Philips 2011 Annual Report Download - page 75

6 Sector performance 6.3.4 - 6.3.6
Annual Report 2011 75
Address cost base and margin management
In 2011, as part of our organizational redesign and cost
program, we took a fundamental approach to increase the
speed and efficiency of our organization. As of 2012 we
will merge business groups, take out management layers
and implement an overhead cost reduction program.
Furthermore, in 2011 we accelerated our program to
rationalize our industrial footprint, closing eight sites and
divesting three.
Our margin performance has been impacted by higher
investment levels in R&D and commercial capabilities.
Furthermore, margin pressure was driven by higher
material prices and in some areas by operational issues.
To protect our margins, we optimized our product mix
and implemented price increases, mainly in our
conventional lamps and luminaires businesses.
Our focus on working capital management in the fourth
quarter has clearly paid off. Inventory levels have been
brought down, combined with a significant reduction in
overdue receivables. We will continue to focus on these
aspects in 2012 and 2013.
Deliver on turnaround of Consumer
Luminaires and Lumileds
In Western markets, our Consumer Luminaires business
has been suffering from adverse economic conditions,
compounded in EMEA by poor supply reliability
performance. A turnaround program is well under way
and covers operational improvements, a reduction of the
product portfolio and a re-focused brand portfolio
towards two main channels (DIY and Lifestyle &
Specialist). The brand program will result in an extended
innovative product portfolio under the Philips brand
name. In EMEA a comprehensive supply chain program
leveraging on the roll-out of SAP resulted in the recovery
of appropriate service levels.
Though our Lumileds business is making further progress
on growing its relative share in general illumination, its
sales were negatively influenced by lower sales in the
display segments.
6.3.5 EcoVision
In 2011 Philips Lighting invested EUR 291 million in Green
Innovation, compared to EUR 230 million in 2010. The
energy efficiency of our total product portfolio improved
by some 2%. Green Product sales increased from 58% of
total sector sales in 2010 to 60% in 2011. Our
sustainability drive has been rewarded with the
prestigious 2011 UN Leader of Change Award for our
visionary leadership in the global switch to innovative
lighting solutions that demonstrate sustainable,
environmental, economic and social value. We also
received Richard Branson’s Carbon War Room Gigaton
Award for outstanding business leadership in energy
efficiency and eco-design to reduce carbon emissions.
And at the high-level UN ‘Momentum for Change’ event
during the UN Climate Change Conference (COP17) in
Durban, South Africa, we were recognized along with The
Climate Group for our solar-driven LED street-lighting
project in China’s Guiyang community.
6.3.6 2011 financial performance
Sales amounted to EUR 7,638 million, a nominal increase
of 1% compared to 2010, mainly driven by growth in our
Professional Luminaires business, Lighting Systems &
Controls, as well as ongoing growth of our Fluorescent
and LED lamps, but tempered by declining sales at
Lumileds and Consumer Luminaires. Excluding a 2%
unfavorable currency impact and a 3% unfavorable
consolidation effect, comparable sales increased by 6%.
The year-on-year sales increase was substantially driven
by growth geographies, which grew over 10% on a
comparable basis. Sales in growth geographies increased
to over 40% of total Lighting sales, driven by China and
India, compared to 38% in 2010. In mature geographies,
sales growth was limited to low single digits due to lower
demand in North America and Western Europe,
particularly for Lumileds and Consumer Luminaires.
Our Lamps business grew strongly compared to 2010,
buoyed by demand for high-end lamps in retail and growth
geographies. Ongoing softness in the residential
construction markets – particularly in mature geographies
– meant that sales in our Consumer Luminaires business
slightly declined compared to 2010. Sales of LED-based
products grew to over 16% of total sales, up from 13% in
2010, driven by Lamps and Professional Luminaires. Sales
of energy-efficient Green Products exceeded EUR 4,571
million, or 60% of sector sales.
EBITA amounted to EUR 445 million, or 5.8% of sales,
compared to EUR 869 million, or 11.5% of sales, in 2010 .
Restructuring and acquisition-related charges amounted
to EUR 66 million in 2011, compared to EUR 97 million
in 2010. The EBITA decrease of EUR 424 million was
mainly attributable to lower gross margin, due to raw
material increases and higher investments in selling as well
as research and development to drive growth.
EBIT amounted to a loss of EUR 362 million, or 4.7% of
sales, which included EUR 128 million related to the
impairment of customer relationships and brand names
resulting from the turnaround plan within Consumer
Luminaires, and EUR 531 million of goodwill impairment