Philips cuts annual sales forecast due to weak demand from China

Royal Philips cut its sales growth forecast for this year as muted demand from China puts pressure on the Dutch medical technology firm’s orders.

Philips expects like-for-like sales to grow 1.5 percent in 2024, up from a previous forecast of as much as 5 percent, the company said on Monday (Oct. 28). Order intake fell 2 percent in the third quarter due to the slowdown in China.

The Amsterdam-based manufacturer has been hit by an anti-corruption campaign in China’s healthcare sector after the Asian country began scrutinizing local purchases of medical technology. The country has introduced strict requirements for domestic products for many categories.

Uncertainty in China will continue “for the next few quarters,” CEO Roy Jacobs said in an interview with Bloomberg Television. “We see steady growth in the rest of the world.”

Philips reported adjusted operating profit of US$557 million for the period, broadly in line with analysts’ estimates.

The manufacturer is trying to restore shareholder and consumer confidence by paying less than expected to settle claims in the United States related to faulty sleep apnea devices. Earlier this year, two of the largest investors, Exor and Artisan Partners GP, increased their stakes in the company.

Bloomberg estimates that the recall cost Philips approximately US$5 billion. The company is still under investigation by the US Department of Justice regarding this matter and has not yet taken any financial action regarding this matter. His forecast excludes the potential impact of ongoing litigation, including a Justice Department investigation, it said Monday.

Philips shares are up about 45 percent this year but are still down more than 30 percent since the recall began in June 2021.

Earlier this month, Charlotte Hanneman took over as Philips’ first chief financial officer and board member in the company’s 133-year history. BLOOMBERG