Philips Q4 Profit Hit By Supply Chain Shortage, Product Recalls

By Vandana Singh

Koninklijke Philips NV (NYSE:PHG) shares plunged more than 16% on Wednesday morning after the company hiked the cost of its recall of ventilators and warned earnings would take a big hit from global supply chain shortages.

  • Philips expects the Q4 Adjusted EBITA to drop almost 43% Y/Y to about €650 million.
  • The company expects Group sales to be €4.9 billion, €350 million lower than prior expectations. The comparable sales decline was approximately 10%.
  • The company had to postpone the installation of equipment in hospitals due to a lack of parts.
  • Group sales for FY21 are expected to be approximately €17.2 billion, resulting in an expected Group comparable sales decline of approximately 1% for the year. 
  • The supply chain headwinds combined with the impact of the Philips Respironics recall amounted to an impact of approximately 5% on full-year comparable sales.
  • The adjusted margin on EBITA is now expected to fall to about 12% from 13.2% in 2020.
  • Philips said it had taken a new provision of €225 million as it expected to take back and repair approximately 5.2 million devices globally, against 4 million anticipated earlier.
  • Price Action: PHG shares are down 16.2% at $32.50 during the premarket session on the last check Wednesday.

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