Consumer Lifestyle - Delivering strong growth and improving profitability

Pieter Nota, CEO Philips Consumer Lifestyle

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• We are executing our strategy with rigor, delivering strong growth and improving profitability through locally relevant innovation

• Consumer Lifestyle will further focus on Personal Health and Well-being

• Our growth thrusts are:– Strengthening the core– New business adjacencies

• Accelerate! is fully embedded and is delivering results

• We have a clear Path-to-Value to meet our 2016 targets

Key takeaways

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• We deliver innovative Personal Health and Well-being appliances and services

• We leverage deep consumer insights and smart technology

• We are committed to deliver the best customer experience and be the preferred brand where we compete

• In combination with our global scale, local market relevance and superior execution, this enables us to create long term value

Consumer Lifestyle guiding statement

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Consumer Lifestyle: Delivering strong growth and improved profitabilityPresenting today:

Fabian WongPresident Greater China

Murali SivaramanCEO Domestic

Appliances

Bret FurioChief Market Leader

Jan van LeeuwenCFO

Pieter NotaCEO

Caroline ClarkeCEO Personal Care

Egbert van AchtCEO Health & Wellness

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37%

24%

18%

47%

7%

20%

14%

33%

Consumer Lifestyle Sales Mix

After significant portfolio rationalization we are further focusing on Personal Health and Well-being

Divestments:• Television Joint Venture TP Vision ensures

continuity of the Philips brand in TV• We are on track to close the agreement

with Funai in 2H 2013, securing Philips’ brand presence in Audio, Video, Multimedia and Accessories

Acquisitions:• Povos – Kitchen Appliances (China)• Preethi – Kitchen Appliances (India)• Discus – Oral Healthcare (North America)

Personal Care Health & Wellness Domestic Appliances Lifestyle Entertainment Television

FY 2010 Jun '13last twelve months

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Our portfolio is well positioned to leverage important mega trends

Growth geographies with an increasing middle class

Interconnectivity and digitization• Purchase decisions are

increasingly made or influenced online

• Consumers are increasingly looking for smart, personalized solutions

Growing interest in Personal Health and Well-being, and desire to look and feel good

Mega trends Our portfolio

• Personal Care– Male Grooming– Beauty

• Health and Wellness– Oral Healthcare– Mother & Childcare

• Domestic Appliances– Kitchen Appliances– Coffee– Garment Care– Floor Care– Air

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We are further building our leadership positions in these categories

1 Based on top 10 BMC’s (Business Market Combination) sell-in volumes corrected for average shaver lifetime2 Global or Regional #1 or #2 positionSource: GfK, Nielsen, YTD and MAT June 2013

• Leadership positions2 in Hair Care in growth geographies• Continuing to strengthen #1 position in Intense Pulsed Light (IPL) hair

removal in Europe• VisaPure cleansing brush successfully launched in 15 markets

Oral Healthcare

• Enhancing geographic growth with strong market share increase outside US

• Converting more manual users to electric, entering manual aisle with PowerUp battery in the US

• Launching new FlexCare Platinum, high consumer ratings

Mother & Childcare

• Natural range launched globally, with significant profitability improvement

• Strengthening geographic footprint with strong growth in key markets such as China

• #1 Market position in many markets

Male Grooming

• 40% of SensoTouch and AquaTouch users recruited from blade, in total recruited 5% new shaving users this year1

• Increasing our share in the total Male Grooming market (including blade), strengthening our leading position

• Further strengthening leadership in China; expanding into lower tier citiesPersonal

Care

Beauty

Health & Wellness

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Domestic Appliances

Garment Care

• Double-digit growth in 1H 2013 driven by strong innovation• Acquisitions and local product creation drive a significant increase of

new product offers• Leadership in key markets strengthened through local relevance

• Optimal Temp innovation (non-thermostat iron) confirms global leadership in steam generators

• Locally relevant innovations like steamers drive leadership in China and expand portfolio globally

• Revamped full automatic Espresso portfolio and strong product pipeline enables us to win in the espresso domain

• Regaining espresso market share in the #1 espresso market, DACH1

• Ready to work with new owners of D.E. Master Blenders 1753, further building the Senseo business

• Created an alliance with Tchibo for our Saeco brand in espresso capsules

Coffee

Kitchen Appliances

We are further building our leadership positions in these categories

1 Germany, Austria, Switzerland

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Our strategy to focus on Personal Care, Health & Wellness and Domestic Appliances is working

• Three consecutive years of overall market share growth

• Strong 1H 2013 sales growth and a significant step-up in profitability from 4.9%3 to 8.6% (EBITA) while operating in challenging market conditions

• With our BMC4 approach we direct investments to where the growth is and drive locally relevant innovation

