Slide 1: Philips Lighting reports sales at €1.7 billion, continued profitability increase led by gross margin improvement
Philips Lighting reports sales at €1.7 billion, continued profitability increase led by gross margin improvement; solid cash flow Q3 2016 Presentation October 20, 2016
Slide 2: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Q&A
Slide 3: Third quarter 2016 highlights
Philips Lighting reports sales at €1.7 billion, continued profitability increase led by gross margin improvement; solid cash flow Third quarter 2016 highlights • Comparable sales decline of 3.3% • Net income of €51 million, including €30 million brand license fee, separation costs and financial expe
Slide 4: Financial performance by business group
Financial performance by business group Q3 2016 CSG% Adjusted vs LY Adjusted vs LY EBITA (€m) EBITA % (bps) (€m) Lamps -13.3% 120 +16 21.1% +560 LED 11.5% 40 +15 10.6% +340 Professional -3.8% 42 -7 6.3% -60 Home 11.0% -1 +16 -0.8% +1,340 Philips Lighting -3.3% 175 +36 10.0% +250 4
Slide 5: Lamps performance supports our strategy to continue to extract value
Lamps performance supports our strategy to continue to extract value 727 671 725 20,3% 20,5% 21,1% 615 572 570 17,7% 15,5% 14,8% -13,3% 129 125 117 120 -14,2% -14,5% 104 107 -16,3% -16,8% -18,3% 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Sales Comparabl
Slide 6: LED volume growth remained strong and margin improved significantly
LED volume growth remained strong and margin improved significantly 8,8% 8,4% 10,6% 400 377 7,2% 345 355 346 5,6% 314 40 2,9% 35 31,6% 32,5% 28,8% 25 29 24,1% 20 15,6% 11,5% 9 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Sales Comparable sales growth Adju
Slide 7: Professional affected by market conditions in the Middle East & Turkey and softer outdoor
Professional affected by market conditions in the Middle East & Turkey and softer outdoor market in some European countries 689 706 752 684 664 601 3,8% 5,7% 6,9% 6,6% 6,7% 6,3% -0,2% 49 50 1,0% -1,9% -1,5% -2,1% 46 42 -3,8% 39 6 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2Q15 3Q15
Slide 8: Home showed growth and adjusted EBITA neared break-even point
Home showed growth and adjusted EBITA neared break-even point 167 -1 120 124 127 130 -7 116 -10 -0,8% 13,8% 10,7% 14,3% 11,0% -12 -19 -17 -4,2% -7,9% -7,0% -6,7% -9,7% -14,2% -16,4% 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Sales Comparable sales growt
Slide 9: Agenda
Agenda Business and operational performance by Eric Rondolat Financial performance by Stéphane Rougeot Q&A
Slide 10: Quarter-on-quarter comparable sales decline mainly due to softness in Professional
Quarter-on-quarter comparable sales decline mainly due to softness in Professional Comparable sales growth (%) Key observations Variance CSG% -1.5% -3.3% • Professional: worsened market conditions in the Middle -180 bps East & Turkey; softer outdoor market in some European countries • LED: market sl
Slide 11: Increase of adjusted EBITA mainly from gross margin improvements
Increase of adjusted EBITA mainly from gross margin improvements Adjusted EBITA (€m) As % of sales 7.5% +2.5% -0.6% +0.6% -0.6% 0.6% 10.0% 140 (10) 10 (9) 9 175 19 (123) 139 Q3 2015 Vol / mix Price CoGS Brand Indirect Other Currency Q3 2016 license fee 1 costs income 2 1 Brand license fee is include
Slide 12: Since 2013 a trajectory of continued improvement in operational profitability
Since 2013 a trajectory of continued improvement in operational profitability Adjusted EBITA Full year (€m and as % of sales) Adjusted EBITA YTD (€m and as % of sales) +90 bps +160 bps 8,8% 7,3% 7,2% 6,8% 6,4% 547 476 453 457 388 FY2013 FY2014 FY2015 9m2015 9m2016 12
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% 13,8% 13,2% 11,6% 12,2% 11,1% 11,2% 832 865 895 809 988 1.010 1.030 999 -190 bps Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2015 Q1 2016 Q2 2016 Q3 2016 -2
Slide 14: Solid improvement of free cash flow in third quarter
Solid improvement of free cash flow in third quarter Free cash flow (in €m) Key observations • Third quarter improved compared to Q3 2015 by: 164 • improved profitability • strong working capital inflow • partly offset by increased interest payments (new financing structure) and higher taxes 60 • Ne
Slide 15: Philips Lighting has sales in a wide range of currencies
Philips Lighting has sales in a wide range of currencies Q3 2016 Sales FX Footprint (% of total) Key observations • Currency movements had a negative impact on sales and a Other USD positive impact on adjusted EBITA in the third quarter currencies 37% 28% • Sales impact from currencies of -2.1%, mai
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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