Dutch electronics giant Philips is confident of returning to growth and profits in the second half of the current year even though it said that its net profits dropped in the second quarter opf the current year because of the novel coronavirus pandemic outbreak.
Philip’s net profit dropped by 14.63 per cent year on year to reach 210 million euros during the quarter compared to 246 million in the same quarter 2019. The company has changed its focus recently by abandoning its home appliance business and focusing more on the health sector.
“As anticipated, COVID-19 caused a steep decrease in consumer demand,” with the impact on non-virus hospital procedures involving its equipment having a particular impact, Philips chief executive Frans van Houten said in a statement.
There was a 6 per cent year on year drop in sales to 4.4 billion because of a fall in demand for its consumer products while hospitals also delayed installing ne equipment because of the coronavirus pandemic.
Orders however were up by 27 per cent year on year because of increased demand for its medical equipment which included CT imaging systems, hospital ventilators and patient monitors.
Philips should be able to moderately enhance its sales and profit margins for the full year with the help of the above mentioned increase in orders and a slowdown in the global spread of the pandemic, Frans van Houten said.
“We have steeply ramped up the production volumes of acute care products and solutions to help diagnose, treat, monitor and manage COVID-19 patients,” van Houten said.
“We expect to return to growth and improved profitability for the group in the second half of the year, assuming we can convert our existing order book… elective procedures normalize, and consumer demand gradually improves,” van Houten said.
More than 100 years ago, the Amsterdam based Philips started off as a lighting company. However in recent years, it has undergone major changes in terms of business focus.
It had previously divested off its lighting division. And in January this year, Philips announced that would be selling off its home appliance business and would now be fully concentrating on health sector products.
The forecast of the Dutch company of returning back to growth in the second half of the current year was based on the assumption that hospitals and consumers would be able to overcome the first shock of the coronavirus pandemic ion a gradual manner.
Philips currently manufactures a host of health related products, ranging from electric toothbrushes to medical imaging systems.
There was a 24 per cent drop in the adjusted earnings before interest, taxes and amortisation (EBITA) for the company for the quarter to reach 418 million euros which was more than the estimate of analysts off a drop to 344 million euros.
(Adapted from Barrons.com)