Philips headquarters is pictured in Barueri, on the outskirts of Sao Paulo
Philips headquarters is pictured in Barueri, on the outskirts of Sao Paulo

Health technology giant Philips sees a drop in profit margins in Q3

By Jesse Wieten Time of article published Oct 11, 2019

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INTERNATIONAL – Dutch health technology company Philips on Thursday issued an early profit warning on the third quarter results of 2019. 

Philips announced that has experienced a drop in profit margins in the Connected Care division, which focuses on solutions for effective information exchange between patients and doctors. 

The EBITA margin of the company, which operates the earnings before interest, taxes, and amortization as a percentage of the total revenue, falls to 11.3 percent of sales after adjustment, 4.5 percent lower than expected.

According to the company, the drop in profit is due to the higher rates on company debt, and a shortfall of around 20 million euros ($22 million) of license income in the segment Other, which is related to innovation, strategy, IP royalties, central costs, and other small items. Group sales for the third quarter are expected to amount to approximately 4.7 billion euros (5.17 billion dollars), reflecting a 6 percent comparable sales growth. 

The Group profit for the quarter is expected to be around 583 million euros (642 million dollars), or 12.4 percent of sales, compared to 13.2 percent in 2018.

"We continue to see good growth momentum across our businesses," said Frans van Houten, CEO of Philips. "However, while I am pleased with the operational performance improvements in the Diagnosis & Treatment and Personal Health businesses, it is disappointing that margins declined in the Connected Care businesses."

The full figures of the third quarter of Philips is set to be announced on the 28th of October.


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