2014 financial performance

Philips Lighting
Key data in millions of EUR unless otherwise stated
2012 - 2014
 
2012
2013
2014
Sales
7,303
7,145
6,869
Sales growth
 
 
 
% increase (decrease), nominal
11%
(2)%
(4)%
% increase (decrease), comparable1)
4%
1%
(3)%
EBITA 1)
69
580
293
as a % of sales
0.9%
8.1%
4.3%
EBIT
(78)
413
185
as a % of sales
(1.1)%
5.8%
2.7%
Net operating capital (NOC)1)
4,635
4,462
3,638
Cash flows before financing activities1)
314
418
442
Employees (in FTEs)
41,757
38,671
37,808
1)
For a reconciliation to the most directly comparable GAAP measures, see Reconciliation of non-GAAP information
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In 2014, sales amounted to EUR 6,869 million, 4% lower on a nominal basis. Excluding a 1% negative currency effect, comparable sales decreased by 3%. Light Sources & Electronics recorded mid-single-digit growth and Consumer Luminaires posted a high-single-digit decline, while Professional Lighting Solutions recorded low-single-digit growth.

From a geographical perspective, comparable sales in growth geographies showed a mid-single-digit decline, largely driven by decline across all businesses in China. As a result, sales in growth geographies decreased from 40% of total sales in 2013 to 39% in 2014. Comparable sales in mature geographies showed a low-single-digit decline, with Western Europe and North America recording a low-single-digit decline and other mature geographies registering a mid-single-digit decline.

Sales of LED-based products grew to 34% of total sales, up from 25% in 2013, driven by Light Sources & Electronics and Professional Lighting Solutions. Sales of energy-efficient Green Products exceeded EUR 4,952 million, or 72% of sector sales.

EBITA declined from EUR 580 million, or 8.1% of sales, in 2013 to EUR 293 million, or 4.3% of sales in 2014. Restructuring and acquisition-related charges amounted to EUR 245 million in 2014, compared to EUR 83 million in 2013. 2014 also included a EUR 13 million past-service pension cost gain in the Netherlands and EUR 68 million of impairment and other charges related to industrial assets, while 2013 included a EUR 10 million past-service pension cost gain. The decrease in EBITA was mainly attributable to higher restructuring and acquisition-related charges and lower sales volume.

EBIT amounted to EUR 185 million, or 2.7% of sales, which included EUR 106 million of amortization charges, mainly related to intangible assets at Professional Lighting Solutions.

Net operating capital decreased by EUR 824 million to EUR 3.6 billion. The decrease was mainly due to the reclassification of Lumileds and Automotive as assets held for sale in 2014, partly offset by positive currency impacts.

Cash flows before financing activities increased from EUR 418 million in 2013 to EUR 442 million, as lower earnings were partly offset by a reduction in working capital.

Philips Lighting
Sales per geographic cluster in millions of EUR
2010 - 2014
2,1091,8482262,2816,464‘102,0601,8322242,4926,608‘112,2251,9912342,8537,303‘122,2141,8272132,8917,145‘132,205Western Europe1,779North America198Other mature2,687Growth6,869‘14
Philips Lighting
Sales and net operating capital1) in billions of EUR
2010 - 2014
6.5‘105.56.6‘115.07.3‘124.67.1‘134.56.9Sales‘143.6Net operating capital
1) For a reconciliation to the most directly comparable GAAP measures, see Reconciliation of non-GAAP information
Philips Lighting
EBIT and EBITA1) in millions of EUR
2010 - 2014
1155286439.9%‘10769(439)3305.0%‘11147(78)690.9%‘121674135808.1%‘13108Amortization andimpairment in value185EBIT in value293 EBITA in value4.3%‘14EBITA as a % of sales
1) For a reconciliation to the most directly comparable GAAP measures, see Reconciliation of non-GAAP information
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SF6 (Sulfur hexafluoride) is used in the electrical industry as a gaseous dielectric medium.

CO2-equivalent or carbon dioxide equivalent is a quantity that describes, for a given mixture and amount of greenhouse gas, the amount of CO2 that would have the same global warming potential (GWP), when measured over a specified timescale (generally 100 years).

Earnings before interest, tax and amortization (EBITA) represents income from continuing operations excluding results attributable to non-controlling interest holders, results relating to investments in associates, income taxes, financial income and expenses, amortization and impairment on intangible assets (excluding software and capitalized development expenses). Philips believes that EBITA information makes the underlying performance of its businesses more transparent by factoring out the amortization of these intangible assets, which arises when acquisitions are consolidated. In our Annual Report on form 20-F this definition is referred to as Adjusted IFO.

Comparable sales exclude the effect of currency movements and acquisitions and divestments (changes in consolidation). Philips believes that comparable sales information enhances understanding of sales performance.

Growth geographies are the developing geographies comprising of Asia Pacific (excluding Japan, South Korea, Australia and New Zealand), Latin America, Central & Eastern Europe, the Middle East (excluding Israel) and Africa.

Mature geographies are the highly developed markets comprising of Western Europe, North America, Japan, South Korea, Israel, Australia and New Zealand.

Green Products offer a significant environmental improvement in one or more Green Focal Areas: Energy efficiency, Packaging, Hazardous substances, Weight, Recycling and disposal and Lifetime reliability. The life cycle approach is used to determine a product’s overall environmental improvement. It calculates the environmental impact of a product over its total life cycle (raw materials, manufacturing, product use and disposal).

Green Products need to prove leadership in at least one Green Focal Area compared to industry standards, which is defined by a sector specific peer group. This is done either by outperforming reference products (which can be a competitor or predecessor product in the particular product family) by at least 10%, outperforming product specific eco-requirements or by being awarded with a recognized eco-performance label. Because of different product portfolios, sectors have specified additional criteria for Green Products, including product specific minimum requirements where relevant.