In its first year as a standalone company, Philips Lighting achieved a total sales of €7,115 million, a decline of 2.4% on a comparable basis. According to Philips, this shows “an improved trend compared to 2015, despite challenging macro-economic conditions in some markets.” Adjusted gross margin increased to €2,763 million, driven by footprint rationalisation, operational leverage and procurement savings, partly offset by price reductions.

Adjusted indirect costs decreased by €60 million, to €2,257 million, driven by cost reduction programs, despite an additional charge of EUR 36 million for the brand license fee. Adjusted EBITA reached €645 million and adjusted EBITA margin increased by 180 basis points, to 9.1%, in line with our medium term path of gradual improvement, with each business group contributing to the increase.

Financial expenses were related to the new financing structure of the company following its separation from Royal Philips.

CEO Eric Rondolat said that business performed in accordance with the strategic objectives, “despite challenging conditions in some markets. We are pleased with the significant increase in profitability and solid free cash flow in our first year as a standalone company. These results mark a continued progression to achieve our strategic goals and medium term financial objectives. Our team remains focused on the opportunities ahead and is committed to meeting the needs of our customers through innovation, while executing concrete actions to continue improving our growth profile.” 

Outlook

In 2017, Philips Lighting expects further improvement in Adjusted EBITA margin by approximately 50-100 basis points, in line with the medium term outlook to gradually improve the Adjusted EBITA margin to 11-13%. “We also remain committed to delivering solid free cash flow. While we are cautious given global economic uncertainty, we remain committed to our ambition to return to positive comparable sales growth in the course of this year.” 

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About the author

Author profile picture Bart Brouwers is co-founder and co-owner of Media52 BV, the publisher of innovationorigins.com.