Philips delivers strong margin improvement; flat comparable sales due to further deteriorated demand in China; growth in rest of world
Philips (PHG) reported Q3 2024 results with flat comparable sales at EUR 4.4 billion, primarily due to deteriorated demand in China while showing growth in other regions. The company achieved significant margin improvement with Adjusted EBITA margin increasing to 11.8% from 10.2%. Free cash flow was EUR 22 million, and comparable order intake decreased by 2% due to China decline. The company revised its full-year 2024 outlook, projecting comparable sales growth of 0.5-1.5%, with Adjusted EBITA margin around 11.5% and free cash flow around EUR 0.9 billion. Productivity initiatives delivered EUR 188 million in savings during Q3.
Philips (PHG) ha riportato i risultati del terzo trimestre del 2024 con vendite comparabili stabili a 4,4 miliardi di EUR, principalmente a causa di una domanda deteriorata in Cina, mentre si è registrata crescita in altre regioni. L'azienda ha ottenuto un significativo miglioramento dei margini, con il margine EBITA rettificato che è aumentato all'11,8% rispetto al 10,2%. Il flusso di cassa libero è stato di 22 milioni di EUR e l'entrata di ordini comparabili è diminuita del 2% a causa del calo in Cina. L'azienda ha rivisto le sue previsioni per l'intero anno 2024, prevedendo una crescita delle vendite comparabili dell'0,5-1,5%, con un margine EBITA rettificato intorno all'11,5% e un flusso di cassa libero intorno ai 0,9 miliardi di EUR. Le iniziative di produttività hanno generato risparmi per 188 milioni di EUR nel terzo trimestre.
Philips (PHG) reportó resultados del tercer trimestre de 2024 con ventas comparables estables en 4.4 mil millones de EUR, principalmente debido a la disminución de la demanda en China, mientras mostraba crecimiento en otras regiones. La compañía logró una mejora significativa en el margen, con el margen EBITA ajustado aumentando al 11.8% desde el 10.2%. El flujo de caja libre fue de 22 millones de EUR y la entrada de pedidos comparables disminuyó un 2% debido a la caída en China. La compañía revisó su perspectiva para todo el año 2024, proyectando un crecimiento de ventas comparables del 0.5-1.5%, con un margen EBITA ajustado alrededor del 11.5% y un flujo de caja libre cercano a 0.9 mil millones de EUR. Las iniciativas de productividad generaron ahorros de 188 millones de EUR durante el tercer trimestre.
Philips (PHG)는 2024년 3분기 실적을 보고하며 비슷한 수준의 판매를 44억 유로로 발표했습니다. 이는 주로 중국의 수요 감소 때문이며, 다른 지역에서는 성장을 보였습니다. 회사는 조정된 EBITA 마진이 10.2%에서 11.8%로 증가하며 유의미한 마진 개선을 달성했습니다. 자유 현금 흐름은 2200만 유로였으며, 중국의 감소로 인해 비교 가능한 주문 수는 2% 감소했습니다. 회사는 2024년 전체 연도 전망을 수정하여 비교 가능한 판매 성장률을 0.5~1.5%로, 조정된 EBITA 마진을 약 11.5%로, 자유 현금 흐름을 약 9억 유로로 전망했습니다. 생산성 이니셔티브는 3분기에 1억 8800만 유로의 절감을 가져왔습니다.
Philips (PHG) a publié les résultats du troisième trimestre 2024 avec des ventes comparables stables à 4,4 milliards d'EUR, principalement en raison d'une demande détériorée en Chine, tout en affichant une croissance dans d'autres régions. L'entreprise a réalisé une amélioration significative de sa marge, avec une marge EBITA ajustée augmentant à 11,8% contre 10,2%. Le flux de trésorerie disponible s'est élevé à 22 millions d'EUR, et l'entrée de commandes comparables a diminué de 2% en raison du déclin en Chine. L'entreprise a révisé ses prévisions pour l'année 2024, projetant une croissance des ventes comparables de 0,5 à 1,5%, avec une marge EBITA ajustée d'environ 11,5% et un flux de trésorerie libre d'environ 0,9 milliard d'EUR. Les initiatives de productivité ont généré des économies de 188 millions d'EUR au cours du troisième trimestre.
Philips (PHG) hat die Ergebnisse des dritten Quartals 2024 gemeldet, mit stabilen vergleichbaren Umsätzen von 4,4 Milliarden EUR, was hauptsächlich auf die verschlechterte Nachfrage in China zurückzuführen ist, während in anderen Regionen ein Wachstum verzeichnet wurde. Das Unternehmen erzielte eine signifikante Verbesserung der Marge, mit der angepassten EBITA-Marge, die auf 11,8% von 10,2% anstieg. Der freie Cashflow betrug 22 Millionen EUR, und die vergleichbaren Auftragseingänge sanken um 2% aufgrund des Rückgangs in China. Das Unternehmen hat seine Jahresprognose 2024 überarbeitet und rechnet mit einem vergleichbaren Umsatzwachstum von 0,5-1,5%, einer angepassten EBITA-Marge von etwa 11,5% und einem freien Cashflow von etwa 0,9 Milliarden EUR. Produktivitätsinitiativen haben im dritten Quartal Einsparungen von 188 Millionen EUR erzielt.
- Adjusted EBITA margin improved by 160 basis points to 11.8%
- Productivity initiatives delivered EUR 188 million in savings in Q3
- Total productivity savings since 2023 exceeded EUR 1.5 billion
- Solid growth in regions outside China
- Connected Care Adjusted EBITA margin improved from 3.7% to 7.3%
- Flat comparable sales growth due to China market deterioration
- Comparable order intake declined 2%
- Personal Health comparable sales decreased 5%
- Diagnosis & Treatment comparable sales decreased 1%
- Downward revision of full-year 2024 sales growth outlook to 0.5-1.5%
Insights
Philips' Q3 results show mixed performance with significant regional variations.
