Philips 2005 Annual Report Download - page 86

Philips Annual Report 200586
(Semiconductors) was substantially offset by the
deconsolidation of NAVTEQ (Other Activities).
The 4% increase in comparable sales at Medical Systems
was driven by double-digit growth at Computed Tomography
and X-ray. At DAP, an increase in sales at Food & Beverage
and Shaving & Beauty was offset by lower sales at Oral
Healthcare and Home Environment Care. At CE, the 11%
comparable sales growth was driven by Connected
Displays, Mobile Infotainment and Optical Licenses. The 5%
comparable increase at Lighting was due to higher sales in
all businesses. Semiconductors showed comparable growth
of 18%, the main driver being Mobile Communications.
Within Other Activities, sales growth came from Optical
Storage and Corporate Investments.
Earnings before interest and tax
The following overview aggregates sales and EBIT by sector.
in millions of euros 2004
1)
sales EBIT
2)
as a %
of sales
2)
Medical Systems 5,884 35 0.6
DAP 2,044 332 16.2
Consumer Electronics 9,919 370 3.7
Lighting 4,526 593 13.1
Semiconductors 4,491 430 9.6
Other Activities 2,482 366 14.7
Unallocated − (540 ) −
29,346 1,586 5.4
1) Restated to present the MDS activities as a discontinued operation
2) Restated to refl ect the move of the EUR 22 million global brand campaign costs
to Unallocated
in millions of euros 2003
1)
sales EBIT
as a % of
sales
Medical Systems 5,990 431 7.2
DAP 2,131 398 18.7
Consumer Electronics 9,188 248 2.7
Lighting 4,522 577 12.8
Semiconductors
3,888 (328 ) (8.4 )
Other Activities 2,218 (263 ) (11.9 )
Unallocated − (561 ) −
27,937 502 1.8
1) Restated to present the MDS activities as a discontinued operation
Improved market conditions, higher-margin products from
innovation and continued tight control of costs resulted in
a sharp improvement in EBIT. Compared to the previous
year, the improvement was supported by a EUR 635 million
gain related to the IPO of NAVTEQ and a EUR 158 million
reduction in pension costs, partly offset by a EUR 329
million increase in net restructuring and impairment charges.
Medical Systems was negatively affected by the impairment
charge for MedQuist (EUR 590 million) and the Volumetrics
settlement (EUR 133 million, net of recoveries from
insurance). Excluding these items, Medical Systems posted
an improvement in EBIT to EUR 758 million. This improved
performance was fueled by the introduction of new products
and improved service capability, which resulted in strong
order rates and higher market shares. Tight control of
costs and process improvements also contributed.
Performance improvements at Lighting were due to the
recovery of some major markets, along with innovation
and solid cost control.
Faced with intensifi ed competition, DAP did not match
2003 profi tability. Together with increased costs, especially
for advertising and promotion, this resulted in a EUR 66
million decline in EBIT compared to 2003.
Benefi ting from the industry upturn in the fi rst half of
2004, Semiconductors was one of the major drivers of the
Company’s improved EBIT. Its performance improvement
was the result of higher capacity utilization, lower research
and development spending and the positive effects of
earlier restructuring programs. By the end of the year,
however, fab utilization declined to approximately the
same level as a year earlier.
The operational performance of CE was affected by
competitive pressures, especially in Europe. Despite the
successful progress of the Business Renewal Program,
EBIT for CE, excluding Optical Licenses’ income, was below
the level achieved in 2003, due to a decline in gross margins.
Optical Licenses’ income improved by EUR 181 million
compared to 2003, to an amount of EUR 478 million.
Past-use Optical License income and general settlements
made an exceptionally strong contribution to income
(EUR 252 million).
After a EUR 312 million increase in Group pension costs in
2003, pension costs decreased by EUR 158 million in 2004,
mainly due to the renegotiation of pension arrangements
in the Netherlands.
Management discussion and analysis