Philips lowers sales outlook amid China weakness

Philips reported flat comparable sales of €4.4bn for its third quarter on Monday, as the Dutch medical devices maker faced a significant decline in demand from China.

The company said the decline, attributed to weakening consumer confidence and an ongoing anti-corruption campaign in the country, offset growth in other regions.

As a result, Philips revised its full-year sales forecast to a range of 0.5% to 1.5%, down from its earlier projection of 3% to 5%.

Adjusted EBITA for the quarter stood at €516m, up 13% year-on-year, with the margin improving by 160 basis points to 11.8%.

That improvement was driven by productivity measures, innovations, and increased royalty income.

The diagnosis and treatment segment experienced a 1% decline in sales, mainly due to China, though it saw growth elsewhere.

Personal health sales fell 5%, again reflecting a double-digit decline in China.

Meanwhile, the connected care segment remained flat, with a modest margin improvement from 3.7% to 7.3%.

Philips said its order intake for the quarter dropped 2%, primarily due to lower orders in China.

The company noted “very material” declines in this market, which forms a substantial part of its global operations.

Despite challenges in China, growth in other regions, particularly the United States, helped mitigate the impact.

For the year to date, comparable order intake grew by 1%, excluding China.

The company said its operating cash flow reached €192m, with free cash flow at €22m, impacted by working capital outflows.

Philips said it expected to close the year with free cash flow around €0.9bn - the lower end of its forecasted range.

“In the quarter, demand from hospitals and consumers in China further deteriorated, while we continue to see solid growth in other regions,” said chief executive officer Roy Jakobs.

“We have adjusted our full-year sales outlook to reflect the continued impact from China.

“Strong improvement in profitability was driven by progress on our execution priorities, productivity measures and the improved margins of our AI-driven, industry-leading innovations.”

Jakobs said that in a challenging macro environment, Philips was focussed on executing its three-year plan to capture growth and margin expansion opportunities.

“With patient safety as our number one priority, we are committed to delivering better care for more people.”

At 1004 CET (0904 GMT), shares in Koninklijke Philips were down 16.76% in Amsterdam at €24.53.

Reporting by Josh White for Sharecast.com.