Dutch healthcare technology company Philips missed estimates for core profit in the third quarter on Monday, sending its shares to their lowest in more than six months. The company, which makes products ranging from electric toothbrushes to medical imaging systems selling for millions of euros, cited "currency headwinds" for the shortfall, though some analysts said underlying growth was subpar.
Philips said core earnings rose 6.8 per cent to €568 million from €532 million a year before. Shares, which had already slid 8 per cent since early October, dropped another 6.3 per cent to €32.55 in early trade, hitting their lowest since early April.
Philips chief executive Frans van Houten blamed currency headwinds and said it was “quite an achievement” that comparable sales grew by 4 per cent, compared to zero growth in the second quarter. Analysts at Berenberg said the sales increase was “not quite the bounce-back in growth that the market was looking for,” adding in a note: “Overall, this was a softer than expected quarter and management commentary surrounding . . . ‘headwinds’ could spook the market.”
The analysts also noted softer trends in both growth and profitability in the group’s Personal Health and Connected Care and Health Informatics businesses, though they repeated a positive view on the shares and said investors should buy on weakness. Analysts at ING, who also rate shares “buy”, said in a note that “organic growth was below expectations in all divisions”.
Philips said margins had improved and order intake was up 11 per cent from a year ago, notably in China, which had seen weak growth in the second quarter.
Van Houten warned he was increasingly worried by the prospect of Britain leaving the European Union with no deal in place. If Brexit occurs without a Britain-EU customs union, that would force the company to "revisit our manufacturing footprint," including its manufacturing plant in Glemsford, eastern England, he said. The company's Ebita margin improved by 0.4 per cent to 13.2 per cent of sales and Van Houten repeated a target of 4-6 per cent average comparable sales growth over the 2017-2020 period. – Reuters
