Philips expects sales growth to accelerate after weak Q1

Tuesday, 30 April 2019 00:00 - - {{hitsCtrl.values.hits}}

Dutch technology company Philips. logo is seen at company headquarters in Amsterdam, Netherlands, January 29, 2019 - reuters

AMSTERDAM (Reuters): Dutch health technology company Philips said on Monday it expects sales to accelerate in coming months on improved demand in Europe and the United States after a weak first quarter.

A decline in demand for hospital equipment in Europe and flat sales in the United States capped overall comparable quarterly sales growth to 2.3%, even though results in China and other emerging markets were much more upbeat.

The maker of heathcare products which range from high-tech toothbrushes to medical imaging systems, stuck to its target of 4 to 6% annual sales growth until 2020, saying demand in Europe and the US will pick up rapidly.

“We expect much stronger growth in mature markets in the second and third quarter”, Chief Executive Frans van Houten told reporters. The order book in those markets is strong and this will result in sales growth.” Philips shares traded up 2.7% at 37.17 euros in Amsterdam at 0926 GMT.

“It is encouraging to see a better performance in Personal Health given that this dominated much of the narrative last year,” Berenberg analyst Scott Bardo wrote in a note. “We believe better group growth and margin improvement is in store over the course of the year and we expect Philips to fulfil guidance.”

Once a sprawling conglomerate, Philips has transformed itself into a health technology specialist in recent years, shedding its consumer electronics and lighting divisions.

It reported sales growth of 2 to 5% for its two largest businesses, hospital equipment and personal healthcare products, in the first quarter.

Overall, adjusted earnings before interest, taxes and amortisation (EBITA) improved 6%, to 364 million euros ($406.2 million).

Revenues of its connected care division, which specialises in remote patient monitoring, dropped 1%.

Philips expects rising life expectancy and associated chronic diseases to lead to growing demand for devices that allow patients to stay at home, while their data is monitored.

But Van Houten in November said demand for such products would remain modest in 2019.

Medical equipment sales were mainly driven by double digit growth in image guided therapy devices, which allow for minimally invasive operations.

Philips expects this strong growth to continue, Van Houten said, as these devices help doctors limit the time patients have to spend in hospitals.