Cost-cutting plan is bearing fruit, says Philips chief

Philips Lighting’s aggressive cost-cutting plan will put the company on track to return to double-digit profit, chief executive Eric Rondolat has told investors.

In what he described as a ‘crazily transforming market’, Rondolat said the rationalisation programme which has seen factories close, staff numbers cut and a reduction in the product portfolio would return the company to around 10 per cent profit in three years’ time.

‘Cost savings are no longer a taboo for us’, he told his London audience. ‘We need to adapt our costs to the reality of the industry’.

More manufacturing is set to move to Mexico and China from the US and Europe, and more global products will be put on a common platform.

He predicted that both the LED components division, Lumileds, and the consumer luminaires business would be profitable this year. The latter is a key priority for the company, says Rondolat.

In North America, Philips has lost market share in recent years as it struggled to integrate its plethora of acquired luminaire brands. ‘We are now tackling this,’ said Rondolat.

Automotive lighting is an area of growth – the firm has recently won its largest ever order from a car maker – as is controls, and the company was receiving an increasing amount in licence fees from over 300 luminaire manufacturers to use the company’s patents.  Rondolat described the latter as a ‘very interesting revenue stream.’

He emphasised that Philips was still the clear number one in lighting, was spending a third more on research and development than its nearest competitor, Osram. ‘We want to lead the technological revolution,’ he declared and pointed to technical successes such as Philips internet-connect colour-changing lamp, the Hue,  its creation of a 200lm/W LED tube – ‘No one else in the world can do this’ – and the brightest OLED panels at 6,000 candelas per square metre.

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