The FINANCIAL — 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, according to Philips Electronics.
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.