Philips Q3 results top estimates on strong Covid-19 demand

[AMSTERDAM] Health technology company Philips on Monday reported much better-than-expected third-quarter results, as the coronavirus pandemic spurred demand for hospital equipment needed to help patients battling the disease.

Amsterdam-based Philips said comparable sales rose 10 per cent to 4.98 billion euros ($5.83 billion), driven by a 42 per cent increase in sales of the connected care division, which makes monitoring and respiratory care devices used to treat Covid-19 patients.

Adjusted earnings before interest, taxes and amortisation (EBITA) increased to 769 million euros in the July-September period, easily beating the 630 million euros predicted by analysts in a company-compiled poll.

"I am pleased that under challenging circumstances, we have been able to return to growth and improved profitability", Chief Executive Frans van Houten said.

Philips' results were hit hard in the first half of 2020, as the global spread of Covid-19 caused hospitals to delay the installation of new equipment and crippled demand for consumer products.

But as the first shock of the pandemic waned, hospitals rushed to buy equipment needed to treat the disease, while consumers bound to their homes increased demand for personal care products and domestic appliances.

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NEW TARGETS In an update of its targets, Philips said it expected average sales growth of 5 per cent to 6 per cent per year between 2021 and 2025, with the adjusted EBITA margin improving by 60 to 80 basis points each year.

The company's profit margin jumped to 15.4 per cent in the third quarter, up from 12.4 per cent a year earlier, and is now expected to reach the "high teens" by 2025, it said.

For 2021, however, Philips predicted "low-single-digit growth", as demand for Covid-19 equipment is expected to cool down.

Philips cut its outlook for 2020 in August, after the US

Department of Health cancelled most of an order for 43,000 ventilators.

The company on Monday maintained its outlook for moderate sales growth and a stable EBITA margin for the whole of this year.

REUTERS