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Apr. 14. 2008 / 4:00AM, PHG - Q1 2008 Royal Philips Electronics Earnings Conference Call

Pierre-Jean Sivignon - Royal Philips Electronics - CFO

Thank you. Ladies and gentlemen let me first welcome you to this conference call on the first quarter results of 2008 for Royal Philips Electronics. I will make a few introductory remarks and then we will open up the call to your questions.

Overall we had essentially a good start to the year. We were pleased to see continuing strong sales in both emerging markets and in green lighting as well as solid growth of both sales and orders at Healthcare. While headline EBITA was below last year, due to comparatively lower license income and lower results in our Television business, our other businesses within Healthcare, Lighting and Consumer Lifestyle performed well and look forward to an encouraging second quarter.

We also announced major steps to improve the results of our TV business firstly by transferring all North American TV operations to Funai under a license agreement starting in September and secondly, through the further optimization of our TV supply base.

Comparable sales growth for the company for the first quarter was 1%. Growth at Healthcare and Lighting was tempered by flat year-on-year sales at Consumer Lifestyles which show comparable sales at Connected Display fall by 2%.

In Healthcare the comparable growth of 5% was driven by Clinical Care, the new name for our Ultrasound and Defibrillator businesses, and by our Patient Monitoring and Customer Services businesses. Sales at Imaging Systems were flat year-on-year. Healthcare order intake in the quarter was strong at 9%, driven by North American orders, notably for imaging systems. While it's too early to talk of a recovery in the US imaging systems market, we were pleased with our intake in the quarter. Orders for patient monitoring and healthcare informatics also grew well.

The EBITA margin for Healthcare was broadly flat year-on-year, impacted to a degree by the acquisition of Respironics and acquisition related charges. Excluding Respironics, year-on-year Healthcare EBITA margins grew by 40 basis points, to 8.7 percentage points, driven by Clinical Care, Patient Monitoring and Customer Services.

At Lighting, sales grew 3% in the quarter. Strong growth continued in emerging markets, and for Green Lighting products this growth was somewhat upset by lower sales of UHP lamps, the market that continues to contract, and lower sales at Lumileds, which had a produce recall early in the quarter. Additionally, the first quarter of last year included sales of LCD backlighting products, the category which we have meanwhile exited. EBITA at Lighting reached EUR200 million in the quarter, some EUR 14 million above last year. Comparable sales at Customer Lifestyle were flat, year-over-year, on a comparable basis.

Good sales growth at Domestic Appliances and Shaving and Beauty, was offset by lower sales of optical licenses and particularly Connected Display. As I have already said, we have announced several decisive steps this quarter to improve the future profitability of our TV business, most importantly, the licensing agreement with Funai in the USA.

The EBITA margin of Consumer Lifestyle was at 2.9% in the quarter. The sectors' overall profitability was heavily impacted by the result of Connected Displays and EUR30 million lower optical license income compared to the first quarter of 2007. Last year, the amount was higher, due to the collection of past-use licenses. The EBITA of Consumer Lifestyles, excluding television and the effect of last year higher license income increased from 10.6% to 12%. This tells us that we are making progress in the other businesses.

EBITA at Innovation and Emerging Businesses included a EUR 13 million loss on the disposal of a non-core business as well lower IP license income. We now expect Emerging and Innovation businesses to report an average negative EBITA of around EUR40 million per quarter for the remainder of 2008, with results improving in the latter part of the year.


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