Philips shares tank on receipts
Philips shares fell to the lowest level in seven years after the company missed earnings expectations and warned trade wars and Brexit will weigh on its business.
The Dutch health-technology company’s profit and sales growth missed estimates, with the shortfall most notably at the personal-health unit that makes products like electric toothbrushes, shavers and equipment to help with sleep and respiratory disorders.
The results sent the stock down up to 9.9%, before paring some of the losses, the most since June 2011.
Chief executive Frans van Houten acknowledged that he would have liked the earnings “to be stronger.”
He said adjustments will have to be made to prices in some emerging markets such as Argentina and Turkey, where local currencies have weakened considerably, and to the company’s manufacturing footprint due to tit-for-tat tariffs imposed by the US and China. The impact of the trade war could shave €60m from profit next year, he said.
“We will redesign some of our supply chains” and create regional manufacturing hubs, he said.
“We are in the good position of having factories in the US, in Europe and in Asia. We can rebalance those going forward to avoid some of the duty impact.”
Philips is not alone among European manufacturers grappling with the emerging trade war between the US and China and currency volatility.
Swedish compressor make Atlas Copco on Friday warned that makers of semiconductors and cars will order fewer tools and equipment in the coming months due to concerns about issues like trade.
For Philips, the UK’s plans to split from the EU also threatens to upend its production.
“We do need to look at our manufacturing facility in the UK. We need frictionless trade and if that is in any way hampered, then the future of that factory may be at risk,” Van Houten said.
UK and EU negotiators are deadlocked in talks over the divorce treaty that will govern exchanges between the two sides and this will shape how manufacturers like Philips can circulate factory supplies and finished products.
Philips reported third-quarter adjusted earnings before interest, taxes and amortisation increased 7% to €568m, less than the €584m estimate of analysts.
The company reiterated a 2017-2020 target for sales growth of 4% to 6%.
It reached 4% in the third quarter.
