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Philips misses Q2 forecasts on supply shortages and China lockdowns By Reuters

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© Reuters. FILE PHOTO: Philips Healthcare headquarters is seen in Best, Netherlands August 30, 2018. Picture taken August 30, 2018. REUTERS/Piroschka van de Wouw/File Photo

AMSTERDAM (Reuters) -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 dented sales.

The company cut its estimate for full-year sales growth to 1%-3% from 3%-5%, forecasting a second-half growth of 6%-9% on the back of a strong order book.

Adjusted earnings before interest, taxes and amortisation (EBITA) came in at 216 million euros ($220 million) for the three months ended June 30. Analysts were expecting 324 million euros, according to a company-compiled poll.

In the same period a year earlier, Philips had adjusted EBITA of 532 million euros.

Sales fell 7% to 4.17 billion euros, also missing analyst forecasts of 4.23 billion euros.

Philips, once known as a consumer electronics company, now does most of its business making medical imaging, monitoring and diagnostic equipment, striking deals with big hospitals.

Chief Executive Officer Frans van Houten said supply shortages and inflationary pressures had played a role, but singled out Chinese pandemic lockdowns as causing pain.

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

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

In 2021, the company was raided by the U.S. Food and Drug Administration (FDA) and forced to recall millions of ventilators and respiratory devices because of a toxic foam part.

Philips said 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 euros. That sum does not cover possible litigation costs from class action suits.

($1 = 0.9803 euros)

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