Philips Q3 Net Profit Soars, EBITA, Sales Weak; Lowers FY21 View; Stock Down

philips oct18 lt

Shares of Philips Electronics NV were losing around 2 percent in the morning trading in Amsterdam after the Dutch consumer electronics giant on Monday trimmed its outlook for fiscal 2021 after reporting weak EBITA and sales in its third quarter. The results were hurt by supply chain challenges as well as Sleep & Respiratory Care recall. However, quarterly net profit was significantly higher on gain from sale of the Domestic Appliances business.

For the full year 2021, Philips now expects to deliver low-single-digit comparable sales growth with a modest Adjusted EBITA margin improvement. Previously, the company expected low-to-mid-single-digit comparable sales growth and an adjusted EBITA margin improvement of 60 basis points.

Frans van Houten, CEO, said, "Looking ahead, we continue to see uncertainty related to COVID-19. Supply chain volatility has intensified globally, which already led to longer lead times to convert our strong order book to revenue in the third quarter, and we expect this headwind to continue in the fourth quarter."

Based on strong customer demand and growing order book, the company expects to resume growth and margin expansion trajectory in 2022 as it works through the headwinds.

For the third quarter, net income was 2.97 billion euros, significantly higher than last year's 338 million euros. Earnings per share were 3.24 euros, up from 0.37 euro a year ago.

Income from discontinued operations was 2.54 billion euros, mainly on the sale of the Domestic Appliances business, compared to income of 61 million euros last year. On a continuing operations basis, income was 442 million euros, up from 279 million euros a year ago.

EBITA, meanwhile, declined to 426 million euros from 456 million euros last year. Adjusted EBITA was 512 million euros, or 12.3 percent of sales, down from 684 million euros, or 15.5 percent of sales a year ago.

Adjusted EBITDA fell to 739 million euros from last year's 924 million euros. Adjusted EBITDA margin was 17.8 percent, down from 20.9 percent a year ago.

Sales for the quarter fell 6 percent to 4.16 billion euros from last year's 4.41 billion euros. Comparable sales decline was 7.6 percent due to headwinds on the back of 10 percent comparable sales growth last year. The headwinds were caused by global supply chain challenges and Sleep & Respiratory Care recall consequences.

The Diagnosis & Treatment businesses recorded 10 percent comparable sales growth, while Connected Care businesses' comparable sales decreased 39 percent. The Personal Health businesses' comparable sales were in line with last year.

Among regions, sales in total mature geographies fell 8 percent with 10 percent drop in Western Europe and 6 percent decline in North America. Sales in Growth geographies edged down 1 percent.

Comparable order intake, however, increased 47 percent. Excluding the partial cancellation of a ventilator contract last year, comparable order intake grew 17 percent. The Connected Care businesses and Diagnosis & Treatment businesses recorded double-digit comparable order intake growth.

In Amsterdam, Philips shares were trading at 37.60 euros, down 2.15 percent.

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