Philips expects a smaller hit to its 2025 earnings from tariffs after the U.S. reached agreements with China and the European Union.
The company now expects an impact of 150 million to 200 million euros (about $173 million to $231 million) compared with an up to 300 million euro charge Philips forecast in the first quarter.
CFO Charlotte Hanneman told investors in a Tuesday earnings call that the changes were based on “two notable revisions” since the company provided its last outlook in May. On Sunday, the U.S. and the EU reached an agreement that would set a 15% rate for most imports from Europe. Imports from China currently face a 30% tariff. As a result, the company raised its forecast for margins in 2025.
“Tariffs remain dynamic,” Hanneman said, adding that the company has taken short-term mitigation actions such as pursuing exemptions and optimizing inventory locations and the flow of goods.
Philips is making progress on other steps to reduce the tariff hit, including optimizing its supplier network and manufacturing locations. The company expects the impact of tariffs to be more pronounced in the second half of the year, Hanneman said, due to a lag between higher inventory costs and when those costs are recognized in Philips’ earnings.
Update on China business
Philips continues to take a cautious approach to its business in China after reporting a double-digit sales drop in its businesses in China in the first quarter. In the second quarter, Philips’ sales declined in China, and were flat in Western Europe and North America.
CEO Roy Jakobs said on the call that stimulus and tender activity are picking up in China.
“We have not yet seen a significant change in market dynamics,” Jakobs said. “Therefore, we continue to maintain a cautious view on China in our full year outlook.”
