Philips profit shows how plant rejig offers trade war remedy


  • Business
  • Tuesday, 23 Jul 2019

Chinese demand for the latest diagnostic equipment and image-guided therapy devices drove a double-digit increase in orders in the the second quarter, the Amsterdam-based company said yesterday.

AMSTERDAM: Royal Philips NV’s efforts to revamp supply chains to avoid tariffs from the US-China trade dispute are paying off, with the Dutch healthcare company reporting better-than-estimated profit.

Chinese demand for the latest diagnostic equipment and image-guided therapy devices drove a double-digit increase in orders in the the second quarter, the Amsterdam-based company said yesterday. Philips hit the top end of its sales growth target range, with an increase of about 6%, beating the 4.5% uptick expected by analysts.

While chief executive officer Frans van Houten signalled the ongoing trade war remains at the top of his of concerns for this year, results show Philips is containing the fallout for now. The company has created local production hubs to serve the Chinese and US markets to avoid supply chain risks as products from ultrasound gear to electric toothbrushes are affected. Philips predicted a stronger second half of the year.

“We are moving towards a regional manufacturing hub strategy as we manufacture in each of these large continents, making us more responsive than we might have been before,” van Houten said in a Bloomberg interview.

Van Houten is betting investment in innovation and an efficiency drive will see Philips through any economic slowdown. New products are reinvigorating Philips’ personal health unit, which makes products like electric toothbrushes, shavers and equipment to help with sleep and respiratory disorders. Sales at the segment grew by 5%.

Quarterly earnings before interest, taxes, and amortisation of €549mil (US$615mil) beat the the €542mil estimate of analysts in a company compiled consensus. — Bloomberg

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