“While we are very pleased with the excellent performance of Healthcare, our fourth-quarter results are a reflection of both the severe impact of the global financial and economic crisis and the decisive actions taken by management. The effects of the steep downturn have led not only to value adjustments of our remaining financial holdings and the impairment of goodwill at Lumileds, but also to a sharp reduction in demand, especially in Consumer Lifestyle and in our OEM businesses in Lighting, compounded by de-stocking in the whole supply chain. In response, management has given absolute priority to cash flow, where necessary at the expense of EBITA, and to the acceleration of our restructuring and change programs. We expect these programs to deliver benefits of approximately EUR 400 million on an annualized run rate, taking effect in the second half of 2009. We have sustained our spending levels on R&D and marketing as innovation is now more crucial than ever.
The increased strength of our business portfolio was particularly evident in Healthcare in the fourth quarter, where we grew sales by 9% comparably and continued to gain market share, while EBITA was a solid 14.2%. Excluding the 3.5% reduction from restructuring and acquisition-related charges, EBITA was 17.7%, with a continued strong contribution from the former Respironics business.
At Lighting, our Professional Luminaires business maintained moderate comparable growth in a declining market, while in our Lamps operations we focused on drastically reducing inventory and production. I am confident the significant restructuring programs we pulled forward in response to the rapid deterioration of the economy towards the end of 2008 will enable us to improve the competitiveness of this sector as well, despite the clear challenges ahead, particularly in the automotive and construction sectors.
In Consumer Lifestyle, we continued to optimize our portfolio by focusing on differentiating, profitable businesses. The choices we made are certainly reflected in the top-line result in this sector. While EBITA came under severe pressure in the fourth quarter, we are creating a much stronger sector for the future, ready to benefit when consumer spending recovers to normal levels.
The development of our quarterly results reflects the unprecedented speed and ferocity with which the economy softened in 2008. This prevents us from looking too far into the future. However, I am confident that the overall strength of our business portfolio, the proactive measures we have taken to manage the impact of the downturn and our strong focus on working capital management will carry us successfully through this economic downturn, making us stronger and well-positioned to succeed in building Philips into the leading brand in Health & Well-being.”
A conference call with Gerard Kleisterlee, President & CEO, and Pierre-Jean Sivignon, Chief Financial Officer, to discuss the results will start at 9:15AM CET, on Monday January 26, 2009. A live audio webcast of the conference call will be available through the link below.
The 2008 Annual Results press conference will be held on Monday January 26, 2009 at 11:00AM CET and will be available via video webcast. Replay will be made available immediately after the ending of the press conference.
Achieva 3.0T TXAt the annual Radiology event RSNA in Chicago in December 2008, Philips unveiled its new 3.0T MRI system – with up to 40% greater scanning speed – that offers the patient greater convenience and increases patient throughput potential for healthcare providers.
Ledino LuminairesIn selected European countries, Philips has launched Ledino luminaires, the world’s most advanced and extensive range of indoor and outdoor energy-efficient, stylish LED-based lighting solutions for general illumination.
MagnotechPhilips showcased a unique biosensor technology, Magnotech, at the German healthcare trade fair Medica 2008. This technology has the potential to offer rapid in-vitro diagnostic test results in near-patient care settings such as the patient’s bedside.
New brand campaignPhilips launched a new brand campaign targeting business influencers with leading media including CNN and The Economist. The campaign, aimed at further increasing Philips’ global brand value, highlights Philips’ uniquely differentiating simplicity-driven propositions in the domain of Health & Well-being.
Sustainable solar lightingPhilips has started supplying sustainable solar lighting to Ghana as part of its partnership with the Dutch Government to provide sustainable off-grid lighting solutions to sub-Saharan Africa. More countries will follow in 2009.
Intelligent Water PurifierPhilips’ Intelligent Water Purifier received the Best Ultraviolet Purifier Award 2008-2009 at the Water Digest Awards in India. The awards were supported by UNESCO.
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Royal Philips Electronics of the Netherlands (NYSE: PHG, AEX: PHI) is a diversified Health and Well-being company, focused on improving people’s lives through timely innovations. As a world leader in healthcare, lifestyle and lighting, Philips integrates technologies and design into people-centric solutions, based on fundamental customer insights and the brand promise of “sense and simplicity”. Headquartered in the Netherlands, Philips employs approximately 121,000 employees in more than 60 countries worldwide. With sales of EUR 26 billion in 2008, the company is a market leader in cardiac care, acute care and home healthcare, energy efficient lighting solutions and new lighting applications, as well as lifestyle products for personal well-being and pleasure with strong leadership positions in flat TV, male shaving and grooming, portable entertainment and oral healthcare. News from Philips is located at www.philips.com/newscenter.
This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items, in particular the outlook paragraph in this report. Examples of forward-looking statements include statements made about our strategy, estimates of sales growth, future EBITA and future developments in our organic business. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.These factors include but are not limited to domestic and global economic and business conditions, the successful implementation of our strategy and our ability to realize the benefits of this strategy, our ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs, raw materials and employee costs, our ability to identify and complete successful acquisitions and to integrate those acquisitions into our business, our ability to successfully exit certain businesses or restructure our operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition. As a result, Philips’ actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements.Statements regarding market share, including those regarding Philips’ competitive position, contained in this document are based on outside sources such as specialized research institutes, industry and dealer panels in combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated.
Use of non-US GAAP informationIn presenting and discussing the Philips Group’s financial position, operating results and cash flows, management uses certain non-US GAAP financial measures. These non-US GAAP financial measures should not be viewed in isolation as alternatives to the equivalent US GAAP measure(s) and should be used in conjunction with the most directly comparable US GAAP measure(s). A discussion of the non-US GAAP measures included in this document and a reconciliation of such measures to the most directly comparable US GAAP measure(s) are contained in this document.
Use of fair-value measurementsIn presenting the Philips Group’s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable.Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When an observable market value does not exist, fair values are estimated using valuation models which we believe are appropriate for their purpose. They require management to make significant assumptions with respect to future developments which are inherently uncertain and may therefore deviate from actual developments. In certain cases, independent valuations are obtained to support management’s determination of fair values.