Slide 1: Philips Lighting reports comparable sales growth of 1.3% and continued improvement in operational profitability
Philips Lighting reports comparable sales growth of 1.3% and continued improvement in operational profitability Q3 2017 results Analyst & Investor presentation October 19, 2017
Slide 2: 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
Slide 3: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 4: Positive CSG of 1.3% and 50 bps improvement in Adjusted EBITA margin
Positive CSG of 1.3% and 50 bps improvement in Adjusted EBITA margin Sales (in EURm) & comparable sales growth (in %) Key observations for Q3 2017 • Comparable sales increased by 1.3%, driven by significant 1.3% growth in LED, Professional and Home -0.8% • Total LED-based sales increased by 22% -1.8
Slide 5: Growth and margin improvement driven by LED, Professional & Home
Growth and margin improvement driven by LED, Professional & Home Adjusted Adjusted Q3 2017 CSG % vs LY (EURm) vs LY (bps) EBITA (EURm) EBITA % Lamps -20.2% 85 -35 20.0% -110 LED 14.3% 45 +5 10.7% +10 Professional 7.0% 69 +27 10.1% +380 Home 28.1% 2 +3 1.4% +220 Philips Lighting 1.3% 176 +1 10.5% +50
Slide 6: Growth and higher profitability at LED, Professional and Home more than offset decreasing profit contribution of Lamps
Growth and higher profitability at LED, Professional and Home more than offset decreasing profit contribution of Lamps 10.5% 10.0% 10 bps 10 bps -130 bps 10 bps 140 bps Adjusted EBITA Lamps LED Professional Home Other Adjusted EBITA margin 3Q16 margin 3Q17 6
Slide 7: Lamps comparable sales decline partly reflects high base of comparison in Q3 2016
Lamps comparable sales decline partly reflects high base of comparison in Q3 2016 Sales (in EURm) & comparable sales growth (in %) Key observations for Q3 2017 -13.3% • Comparable sales declined by 20.2%, partly reflecting a -18.5% -17.9% -18.2% high base of comparison in Q3 2016 -20.2% • We estimat
Slide 8: LED shows continued volume growth, driven by LED lamps
LED shows continued volume growth, driven by LED lamps Sales (in EURm) & comparable sales growth (in %) Key observations for Q3 2017 • CSG of 14.3% driven by significant volume growth, partly 20.9% offset by lower selling prices and stronger growth in 11.5% 11.3% 16.7% 14.3% more affordable products
Slide 9: Professional significantly improved CSG and profitability
Professional significantly improved CSG and profitability Sales (in EURm) & comparable sales growth (in %) Key observations for Q3 2017 10.1% • CSG of 7.0%; Europe and the Rest of the World remained 3.6% 3.8% 0.3% strong -1.0% 7.0% 2.5% • Market conditions in the US continued to be soft, 0.1% -2.7%
Slide 10: Growth acceleration in Home, profitability improved; continued investments in growth
Growth acceleration in Home, profitability improved; continued investments in growth Sales (in EURm) & comparable sales growth (in %) Key observations for Q3 2017 28.1% • Acceleration of CSG at 28.1%: 20.6% • Significant growth in Home Systems 15.5% 11.0% • Solid growth in all regions 8.8% • Home sy
Slide 11: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 12: Adjusted EBITA margin improvement primarily driven by procurement & productivity savings and indirect cost reductions
Adjusted EBITA margin improvement primarily driven by procurement & productivity savings and indirect cost reductions Adjusted EBITA (in EURm) as % of sales 10.0% +50 bps 10.5% Gross margin + 30 bps 175 2 (94) 12 2 (6) 176 86 Q3 2016 Volume / Mix Price CoGS Indirect Costs Currency OBI Q3 2017 *) Oth
Slide 13: Developments in adjusted indirect costs in Q3 2017
Developments in adjusted indirect costs in Q3 2017 31.4% -40 bps 31.0% Key observations for Q3 2017 as % of sales • Indirect cost reduction of EUR 12m, including additional investments to support growth In EURm 548 522 • Positive currency impact of EUR 14m Adj. R&D 81 (12) (14) • Executing a detaile
Slide 14: Working capital as % of sales increased by 70 basis points y-o-y to 11.9%
Working capital as % of sales increased by 70 basis points y-o-y to 11.9% mainly due to higher inventories Working capital1 (in EURm & as % of sales) Inventories (in EURm & as % of sales) 11.9% 15.3% 16.2% 10.9% 13.8% 9.3% 9.8% 12.5% 662 695 769 837 886 982 1,082 1,137 +70 bps +240 bps 4Q16 1Q17 2Q1
Slide 15: Net debt increase of EUR 12m
Net debt increase of EUR 12m In EURm 709 697 15 9 33 21 76 228 3 107 FCF: EUR -5m Net debt EBITDA Change in Net Change in Interest & tax Other FCF Share Other*** Net debt end 2Q17 working capex provisions* items** repurchase end of 3Q17 capital *) Includes a contribution of EUR 42m to the company’s
Slide 16: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Outlook & Conclusion by Eric Rondolat Q&A
Slide 17: Achieved positive CSG, on track to improve our Adjusted EBITA margin and expect strong FCF in Q4
Achieved positive CSG, on track to improve our Adjusted EBITA margin and expect strong FCF in Q4 based on a substantial reduction in inventories • Achieving positive comparable sales growth in Q3 2017 is an important step in the improvement of our growth profile % • On track to improve the Adjusted
Slide 18: Lighting
Lighting
Slide 19: Currency movements had a negative impact on sales and positive impact on Adjusted EBITA
Currency movements had a negative impact on sales and positive impact on Adjusted EBITA Q3 2017 Sales FX Footprint (% of total) Key observations • Currency movements had a negative impact on sales and a positive impact on Adjusted EBITA in Q3 2017 EUR • Sales impact from currencies of EUR -55m, main
Slide 20: Net income of EUR 110m driven by higher operating profit and EUR 21m real estate gain
Net income of EUR 110m driven by higher operating profit and EUR 21m real estate gain From Adjusted EBITA to net income (in EURm) Key observations 3Q16 3Q17 Adjusted EBITA 175 176 - Restructuring -49 -9 - Acquisition related charges 0 0 1 - Other incidental items -6 23 1 Real estate gain of EUR 21m
Slide 21: Free Cash Flow of EUR -5m
Free Cash Flow of EUR -5m Free cash flow (in EURm) Key observations 3Q16 3Q17 • Free cash flow decreased to EUR -5m: Income from operations 93 161 • Working capital increased as an improvement in the Depreciation and amortization 72 67 growth profile and a build-up in Home ahead of the Change in wor