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Mixed results for Philips

20 October 2011 10.00 BST

(Netherlands) - Philips announces cost reduction programme that includes 4,500 job losses but LED sales up 32 per cent.

Philips has announced a cost reduction programme that will include 4,500 job losses. The company announced the results after registering a fall in profits from 11.8 per cent in Q3 2010 to 6.8 per cent in the same quarter 2011, marginally below Q2 2011.

Although lighting grew by a strong 8 per cent, driven by LED sales at 32 per cent, investments in selling and R&D, higher raw material costs, and adverse Lumileds and Consumer Luminaires performance led to a decline in earnings.

The Accelerate! program sees Philips investing in growth, addressing structural change, focusing on execution, reducing overhead costs and adopting a new company culture. It is this programme that includes a cost-savings program that targets EUR 800 million in savings and aims to significantly decrease complexity and overhead costs, while at the same time reinvesting in innovation and customer-facing resources. About 60 per cent of the savings will result in the loss of 4,500 positions, 1,400 of which will be in the Netherlands. The remaining 40 per cent relate to other structural costs.

CEO Frans van Houten said: “Our cost reduction plan of EUR 800 million has now been detailed, and we are in the process of deploying it across the organization as we optimize all overhead and support costs not directly involved in the operational customer value chain. The cost savings program will lead to the loss of approximately 4,500 jobs, which is a regrettable but inevitable step to improve our operating model to become more agile, lean and competitive...

... We are not yet satisfied with our current financial performance given the ongoing economic challenges, especially in Europe, and operational issues and risks. We do not expect to realize a material performance improvement in the near term. Our renewed focus on innovation and customer intimacy, supported by a changing culture that embraces entrepreneurship and accountability, will unlock the full potential of our portfolio and set the stage for profitable growth. We are taking the right steps to achieve our 2013 mid-term financial targets.”


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