By Toby Sterling
AMSTERDAM -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% to 20.24 euros at 0726 GMT, a nine-year low, and are down 38% in the year to date.
The company cut its estimate for full-year sales growth to between 1% and 3%, from 3% to 5%, while forecasting second-half growth of 6% to 9% on a strong order backlog.
Chief Executive Officer 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.
In China, “comparable sales and order intake declined almost 30% 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 euros ($220 million) for the three months ended June 30, 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 euros.
Sales fell 7% to 4.17 billion euros, also missing analyst forecasts of 4.23 billion.
“The quarter was significantly below expectations and Philips has lowered both annual and mid-term guidance,” said Jefferies analysts 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 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 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 euros. That does not cover possible costs from class action suits.
($1 = 0.9803 euros)
(Reporting by Toby Sterling; Editing by Subhranshu Sahu and David Holmes)