• Continued strong focus on ROI of our A&P investments

We have grown market share in the past 12 months1

Personal Care

Health &Wellness

Domestic Appliances

China

Americas

Europe

APMEA2

Share gain No Share Gain Share loss

1 GfK, ZYK YTD June 20132 APMEA: Asia Pacific, Middle East & Africa3 Corrected for Senseo deal result in Q1 20124 Business Market Combination

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Our growth thrusts are enabled by our Capabilities, Assetsand Positions

Locally relevant innovations and global

platforms

Addressinggeographical white

spots

In Personal Healthand

Well-being

Strengthening the core New business adjacencies

Philips Group portfolio

Deep market insights

Technology innovation

Global footprint

The Philips brand Our people

Supported by a strong balance sheet

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Strengthening the core: Our BMC approach addresses consumer needs through locally relevant innovation and global scale

Local relevance on global platforms

Global scale

• Flexcare Platinum• Airfryer• Laser guided beard trimmer• AirFloss

• MultiCooker• Noodle Maker• SoupMaker• Soy Milk Maker

Business Market Combinations Planning, resourcing and managing performance by Business Market Combination- Illustrative -

Market 9

Market 1

B1 B2 B4 B5 BProduct categories B3

Market 2Market 3Market 4Market 5

Market 6Market 7Market 8

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Strengthening the core: We continue our geographical expansion addressing BMC white spots

• Airfryer – Japan

• Airfryer – North America

• Domestic Appliances – Africa

• Oral Healthcare – Brazil

• Oral Healthcare – China

• Male Grooming – ASEAN

We continue our geographical expansion, with plenty of opportunities in addressing BMC1 white spots with proven propositions:

Examples current initiatives

1 Business Market Combination

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New business adjacencies: We will further focus on Personal Health and Well-being

• Air Purification – Leveraging technology, brand and channels

• Beauty & Skin – Leveraging technology, brand and channels

• Interdental Cleaning & Teeth Whitening – Leveraging brand, channels and dental professional network

• More opportunities in Personal Health Solutions

We are further expanding in the chosen domain of Personal Health and Well-being, leveraging our CAPs1:

Examples

Air Purifier(Domestic Appliances)

VisaPure(Skin Cleansing)

Lumea(Female Depilation)

Teeth whitening(Oral Healthcare)

1 Capabilities, Assets and Positions

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We are capturing the digital opportunity

• E-Commerce: Today more than 15% of our sales is achieved via e-commerce– Our online share is above our offline

share

• Connected products: This year we announced a number of Connected Products, e.g.:– Smart Air Purifier– Smart Baby Monitor– Gran Baristo Avanti

• Consumer engagement: Over 35% of our advertising investments are in digital, resulting in increasing market shares, e.g., China, US, DACH1

Online sales

1H 20131H 20121H 2010 1H 2011

1 Germany, Austria, Switzerland

Key Comments

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Accelerate! is also transforming the way we work

• We have moved from a functional, centrally-led organization to an organization built around Businesses and Markets

• We have reduced overheads and reduced total number of executives by 30%1

Operating model

• End2End is driving business improvements:– Time to market improvement in Male Grooming China of 60% – Inventory improvement in Oral Healthcare North

America of 30%– Cost of non-quality improvement in Oral Healthcare

DACH2 of 13%

End2End

• Our performance culture, with a strong focus on accountability, is consistently delivering results

Performance culture

1 Like-for-like, excluding TV2 Germany, Austria and Switzerland

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The Accelerate! journey will continue…Drive performance towards 11% to 13% EBITA in 2016

Value

Continued implementation of the PBS1

• Invest in new growth

– Strengthening the core

– New business adjacencies

• Further overhead cost reduction program

• Further eliminate stranded cost

• Realize End2End productivity gains and apply Lean to all End2End processes, supported by new IT systems

• Complete culture change

2014–2016

2011–2013Mid-term

performance box

EBITA

Current performance

boxGro

wth

EBITA

Gro

wth

Reshape portfolio & reignite growth

Transforming the Consumer Lifestyle portfolio

Internalize Accelerate!

Preethi and Povos acquisitions

Rapidly renew product range through increased spending in innovation

Roll out of End2End programs will drive reduced time to market, reduced inventories, reduced cost of non-quality and improved gross margins

Culture change

1 Philips Business System

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• We are executing our strategy with rigor, delivering strong growth and improving profitability through locally relevant innovation

• Consumer Lifestyle will further focus on Personal Health and Well-being

• Our growth thrusts are:– Strengthening the core– New business adjacencies

• Accelerate! is fully embedded and is delivering results

• We have a clear Path-to-Value to meet our 2016 targets

Key takeaways

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