Philips (PHG, Financials) lowered its full-year outlook for 2024 due to declining demand in China; with an adjusted EBITA margin at 11.5%, the firm now forecasts comparable sales growth between 0.5% and 1.5%. Projected to be 900 million euros, free cash flow falls at the lower end of its past projection. PHG shares fell 16% during Monday's trading session.
With 4.4 billion euros in revenue and 337 million euros in operating income, the business said in the third quarter of 2024 flat comparative sales growth. Supported by production data and innovation, adjusted EBITA margin rose by 160 basis points to 11.8%.
Although growth in other areas was strong, CEO Roy Jakobs said the updated view shows the ongoing effect of declining demand from China. China was blamed for a 2% decline in similar order intake; markets like the United States saw rising demand, particularly in the Diagnosis & Treatment division.
For the quarter, Philips had operational cash flow of 192 million euros and free cash flow of 22 million euro. Aimed at driving margin expansion and development, the company's three-year strategy produced 188 million euro in productivity savings during the quarter.
For its Diagnosis & Treatment division, Philips saw a 1% drop in comparable sales; growth outside of China was offset by the weakening of the Chinese market. Sales of connected care were unchanged, while Personal Health dropped 5% mostly from a double-digit loss in China.
Notwithstanding continuous difficulties, Philips is still focused on long-term expansion in China and underlined current developments and alliances aiming at worldwide healthcare improvement including artificial intelligence-driven solutions.
The company's updated projection ignores any effects from continuous legal actions involving Philips Respironics, including an inquiry by the U.S. Department of Justice.
