Weaker quarter spells "challenging year" for Philips

Mostly Healthcare under pressure

CEO Frans van Houten believes the lower net profit is because of worse operational results, mostly in China and Russia, and higher costs for its overhead cost reduction program (as more than 4,000 people were laid off since last year). The turnover drop is because of negative exchange rate fluctuations, as a like-for-like comparison yielded similar turnover as last time.

Mostly the Healthcare department is under pressure (turnover dropped 2 % on a like-for-like basis), partly because a Cleveland factory temporarily shut down after the American Food & Drug Administration had found issues with the scanning equipment.

The Lighting division’s profitability decreased compared to last year, albeit less than the medical branch, because if exchange rate fluctuations are taken out of the equation, sales remained stable. Particularly the LED department is doing well, with a 37 % growth. Consumer Lifestyle was the only branch which managed to grow both its turnover (+ 7 %) and its profit.

“Challenging year”

CEO Frans van Houten confirmed in a press release that 2014 would be a “challenging” year, even though he remained optimistic about the mid-term goals.

“Our multi-year transformation program Accelerate! continues to show strong traction, driven by a solid innovation pipeline, investments in future growth and a company-wide focus on improved operation and financial performance. We are also taking comprehensive measures to raise the efficacy of our quality management system. 2014 will be a challenging year, but we remain very confident of achieving our 2016 mid-term financial targets.”