Royal Philips Creating value through sustainability. Nomura European SRI Conference London, UK June 26, 2014

Transcription

1 Royal Philips Creating value through sustainability Nomura European SRI Conference London, UK June 26, 2014

2 Important information Forward-looking statements This document and the related oral presentation, including responses to questions following the presentation, contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forwardlooking statements include statements made about our strategy, estimates of sales growth, future EBITA and future developments in our organic business. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements. These factors include, but are not limited to, domestic and global economic and business conditions, developments within the euro zone, the successful implementation of our strategy and our ability to realize the benefits of this strategy, our ability to develop and market new products, changes in legislation, legal claims, changes in exchange and interest rates, changes in tax rates, pension costs and actuarial assumptions, raw materials and employee costs, our ability to identify and complete successful acquisitions and to integrate those acquisitions into our business, our ability to successfully exit certain businesses or restructure our operations, the rate of technological changes, political, economic and other developments in countries where Philips operates, industry consolidation and competition. As a result, Philips actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see the Risk management chapter included in our Annual Report Third-party market share data Statements regarding market share, including those regarding Philips competitive position, contained in this document are based on outside sources such as specialized research institutes, industry and dealer panels in combination with management estimates. Where information is not yet available to Philips, those statements may also be based on estimates and projections prepared by outside sources or management. Rankings are based on sales unless otherwise stated. Use of non-gaap Information In presenting and discussing the Philips Group financial position, operating results and cash flows, management uses certain non-gaap financial measures. These non- GAAP financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measures and should be used in conjunction with the most directly comparable IFRS measures. A reconciliation of such measures to the most directly comparable IFRS measures is contained in our Annual Report Further information on non-gaap measures can be found in our Annual Report Use of fair-value measurements In presenting the Philips Group s financial position, fair values are used for the measurement of various items in accordance with the applicable accounting standards. These fair values are based on market prices, where available, and are obtained from sources that are deemed to be reliable. Readers are cautioned that these values are subject to changes over time and are only valid at the balance sheet date. When quoted prices or observable market data are not readily available, fair values are estimated using appropriate valuation models and unobservable inputs. Such fair value estimates require management to make significant assumptions with respect to future developments, which are inherently uncertain and may therefore deviate from actual developments. Critical assumptions used are disclosed in our Annual Report Independent valuations may have been obtained to support management s determination of fair values. All amounts in millions of euro s unless otherwise stated; data included are unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 2013, unless otherwise stated. 2

3 Agenda 1. We have built a strong foundation to drive profitable growth 2. Creating value through Sustainability 3

4 A strong diversified technology group with a vision to make the world healthier and more sustainable 40 businesses in 3 sectors 1 Geographies 1 Healthcare Consumer Lifestyle Lighting Western Europe North America Other Mature Geographies Growth Geographies 2 43% 20% 37% 25% 30% 9% 36% Since billion sales in 2013, 70% B2B 1/4 of revenues from recurring revenue streams 50% of the portfolio has global leadership positions Adjusted EBITA of 2.5 billion in billion R&D spend in ,000 employees in over 100 countries 4 1 Splits based on sales full year Growth geographies are all geographies excluding USA, Canada, Western Europe, Australia, New Zealand, South Korea, Japan and Israel

5 Lighting Consumer Lifestyle Healthcare Our business domains benefit from mega trends Our Business Domains Mega Trends Imaging systems for diagnostics and therapy Patient care for hospital and home Clinical Informatics & consulting services Personal health & well-being appliances and services Growing and aging population with more chronic diseases Growing demand for integral value-based healthcare solutions Growth geographies 1 with growing middle class Rising health & well-being consciousness Energy efficient Light sources Lighting applications, systems and services The world needs more light and energy efficient lighting Digitalization driving demand for integrated lighting solutions 5 1 Growth geographies are all geographies excluding USA, Canada, Western Europe, Australia, New Zealand, South Korea, Japan and Israel

6 Redefining the delivery of care as a solutions partner Partnering with the Stockholm County and Karolinska University Hospital to meet future demands of healthcare Karolinska will develop new care pathways by integrating patient care, clinical research and education Philips will provide access to state-of-the-art imaging systems equipment and services for 14 years for 600-bed new hospital site to be opened in late 2016, at predictable costs Managed equipment services include the procurement, system integration and maintenance, including those of other vendors, to ensure optimal delivery of care Strong focus on innovation, education and collaboration, including establishment of a research and innovation hub The sustainability performance of Philips and its products and solutions was one of the important drivers to make this deal 6

7 Becoming a lighting systems and solutions provider City of Barcelona Stadium Allianz Arena FC Bayern Munich Green Sense Farms (GSF) indoor farming systems Joint effort to increase efficiency and quality of public-lighting installations Combined implementation of LED lighting and control systems including Philips LumiMotion and CityTouch More than 60% energy savings Aims to make Barcelona a frontrunner in the field of Smart Cities Largest arena façade for animated LED light effects in Europe Every single point of light controlled in real-time; palette expanded from 3 to 16 million colors LEDs used in the system: 60% more energy efficient, saving 362 tons of CO 2 per year Tailored LED growing lights and vertical hydroponic technology Innovative farming model allows GSF to harvest times a year 30-60% energy efficiency compared to fluorescent lighting Eliminates the need for harmful pesticides and fertilizers 7

8 Agenda 1. We have built a strong foundation to drive profitable growth 2. Creating value through Sustainability 8

9 At Philips we strive to make the world healthier and more sustainable through innovation We will be the best place to work for people who share our passion Together we will deliver superior value for our customers and shareholders Improving people s lives through meaningful innovation 9

