Slide 1: Philips Lighting reports continued improvement in operational profitability and cash flow in second quarter
Philips Lighting reports continued improvement in operational profitability and cash flow in second quarter Q2 2016 Presentation July 22, 2016
Slide 2: Today's presenters
Today’s presenters Eric Rondolat Rene van Schooten CEO CFO & Head of BG Lamps • Joined Philips Lighting in 2012 • Joined Philips Lighting in 1999 • 25+ years of international management experience in • 30+ years of international management experience in lighting and energy management at Philips and
Slide 3: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Rene van Schooten Q&A
Slide 4: Philips Lighting reports continued improvement in operational profitability and cash flow in second quarter
Philips Lighting reports continued improvement in operational profitability and cash flow in second quarter Second quarter 2016 highlights Half year 2016 highlights • Total LED based sales grew 25% in the quarter and now • Continued improvement in operational profitability represent 53% of total sal
Slide 5: Successful execution of our strategy
Successful execution of our strategy Q2 2016 CSG% Adjusted vs LY Adjusted vs LY EBITA (€m) EBITA % (bps) (€m) Lamps -16.8% 117 -12 20.5% +270 LED 15.6% 29 20 8.4% +550 Professional 3.8% 46 7 6.7% +110 Home 14.3% -10 8 -7.9% +850 Philips Lighting -1.5% 161 22 9.3% +180 5
Slide 6: Lamps continued to deliver solid margins
Lamps continued to deliver solid margins 727 727 671 725 615 20,3% 20,5% 572 16,9% 17,7% 15,5% 14,8% -14,2% -14,5% 123 129 125 117 -15,0% 104 107 -16,3% -16,8% -18,3% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Sales Comparable sales growth Adjusted EBIT
Slide 7: LED grew double-digit with good margin progression
LED grew double-digit with good margin progression 400 8,8% 8,4% 355 7,2% 345 346 5,6% 314 275 2,9% 35 31,6% 32,5% 1,8% 25 29 24,1% 28,8% 20 19,9% 15,6% 9 5 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Sales Comparable sales growth Adjusted EBITA (in €m)
Slide 8: Professional delivered growth and margin improvement
Professional delivered growth and margin improvement 689 706 752 684 6,9% 6,6% 6,7% 610 601 3,8% 5,7% 2,0% 1,0% -0,2% 2,0% 49 50 46 -1,9% -1,5% -2,1% 39 12 6 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Sales Comparable sales growth Adjusted EBITA (in €m)
Slide 9: Home showed solid growth and reduced adjusted EBITA loss
Home showed solid growth and reduced adjusted EBITA loss 167 124 127 -7 112 116 120 -10 13,8% 14,3% -14 -12 10,7% -17 -19 -4,2% -5,3% -7,0% -6,7% -7,9% -9.7% -12,5% -14,2% -16,4% 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 Sales Comparable sales growth A
Slide 10: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Rene van Schooten Q&A
Slide 11: Improved adjusted EBITA from gross margin improvements, offsetting currency effects
Improved adjusted EBITA from gross margin improvements, offsetting currency effects Adjusted EBITA (€m) As % of sales 7.5% +2.2% -0.6% +0.6% -0.5% 9.3% 33 (108) 113 (10) 11 (17) 161 139 Q2 2015 Vol / mix Price CoGS Brand Indirect costs Currency Q2 2016 1 license fee 11 1 Brand license fee is include
Slide 12: Year-on-year reduction of indirect cost
Year-on-year reduction of indirect cost Adjusted indirect costs (€m and as % of sales) Key observations • Year-on-year cost reduction offsetting 32.1% 31.1% 30.2% 30.8% 33.0% 32.0% negative impact from brand license fee: Q1 2016: €6 million Q2 2016: €10 million • As % of sales, negative impact from
Slide 13: Working capital well managed driven by reduced inventory levels
Working capital well managed driven by reduced inventory levels Working capital1 (in €m & as % of sales) Inventories (in €m & as % of sales) 13,6% 14,1% 13,2% 11,6% 12,2% 11,1% 832 865 895 988 1.010 1.030 -280bps -250bps Q4 2015 Q1 2016 Q2 2016 Q4 2015 Q1 2016 Q2 2016 16,0% 16,6% 15,0% 14,3% 14,1% 1
Slide 14: Improved free cash flow in second quarter
Improved free cash flow in second quarter Free cash flow (in €m) Key observations • Second quarter improvement by : • lower cash out from working capital, provisions and 60 net capex • offset by increased interest payments (new financing structure) and higher taxes • Special items Q2 2016 (€43m) of
Slide 15: Philips Lighting has revenues in a wide range of currencies
Philips Lighting has revenues in a wide range of currencies Q2 2016 Sales FX Footprint (% of total) Key observations • Currency movements had a negative impact on sales and Other Adjusted EBITA in the second quarter currencies USD 38% 29% • Sales impact from currencies of -4.6%, mainly from US Dolla
Slide 16: on c £ c — eu = 5,
on c £ c 00 7 — eu = 7 5,
Slide 17: Important information
Important information Forward-Looking Statements and Risks & Uncertainties This document and the related oral presentation contain, and responses to questions following the presentation may contain, forward-looking statements that reflect the intentions, beliefs or current expectations and projectio