Philips Sales, Operational Revenues Hit EUR 6.036 in 3Q2014

Philips has reported third quarter 2014 sales of EUR 5.5 billion and operational results of EUR 536 million, a comparable sales growth flat, with sales in growth geographies up 2%.

The Company said that EBITA, excluding restructuring and acquisition-related charges and other items, amounted to EUR 536 million, or 9.7% of sales, compared to 11.4% in Q3 2013

EBITA amounted to a loss of EUR 7 million, primarily impacted by charges related to IP litigation and the voluntary production suspension at the Cleveland facility.

Net loss of EUR 103 million, compared to net income of EUR 281 million in Q3 2013.

Currencies negatively impacted sales by 1.7% and EBITA by 0.9 percentage points of sales.

Free cash flow of EUR 166 million, compared to EUR 122 million in Q3 2013, while it has started the process of creating two market-leading companies focused to capitalize on the HealthTech and Lighting solutions opportunities

Frans van Houten, chief executive officer of the Company, said that, “The successful execution of our Accelerate! program continues to improve operational performance in most of our businesses. We are very excited by the vast opportunities in the HealthTech and Lighting solutions markets that we will capitalize on with the creation of two dedicated market-leading companies.

“As we manage through a challenging 2014 and given a number of incidentals, we are not satisfied with our overall performance in the third quarter. We are facing sustained softness in a number of markets such as China and Russia. We were also confronted by an adverse jury verdict with a surprisingly high proposed award in the Masimo litigation, which we will appeal. On a positive note, production at our Cleveland facility is ramping up.

In Healthcare, he said, Philips was delighted to win four multi-year strategic contracts, thereby demonstrating that its integrated solutions are gaining momentum despite a very slow market.

“In Consumer Lifestyle, our focus on health and wellness products is yielding good results, as demonstrated by the solid performance of Oral Healthcare and Mother & Child Care, despite challenging conditions in some of our bigger markets. In Lighting, we improved the performance of Consumer Luminaires in Europe and achieved double-digit growth and market share gains in Lumileds, which helped to balance the decline in conventional lighting.

“As a few of the near-term headwinds start to abate and our Accelerate! program continues to improve our operational performance, we expect our adjusted EBITA in the second half of 2014 to be slightly below the adjusted EBITA in the same period last year and we remain committed to our 2016 financial targets.”

Reviewing the Q3 financial and operational, in Healthcare, he said, “We are making good progress in the remediation of the quality management system at our Cleveland facility. We have now also resumed production of the iCT and Ingenuity scanners, and production ramp-up will continue through the first quarter of 2015. This will contribute to improved performance in the fourth quarter and into 2015.

“More broadly, we are seeing good traction with our programs that address government and health system goals of improving population health and delivering quality care more effectively.

“This is illustrated by our new 15-year contract with the Reinier de Graaf hospital in the Netherlands, the 14-year contract with the Karolinska University Hospital and the Stockholm County Council, and the 10-year contract related to the 700-bed Philippine Orthopedic Centre in the Philippines, where our systems and consultancy will help improve operational performance.”

Healthcare comparable sales grew by 1% year-on-year.

The EBITA margin, excluding restructuring costs and various charges, was 12%, a decrease of 2.6 percentage points year-on-year. Currency-comparable equipment order intake declined by 1%.

On Consumer Lifestyle, Houten said, “In Consumer Lifestyle, we are continuing to expand our offering to help consumers make healthier choices every day and drive value from the ‘Internet of Things’. In the third quarter, we introduced a number of digital cloudconnected solutions, including an application to manage chronic pain treatment and an oral healthcare application that helps children to brush their teeth more effectively.

“Consumer Lifestyle comparable sales increased by 5%, with mid-single-digit growth in Health & Wellness and Domestic Appliances and low-single-digit growth in Personal Care. The EBITA margin, excluding restructuring and acquisition-related charges and other items, was 10.6%, compared with 11.1% in the same period last year. The margin decline was attributable to country and product mix”.

The company also launched a series of exciting new products.

On Lighting, the CEO added, “In Lighting, we are solving customer needs with exciting energy-efficient LED solutions, and our breakthrough range of Hue Beyond connected luminaires illustrates how well-positioned we are to drive profitable growth through leading LED innovations, connected ecosystems and professional systems and services. We saw encouraging wins, including a partnership in Indonesia to install LED lighting solutions in nearly 1,000 convenience stores and a contract to deliver LED pitch lighting for Chelsea’s Stamford Bridge stadium in London.”

Lighting comparable sales declined 1% year-on-year. LED-based sales grew by 28%, offset by a decline of 14% in overall conventional lighting sales, among other overviews released on the company’s website.