Philips 4Q Operational Results Improved 50%
Jan 31, 2013
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Royal Philips Electronics reported that operational results improved by 50%, to EUR 875 million in the fourth quarter of 2012, even as net income was driven down by charges in the quarter. Comparable sales were up 3% in the quarter, and up 10% in growth geographies.

Consumer Lifestyle comparable sales were up 2%, with double-digit growth in the combined growth businesses - that is, Personal Care, Health & Wellness, and Domestic Appliances. Increases were partly offset by a sales decline in Lifestyle Entertainment.

Healthcare comparable sales grew 4%, led by high-single-digit growth in Home Healthcare Systems, mid-single-digit growth in Customer Services, and low-single-digit growth in Imaging Systems and Patient Care & Clinical Informatics.

Lighting comparable sales increased by 4%, with growth in all businesses.

"Our growth initiatives are working, as we increased sales despite the challenging economic environment in western economies," said CEO Frans van Houten. "Our operational results improved across all sectors, as a result of increased sales, overhead cost reductions, and gross margin expansion. We also exceeded our inventory reduction goals as we stepped up working capital management. Underlying performance improved, as EBITA excluding restructuring and other charges increased by 50% to EUR 875 million, which is 12.2% of sales."

Net income in the quarter was impacted heavily by a fine from the European Commission, which van Houten said the company would appeal, and by restructuring costs.

"The challenging economic environment in 2012, notably in Europe and United States, has impacted our order book, and hence we expect our sales in 2013 to start slow and pick up in the second half of the year," van Houten said. "We remain confident in our ability to further improve our operational and financial performance, enabling us to achieve our 2013 financial targets".

The results came even as the company announced that it would be getting out the of the consumer electronics business. The company signed an agreement to transfer its Lifestyle Entertainment business (audio, video, multimedia, and accessories) to Funai Electric Co. A licensing agreement allows Funai to continue using the Philips brand name for at least 5-1/2 years and perhaps indefinitely. The transfer of the audio, multimedia, and accessories businesses to Funai is expected to close in the second half of 2013; the video business will transfer in 2017 to accommodate existing intellectual property licensing arrangements.

The move is part of Philips effort to reshape itself into a technology company focused on health and well-being, as CEO van Houten said at the announcement of the transfer. Philips Consumer Lifestyle CEO Pieter Nota said the Consumer Lifestyle sector will focus on its portfolio of Personal Care, Health & Wellness, Domestic Appliances and Coffee.

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