United States halts order of Philips ventilators, earnings to be hit

FILE PHOTO: The Philips headquarters is pictured in Barueri, on the outskirts of Sao Paulo, Brazil

Electrical equipment maker Philips (PHG.AS) on Monday said the U.S. Department of Health had cancelled the bulk of an order for 43,000 hospital ventilators, leading it to cut its 2020 earnings outlook.

The Dutch company, which makes products ranging from electrical toothbrushes to hospital equipment, said it will now deliver just 12,300 hospital ventilators by the end of the year.

Philips was one of several companies contracted by the U.S. to supply more than 187,000 ventilators to the strategic national stockpile to help treat patients during the coronavirus pandemic.

The company said it had been informed by the U.S. Department of Health and Human Services (HHS) of the partial termination of the contract. Philips will not ship a remaining 30,700 ventilators, it said in a statement.

Orders for ventilators and other medical equipment resulting from the COVID-19 outbreak had been expected to lift Philips’ performance in 2020.

“The reduction in our ventilator deliveries to HHS will obviously impact Philips’ financial performance, but we continue to expect to return to growth and improved profitability in the second half of the year, starting in the third quarter,” Frans van Houten, Philips chief executive, said.

Philips had said in July that the surge in orders for medical equipment would enable it to achieve an “adjusted EBITA margin improvement” this year.

But on Monday it said it expects “to deliver modest comparable sales growth with an adjusted EBITA margin of around the level of last year.”

Philips’ core earnings fell by almost a quarter in April-June to 418 million euros ($497.25 million) as sales dropped 6% to 4.4 billion euros.

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