The lighting arm of the business grew 7 per cent,bolstered by 32 per cent growth in LED sales
Philips has announced a cost reduction programme that will include 4,500 job losses.The company made the announcement after registering a fall in third-quarter profits.
The lighting and consumer electronics giant posted a group-wide profit for the three months to December of 76m euros(EUR 65m),compared with 524m euros for the same time last year.The fall has been attributed to reduced margins,falling sales and a loss at the company's TV division.
Although the lighting arm of the business grew 7 per cent,driven by a 32 per cent growth in LED sales,earnings were adversely affected by investments in selling,R&D costs and adverse Lumileds and Consumer Luminaires performance.Margins were also reduced by higher raw material costs brought about by shortages in rare earth materials.
As a result of the overall group position,the company said it would move forwards with a cost saving programme that will aim to reduce overheads and target 800 million euros of savings.A company statement said 60 per cent of the savings would be people-related,resulting in the loss of 4,500 positions,1,400 of which will be in the Netherlands.
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.
"Lighting,despite operational and performance issues that are being addressed,is sustaining its global leadership position,and we are particularly pleased with our high growth in energy-efficient LED lighting solutions."
Company spokesperson Steve Klink said the overhead structure of Philips was too big for a company of its size but did not reveal where the remaining job losses would come from."We don't want to lose those parts of the staff that will affect growth.We want to reduce overhead layers above the business in things like IT,finance,HR and real estate."
Philips said the majority of the restructuring would take place in 2012 to 2013 and reiterated its 2013 mid-term financial targets of 4 to 6 per cent sales growth and 10-12 per cent EBITA.
