Daily Management Review

Philips Beats Estimates For Q3 On Strong Covid-19 Medical Equipment Demand


Philips Beats Estimates For Q3 On Strong Covid-19 Medical Equipment Demand
The novel coronavirus pandemic drove global demand for hospital equipment needed to help patients battling the disease which helped the health technology company Philips to report much better than expected results for the recently concluded third quarter on Monday.
There was a 10 per cent growth in comparable sales to reach 4.98 billion euros ($5.83 billion) primarily because of a 42 per cent rise in the sales revenues from its connected care division which is engaged in manufacturing of monitoring and respiratory care devices that have turned out to be critical for treatment of patients infected by Covid-19, said Amsterdam-based Philips.
In the three month of July to September, the company reported an increase in its adjusted earnings before interest, taxes and amortisation (EBITA) to 769 million euros which very comfortably beat estimates of 630 million euros that was made by analysts in a poll compiled by the company.
“I am pleased that under challenging circumstances, we have been able to return to growth and improved profitability”, Chief Executive Frans van Houten said.
In the first half of the current year, the rap[id and fast spread of the pandemic resulted in hospitals deciding to delay the installation of new equipment while demand for consumer products was also crippled which resulted in a significant hit to the business of Philips in the first half of the year.
But with the waning down of the initial shock of the pandemic, there was a rush among hospitals to purchase the medical equipment necessary for treating patients with Covid-19, the disease caused by the novel coronavirus, whereas consumers on the other hand who had been confined to their homes demanded more personal care products and domestic appliances.
Updating its targets for the medium term, the company said that it now expected an average growth in sale of 5 per cent to 6 per cent per year between 2021 and 2025 while it also expected to note an improvement in its adjusted EBITA margin by 60 to 80 basis points each year.
Philips said in a statement that there was a 15.4 per cent growth in the company’s profit margin for the third quarter of the current year which was larger compared to the profit margin of 12.4 per cent achieved by the company in the same period a year earlier. It now expected the metric to reach the “high teens” by 2025, Philips said.
With the expected slowing down of medical equipment to treat Covid-19, a “low-single-digit growth” was predicted by the company for the entire of 2021.
In August, its outlook for 2020 was brought down by Philips following the cancelation of most of an order for 43,000 ventilators by the Department of Health of the United States.
Its outlook for moderate sales growth and a stable EBITA margin for the entire year of 2020 were maintained by the company on Monday.