Philips Shares Down On Profit Warning, Sleep Apnea Device Writedown

Philips shares fell to their lowest in a decade on Wednesday, Oct. 12, 2022, as the Dutch health tech company said supply chain problems would hit sales, and wrote down 1.3 billion euros ($1.26 billion) of the value of its sleep apnea business, Bart H. Meijer reported for Reuters.

Photo Insert: Philips last year shocked investors by recalling 5.5 million ventilators used to treat sleep apnea, over worries that foam used in the machines could become toxic.

Shares were down 9% at 0750 GMT (3:50 p.m., Oct. 12, in Manila) at 14.13 euros, hitting their lowest level since June 2012. In its second profit warning of the year, Philips said third-quarter core profit would drop around 60%, as ongoing supply chain problems had pushed down comparable sales by around 5%.

Philips said problems with supply shortages had been much greater than anticipated in the past months, after some signs of improvement earlier in the year, and would continue to weigh on sales in the last months of 2022.

This was expected to have limited adjusted earnings before interest, taxes and amortization (EBITA) to 210 million euros in the third quarter, down from 512 million euros a year before.

Philips also slashed its outlook for the fourth quarter, as it now expects a "mid-single-digit" comparable sales decline while it previously guided for improvement towards the end of the year.

"This weakness will also spill into 2023 where consensus on adjusted EBITA probably also needs to come down by at least 10%," ING analyst Marc Hesselink said in a note.

"Next step will be the 2025 targets which became very challenging especially now that the Sleep & Respiratory care business is not expected to fully recover post the recall."

Philips last year shocked investors by recalling 5.5 million ventilators used to treat sleep apnea, over worries that foam used in the machines could become toxic.

Outgoing Chief Executive Frans van Houten said the impairment on the sleep care business was the "best estimate" of the effects of a consent decree proposed by the US Food and Drug Administration (FDA) to solve the problems, which have lopped around 28 billion euros off Philips' market value in the past 15 months.

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