Shares in Royal Philips fell more than 10 per cent after the health technology company cut its guidance for the second time this year, pinning the blame on coronavirus pandemic lockdowns in China.
The medical equipment maker on Monday lowered its estimate for full-year sales growth to between 1 and 3 per cent, down from a previous forecast of between 3 and 5 per cent.
“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,” said Frans van Houten, chief executive of Philips.
“The impact of the Covid lockdowns significantly affected our business in China, where comparable sales and order intake declined almost 30 per cent in the quarter,” he added.
The profit downgrade marks the latest setback in a bruising period for Philips that has seen its share price fall 60 per cent from its peak, after announcing a costly recall of respiratory devices.
For the three months to June 30, the company reported a 7 per cent year-on-year decline in sales to €4.18bn, which Philips attributed to supply chain bottlenecks, lockdowns in China, inflationary pressures and fallout from Russia’s invasion of Ukraine.
The group reported earnings before interest, tax and amortisation of €216mn for the quarter, missing analysts’ expectations of €324mn.
Shares in Amsterdam-listed Philips on Monday fell 10.6 per cent to €19.42, a nine-year low.
Van Houten insisted the picture would improve later in the year, saying that Philips had stepped up “actions on productivity, pricing and strengthening supply chain resilience to mitigate the ongoing headwinds and associated risks”.
A stronger order book and improved supply chains “give me confidence that we will resume growth from the third quarter onwards”, he added, as well as expected better profitability “in the second half of the year”.
Monday’s guidance cuts follow a profit warning by Philips in January. The company was forced to recall of millions of medical devices containing a faulty component on concerns that patients may have been harmed by inhaling particles of toxic chemicals.
The group on Monday said its subsidiary Philips Respironics was making “solid progress” with its programme to repair or replace the devices, which are primarily used to assist the breathing of patients suffering from sleep apnoea.
