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Philips Cuts 2020 Adj. EBITA Margin Outlook, After U.S. Terminates Ventilator Contract

Philips Electronics NV (PHGFF.PK,PHG) said Monday that it has been informed by the U.S. Department of Health and Human Services of the partial termination of 43,000 EV300 ventilators contract. The termination of contract will impact the company's financial performance. The company cut its annual adjusted EBITA margin outlook.

The company will end the contract after delivery of 12,300 ventilators and it will not supply the remaining 30,700 ventilators to the Strategic National Stockpile, the Dutch company said in a statement.

Philips' hospital ventilator contract with HHS was one of several contracts that the department announced in April 2020 for the production and delivery of a total of more than 156,000 ventilators to the Strategic National Stockpile by the end of August 2020, and a total of more than 187,000 ventilators by the end of the year.

Philips said that the reduction in its ventilator deliveries to HHS will obviously impact the company's financial performance, but the company continues to expect to return to growth and improved profitability in the second half of the year, starting in the third quarter.

For the full year 2020, the company now expect to deliver modest comparable sales growth with an Adjusted EBITA margin of around the level of last year. Previously, the company expected a modest comparable sales growth in 2020 and adjusted EBITA margin improvement.

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