• Comparable sales up 3%, led by 7% growth at Lighting
• Growth geographies sales up 12% on a comparable basis
• EBITA of 7.5% of sales
• Net income from continuing operations at EUR 112 million
• Free cash flow of EUR 961 million
• Proposed dividend stable at EUR 0.75 per share
Q4 financials: Year-on-year revenue increased across all operating sectors. EBITA margin declined from 14.1% in Q4 2010 to 7.5% in Q4 2011.
Healthcare comparable sales were 3% higher year-on-year. Comparable equipment order intake grew 3% year-on-year. Equipment orders in growth geographies grew by 17%. Results were impacted by weakness in the European markets, postponed deliveries of existing orders, as well as increased investments in new product innovation and sales channels.
Consumer Lifestyle sales increased 1% on a comparable basis. At an aggregate level, the three growth businesses – Personal Care, Health & Wellness, and Domestic Appliances – achieved a high single-digit comparable sales increase compared to the fourth quarter of 2010. The sector growth rate was impacted by a comparable sales decline at Lifestyle Entertainment. Reported EBITA margin for the quarter was 10%.
Lighting comparable sales increased 7% year-on-year, driven by double-digit sales growth at Lamps and Automotive. LED-based sales grew 37% compared to Q4 2010, now representing 18% of total Lighting sales. Sales in growth geographies increased by 21% in the quarter. Results were impacted by pricing, inventory reduction measures, and operational issues. As part of the turnaround plan, most brands for Consumer Luminaires products will be re-branded as Philips, which resulted in a value adjustment of commercial and brand-related assets leading to a charge of EUR 128 million.
Working capital reductions in the sectors amounted to more than EUR 500 million in the quarter, contributing to a free cash inflow of EUR 961 million in the fourth quarter.
The company completed 35% of its EUR 2 billion share buy-back program since the start of the program in July 2011. Taking into consideration the volatility of the financial markets, Philips has decided to extend the timing of the program until the end of Q2 2013.
Moving forward on Accelerate!, Philips’ change and performance improvement program
Philips is seeing the initial signs of the Accelerate! program positively impacting sales growth in difficult market circumstances. Importantly, the company has attracted key talent for critical positions across the company.
In addition, as part of the company’s efforts to improve its end-to-end processes, inventory as a percentage of sales decreased to 16.1% from 18.2% in Q3 2011, representing a comparable decrease of EUR 585 million, which is an improvement compared to the decrease in inventory seen in the same period last year.
The actions to deliver on the overhead cost reduction program are on track, and the first planned cost savings were realized in the quarter.
The annual incentive system for the executives has been changed to reflect line-of-sight accountability and is now fully aligned with the key performance indicators of the 2013 mid-term financial targets.
“Our fourth quarter results were impacted by weak European sales, postponement in deliveries of existing orders in our Healthcare sector, and inventory correction actions and other operational issues in our Lighting business. These issues were partially offset by solid results in our Consumer Lifestyle growth businesses, which benefited from the early adoption of the Accelerate! change and performance improvement program. In addition, we delivered strong free cash flow as a result of our work to reduce working capital.
We are cautious about 2012 given the uncertainty in the global economy, and Europe in particular. In addition, we expect our 2012 results to be affected by the previously communicated restructuring charges and one-time investments aimed at improving our business performance trajectory, as part of the multi-year Accelerate! program. Excluding these additional charges, we expect the underlying operating margins and capital efficiency in the sectors to improve in the latter part of 2012.
While we are concerned about the economic environment, all of us at Philips are fully committed to improve our operational performance to achieve our mid-term (2013) financial targets."
Frans van Houten, CEO of Royal Philips Electronics
Philips CEO Frans van Houten comments on Q4