Philips 2007 Annual Report Download - page 32

Philips Annual Report 200738
In 2007, EBIT increased by EUR 651 million compared
to 2006, to EUR 1,852 million or 6.9% of sales. Excluding
the EUR 256 million product liability charge which was
recognized in 2006, EBIT protability improved by 1.4%
in relation to sales, driven by the improved performance
of DAP, Lighting and Group Management & Services.
Total EBITA for the Group increased from EUR 1,386 million,
or 5.2% of sales, in 2006 to EUR 2,065 million, or 7.7%
of sales, in 2007, exceeding the Group’s protability
target of 7.5%.
The main drivers of the year-on-year EBITA
improvement were the strong, mainly sales-driven
performance at DAP (EUR 145 million) and higher
earnings at Lighting (EUR 114 million), as a result of
higher sales across almost all businesses and a lower
loss in the uorescent-based LCD Backlighting business.
Excluding the EUR 256 million negative impact of
product liability charges in 2006, Group Management
& Services’ result improved by EUR 146 million due
to reduced corporate and regional costs as well as
lower pension and brand campaign costs.
Medical Systems’ EBITA of EUR 875 million represented
a slight increase compared to 2006, both in absolute
value and as a percentage of sales (13.5%).
Higher earnings at Customer Services, Ultrasound
& Monitoring and Healthcare Informatics were partly
offset by lower earning at Imaging Systems, largely as a
consequence of lower sales. However, the division fell
short of its 2007 target of 14-15% EBITA protability,
almost entirely due to the challenging nature of the
imaging market in 2007, especially in the US, which was
affected by the Decit Reduction Act. The 2007 EBITA
included EUR 8 million acquisition-related charges for
Intermagnetics, whereas
EUR 78 million post-merger
integration costs and purchase
-accounting charges
related to the acquisitions of Witt Biomedical and
Intermagnetics were included in 2006.
Exceeding the targeted 15% EBITA protability, DAP’s
EBITA increase of EUR 145 million compared to 2006
was primarily driven by strong sales growth, supported
by the full-year contribution of Avent, and rapid expansion
in emerging markets with stable margins. In addition,
effective cost management supported the EBITA
protability increase of 2.7% of sales compared to 2006.
All DAP businesses supported the overall year-on-year
improvement, both in nominal terms and as a percentage
of sales.
CE’s EBITA reached EUR 325 million, or 3.1% of sales,
compared to 3.0% in 2006, in line with the target set for
the division. A sales decline and high margin pressure
at Connected Displays, particularly in North America,
were more than offset by higher EBITA in the other
businesses, most notably Peripherals & Accessories
and Entertainment Solutions.
Lighting’s EBITA improved to EUR 722 million, or
11.9% of sales, mainly due to higher earnings in Lamps,
Lumileds, Luminaires and additional EBITA from the
acquisition of Partners in Lighting International (PLI).
The exit from the loss-making uorescent lamp-based
LCD backlighting business at the beginning of 2007
also added to the EBITA improvement.
The EBITA loss at Innovation & Emerging Businesses
amounted to EUR 83 million, compared to a loss of
EUR 76 million in 2006. EBITA in 2006 included an
aggregated gain of EUR 76 million on the divestment
of several businesses within Corporate Investments and
Corporate Technologies. In 2007, EBITA improved due
to EUR 44 million higher license income.
Philips, together with the Dutch oil company NAM, has developed
a new type of lighting for offshore oil platforms, designed to reduce
the number of birds being attracted and interrupting their migration
across the North Sea (often with fatal consequences).
8 Financial highlights 10 Message from the President 16 The Philips Group
Management discussion
and analysis
62 The Philips sectors