Shares of Philips Electronics NV were losing around 3 percent in the morning trading in Amsterdam as well as in pre-market activity on NYSE after the Dutch consumer electronics giant reported Monday weak profit due to a provision and lower orders in its second quarter, while sales were higher.
Looking ahead for fiscal 2021, the company continues to expect low-to-mid-single-digit comparable sales growth and an adjusted EBITA margin improvement of 60 basis points.
Further, Philips announced 1.5 billion euros share buyback program, which represents a total of around 36.8 million shares, or 4 percent of total shares outstanding. Philips expects to start the program in the third quarter of 2021 and to complete it within three years.
Frans van Houten, CEO, said, “Looking ahead, while we continue to see uncertainty related to the impact of COVID-19 across the world and electronic component shortages, our financial outlook remains within our guided range.”
For the second quarter, net income was 153 million euros, lower than last year’s 210 million euros. Earnings per share were 0.16 euro, down from 0.23 euro a year ago. Adjusted earnings per share from continuing operations were 0.40 euro, up from 0.27 euro last year.
The decline in profit reflected a 250 million euros provision related to field actions to address a component quality issue that resulted in a recall of certain sleep and respiratory care products in the U.S. in mid-June. The recall was to address identified potential health risks related to the polyester-based polyurethane or PE-PUR sound abatement foam in these devices. Subject to regulatory clearances, Philips is ready to start deploying the repair kits and replacement devices that it is producing.
Adjusted EBITA in the quarter increased to 532 million euros from last year’s 390 million euros. Adjusted EBITA margin improved 280 basis points to 12.6 percent from 9.8 percent a year ago.
Philips delivered sales of 4.23 billion euros, 6 percent higher than prior year’s 3.97 billion euros. Comparable sales growth was 9 percent. In the second quarter, all of its businesses performed well except the Sleep & Respiratory Care business.
Comparable order intake, meanwhile, decreased 15 percent, with 29 percent order intake growth in the Diagnosis & Treatment businesses offset by a decline in the Connected Care businesses.
In the quarter, the Diagnosis & Treatment businesses recorded 16 percent comparable sales growth, with double-digit growth in all businesses.
Comparable sales in the Connected Care businesses decreased 16 percent, as mid-single-digit growth in Hospital Patient Monitoring was more than offset by a double-digit decline in Sleep & Respiratory Care. Comparable order intake decreased significantly following the steep COVID-19-related increase in the same period last year.
The Personal Health businesses’ comparable sales growth was 33 percent, driven by double-digit growth across all businesses.
In Amsterdam, Philips shares were trading at 39.68 euros, down 2.7 percent.
In pre-market activity on NYSE, the shares were losing around 2.7 percent to trade at $46.66.
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