Philips reports Q2 sales of EUR 5.9 billion (US $6.49 billion) and comparable sales growth of 3%, a 9% improvement in Adjusted EBITA to EUR 544 million and net income of EUR 431 million

Second-quarter highlights

• Comparable sales of the HealthTech portfolio continued to grow at 5%
• Adjusted EBITA amounted to EUR 544 million, or 9.3% of sales, compared to 8.4% of sales in Q2 2015
• EBITA totaled EUR 464 million, or 7.9% of sales, compared to 7.5% of sales in Q2 2015
• Income from operations (EBIT) amounted to EUR 376 million, compared to EUR 349 million in Q2 2015
• Net income amounted to EUR 431 million, including a EUR 144 million award from the Funai arbitration, compared to EUR 274 million in Q2 2015
• Operating cash flow of EUR 318 million, compared to EUR 186 million in Q2 2015, and a free cash inflow of EUR 127 million, compared to an outflow of EUR 30 million in Q2 2015.

Frans van Houten, CEO:

“Philips’ performance in the second quarter of 2016 was solid, with 3% comparable sales growth overall and strong 5% growth from our HealthTech businesses. Our Accelerate! transformation program delivered further operational improvements across most businesses, while we continued to invest in quality and innovation.

I am pleased with the successful listing of Philips Lighting on Euronext in Amsterdam at the end of May. With that momentous step, Philips will now fully focus on capturing the exciting opportunities in the health technology space, allowing Philips Lighting to do the same in the growing market for energy-efficient lighting. Philips currently retains a majority holding in Philips Lighting with the aim of fully selling down over the next several years.

Our outlook for 2016 remains unchanged, as we continue to expect earnings improvements in the second half of the year, but we are concerned about increased risk due to volatility in a number of markets.”

Lighting

On May 27, 2016, Philips Lighting was listed and started trading on Euronext in Amsterdam under the symbol ‘LIGHT’. Following the listing of Philips Lighting, Philips retains a 71.225% stake and continues to consolidate Philips Lighting.

In the second quarter, comparable sales in Philips Lighting declined by 1%, while Adjusted EBITA improved by 180 basis points to 9.3% of sales. Full details about the financial performance of Philips Lighting in the second quarter were published on July 22, 2016. The related report can be accessed here.

Separation costs

Costs related to the separation of Philips Lighting amounted to EUR 45 million in the second quarter of 2016. For the second half of 2016, Philips expects separation costs to be in the range of EUR 65–85 million. Another EUR 38 million of costs related to the listing of Philips Lighting were booked through equity in the second quarter of 2016.

Cost savings

Overhead cost savings amounted to EUR 19 million in the second quarter. The Design for Excellence (DfX) program generated EUR 86 million of incremental procurement savings in the quarter. The End2End improvement program achieved EUR 45 million in productivity gains.

Miscellaneous

As of June 30, 2016, Philips had completed 91% of the 3-year EUR 1.5 billion share buy-back program.

Quarterly Report

Second quarter results 2016 - Quarterly Report

Presentation

Second quarter results 2016 - Quarterly Results Presentation