Royal Philips, the Amsterdam-based medical technology company, said revenue declined across its business units in the third quarter amid “more significant than anticipated” supply chain issues. Its shares plunged 12%.
Philips added that its troubled Respironics unit, dogged by a recall of 5.5 million sleep apnea ventilators, would take a 1.3 billion euro ($1.26 billion) non-cash impairment in the quarter because of a proposed consent decree from the U.S. Department of Justice, along with what it called “changes to the pre-tax discount rate.”
“Supply chain challenges” the company described as “more significant than anticipated” hampered Philips’ ability to deliver and install its medical devices, cutting sales by about 5% to about 4.3 billion euros in the quarter, the company said in a statement detailing preliminary earnings.
“The Diagnosis & Treatment businesses are expected to show a low-single-digit comparable sales decline and the Connected Care businesses a mid-teen decline, while the Personal Health businesses are expected to show mid-single-digit comparable sales growth. As a consequence of the lower sales, Group Adjusted EBITA for the quarter is expected to be approximately EUR 210 million or approximately 5% of sales,” Philips said. New orders fell 6% from a year earlier.
The company added it plans to increase productivity by cutting the number of products in its research and development pipeline, forcing it to record a non-cash charge of about 165 million euros for the quarter.
While Philips said it expects “a better second half of the year” compared to the first six months, it still forecasts “prolonged supply chain disruptions and a worsening macro-environment,” with comparable sales falling by “mid single digits” and an EBITA margin in the “high single-to-double-digit” range.
Philips shares fell $1.75 to $13.16 in early trading on the New York Stock Exchange.
The company will report final results on Oct. 24.