China weakness weighs on full-year growth for Philips
By Josh White
Date: Wednesday 19 Feb 2025
(Sharecast News) - Shares in Dutch healthcare technology company Philips were sliding on Wednesday, after it reported modest growth and improved profitability in 2024 amid a sharp decline in Chinese demand, which weighed on its fourth-quarter results.
The firm posted full-year sales of €18bn, reflecting a 1% increase in comparable sales, although fourth-quarter revenue rose 1% to €5bn, falling short of analyst expectations, as sales in China saw a double-digit decline.
Adjusted EBITA margin improved 90 basis points to 11.5% for the year and 60 basis points to 13.5% in the fourth quarter, supported by productivity measures and operational efficiencies.
Free cash flow rose significantly to €1.3bn in the final quarter, largely driven by insurance proceeds related to the Philips Respironics recall.
Segment performance was mixed - diagnosis and treatment comparable sales declined 1% in the fourth quarter, with gains outside China offset by weakness in the market.
Personal health saw a 2% drop, while connected care grew 7%, benefiting from a favorable comparison base.
For the full year, both diagnosis and treatment and connected care posted modest gains, while personal health saw a slight decline.
"We delivered better care for more people by enhancing execution and focusing on driving improvements in profitability and cash flow, as well as order and sales growth," said chief executive officer Roy Jakobs.
"We strengthened our fundamentals and resolved significant US litigation relating to the Respironics recall."
Jakobs said that, despite double-digit declines in demand in both consumer and health systems in China, Philips returned to positive order growth and continued to drive margin expansion and cash-flow generation.
"With our strong balance sheet we are pleased to offer shareholders the option to receive the dividend in shares or cash."
China remained a key challenge for Philips, with the company expecting a mid- to high-single-digit decline in Chinese sales in 2025, impacting overall performance.
It attributed that to lower consumer spending, regulatory shifts, and anti-corruption measures affecting healthcare procurement.
Philips forecast a mid-single-digit decline in first-quarter sales, with recovery expected later in the year.
Full-year comparable sales growth was projected between 1% and 3%, with an adjusted EBITA margin improving to 11.8% to 12.3%.
Philips finalised its US Respironics recall settlements, totaling $1.1bn, with payments set for the first half of 2025.
The company maintained its dividend at 85 euro cents per share, payable in shares or cash.
Meanwhile, productivity initiatives had delivered €1.7bn in savings since 2023, prompting Philips to raise its 2023 to 2025 savings target from €2bn to €2.5bn.
"Within a persistently challenging macro environment, our focus remains on executing our value creation plan, bringing industry-leading innovations to the market and driving a simplified, more agile operating model," Roy Jakobs added.
"We strengthened our team and culture of impact with care, with patient safety and quality as our number one priority.
"Looking ahead, we remain confident in our long-term plan and will continue to work closely with customers as we build on our strong innovation pipeline and focus on execution excellence to drive profitable growth."
At 1520 CET (1420 GMT), shares in Koninklijke Philips were down 12.04% in Amsterdam at €23.82.
Reporting by Josh White for Sharecast.com.
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