Philips 2009 Annual Report Download - page 7

Dear stakeholder
Looking back at what was a testing year for Philips, I am
very pleased with the progress we made in 2009. In the
most challenging economic environment in decades, we
acted swiftly and decisively to adjust our cost structure
and working capital to market conditions – while
continuing to invest in our future. We did this to make
sure we emerge from the recession as a stronger
company, well positioned to capitalize on future
economic growth. The effects of our actions became
increasingly visible in our earnings, our cash flow
performance and our stronger position with customers,
especially in the second half of the year.
Philips today is a simpler, more agile company. Compared
to previous downturns, our new Health and Well-being
portfolio proved its intrinsic quality and increased
resilience through sustained profitability.
For the full year, comparable sales were down 11% on
2008. While Healthcare revenues were almost on par
with 2008, Consumer Lifestyle saw the biggest drop in
sales, due to a very weak consumer market and active
portfolio pruning. Lighting rebounded strongly in the
course of the year, though it continued to feel the impact
of the ongoing decline in commercial construction.
Emerging markets accounted for a steady 30% of
revenues, with strong growth at Healthcare offsetting
declines at Consumer Lifestyle.
EBITA as a percentage of sales rose from 2.8% to 4.5%.
Our performance in the second half of the year reflected
our proactive cost management and strong fundamentals,
delivering an adjusted profitability of 9.9% for that period
and a record 12.3% for a fourth quarter.
We tackled the recession without sacrificing our longer-
term strategic ambitions. We continued to invest in
marketing and innovation and to reallocate resources to
emerging markets and high-margin, sustainable growth
initiatives, while maintaining a strong balance sheet
supported by robust operating cash flows. Examples
include our acquisition of coffee-machine maker Saeco
and the expansion of our Philips-branded stores for
Consumer Lighting in China and India.
As a responsible corporate citizen committed to helping
build a sustainable society, we continued to drive the
implementation of our EcoVision programs. Green
Products generated 31% of total sales, up from 23% in
2008, and our investment in Green Innovations is ahead of
target to reach a cumulative EUR 1 billion by 2012.
As a sign of confidence in our future, we are proposing to
the upcoming General Meeting of Shareholders to
maintain this year’s dividend at EUR 0.70 per common
share, in cash or stock – resulting in a yield (as of
December 31, 2009) of 3.4% for shareholders.
Dividend per common share
in euros
0.8
0.6
0.4
0.2
0
0.44
2006
0.60
2007
0.70
2008
0.70
2009
0.70
20101)
1) Subject to approval by the 2010 Annual General Meeting of Shareholders
How did we do against our Management
Agenda 2009
Drive performance
Relentlessly manage cash
On the back of improved operating performance and
strongly reduced working capital, we improved free cash
flow to 3.7% of sales, more than offsetting the EUR 485
million cash-out for the final settlement of asbestos claims.
Proactively align cost structure with market conditions
and increase productivity
We took swift action to adjust our cost structure to
lower revenues. We substantially reduced our fixed costs
through decisive but responsible actions to optimize our
industrial footprint and organizational structure, and we
tightly managed our discretionary expenses.
In 2009, in spite of 11% lower revenues, overall
productivity improved by 5.6%, driven by the positive
effect of our ongoing efficiency programs in all sectors.
The restructuring and change programs across our
sectors have put us in a stronger position, and we will
continue to drive productivity improvement going
forward.
Manage risks and opportunities in a balanced way to
strengthen our market positions
In the face of the ongoing uncertainty, we focused on cash
flow and profitability when making decisions regarding
mix and pricing. Nevertheless we broadly managed to
maintain our shares in the market, with gains for
Healthcare and Lighting in emerging markets.
President’s message
Philips Annual Report 2009 7