- Comparable sales increased by 1%; growth geographies up by 4%
- EBITA was EUR 402 million or 7.6% of sales
- EBITA excluding restructuring and acquisition-related charges increased to EUR 421 million or 8.0% of sales, a significant improvement over the 6.1% of sales in Q1 2012
- Net income of EUR 162 million was significantly better than Q1 2012 excluding one-off gains
- Consumer Lifestyle sales grew 10%; the Audio, Video, Multimedia and Accessories business is reported as discontinued operations as of Q1 2013 following the signing of the agreement with Funai
- Free cash flow was EUR 78 million, excluding payment of the EUR 509 million European Commission fine
- Inventories as a percentage of sales improved by 1.4 percentage points compared to Q1 2012
Frans van Houten, CEO:
“We made solid progress again in the first quarter as all sectors contributed to the 31% improvement of our operational results, clearly demonstrating the positive impact our Accelerate! transformation program is having on our company. The initiatives to improve gross margins, structurally lower our cost base and reduce our inventory levels led to a better performance in the quarter. Consumer Lifestyle sales did very well, with strong 10% growth, as our locally relevant products and granular approach to drive growth delivered results. At Lighting, LED-based sales grew 38% over the previous year. Weak construction markets negatively impacted overall Lighting sales which were flat compared to the first quarter of 2012. At Healthcare, lower order intake in 2012 impacted sales, mainly in the US.
We reiterate our view of a slow first half to 2013, due to adverse market trends, especially in Europe and the US. We will continue to drive the execution of the Accelerate! initiatives, which include major productivity improvements and investments in innovation and sales capabilities, as we are convinced that our strong focus on operational excellence and organic growth will further unlock the full potential of Philips. We are committed to reach our financial targets this year.”
Q1 financials: Operating results improve to 8.0% of sales versus 6.1% in Q1 2012, with improvements across all sectors. Sales growth in the quarter was modest.
Healthcare comparable sales declined by 1% year-on-year. Customer Services and Home Healthcare Solutions had low single-digit growth, Patient Care & Clinical Informatics sales were flat, and Imaging Systems sales had a high-single-digit decline. Currency-comparable equipment order intake declined by 5%. EBITA margin improved to 10.4% of sales. EBITA margin excluding restructuring and other charges was 10.5% of sales, a year-on-year improvement of 0.9 percentage points.
Consumer Lifestyle comparable sales were 10% higher year-on-year, driven by double-digit growth at Domestic Appliances, high-single-digit growth at Personal Care, and mid-single-digit growth at Health & Wellness. EBITA margin was 9.8%. EBITA margin excluding restructuring and other charges was 9.9% of sales, a year-on-year improvement of 3.2 percentage points.
Lighting comparable sales were in line with Q1 2012 as double-digit growth at Lumileds and mid-single-digit growth at Automotive were offset by declines in the other businesses. LED-based sales grew 38% compared to Q1 2012 and now represent 23% of Lighting sales. EBITA margin improved to 7.4%. EBITA margin excluding restructuring and other charges was 8.4%, an improvement of 3.7 percentage points.
Philips has completed 86% of the EUR 2 billion share buy-back program since the start of the program in July 2011.
Prior-period financials have been revised for the adoption of IAS19R, which mainly relates to pension reporting.
Accelerate! continues to deliver results
To support this transformation, over 900 senior leaders have participated in change management programs to create a high-performance culture. Our quarterly surveys conducted across 40,000 employees confirm that our Accelerate! initiatives are impacting all levels of the organization. We have launched our DfX program (DfX stands for Design for X, where X can be cost, quality, manufacturing, etc.) to reduce our bill of materials and improve value creation. The first pilots of our DfX program have clearly demonstrated the potential for improvement in this area. We have simplified the value chain in executed projects, which has led to an improvement of around 25% in customer service levels in Q1 2013 and reduced time-to-market of new innovations. Our overhead cost reduction program has resulted in EUR 549 million cumulative gross savings to date, including EUR 78 million realized in Q1 2013. We reduced inventory levels by 1.4 percentage points year-on-year this quarter.
Conference call and audio webcast
A conference call with Frans van Houten, CEO, and Ron Wirahadiraksa, 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.
More information about Frans van Houten and Ron Wirahadiraksa