Philips' Third Quarter Results 2013

Philips reports third-quarter comparable sales growth of 3% to EUR 5.6 billion; operational results improve by 33% to EUR 634 million

• Comparable sales in growth geographies up 10%
• EBITA increased to EUR 562 million, or 10.0% of sales, compared to 6.3% in Q3 2012
• EBITA excluding restructuring and other charges increased to EUR 634 million, or 11.3% of
  sales
• Net income increased to EUR 281 million, compared to EUR 105 million in Q3 2012
• Free cash flow amounted to EUR 117 million
• New EUR 1.5 billion share buy-back program starts on October 21

Frans van Houten, CEO:

“This was another solid quarter for Philips, especially in light of the challenging global economic environment. I am pleased with the 33% increase in our operational results, clearly reflecting the continuing benefits of our Accelerate! program. At Healthcare, EBITA improved while sales were flat and order intake declined by 2%. Consumer Lifestyle continued its strong sales performance with a comparable sales growth of 9%, driven by our focus on locally relevant products. At Lighting, LED-based sales grew 33% over the previous year, leading to an overall growth of 3%.

We continued to make good progress on the Accelerate! journey. Our overhead cost reduction program has resulted in EUR 856 million in total gross savings to date, including EUR 183 million realized in Q3 2013. Our End2End programs are delivering strong results. The leaning-out of the supply chain has led to a reduction of inventory. Our Design for Excellence (DfX) program is building a strong funnel of opportunities to lower cost of goods sold in the coming years. End2End also enables us to deliver more locally relevant innovations faster to our customers. We see strong positive engagement from our employees, making us more agile and entrepreneurial

Our strategic focus on value-accretive innovations and new business models is resulting in encouraging successes across our markets. As the leader in the growing image-guided interventions and therapy market, Philips was the first company to install an advanced hybrid operating room in a leading medical institute in Moscow, which will serve as an example for other hospitals in Russia. Building on our leadership in digital innovation, we recently unveiled a range of higher-value connected consumer products, such as a smart air purifier, baby monitor and a digital grooming guide. As the global leader in energy-efficient lighting, we have been selected to transform Dubai Municipality’s buildings with intelligent LED solutions. Our lighting solutions are saving 50% in electricity usage and will advance Dubai’s mission to become the most sustainable city in the world.

We remain committed to reaching our financial targets this year. However, ongoing headwinds in the global economy are expected to continue to affect sales growth in the coming quarters.

Third quarter financials: Operational results improve significantly across all sectors.

Healthcare currency-comparable equipment order intake declined by 2% year-on-year, with lower order intake at Patient Care & Clinical Informatics, while Imaging Systems recorded a slight increase. Comparable sales were flat year-on-year. Growth at Customer Services, Home Healthcare Solutions and Patient Care & Clinical Informatics was offset by a decline at Imaging Systems. In growth geographies, comparable sales increased by 3%, with strong growth in China, Central & Eastern Europe and Latin America. EBITA margin excluding restructuring and acquisition-related charges increased by 2.0 percentage points year-on-year to 14.6%.

Consumer Lifestyle comparable sales increased by 9%, with all businesses, i.e. Health & Wellness, Domestic Appliances and Personal Care, recording good growth. In the growth geographies, comparable sales registered a strong double-digit increase. EBITA margin excluding restructuring and acquisition-related charges increased to 11.1%, a year-on-year improvement of 3.0 percentage points

Lighting comparable sales increased by 3%, led by Lumileds, Automotive and Light Sources & Electronics. Comparable sales at Professional Lighting Solutions and Consumer Luminaires declined in the quarter. LED-based sales grew by 33% and now represent 30% of total Lighting sales. In the growth geographies, comparable sales showed a double-digit increase. EBITA margin excluding restructuring and acquisition-related charges was 10.2%, a year-on-year improvement of 3.9 percentage points.

The new EUR 1.5 billion share buy-back program starts on October 21.