Lighting:
Building on Strength - Thinking the Future
Theo van Deursen
CEO Philips Lighting
November 23, 2004
Agenda
•
Mission, Vision & Strategy
•
We improve people’s lives
•
Building on Strength - securing financial results
•
Thinking the Future - profitable growth
•
Conclusion
Lighting
2
Philips Lighting: Mission statement
We understand people
Light is a visible form of energy
It pushes back the night
Welcomes the weary
Protects those you love
Banishes monsters from under beds
Makes eyes sparkle
……and improve their lives with lighting
Lighting
3
Philips Lighting: Vision statement
To be recognized by all our stakeholders as
The Clear Leader;
Setting the pace in the lighting industry
•
the best partner to do business with
•
the best company to work for
•
the best company to invest in
•
a responsible citizen contributing
to the sustainability of society at large
Lighting
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Lighting Strategy Overview
Ambition
Strategic Challenges
Profitable Growth:
– In developing markets
– With leading global customers
– In existing markets
– In new segments
Recognized by our stakeholders as
“The Clear Leader:
Setting the pace in the industry”
Building on Strength:
– China
– Key Account Management
– Business to Business
Think the Future:
– Consumer Electr. Applications
– Solid State Lighting
Key Business Drivers
–
–
–
–
End user driven Innovation
Marketing Excellence
Supply Excellence
Committed and competent people, living our values
On the basis of:
– A learning organization (Continuous improvement)
– Control of costs and assets
Lighting
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Agenda
•
Mission, Vision & Strategy
•
We improve people’s lives
– Marketing Excellence: Brand foundation
– End user driven innovation
•
Building on Strength - securing financial results
•
Thinking the Future - profitable growth
•
Conclusion
Lighting
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Philips Lighting: Sense and simplicity
Upgrade light-system
without interruption
of the light effect
and save 30% energy
Lighting
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Designed around you:
End User Driven Innovation
Experiences
Purpose
Process
Product
Lighting
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Easy to Experience: 2 in 1 Nightlight
Unique combination of
energy saver and LED
One click: night light
Two clicks: normal light
Lighting
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Advanced: Based on Leading edge R&D
Even experimenting in non-gravity environments
International Space Station (April 2004):
to improve High Intensity Discharge Lamps
together with Technical University
Eindhoven
Lighting
Parabolic flights to test
filament of halogen bulb
10
Development R&D % and Size Patent Portfolio
Patent Portfolio Increase
1999 – 2004: 58%
Increasing R&D effort
2000
5.0%
4.3%
4.5%
3.9%
4.0%
3.0%
2.8%
3.0%
2.5%
2.0%
1.5%
Lighting
1200
1155
600
200
0.0%
0
E2004 T2005
1101
800
0.5%
2003
1303
1000
400
2002
1480
1400
1.0%
2001
1604
1600
# of Patent Families
3.3%
3.5%
1741
1800
1999
2000
2001
2002
2003 E2004
11
Philips Lighting - Recent Innovations
1994
1995
1997
1999
2001
2002
2003
2004
Lighting
CDM MasterColour (high efficacy and “white light”colour)
Low mercury fluorescent lamp
TL5 (narrow diameter fluorescent)
Xenon Automotive Head Lamp
UHP (Ultra High Power light system for projectors)
Fully recyclable fluorescent lamp
HiPerVision (High performance car signalling lamp)
Luxeon LEDs
Improved and smaller UHP
Night-light (hybrid LED-Compact Fluorescent)
Mini CDM MasterColour (white light mini-spots)
LED-modules (building blocks for luminaires)
Night-guide car light (more-non-blinding-light, better reflection)
Mercury free Xenon Automotive Head Lamp
12 watt Extreme Ultraviolet source (for Lithography)
12
Agenda
•
Mission, Vision & Strategy
•
We improve people’s lives
•
Building on Strength – securing financial results
– Financial results
– China
– Key account management
– Business to Business
– Supply excellence
•
Thinking the Future - profitable growth
•
Conclusion
Lighting
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Philips Lighting
Revenues:
EBIT:
Net operating capital (NOC):
Return on NOC
Employees:
Capital expenditure:
Lighting
2003
EUR 4.5 billion
EUR 577 million,
or 12.8% of sales
EUR 1.5 billion
34%
43,800
EUR 164 million
Q1-Q3 2004
5% comparable growth
13.5%
37%
14
Philips Lighting: EBIT margin and RONA
%
16
EBIT/SALES
40
14
35
12
30
10
25
8
20
6
15
4
10
2
5
0
0
'90 '92 '94 '96 '98 '00 '02 '04
Q3
Lighting
RONA
(RONA= Return on Net
Operating Capital)
'90 '92 '94 '96 '98 '00 '02 '04
Q3
15
Philips Lighting
2003 Sales by Region
Asia
23%
Europe
46%
Americas
31%
Lighting
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Philips Lighting – Sales per Business Group
2003
Automotive &
Special Lighting
16%
Lamps
50%
30%
60%
Lighting
Electronics
16%
Direction of
allocation of
Capital
Expenditures
Luminaires
18%
Total Sales to thirds: EUR 4.5 billlion
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2003 Market Position
Philips position
#1
Size of market
as % of world
38%
W. Europe
E. Europe
22%
7%
N. America
L. America
32%
Japan
# 2 or 3
<#3
100%
Asia/Pacific
Total
Lamps
46%
Luminaires
29%
Not
served
Not
served
Not
Applicable
Light. Elec.
