Lighting Industry, News

Middle East: Sun shines on Philips’ stormy financials

Administering to profits: It's been tough for Philips to make money in the lighting business, but one area where it is profiting is the MIddle East, which is full of government projects like Saudi Arabia's Ministry of the Interior building in Riyadh.

Big traditional lighting companies have struggled financially as they transition into the brave new world of digital lighting, but amid the doom-and-gloom, at least one bright spot stands out: The Middle East.

At least that was the case in Philips’ most recent quarterly results, as reported by Abu Dhabi newspaper The National.

While Philips as a whole lost €103 million net (€7 million EBITA) on sales of €5.5 billion in the third quarter (both down from the same quarter in 2013 when Philips reported €5.6 billion in sales and a €281 million net profit), the Middle East bucked the trend. Regional LED projects in particular helped boost overall performance for the lighting, healthcare and consumer products company.

‘We are growing, this is a region that stands out in the portfolio by profitable growth,’ said Roy Jakobs, the chief executive of Philips Middle East and Africa. ‘You can see across the business, momentum is good. The lighting energy efficiency development and infrastructure projects, especially in the commercial side, is doing very well.’

The National reported that, ‘Big infrastructure projects in the (Gulf countries) have fueled the 10 per cent growth in the company’s regional operations with another 10 per cent growth expected for the coming year.’

It also pointed out that, ‘Since acquiring 51 per cent of Saudi Arabia’s General Lighting Company for $235 million in March, the company’s light-emitting diodes (LED) lighting segment has become its biggest revenue booster.’

Philips is benefitting from various initiatives in the region, including the United Arab Emirates’ recent ban on selling conventional lamps (bulbs), and Dubai’s decision to overhaul all the lighting in government building with LEDs – digital lights that save massive energy and that are believed to last for 20 years or longer.

The Middle East brings some much needed sunshine to Philips lighting business. While the company has made notable technological strides into digital lighting, it has faced stormy financial weather as it competes against start-ups unencumbered by a legacy lighting business. Like all companies in the industry, it is also trying to figure out how to profit in a world where lamps (bulbs) can last for decades, obliterating the traditional replacement market.

Philips is in the process of hiving off its lighting business as a result.  

Photo is from Philips

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