Daily Management Review

Philips Beats Second Quarter Estimates Driven By Double Digit Growth In China


Philips Beats Second Quarter Estimates Driven By Double Digit Growth In China
Double-digit growth in China and Western Europe spurred the Dutch health technology company Philips top post better than expected growth in sale in the second quarter. The company said that the Chinese market in particular was drive by higher spending which saw a 6.4 per cent quarter on quarter growth in sale in its diagnosis and treatment businesses – driven by double-digit growth in its image-guided therapy business segment.
Analysts had expected a sale growth of about 4.5 per cent which was easily surpassed by the company in the second quarter.
The company also reported a 12.3 per cent increase in its adjusted EBITA margin which reflected robust sale growth and productivity, was lower than comparable number in the same quarter a year ago. The company said that its performance in was partly hindered by the import tariffs in the US and China.
The company reported sale revenues of EUR 4.7 billion, income from continuing operations at EUR 260 million and Adjusted EBITA margin at 11.8 per cent – all of which were better quarter on quarter.
“I am pleased with the 6% comparable sales growth in the second quarter, with all businesses contributing. We also recorded strong 8% comparable order intake growth, driven by the continued demand for our innovative product portfolio across the Diagnosis & Treatment businesses. Adjusted EBITA margin for the Group improved by 60 basis points, mainly driven by the performance improvement of the Diagnosis & Treatment businesses, despite adverse currency and tariff impacts,” said company CEO Frans van Houten.
The company continues to expect similar momentum in its performance going into the second half of the current year, van Houten said. The company is banking on its sale growth and enhanced productivity programs.
“We maintain our overall targets of 4-6% comparable sales growth and an Adjusted EBITA margin improvement of 100 basis points on average per year for the 2017-2020 period,” van Houten said.
The company also reported a 6 per cent quarter on quarter increase in sale revenues from its connected care businesses while its other important segment – the monitoring & analytics and sleep & respiratory care, recorded “mid-single-digit growth”, Philips said in a press statement. .
The company however noted a “mid-single-digit decline” in comparable order intake which was because of the uneven order intake dynamics. There was a decrease
The company has in recent year been focused on innovation and strategic partnerships. The company said that during the second quarter it signed a 10-year agreement with Centre Hospitalier Régional Universitaire de Nancy in France and jointly the organizations would implement Philips’ IntelliSpace Enterprise Imaging Solution. The hospital currently provided 1.2 million consultation visits and inpatient stays annually and this joint effort would help the hospital to streamline complex medical image data management across its departments.
As a part of its cost saving program, the company managed to save a total of about EUR 146 million during only the second quarter of the current year which included savings made in procurement, and overhead and other productivity programs.