• Comparable sales up 4%, led by 9% growth at Healthcare
• Sales in growth geographies up 9% on a comparable basis
• Reported EBITA of 9.8% of sales
• Net income of EUR 249 million
• Free cash flow of EUR 642 million
• TV joint venture with TPV completed, Senseo transaction with Sara Lee finalized
• Philips sells real estate of High Tech Campus Eindhoven
• Cost savings on track
Q1 financials: Good growth at Healthcare and growth businesses in Consumer Lifestyle.
At Lighting, LED product sales continued to increase. Improved EBITA at Healthcare and Consumer Lifestyle while EBITA at Lighting declined.
Healthcare comparable sales were 9% higher year-on-year, with very strong growth of 27% in growth geographies. Comparable equipment order intake grew 7% year-on-year, with the strongest contribution from Patient Care & Clinical Informatics (PCCI). EBITA margin for the quarter was 10.2%.
Consumer Lifestyle sales decreased 1% on a comparable basis as strong growth at Personal Care, Health & Wellness, and Domestic Appliances combined was offset by a decline at Lifestyle Entertainment. Reported EBITA margin for the quarter was 20.1%, as a one-time gain from extending the partnership with Sara Lee impacted results positively.
Lighting comparable sales increased 2% year-on-year; mid-single-digit sales growth in all businesses was partly offset by a decrease at Lumileds. LED-based sales grew 22% compared to Q1 2011, and now represent 16% of total Lighting sales. Lighting achieved high-single-digit sales growth in its growth geographies. Results were impacted by operational issues at Consumer Luminaires and Lumileds, as well as a one-time loss on the sale of assets. Reported EBITA was 3.0%.
We have completed 43% of our EUR 2 billion share buy-back program since the start of the program in July 2011.
Moving forward on Accelerate!, Philips’ change and performance improvement program
In the first quarter of 2012 our multi-year Accelerate! program continued to gain traction, with much potential still to be realized. The implementation of the granular performance management approach is resulting in improved performance and market share gains in many Business Market Combinations. We have completed the strengthening of the leadership teams in all our important markets. Programs to improve the cost, speed and effectiveness of the end-to-end customer value chain are making good progress. The actions to deliver on our announced overhead cost reduction program are on track; incremental savings in the first quarter of 2012 amounted to EUR 37 million. Cumulative savings to the end of 2012 are expected to be EUR 400 million. Additionally, in order to drive the company towards a performance culture, close to 200 of our leaders have participated in an immersive behavior change program, with encouraging feedback.
I am encouraged by our results in the first quarter of 2012, which is a further step in the right direction for Philips on our path to value to achieve the mid-term 2013 financial targets. Accelerate! is beginning to impact the company’s performance, and cost-saving initiatives are on track. Healthcare sales and order intake showed robust growth, and the growth businesses of Consumer Lifestyle continued to perform well. After a declining trend over the past seven quarters, I am quite pleased with the sequential performance improvement at Lighting, as organizational changes and operational improvements began to show positive results.
Very importantly, during the quarter, we completed the formation of the TV joint venture as planned, which was a top priority.
I am also pleased with two great additions to our Executive Committee: Eric Rondolat, who will run our Lighting business, and Deborah DiSanzo, who will lead Healthcare. Eric brings a wealth of experience from the energy management industry and is well-positioned to lead our transformation to LED lighting solutions. And Deborah is a Healthcare veteran who, with her highly successful track record in Philips, provides continuity to our largest sector.
We remain cautious about the remainder of 2012 given the uncertainties in Europe, particularly in the healthcare and construction markets, and the slowing growth rate in the global economy. As we have stated earlier, we expect our results in 2012 to be impacted by restructuring charges and one-time investments aimed at improving our business performance trajectory, as part of the multi-year Accelerate! program. Notwithstanding these one-time charges, we expect the underlying operating margins and capital efficiency in the sectors to improve in the latter part of 2012.
Frans van Houten, CEO of Royal Philips Electronics