Chips and ships: Philips cuts outlook as supply chain issues worsen

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The logo of the Dutch tech company Philips can be seen at the company’s headquarters in Amsterdam, the Netherlands on January 29, 2019. REUTERS / Eva Plevier

  • Philips cuts sales and profit outlook for 2021
  • Supply chain problems expected to increase in Q4
  • Comparable sales fell 7.6% in the third quarter, with basic profit down 25%

AMSTERDAM, Oct. 18 (Reuters) – Dutch healthcare technology company Philips (PHG.AS) on Monday slashed its outlook for sales and profit growth this year and said global supply chain issues that ‘added to his growing list of concerns in the third trimester likely to intensify.

Amsterdam-based Philips said comparable sales fell 7.6% in the July-September period to 4.2 billion euros ($ 4.9 billion) as a shortage of electronic components such that memory chips and a lack of shipping containers hampered production and delivery.

“These are chips and ships,” Managing Director Frans van Houten told Reuters in a telephone interview.

Memory chip producers have been unable to meet growing demand from Philips, Van Houten said, with orders for its products ranging from electric toothbrushes to patient monitoring systems increasing 17% at the latest. trimester.

Ships carrying Philips products have also been backed up at ports around the world as international trade quickly recovered from the COVID-19-induced crisis.

“We expect the port congestion to be temporary, while it could take until the second half of next year to bring the chip shortage under control,” Van Houten said.

The impact of supply chain issues will likely increase to € 200 million in missed sales in the last quarter of 2021, the CEO said, from € 150 million in the third quarter.

Although the problems will likely still affect sales until 2022, Van Houten said he expects growth to return over the next year.

BITES REMINDER

Philips shares fell nearly 1% at the start of trading in Amsterdam, having already lost about a fifth of their value since the company recalled millions of respirators in June. Read more

He has set aside 500 million euros to repair or replace popular machines used primarily for the treatment of sleep apnea.

The amount does not cover any possible litigation costs, however, with Philips facing more than a hundred class actions from concerned patients, some of whom have said degrading foam in devices could cause cancer or other health problems. .

Van Houten said it was still too early to estimate the costs of the litigation, as Philips was working with experts to determine the real health risks of the degrading foam, which should not be known until next year.

Recall and supply chain issues pushed adjusted earnings before interest, taxes, depreciation and amortization (EBITA) down 25% in the third quarter to € 512 million, slightly above analysts’ expectations.

($ 1 = € 0.8639)

Reporting by Bart Meijer; Editing by Himani Sarkar, Kim Coghill, Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.


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