Philips cuts annual sales outlook on weak demand from China

Royal Philips slashed its sales-growth forecast for the year as tepid demand from China weighs on the Dutch medical technology firm’s orders.

Philips expects comparable sales to grow as much as 1.5 per cent in 2024, down from a previous forecast of as much as 5 per cent, it said on Monday (Oct 28). Order intake decreased 2 per cent in the third quarter due to the China slump.

The Amsterdam-based manufacturer has been affected by an anti-corruption campaign across China’s health-care sector after the Asian nation began to scrutinise local medical-technology procurement. The country has implemented strict domestic product requirements for many categories.

Uncertainty in China will remain in “the next few quarters,” chief executive officer Roy Jakobs said in an interview with Bloomberg Television. “We see solid growth in the rest of the world.”

Philips reported adjusted operating earnings of US$557 million in the period, broadly in line with analyst estimates.

The manufacturer is trying to regain shareholder and consumer trust after paying less than expected to settle US claims linked to faulty sleep apnoea devices. Earlier this year, its two biggest investors Exor and Artisan Partners GP raised their stakes in the company.

The recall cost Philips around US$5 billion, according to Bloomberg calculations. The company is still being investigated by the US Department of Justice over the issue and has not yet made any financial provisions for that matter. Its outlook excludes the potential impact of the ongoing legal proceedings, including the DOJ probe, it said on Monday.

Philips shares have gained around 45 per cent this year but are still down more than 30 per cent since the recall started in June 2021.

Earlier this month, Charlotte Hanneman took over as Philips’ first female chief financial officer and management board member in its 133-year history. BLOOMBERG