Philips Lighting Report Lower Sales and Profit

According to Philips, the lighting market is expected to grow by 3-5% per annum between 2013 and 2018. The majority of this growth will be driven by LED-based solutions and applications – heading towards a 60-65% share by 2018 – and growth geographies.

“We are leading the industry transformation, capturing market opportunities and creating value for our customers. Going forward, Philips Lighting will become a stand-alone Lighting Solutions company. This will enable us to further capitalize on the fundamental changes taking place in the lighting industry and deliver innovations that create value and boost growth.”

Eric Rondolat, CEO Philips Lighting

  • The lighting industry is undergoing a radical transformation.
  • The lighting market is being driven by the transition to LED and digital applications.
  • With our four-pillar strategy our goal is to create further value as a world-class lighting solutions provider.
  • We continue on our Accelerate! journey to achieve operational excellence across our businesses.
  • The separation process is fully under way and is expected to take approximately 12-18 months.

In 2014, sales amounted to EUR 6,869 million, 4% lower than 2013. Excluding a 1% negative currency effect, comparable sales decreased by 3%. Light Sources & Electronics recorded mid-single-digit growth and Consumer Luminaires posted a high-single-digit decline. What is worrying is that given Philips’ strategy of focusing on the Professional Lighting Solutions business, it only recorded low-single-digit growth.

From a geographical perspective, comparable sales in growth geographies showed a mid-single-digit decline, largely driven by decline across all businesses in China. As a result, sales in growth geographies decreased from 40% of total sales in 2013 to 39% in 2014. Comparable sales in mature geographies showed a low-single-digit decline, with Western Europe and North America recording a low-single-digit decline and other mature geographies registering a mid-single-digit decline.

Sales of LED-based products grew to 34% of total sales, up from 25% in 2013, driven by Light Sources & Electronics and Professional Lighting Solutions. Sales of energy-efficient Green Products exceeded EUR 4,952 million, or 72% of sector sales.

EBITA declined from EUR 580 million, or 8.1% of sales, in 2013 to EUR 293 million, or 4.3% of sales in 2014. Restructuring and acquisition-related charges amounted to EUR 245 million in 2014, compared to EUR 83 million in 2013. 2014 also included a EUR 13 million past-service pension cost gain in the Netherlands and EUR 68 million of impairment and other charges related to industrial assets, while 2013 included a EUR 10 million past-service pension cost gain. The decrease in EBITA was mainly attributable to higher restructuring and acquisition-related charges and lower sales volume.

EBIT amounted to EUR 185 million, or 2.7% of sales, which included EUR 106 million of amortization charges, mainly related to intangible assets at Professional Lighting Solutions.

Net operating capital decreased by EUR 824 million to EUR 3.6 billion. The decrease was mainly due to the reclassification of Lumileds and Automotive as assets held for sale in 2014, partly offset by positive currency impacts.

Cash flows before financing activities increased from EUR 418 million in 2013 to EUR 442 million, as lower earnings were partly offset by a reduction in working capital.

For more information, visit Philips.

Philips Lighting
Key data in millions of EUR unless otherwise stated
2012 – 2014
2012
2013
2014
Sales
7,303
7,145
6,869
Sales growth
% increase (decrease), nominal
11%
(2)%
(4)%
% increase (decrease), comparable1)
4%
1%
(3)%
EBITA 1)
69
580
293
as a % of sales
0.9%
8.1%
4.3%
EBIT
(78)
413
185
as a % of sales
(1.1)%
5.8%
2.7%
Net operating capital (NOC)1)
4,635
4,462
3,638
Cash flows before financing activities1)
314
418
442
Employees (in FTEs)
41,757
38,671
37,808

By Julie Allen

28 Apr