AMSTERDAM (Reuters) – Philips has cut its growth targets for 2024 due to sluggish demand from China.
In addition to the weakening economy in the People’s Republic, the medical technology company is suffering from a government anti-corruption campaign, said company boss Roy Jakobs on Monday. As a result, Chinese hospitals were hesitant to place orders. As a result of this interaction, the order situation has deteriorated more significantly than expected. Philips shares then temporarily fell by almost 18 percent on the Amsterdam Stock Exchange and were heading for their biggest daily loss in more than 32 years.
The government in Beijing has been taking increased action against possible bribery in the health sector for over a year. As a result, orders for medical devices and medicines came to a temporary standstill. Philips competitors such as Siemens Healthineers and GE Healthcare also felt this.
GROWTH TARGET SIGNIFICANTLY LOWERED – PROFIT MARGIN RISES
Philips only expects sales to increase by 0.5 to 1.5 percent for the year as a whole instead of three to five percent. However, the operating profit margin of 11.5 percent is expected to be at the upper end of the targeted range. Business outside of China is developing well, emphasized Jakobs.
In the past quarter, revenues reportedly stagnated at 4.4 billion euros. Analysts had hoped for an increase of 2.1 percent. A “very significant” decline in orders was observed in China, emphasized Jakobs, without going into detail. Thanks to robust business outside the People’s Republic, the overall decline in orders was only two percent. “All divisions were disappointing,” complained analyst Julien Dormois from the investment bank Jefferies.
However, through strict cost control, the profit margin rose to 11.8 percent. As a result, the operating result grew by 13 percent and met market expectations at 516 million euros.
(Report by Bart Meijer; written by Hakan Ersen, edited by Myria Mildenberger. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and economics) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)
