Daily Management Review

Philips To Cut 2020 Earning Overlook Following Ventilator Order Cancellation


The U.S Department of Health cancels most of its ventilator orders from Philips.

Philips has informed that the “U.S. Department of Health” has withdrawn most of the order for “43,000 ventilators”, as result, the company is cutting down on its “2020 earnings outlook”. The “U.S. Congress House Subcommittee on Economic and Consumer Policy” came out with a report in July wherein it cited overpayment to Philips by the White House for a minimum value of “$500 million”. However, Philips did not agree with extracting any such profit from ventilators.
Like Philips, the U.S government reached out to several firms for supplying “187,000 ventilators” to add to the “strategic national stockpile” in treating COVID-19 patients. Furthermore, Philips had under gone an expansion in California and Pennsylvania in order to cater to the sudden rise in demand. However, it is now stated that it will only be delivering “12,300 hospital ventilators by the end of the year to the U.S. Department of Health and Human services”, added Reuters.
On the other hand, a spokesperson had expected Philips to look for other buyers to supply the “30,700 excess ventilators”. As a result, the company also saw its shares slip by “4.3% in the year to date”. While, the C.E.O of Philips, Frans van Houten said:
“We continue to expect to return to growth and improved profitability in the second half of the year, starting in the third quarter”.
Earlier in July, Philips has said that give the increase in medical equipment order, this year, the company will be in the position to arrive at an “adjusted EBITA (earnings before interest, taxes, and amortisation) margin improvement”.
However, today it informed that the company looks “to deliver modest comparable sales growth with an adjusted EBITA margin of around the level of last year”.