Philips Faces Decline in Demand from China

By Bart H. Meijer

AMSTERDAM (Reuters) – Philips reported a significant slump in demand from China, prompting the Dutch medical devices manufacturer to lower its sales outlook for the year.

Chief Executive Roy Jakobs stated that during the third quarter, demand from hospitals and consumers in China continued to deteriorate, although robust growth is observed in other regions.

"China remains a fundamentally attractive growth market for Philips in the long term, with market conditions expected to remain uncertain," he added.

Philips now anticipates its comparable sales growth to be only 0.5% to 1.5% in 2024, a decrease from the previous forecast of 3% to 5%, which the company believes will still be achievable in other regions.

The company's product range includes items from toothbrushes to medical imaging systems, placing it in direct competition with General Electric (NYSE:GE) and Siemens Healthineers.

The slowdown is most noticeable in the personal health segment, where sales fell by 5% in the third quarter, driven by a double-digit decline in China. The medical devices division (Diagnosis & Treatment) also experienced a sales decline of 1%, despite seeing solid growth outside of China.

Overall, comparable sales remained flat at 4.4 billion euros ($4.75 billion), which fell short of the 2.1% growth analysts had anticipated. Adjusted earnings before interest, taxes, and amortisation (EBITA) matched expectations at 516 million euros, up 13% year-on-year, as reduced costs increased the profit margin to 11.8%.

Philips expects the full-year core profit margin to be around 11.5%, at the upper end of its earlier projection.

(Exchange Rate: $1 = 0.9266 euros)