By Scott Kanowsky
Investing.com -- Koninklijke Philips NV (AS:PHG) has reported disappointing second quarter sales and income, as the Dutch medical equipment maker said it was hit by Covid restrictions in China and persistent supply chain constraints.
Group sales for the period dropped by 7% to €4.17B, missing analyst expectations of €4.19B. Quarterly adjusted earnings before interest, taxes and amortization (EBITA) also came in at €216M, below a company-compiled estimate of €324M.
Amsterdam-listed shares in Philips slid sharply by more than 8% following the release of the results, falling past its low level in nine years. Over the one-year period, the stock is down by more than 46%.
"Production in several of our factories, as well as those of our suppliers in China, was suspended for two months, which exacerbated the global supply chain and cost challenges," said chief executive Frans van Houten in a statement.
He added that lockdowns in China directly led to a 230-basis point decline in adjusted EBITA, while soaring global inflation and higher expenses also negatively impacted group profitability by around 290 basis points.
The company also slashed its outlook for annual group revenue to between 1% and 3%, down from 3% to 5%. Comparable sales growth in the second half of the year is also now seen at 6% to 9%.
Looking ahead to 2023, van Houten said he expects measures taken by the firm to mitigate the impact of supply chain disruptions will result in a "significant improvement" in the conversion of orders into revenue.
However, van Houten warned that Philips continues to see "risks and a challenging macro-environment."
Monday's results come as the company is also aiming the manage the fallout from the recall of millions of faulty medical devices. According to Reuters, the cost of this action has come in at around €900M.
Philips said it is engaging with the U.S. Food and Drug Administration and other authorities about the recall. It added that it is a defendant in a number of class action lawsuits and personal injury claims, but did not detail the potential costs from these cases.