Philips' First Quarter Results 2013 - Healthcare Sector

Royal Philips ElectronicsPhilips' 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.

Business highlights

  • Expanding its leadership in image-guided interventions and therapy, Philips has globally introduced its EchoNavigator live image-guidance tool, a breakthrough technology that combines live X-ray and 3D ultrasound to support structural heart-disease repairs without the need for open-heart surgery.
  • Leveraging its expertise in clinical informatics, Philips has expanded its eICU offering to remotely monitor ICU patients from a centralized facility with an innovative graphical dashboard that integrates practical data with visual technology to help clinicians to prioritize patient needs and streamline in-hospital care.
  • In line with its strategic objective to expand its value segment portfolio in imaging, Philips has introduced the Multiva 1.5T MRI system and the Ingenuity Flex 16-slice CT scanner that combine fast and robust imaging with a rich set of clinical applications. In addition, Philips has started shipping the ultrasound ClearVue 350 and 550 value segment systems from its manufacturing facility in Suzhou in China.
  • Philips has grown its offering for personalized care from the hospital to the home with the introduction, in the US, of Philips Lifeline GoSafe, a new mobile personal emergency response system with a suite of locating technologies and two-way cellular voice communication including fall detection capabilities.
  • Investing in growth geographies, Philips launched the "Fabric of Africa", a collaborative campaign to improve healthcare access across the continent. Philips will introduce innovative, cost-appropriate health technologies and solutions to the African market, and through local and international partnerships will provide financing solutions, technical assistance and support, and training programs.

Financial performance

  • Currency-comparable equipment order intake declined 5% year-on-year. Order intake at Patient Care & Clinical Informatics and Imaging Systems declined in the quarter. Equipment orders in Europe showed a high-single-digit decline due to weak markets in Western Europe. Orders in North America showed a double-digit decline, reflecting the continued market uncertainties. Equipment orders in growth geographies declined by 4%.
  • 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.
  • From a regional perspective, comparable sales in growth geographies decreased by 2%, with high-single-digit sales growth in China and low-single-digit growth in Latin America offset by double-digit declines in Russia, the Middle East and Central and Eastern Europe. Comparable sales in mature geographies decreased by 1%, with mid-single-digit declines in North America and Europe. Comparable sales in other mature geographies showed strong double-digit growth.
  • EBITA was EUR 222 million, or 10.4% of sales, compared to EUR 202 million, or 9.1% of sales, in Q1 2012. The year-on-year improvement was driven by overhead cost reductions and gross margin improvements. Excluding restructuring and acquisition-related charges, EBITA grew to EUR 224 million, or 10.5% of sales, compared to EUR 211 million, or 9.6% of sales, in Q1 2012.
  • Net operating capital, excluding a currency translation increase of EUR 184 million, decreased by EUR 335 million. The decrease was largely driven by improved working capital. Inventories as a percentage of sales improved by 2.0 percentage points year-on-year, with improvements seen across all businesses.
  • Compared to Q1 2012, the number of employees decreased by 681, driven by reductions in North America and Europe

Frans van Houten, CEO, mentioned: "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."

About Royal Philips Electronics
Royal Philips Electronics (NYSE: PHG, AEX: PHIA) is a diversified health and well-being company, focused on improving people's lives through meaningful innovation in the areas of Healthcare, Consumer Lifestyle and Lighting. Headquartered in the Netherlands, Philips posted 2012 sales of EUR 24.8 billion and employs approximately 118,000 employees with sales and services in more than 100 countries. The company is a leader in cardiac care, acute care and home healthcare, energy efficient lighting solutions and new lighting applications, as well as male shaving and grooming, home and portable entertainment and oral healthcare.

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