Dutch medical equipment maker Philips posted a bigger-than-expected drop in second-quarter core earnings on Monday, saying supply shortages and lockdowns in China had dented sales.
Shares fell 6.9 per cent to €20.24 at 7.26am, a nine-year low, and are down 38 per cent in the year to date.
The company cut its estimate for full-year sales growth to 1-3 per cent, from 3-5 per cent, while forecasting second-half growth of 6-9 per cent on a strong order backlog.
Chief executive Frans van Houten said supply chain issues and inflationary pressures had played a role, but singled out Chinese Covid-19 lockdowns as the biggest cause of the shortfall.
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In China, “comparable sales and order intake declined almost 30 per cent in the quarter”, van Houten said in a statement.
“Production in several of our factories, as well as those of our suppliers in China, was suspended for two months, which exacerbated the global supply chain and cost challenges.”
Adjusted earnings before interest, taxes and amortisation (Ebita) reached €216 million ($220 million) for the three months ended June 30th, missing an average forecast of €324 million according to a company-compiled poll.
In the same period a year earlier, Philips had achieved adjusted Ebita of €532 million.
Sales fell 7 per cent to €4.17 billion, also missing analyst forecasts of €4.23 billion.
“The quarter was significantly below expectations and Philips has lowered both annual and midterm guidance,” Jefferies analysts wrote in a note.
“While investors had somewhat expected top-line guidance was too high, the magnitude of the Ebita margin cut is likely to disappoint ... [and] revised guidance also leaves limited room for execution error.”
Philips, once known as a consumer electronics company, now does most of its business making medical imaging, monitoring and diagnostic equipment.
In 2021 the company was raided by the US Food and Drug Administration (FDA) and forced to recall millions of ventilators and respiratory devices because of a toxic foam part.
Philips said on Monday it was in talks with the FBI, on behalf of the FDA, on the terms of a settlement.
Total costs from the recall so far amount to about €900 million. That does not cover possible costs from class-action suits.
(c) Copyright Thomson Reuters 2022
