Philips expects profit to drop with $1.3 billion hit to sleep business
© Reuters. FILE PHOTO: Logo of Dutch technology company Philips is seen at its company headquarters in Amsterdam, Netherlands, January 29, 2019. REUTERS/Eva Plevier
AMSTERDAM (Reuters) -Dutch health technology company Philips said on Wednesday its third-quarter core profit would drop around 60%, and it flagged a charge of 1.3 billion euros ($1.26 billion) on the value of its plagued sleep and respiratory care business.
In a trade update, Philips said its comparable sales fell around 5% in the third quarter, as supply chain problems remained bigger than the company had anticipated.
This was expected to have pushed adjusted earnings before interest, taxes and amortisation (EBITA) down to 210 million euros, or around 5% of sales, Philips said.
Adjusted EBITA was 512 million euros in the third quarter of 2021.
The impairment on the sleep care business was the result of a consent decree proposed by the U.S. Food and Drug Administration to solve the problems that led to a worldwide recall of respiratory machines, which has lopped around 27 billion euros off Philips’ market value in the past 15 months..
The company’s spokesman Steve Klink said the impairment was a “best estimate” of the consequences that measures imposed by the FDA could have on the value of the business, while talks with the supervisor were still ongoing.
Philips said it expected supply chain problems and slowing economic growth around the globe to also lead to a “mid-single-digit” comparable sales decline in the fourth quarter, with a “high-single-to-double-digit” adjusted EBITA margin range.
Philips will publish its full third-quarter results on Oct. 24.
($1 = 1.0298 euros)