10 A healthier and more sustainable world UN Human Development Index = life expectancy + education level + purchasing power 10 Source: Ecological Footprint Atlas 2009

11 The building blocks of the Philips approach We take a dual approach, social and ecological, in the way we operate and innovate II. Sustainable Planet We invest in the development of green technologies and products, take action to reduce the ecological footprint of our operations and supply chain as well as strive for an injury-free and illness-free work environment Green Innovation Green Operations I. Healthy People We innovate to deliver products and solutions that improve people s health and well-being as well as investing resources to address social challenges and create healthy communities Circular Economy 11 Access to Care Well-Being Supporting Society

12 Our goal is to improve the lives of 3 billion people by 2025 The model to measure our progress 12 1 Double-counts between various Philips Green-, Care- and Well-being products that touch the same person are eliminated

13 Results: lives improved by Philips by Source: Philips Annual Report 2013

14 Philips Green products have proven best-in-class eco performance 15 years track record in embedding EcoDesign with attention to 6 Green Focal Areas Green product definition reviewed and further sharpened (more ambitious, e.g. reference point) Green products are proven best in class: Offer a significant environmental improvement (10%+ better than the reference product 1 ) Or outperform product-specific eco-performance requirements (e.g. regulatory) Or are rewarded with a recognized eco-performance label And meet sector Green product specific minimum requirements Continuous investments in Green Innovation (EUR 2 billion until 2015 in EcoVision5) - 51% 2 of total 2013 revenues coming from Green products Audited by independent external party (KPMG) 14 1 Reference product: Philips predecessor or closest commercial competitors 2 Excluding the Audio, Video, Multimedia and Accessories business

15 Philips Care: professional products and services that have a direct positive impact on a person s health As part of our EcoVision5 program we made the commitment to bring care to 500 million people by 2015 Metrics are by now well established and embedded in the business Included are most Healthcare products Audited by independent external party (KPMG) Reasonable Assurance 15

16 Philips well-being products and solutions enable people to live healthier lives Philips focus on Healthy Living (enabling healthier lives) means providing consumers with tools: - To make healthier choices, e.g. when preparing food - Air fryer, Juicer, Blender - To care for their physical and mental health - Mother & Childcare, Oral Healthcare, Light therapy - To create a healthy home environment - Air purification Measuring our impact on well-being can spark a new wave of meaningful innovation Audited by independent external party (KPMG) Reasonable Assurance 16

17 The building blocks of the Philips approach We take a dual approach, social and ecological, in the way we operate and innovate II. Sustainable Planet We invest in the development of green technologies and products, take action to reduce the ecological footprint of our operations and supply chain as well as strive for an injury-free and illness-free work environment Green Innovation Green Operations I. Healthy People We innovate to deliver products and solutions that improve people s health and well-being as well as investing resources to address social challenges and create healthy communities Circular Economy 17 Access to Care Well-Being Supporting Society

18 Current business is based on a Linear Economy Linear economy is a take-make-dispose economy: Take: get raw materials from the planet natural resources Make: create products to consume and use Dispose: throw away the waste generated Current recovery of consumer goods: 2% Recovered for reuse 18% Recovered for decomposition 80% not recovered 18

19 19 Circular Economy reduces material throughput by maximizing value retention Parts supply Manufacturing Distribution User Waste Mining/materials manufacturing Service Recycle Parts harvesting Refurbish Reverse Supply Chain Building Blocks Design New business model Source: Ellen MacArthur Foundation, McKinsey Collaboration From highest to lowest value retention: 1. Service & Upgrade 2. Refurbishment 3. Parts harvesting 4. Recycling

20 Circular models economic potential of EUR billion annually for Europe alone Net material cost savings in complex durables with medium life spans EUR billions per year, based on current total input costs per sector Office machinery and computers Medical precision and optical equipment Key insights Circular economy requires new business models and can be source of innovation Radio, TV, and communication Furniture Other transport Levels: remanufacturing, refurbishment, spare parts, material reuse Electrical machinery and apparatus Machinery and equipment Motor vehicles EUR M Transition scenario (2018) Advanced scenario (2025) A shift from owner to user for customers and from transactional to relationship sales for companies 20 Source: Ellen MacArthur Foundation, McKinsey

21 Some Sustainability highlights and 2013 Thought leaders at Rio+20, launch of LED revolution Partner of the year with 370 ENERGY STAR products Recognized leader - Carbon Disclosure Project Sourced conflict-free tin from Congo 100 Light Centers during Cairo to Cape Town tour One of the top risers in Interbrand s BGGB

22 Sustainability as a driver for growth Success of EcoVision Green Products represented around 51% of sales in 2013, up from 40% 1 of sales in 2011, driven by investments in Green Innovation. EcoVision targets for % of sales from Green Products EUR 2 billion Green Innovation investments To improve the lives of 2 billion people To improve the energy efficiency of our overall portfolio by 50% To double the amount of recycled materials in our products as well as to double the collection and recycling of Philips products Recent accomplishments Philips was presented with the 2014 Champion for Change Award by Practice Greenhealth, the US leading health care community Philips received the VBDO Responsible Supply Chain Management Award for the sixth consecutive time Philips was recognized as a leader in the Carbon Disclosure Project for the third consecutive year on both performance and disclosure Philips signed a partnership agreement with the Ellen MacArthur Foundation to leverage the benefits of the Circular Economy Philips has been recognized in Interbrand s annual ranking of the top 50 Best Global Green Brands, moving up eight places to the 23rd position Philips has been recognized Energy Star partner of the year by the US Environmental Protection Agency for our outstanding contribution to environmental protection through energy efficiency 22 1 Excluding the Audio, Video, Multimedia and Accessories business

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