15%
Automotive
7%
SpL.
3%
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PD Lighting
Comparable sales growth in Emerging markets
2004 vs. 2003 (Q1-Q3)
Comparable growth
Lamps
Market share
2003
5%
32%
12%
27%
China
8%
14%
India
13%
36%
Brazil
C & E Europe
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China: a fast expanding market
•
•
•
•
•
Lighting
Large market potential
Philips #1 player in China
We create and extend distribution
– with 100+ preferred partners
– Internet enabled: supplies, inventories, cash
We extend into Mid-end of the market with dedicated products
Track record of profitability
20
Continuous profitable sales growth in China
Total Lighting
Index based on USD
600
500
400
300
200
100
0
'96
Lighting
'97
'98
'99
'00
'01
'02
'03
Exp'04
21
China: a vast supply base
• Access to vast supply base via fast growing China Sourcing Group
(From USD 100 mln in 2004 to over USD 600 mln in 2007)
• Business Groups have 8 factories
our leading edge assembly
of UHP projection systems
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China: Increasingly innovative
•
Increasing local innovation resources:
from 110 engineers in 2003 to 250 in 2007
•
Today: Shanghai Global Competence center
for Compact Fluorescent
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Growth partnerships with leading (global)
Key Accounts
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International Key Account Management drives
sales top Key Accounts Philips Lighting
1400
1250
1200
1090
EUR mln
1000
800
850
660
600
400
200
0
1990
Lighting
1995
2000
Exp.2004
25
Strength in Business to Business:
Olympic Games 2004 Athens
28 out of 33 venues (85%) with Philips Lighting
Partnering with:
• Government & Municipality
• Olympic Committee
• TV Broadcasters
• International Sport Federations
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Strength in Business to Business:
Philips market leader with MasterColour CDM
The change
Today 5% penetration in shops
Mini-Master Colour
Miniaturization:
Lead to increasing # of light points
Resulting in acceleration of growth:
10% pa in value
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Supply Excellence
•
•
•
Lighting
Impeccable quality:
– Towards “0” ppm level
Integrated demand and supply planning
– suppliers
customers
High delivery reliability - Quick response
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Supply Excellence
Delivery Reliability: complete & on time
Lighting Total
Target
95.0
%
90.0
85.0
80.0
2001 2002 2002 2002 2002 2003 2003 2003 2003 2004 2004 2004
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
Lighting
2005 2006 2007
29
Lighting IT Costs: ERP systems installed
Index based on EUR mln
120
110
100
90
80
70
60
50
'99
'00
'01
'02
'03
Exp'04
Further investment in IT to include supplier and customer in supply chain
management, and to support account management and global R&D
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Continuing Inventory Reduction as % of Sales
22
20
18
16
14
12
10
'95
Lighting
'96
'97
'98
'99
'00
'01
'02
'03
31
PD Lighting
Working Capital 1996 - 2004
in mln EUR
Turnover rate
1,000
Turnover rate
9
950
8.5
900
8
850
7.5
800
7
750
6.5
700
6
650
5.5
600
5
550
4.5
500
Lighting
Average Working Capital
1996
1997
1998
1999
2000
2001
2002
2003
exp ‘04
4
32
Continuous Improvement:
Business Excellence in Philips Lighting
All metrics show ample room for improvement
•
Applying model from European Foundation for Quality Management
we measure our progress: from 600 points today towards 700
in next two years
•
Business Balanced Scorecards: focus on essentials
•
Improve Business processes through:
– Systematic deployment of breakthrough plans
– Black Belts – Green Belts
– Process Survey Tools
•
Quality Improvement Competition: from 30 towards 40 % participation
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Conclusion
We improve people’s lives
• Marketing Excellence: Brand foundation
• End user driven innovation
Building on strength – securing financial results
• China
• Key account management
• Business to Business
• Supply excellence
Room for improvement
• In all our business processes
• In Margin and NOC turns
• But especially in accelerating profitable growth
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We will accelerate profitable growth,
breaking away from historic pattern
Philips Lighting Sales growth %
Average Growth
Nominal
1.8%
Comparable
2.2%
15.0
12.0
9.0
6.0
3.0
0.0
-3.0
-6.0
-9.0
Lighting
Nominal
Comparable
1996
1997
1998
1999
2000
2001
2002
2003
Q3
2004
35
Agenda
•
Mission, Vision & Strategy
•
We improve people’s lives
•
Building on Strength - securing financial results
•
Thinking the Future - profitable growth
– Automotive, Special Lighting & UHP
– Solid State Lighting
•
Conclusion
Lighting
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