Philips reported Q3 sales of $6.42 billion, a 14% improvement in Adjusted EBITA to $706 million, and an 18% increase in net income to $416.7 million.
- Sales increased to $6.42 billion, with consolidated comparable sales growth of 2% and the HealthTech portfolio growing by 5%
- Adjusted EBITA amounted to $706 million, or 11.0% of sales, compared to 9.8% of sales in Q3 2015
- EBITA totaled $617 million, or 9.6% of sales, compared to 7.4% of sales in Q3 2015
- Income from operations (EBIT) amounted to $523.3 million, compared to $372 million in Q3 2015
- Net income amounted to $416.7 million, compared to $352.5 million in Q3 2015
- Operating cash flow totaled $544 million, compared to $305.7 million in Q3 2015; free cash flow of $304.65 million, compared to $63.1 million in Q3 2015
Frans van Houten, CEO: “I am pleased with the solid 5% comparable sales growth and 8% order intake growth in our HealthTech portfolio in the third quarter. Overall, Philips posted 2% comparable sales growth, and the operational improvements at the Personal Health and Diagnosis & Treatment businesses, combined with continued improvements at Philips Lighting, led to the 120-basis-point increase in the Adjusted EBITA margin for the Philips Group.
Our outlook for 2016 remains unchanged, as we expect further earnings improvements in the fourth quarter of the year. Going forward, we remain concerned about risk due to volatility in the markets in which we operate.”
In the third quarter, Adjusted EBITA improved by 250 basis points to 10.1% of sales, while comparable sales declined by 3% and free cash flow improved to $178.44 million. Full details about the financial performance of Philips Lighting in the third quarter were published on October 20, 2016. The related report can be accessed here. Following the listing of Philips Lighting in Amsterdam, Philips holds a 71.225% stake with the aim of fully selling down over the next several years. As the majority shareholder in Philips Lighting, Philips continues to consolidate the financial results of Philips Lighting.
Group cost savings
In the third quarter, overhead cost savings amounted to $13.06 million, the Design for Excellence (DfX) program generated $110.98 million of incremental procurement savings, and the End2End improvement program achieved $71.8 million in productivity gains.
As of September 30, 2016, Philips had completed 98% of the 3-year $1.632 billion share buy-back program. The buy-back was completed on October 20, 2016. On October 19, 2016, Philips announced the final results of the tender offer for certain outstanding notes, which the company started on September 20, 2016. The aggregate principal amount of the purchased notes was $285 million, and in Q3 2016 the tender offer resulted in a $106.63 million charge recognized in Financial expenses.
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