Philips shares drop as supply chain issues and fan issues persist

The logo of Dutch technology company Philips is seen at the company’s headquarters in Amsterdam, the Netherlands, January 29, 2019. REUTERS/Eva Plevier/File

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  • Philips reports 32% drop in first quarter core profit
  • Expands Fan Recall
  • Flags a range of risks to the 2022 outlook
  • Stocks fall nearly 11%

AMSTERDAM, April 25 (Reuters) – Shares of Philips (PHG.AS) fell nearly 11% on Monday as the Dutch health-tech company extended a ventilator recall and flagged multiple risks to its outlook for growth for the rest of the year.

The supplier of products ranging from large medical systems to toothbrushes and razors said it still expects sales and profitability to pick up in the second half.

But Philips also said any deterioration in the situation from COVID-19 in China, the war in Ukraine or supply chain challenges and inflationary pressures could put that outlook in jeopardy.

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“Now is not the time to give up (on the outlook), but the situation is very vulnerable,” chief executive Frans van Houten told Reuters.

“Especially in China, where the COVID shutdowns are a major risk to international trade and to us.”

The Amsterdam-based company said adjusted earnings before interest, tax and amortization (EBITA) fell about a third in the first quarter from a year earlier and comparable sales fell 4%, while She continued to struggle with a global parts shortage and the fallout from her recall operation.

Philips shares were trading down 10.5% at 08:50 GMT in Amsterdam.

ING analysts said the cautious stance was likely to lower market expectations for results this year and next.

Growth is also being held back by the company’s sleep and respiratory care business, which is still working on the recall of ventilators launched last year over concerns that a type of foam used in the devices could deteriorate and become toxic. Read more

Philips said the total number of devices needing repair or replacement had increased by 300,000 to around 5.5 million worldwide. It increased its provision for the operation by 165 million euros in the first quarter, bringing the total cost so far to nearly 900 million euros.

“We expect this provision to be sufficient to cover the remediation risks,” Van Houten said.

However, the sum does not cover any legal costs, as the company faces more than a hundred class actions. Fears of a large claims bill have sent Philips’ market value down around 15 billion euros since June last year. Read more

($1 = 0.9281 euros)

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Reporting by Bart Meijer; Editing by Christopher Cushing, Kenneth Maxwell and Jane Merriman

Our standards: The Thomson Reuters Trust Principles.

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