Business Essentials for Professionals


Product Recall And Parts Shortages Prompts Philips To Lower Outlook

Product Recall And Parts Shortages Prompts Philips To Lower Outlook
The third-quarter earnings of the Dutch health technology company Philips were severely hit by a severe global shortage of electronic components and a huge recall of the company’s respiratory devices which prompted the firm to lower its forecast for sales and profit growth in 2021 in an announcement on Monday.
There was a drop of 6.7 per cent in the July-September quarter compared to the same period in the previous year in comparable sales as the comp[any began recalling its respiratory devices and ventilators to the tune of up to four million of the products during the third quarter of the current year over concerns of parts of the devices getting degraded and potentially turning toxic.
The issues in the global supply chain also forced down revenues of the company for the period and a severe shortage of electronic components and parts resulted in Philips taking longer than usual to turn orders into sales.
"Supply chain volatility has intensified globally," Chief Executive Frans van Houten said. "We expect this headwind to continue in the fourth quarter."
This prompted the Amsterdam-based company to now expect growth in "low single-digit" in comparable sales for the current year, which is at the lower end of the guidance that was previously issued by the company for investors, while also prompting the company to now forecast only a "modest" enhancement of its profit margin.
During the third quarter, there was a 25 per cent fall in the company’s adjusted earnings before interest, taxes, and amortisation (EBITA) to 512 million euros ($592.7 million), compared to the prediction of analysts in a company-compiled poll on the average of a drop of the metric to 490 million euros.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc