
Comparable sales increased by 15%, driven by IP Royalties and very strong growth in Philips' emerging businesses such as Digital Pathology and Photonics. EBITA was a net cost of EUR 139 million, compared to a net cost of EUR 151 million in the third quarter of 2014.
"We are driving leadership positions in emerging business areas such as digital pathology. In Europe and Asia Pacific, leading health institutions such as Germany's largest telemedicine platform and Singapore General Hospital digitize their pathology workflows with Philips' IntelliSite
Pathology Solutions to enhance disease diagnosis, underpinning our leadership in this field."
Quarterly Report
[IMG] Q3 2015 - Quarterly Report
Presentation
[IMG] Q3 2015 - Quarterly Results Presentation
Conference call and audio webcast
A conference call with Frans van Houten, CEO, and Abhijit Bhattacharya, 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 2015 conference call audio webcast
More information about Frans van Houten and Abhijit Bhattacharya
Click here for Mr. van Houten's CV and images
Click here for Mr. Bhattacharya's CV and images
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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 2014 sales of EUR 21.4 billion
and employs approximately 106,000 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 the strategy, estimates of sales growth, future EBITA, future developments in Philips' organic business and the completion of acquisitions and divestments. 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 Philips' strategy and the ability to realize the benefits of this strategy, the 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, the ability to identify and complete successful acquisitions, including Volcano, and to integrate those acquisitions
into the business, the ability to successfully exit certain businesses or restructure the 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 the Annual Report 2014 and
the "Risk and uncertainties" section in the semi-annual financial report for the six months ended June 30, 2015.
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. Non-GAAP financial measures do not have standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. 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 the Annual Report 2014.
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 the Annual Report 2014. Independent valuations may have been obtained
to support management's determination of fair values.
Presentation
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 2014, unless otherwise stated. The presentation of certain prior-year information has been reclassified
to conform to the current-year presentation.
In 2014, we announced plans to establish two standalone companies focused on the HealthTech and Lighting opportunities. The proposed separation of the Lighting business impacts all businesses and markets as well as all supporting functions and all assets and liabilities of the Group. Philips
expects to complete the separation of the Lighting business in the first half of 2016. We expect to continue reporting in the existing structure until the changes in the way we allocate resources and analyze performance in the new structure have been completed.
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[IMG] Global News Center
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Leading global health institutions digitize pathology workflows with Philips to enhance disease diagnoses
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Philips became Leader in the Industrial Conglomerates category
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