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CNBC Interview with Philips Lighting CEO, Eric Rondolat from the World Economic Forum 2018

Following are excerpts from a CNBC interview with Eric Rondolat, Philips Lighting CEO and CNBC's Steve Sedgwick and Geoff Cutmore from the World Economic Forum 2018.

GC: Sri, thanks very much indeed for that. Well, let's talk a little bit about Philips Lighting, the company is hoping for a brighter year when it posts-,

SS: Ohh-,

GC: 2017 results next year-, do you see what they did there?

SS: Amazing.

GC: It's clever, isn't it? The world's largest lighting-maker posted sales growth in all four of its units last quarter, which helped outweigh declining sales in the traditional bulbs business, but said US demand is lagging. Eric Rondolat is with us, the CEO of Philips Lighting. Eric, good to see you, thanks very much for joining us. Just on that, I mean, is there an issue with the US, at the moment, in terms of demand?

ER: So, thanks for having me, first, in this very beautiful environment.

GC: Yes.

ER: As you've said, you know, so, we've posted, in Q3, growth, which was extremely important in the dynamic of the company, because we have our LED, our professional lighting business, which are offsetting the decline of the conventional part of the business in lighting. We've seen, since the third quarter 2016, the US market being softer, and we are not the only ones.

GC: Mm. But that's interesting, because, here at Davos, we've had CEO after CEO talking about their great expectations for 2018, and a lot of that built on the Donald Trump tax cuts stimulating the North America market growth. Do you think that 2018 will be a better year, in terms of that weakness of demand? Will it come back this year, or are you in the wrong product mix?

ER: So, we clearly are not in the wrong product mix, because we see the connected part of the business, which is growing very strong double-digit, totally in line with the strategy that we had, from the very beginning, at the IPO time, described. You know, 1,000 references of CityTouch projects in the world. We have been launching recently our new entertainment. Can you imagine that, at home, watching a movie, or you're gaming, and all the lighting just adapts to the color that you have on the screen? So, we see those businesses, you know, growing extremely fast, and we're very positive for 2018. We've seen a very strong Europe, a very strong China, a very strong India, and, it's true, a bit softer US, so far. We'll see what 2018 brings. When it comes to tax cuts, it's positive in general. You know, it generates investment in growth opportunities.

SS: Big competition from low-cost Asian producers of the product, as well, we've talked about this on many occasions, as well. Do you understand the American point of view, whether it comes to washing machines, or solar panels, about why they're putting on tariffs against some Chinese products, as well? Do you have empathy, or sympathy, for the view that actually, some of your Asian competitors are selling product below cost?

ER: Well, if that happens, this is something which is, you know, against competition rules-,

SS: Against the WTO, as well, yes.

ER: In general. You know, I think that when it comes-,

SS: But is that a risk that you see? In order to gain the market share at your expense?

ER: We look at it very seriously, and when there is issues relating to dumping, we try to highlight them to the governments, and most of the governments are acting, you know, when they know that this is happening, so this is what we do, also, as a company.

SS: Mm.

GC: Yes. I mean, we were talking, a little bit before you sat down, about The Scorpions, and Steve didn't seem to-,

SS: Never heard of them. What are they?

GC: Not part of his childhood, I don't think, The Scorpions, but, it is interesting, the work you are doing in the specialty lighting area, especially around concerts and things like that. Does that represent a better margin driver of the business for you?

ER: You know, strategically, as we have described it to you, the more we get differentiated, and when you move to connectivity, furthermore to services, and when you use light as a language, we see that we are having higher margins.

GC: Mm. Mm. So, as we wrap up the World Economic Forum here, what do you think you leave with, in terms of your takeaway?

ER: So, it was extremely interesting. So, first of all, we talked a lot about the disruptions, both on the political side, but also on the technological side, that are happening, and it was good to see that most of the people understand that the solution to this is systemic, and we need to get together. Governments, companies, NGOs, but also inter-countries, and to fix the issue. On the other hand, you know, when I look at something very specific, which is climate actions, we are very involved, I am personally involved, you know, in the group of companies that gather here, I am a bit disappointed. Because we are not where we should be. If you look at the Paris Agreement, the objective of 2 degrees, we have, today, only half of the actions worldwide that would lead to that objective. So, we should not be there. We should have much more actions already listed that would lead us to this objective of 2%. As a company, you know, we have delivered the 1 billionth LED lamp to the market, and we have declared that we are going to be carbon neutral in 2020. I think that many others should follow us.

SS: Alright, fabulous. And I hope you note that we've gone LED this year, as well-,

ER: Yes, that's good.

SS: Making Geoff and I look even better. Okay-,

GC: Yes. Clearly the-, the winds of change-, the winds of change are blowing here.

SS: Yes. Exactly. So, Scorpions. What songs? Name one song. I don't know.

GC: Winds of Change. We just did it.

SS: Well, how does that go?

GC: There's, like, a big guitar intro-,

ER: No, it-, it's a beautiful song, with a guitar intro, and a beautiful guitar solo.

GC: Yes. You have to listen to it.

SS: Alright, I might look up my-, my streaming device in the break, and see if I can find it. They probably don't have that on there, it's too obscure.

GC: I can hear the director singing it.

SS: Is that what he was doing? I thought I heard a cat in my ear-,

GC: Did you?

SS: Eric Rondolat, thank you very much indeed for that-,

ER: Thank you, guys.

SS: CEO-, sorry, Rod-, CEO of Philips Lighting.