Philips Misses Q2 Forecasts On Supply Woes, China Lockdowns

Dutch medical equipment giant Philips announced a larger-than-expected decline in second-quarter core earnings, citing supply bottlenecks and lockdowns in China, Toby Sterling reported for Reuters.

Photo Insert: Philips, long recognized as a consumer electronics company, now focuses on medical imaging, monitoring, and diagnostic equipment, as well as contracting with large hospitals.

The business reduced its full-year sales growth prediction to 1 percent -3 percent from 3 percent -5 percent, while projecting second-half growth of 6 percent -9 percent due to a solid order book.

For the three months ended June 30, adjusted earnings before interest, taxes, and amortization (EBITA) totaled 216 million euros ($220 million). According to a company-compiled poll, analysts expected 324 million euros.

Philips generated adjusted EBITA of 532 million euros in the same quarter last year. Sales decreased 7% to 4.17 billion euros, falling short of analyst expectations of 4.23 billion euros.

Philips, long recognized as a consumer electronics company, now focuses on medical imaging, monitoring, and diagnostic equipment, as well as contracting with large hospitals. Supply shortages and inflationary pressures, according to CEO Frans van Houten, played an impact, but Chinese epidemic lockdowns were particularly painful.

In China, "comparable sales and order intake declined almost 30% in the quarter," he said. "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," he added.

Philips shares, which are down 34% so far this year, closed at 31.75 euros on Friday.

The US Food and Drug Administration (FDA) raided the company in 2021, forcing it to recall millions of ventilators and breathing devices due to a dangerous foam component. Philips stated that it was negotiating a settlement with the FBI on behalf of the FDA. So far, the recall has cost over 900 million euros. This amount does not include any potential legal costs from class action lawsuits.

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