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Philips (PHG.US) Q3 profit grows, cuts full-year sales growth forecast significantly

Market IntelMonday, Oct 28, 2024 4:00 am ET

1min read

Philips (PHG.US) has significantly lowered its sales growth expectations for this year due to weak demand in China, expecting a comparable sales growth of only 0.5% to 1.5% in 2024, far below its previous expectation of 3% to 5%. Third-quarter order volumes fell 2%, and comparable sales were flat at 4.4 billion euros, below analyst estimates. Despite meeting the top end of expectations with an adjusted EBITA margin of 11.8%, uncertainty in the Chinese market is expected to persist for several quarters. In addition, Philips is still dealing with claims related to faulty sleep apnea devices in the US and an investigation by the US Department of Justice, but the potential impact of these legal proceedings is not included in the outlook.

The company's product line, ranging from toothbrushes to medical imaging systems, reported a comparable sales growth of 0% in the third quarter, compared to the same period last year, at $4.75 billion, missing analyst estimates for an average 2.1% growth. However, adjusted EBITA reached 516 million euros, up 13% year-on-year, and the margin improved to 11.8%, thanks to cost reductions. CEO Roy Jakobs mentioned in an interview that while there is uncertainty in the Chinese market, the economy in other parts of the world is growing steadily.

Philips is trying to rebuild trust among shareholders and consumers after settling claims related to faulty sleep apnea devices in the US for less than expected. Earlier this year, two major investors, Exor NV and Artisan Partners GP LLC, increased their stakes in the company. Bloomberg estimates that the recall cost Philips about $5 billion, and the company is still under investigation by the US Department of Justice, without making any financial provision for it.

Despite Philips' stock price rising about 45% this year, it has still fallen more than 30% since the recall in June 2021. Moreover, Philips welcomed Charlotte Henneman as its first female CFO and member of the management board at the beginning of this month.

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