Philips lifts Middle East revenues in spite of global losses
Revenues have grown in the Middle East region for Philips, the Dutch lighting, electronics and medical systems manufacturer, despite this month reporting global losses for the third quarter of this year.
Big infrastructure projects in the GCC have fuelled the 10 per cent growth in the company’s regional operations with another 10 per cent growth expected for the coming year.
Since acquiring 51 per cent of Saudi Arabia’s General Lighting Company for US$235 million in March, the company’s light-emitting diodes (LED) lighting segment has become its biggest revenue booster.
“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.”
Earlier this month, the global chief executive Frans van Houten announced plans to divest the lighting business into a standalone company, with an initial public offering a likely option.
Such a plan is unlikely to affect sales in the region according to Philips, which counts the UAE as one of its biggest growth markets.
Philips is currently the market leader in the Emirates with a 38.5 per cent share, followed by Osram with 22.6 per cent and General Electric with 16.3 per cent.
In July this year, the UAE government announced the Energy Efficiency regulation on lighting products, which bans the sale of inefficient standard bulbs in a move that is expected to save the country Dh668m in energy bills while also reducing carbon dioxide emissions by 940,000 tonnes – equivalent to taking 165,000 cars off the road.
Dubai’s government has started an initiative to switch all lighting in government buildings to LED, which is more energy-efficient and can be digitally controlled.
It is these such projects that have helped Philips to grow in the region.
“The LED revolution is a massive one,” said Mr Jakobs. “There are two trends, we see a huge uptake in this part of the world. Businesses as well as governments are strongly adopting LED because the return times are very attractive for business.”
The UAE’s lighting market is expected to reach Dh459m by the end of this year according to Euromonitor International, and is set to rise to Dh464m next year. LED lighting is set to grow to Dh11.4m in 2015 from Dh10.3m this year, but it will still remain a “niche category”.
“They are by far the most expensive types of lamps available and they are expected to remain more popular for use in construction projects rather than for home use among individual households,” said Nikola Kosutic, research manager at Euromonitor International.
Lighting has become an increasingly competitive market around the world. Earlier this year Samsung announced it would pull out of all markets except South Korea as it struggles to compete with cheaper Chinese players.
“It is something we will benefit from,” said Mr Jakobs, referring to Samsung’s decision. “Lighting is not just a function, in the retail, hospitality space, malls, they need to have 24/7 lighting and it needs to be dynamic, attractive and revenue enhancing.”
The company did a pilot test of its City Touch offering with the Abu Dhabi government which allows all the lights in an area to be managed by one centre that has control over the colour and brightness.
But while the commercial sales have been growing, the consumer side is still lagging.
“Since energy costs are heavily subsidised in the region, there is less incentive for consumers to switch over to LED lights,” said Mr Jakobs. “Adoption here is trailing versus global trends, but we are teaming up with the government to educate people and raise awareness.”
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Updated: October 29, 2014 04:00 AM