According to the president of Philips Gerad Kleisterlee, the company performed with agility and now in 2010, it is in better position as compared to 2009.
Royal Philips Electronics is a publicly listed company at New York and Amsterdam stock exchanges. Philips was created in 1891in Netherland. The main headquarters of Philips is in Netherland. It started to manufacture only light bulbs in the beginning. Philips gave the cheapest products to their customers. Philips is a financially healthy company in the world. In 1920, the company started to make the vacuum tubes. In 1950, Philips became famous in the market for producing radios and x-rays machines. In 1972, Philips invented the world's first home video cassette recorder, the N1500 with bulky video cassettes which could record 30 minutes or 45 minutes. Philips has many competitors like betamax and Sony. Philips has 116,000 employees in the 60 branches in different countries on worldwide. There are three sectors in Philips: health care, lighting and consumer life style. According to the company's profile, the Lighting sector has 51,000 employees on worldwide. It produced the following things: Automotive, consumer Luminaries, Professional Luminaries, Lighting electronics, Lamps, Special lighting applications, and Lumileds.
The Healthcare sector has 34,000 employees in different branches of the company. It invented the following products: Imaging system, Home healthcare solutions, Healthcare informatics and patient monitoring clinical care system, and Customer services.
The Consumer Lifestyle sector has 18,400 employees in the branches of the company and makes the followings products - Shaving and Beauty, Domestic appliance, Multimedia peripherals and accessories, Television, Health and wellness and licenses, Audio and video.
Philips brought new changes to the consumer taste by its new products. Philips has become the 42nd brand company in the world. By the company's profile,60 top leaders focus on driving their global business for achieving their short and long term goals.
According to market report of London, it seems that Philips sales rose during the first quarter of 2010 due to its good performance in the quality assurance and behaviour with its customers. Philips share prices dramatically increased by 3.2% in Amsterdam in the current year. Philps managed to maintain its position in the market during the recession. Although recession affected the sales of the company as compared to the previous two years. It has sustainability in the market.
Income statement:
In contrast the 2008 and 2009 sales income according to the statements were 26,385 millions of euros and 23,189 millions of euros respectively. After deduction of the cost of sales, the gross margin was 8,447 MIE in 2008 and 8,079 MIE in 2009.When deduction of all selling, financial and general expenses is made the income before tax remained 54 MIE in 2008, while in 2009 it was 614MIE. After paiying the tax, the company had have 92MIE loss in 2008 and in 2009, after paying the tax the company had have 424MIE profit.
Balance sheet:
In order to explain the balance sheet, I compared the 2009 statement with the 2008 statement. It had have 12,149 (millions of euros) current assets in 2008,while the 2009th annual report showed that the current assets were 11,909 millions of euros which were less than 2008th.the company's non-current assets were 31,910 million of euros in 2008,wether in 2009 its non-current assets were 30,527 million of euros. As contrast the liabilities and equity of 2008 and 2009, the total liabilities were 16,317 MIE (million in euros) in 2008.In 2009 the total liabilities were 15,883 MIE. The company's equity were 15,593 MIE in 2008, even in 2009 the company had have 14,644 MIE.
Financial Performance:
Evident from the annual reports, the company earned huge revenues in 2007 but after that due to the adverse effects of economic downturns, the company suffered losses although only little and in 2009, the company reverted back and started earning profits.
In this year, Philips did not sell much of its assets and so the gain or loss on disposal of assets remained much less than the previous years. The company is doing well as far as the working capital is concerned. However, the point to be noted is that there is a 100 million euro decrease each year since 2007 in the net cash inflows from the operations and if this condition persists, it could cause serious liquidity issues for the company.
The company seems to be spending less each year for the last three years on purchase of assets, plant and machinery. The company has been purchasing businesses continuously. The expenditure for purchase of other businesses was at the highest level in 2008 and least in 2009. The reason for this is that the company had to overcome the economic recession and this was an attempt for the purpose.
The best feature of the company is that it has not allowed anything to disturb its history of dividend payments. Philips has been paying continuously to its shareholders. Since 2007, the amounts have been 639M, 698M and 634M Euros.
Financial year 2008 remained the most troubling year for the company due to economic issues. The company purchased businesses, issues long term securities to cope with the liquidity issues and undertook highest level of treasury stock transactions. Although the company did not revalue the assets in 2009, goodwill was re-valued and increased. This is due to the reason that the company has not reduced the amount of dividend payments and the company has no contractual or contingent liabilities.
Net interest expense for 2009 was 147 million Euros higher than in 2008 and this was due to lower interest rates applied to the liquid assets, as the annual report stated. In 2009, income of Euro 126 million was earned from the sale of securities. This included EUR 69 million gains from the sale of remaining shares in LG Display, and EUR 48 million gain from the sale of remaining shares in Pace Micro Technology which were partially offset by impairment losses of EUR 58 million. Other financial expenses consisted of EUR 15 million accrued expenses of asbestos and environmental provisions.
According to the annual report, financial year 2008, income from the sale of securities was EUR 1,406 million which included EUR 1,205 million gain from the sale of shares in TSMC, EUR 158 million gain on the sale of shares in LG Display, and EUR 20 million gain on the sale of shares in D&M.
The weighted average statutory income tax rate increased in 2009 compared to 2008, as a result of a modification in the country mix for the optimal income tax rates. The effective income tax rate remained higher than the weighted average statutory income tax rate in year 2009 and the reason for this was that are the new losses carried forward which are not expected to be realized, non-tax-deductible impairment charges and costs.
In 2009, the company noticed continued deterioration of their markets due to economic recession. Even in the demanding economic conditions, the management acted quickly and positively to further speed up reorganization programs and implementation of cost-saving measures, while still investing in acquisitions and mergers, marketing, and research and development. As compared to 2008, figures of earnings before interest and tax and net income and cash flow before financing activities enhanced. Sales got better in the second half of the year 2009. Group sales were impacted by 17% lower comparable sales at Consumer Lifestyle and the reason was the severe slump in consumer markets; Lighting sales lowered by 13%; Healthcare proved more flexible, with a sales decline restricted to only 3%. Despite hard economic circumstances, the company continued to make careful acquisitions of high-margin, high-growth businesses in 2009, adding up eight companies to its portfolio which resulted in a cash leak of EUR 294 million. The company produced cash flows from operating activities totalling EUR 1,545 million.
Sustainability performance:
According to the Philips global website on sustainability, Philips has announced its 2015 sustainability targets. The program is named as EcoVision5 which is supported by the global trends to which it can offer important solutions. The approach of Philips towards sustainability will change and broadened well beyond the ecology remaining in line with the company's health and well-being strategy.
At Philips, sustainability means improving the health and well-being of the communities in which the individuals live in. At the same time, the company struggles continually towards the betterment and improvement of the environmental performance of the products and processes, and to keep sustainability all the way through the supply chain.
According to the 2009 annual report, the main focus of the company is on,
implementing of EcoVision programs,
reinforcement of the energy-efficient and Green Product approach at both Healthcare and Consumer Lifestyle, leveraging the experience of our Lighting sector,
making the supply chain fully acquiescent to the Electronic Industry Code of Conduct standard, and
including the suppliers of recent acquisitions into their Supplier Sustainability Involvement Program.
Conclusion:
Philips is doing well financially and technologically for the last many years. It was quite successful even in the economic bad patches. Its product has earned a good name and the afterward services are even better. It is financially stable and the stakeholders has trust in the company.