The bright spots include strong margin improvements driven by productivity initiatives delivering
The geographical divergence in Philips' performance highlights shifting market dynamics. While China shows concerning weakness, growth remains robust in other regions, particularly in the US healthcare sector. The strategic focus on AI-driven innovations and digital health transformation, evidenced by partnerships with major healthcare providers like NYU Langone Health and Siloam Hospital Group, positions Philips well for future growth despite current headwinds.
The productivity gains and margin improvements demonstrate successful execution of operational efficiency initiatives, though these benefits are partially offset by macroeconomic challenges. The company's emphasis on ESG through carbon footprint reduction partnerships adds long-term value proposition.
October 28, 2024
Third-quarter highlights
- Group sales amounted to EUR 4.4 billion, with flat comparable sales growth
- Income from operations was EUR 337 million
- Adjusted EBITA margin increased by 160 basis points from
10.2% to11.8% of sales - Operating cashflow of EUR 192 million, with a free cashflow of EUR 22 million
- Comparable order intake decreased by
2% , due to decline in China - Outlook for full-year 2024 revised to reflect deteriorated demand in China: comparable sales growth within an updated range
0.5% -1.5% , Adjusted EBITA margin at around11.5% , the upper end of current range; free cashflow at around EUR 0.9 billion, at lower end of current range
Roy Jakobs, CEO of Royal Philips:
“In the quarter, demand from hospitals and consumers in China further deteriorated, while we continue to see solid growth in other regions. We have adjusted our full-year sales outlook to reflect the continued impact from China.
Strong improvement in profitability was driven by progress on our execution priorities, productivity measures and the improved margins of our AI-driven, industry-leading innovations.
Within a challenging macro environment, we remain focused on successfully executing our three-year plan to fully capture growth and margin expansion opportunities. With patient safety as our number one priority, we are committed to delivering better care for more people.”
Group and segment performance
Group comparable sales were flat on the back of
Adjusted EBITA margin improved 160 basis points from
Comparable order intake in the quarter declined
Diagnosis & Treatment comparable sales decreased
Connected Care comparable sales were flat, with growth in Enterprise Informatics and Sleep & Respiratory Care offset by a low- single-digit decline in Monitoring, on the back of high-teens growth in Q3 2023. Adjusted EBITA margin improved from
Personal Health comparable sales decreased
Productivity
Our productivity initiatives are on track and delivered savings of EUR 188 million in Q3: operating model savings of EUR 54 million, procurement savings of EUR 58 million, and other programs savings of EUR 76 million. Since 2023, productivity initiatives delivered savings of over EUR 1.5 billion.
Outlook
The significant deterioration in China demand leads to an updated comparable sales growth outlook range of 0.5
Within an ongoing challenging macro environment, Philips remains focused on successfully executing its three-year plan to drive operational improvement and create value with sustainable impact. The uncertainties signaled in earlier quarters have intensified in China and are expected to continue.
The outlook excludes the potential impact of the ongoing Philips Respironics-related legal proceedings, including the investigation by the US Department of Justice.
Customer, innovation and ESG highlights
- Philips expanded its next-generation cardiovascular ultrasound platform with FDA clearance of two additional AI algorithms to enhance structural heart disease examinations as part of the global rollout of this technology.
- Philips secured FDA approval for its new LumiGuide Navigation Wire, which uses fiber optic technology to reduce radiation for both patients and physicians during minimally invasive surgery.
- Carilion Clinic in the US will expand cardiac care access through 11 specialized Philips interventional suites that allow physicians to treat patients with complex cardiovascular conditions closer to home using platforms including the Azurion Image Guided Therapy System and EPIQ CVx cardiology ultrasound system with AI capabilities.
- NYU Langone Health in the US successfully implemented Philips' digital pathology solutions as part of an eight-year partnership, enabling patients to be diagnosed faster using real-time digital images instead of microscopes.
- Siloam Hospital Group, Indonesia’s largest private hospital network serving close to 4 million patients a year, is partnering with Philips for digital health and AI transformation. The collaboration aims to improve healthcare access and enhance clinical outcomes, delivering better care for more people in one of the fastest-growing G20 nations.
- Supporting China in expanding access to care in a new private hospital in Zhangzhou serving half a million patients each year, Philips will be the sole provider of MR, image-guided therapy and ultrasound technologies, enabling high-quality care for patients.
- Philips launched the AI-powered Avent Premium Connected Baby Monitor, which offers cry translation and SenseIQ technology to track sleep, breathing, and movements, giving parents peace of mind.
- Philips is collaborating with customers worldwide to help them assess and mitigate their carbon footprints, including Jackson Health System in the US, Rennes University Hospital in France, and Champalimaud Foundation in Portugal.
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For further information, please contact:
Elco van Groningen
Philips External Relations
Tel.: +31 6 8103 9584
E-mail: elco.van.groningen@philips.com
Ben Zwirs
Philips External Relations
Tel.: +31 6 1521 3446
E-mail: ben.zwirs@philips.com
Dorin Danu
Philips Investor Relations
Tel.: +31 20 59 77055
E-mail: dorin.danu@philips.com
About Royal Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health technology company focused on improving people's health and well-being through meaningful innovation. Philips’ patient- and people-centric innovation leverages advanced technology and deep clinical and consumer insights to deliver personal health solutions for consumers and professional health solutions for healthcare providers and their patients in the hospital and the home.
Headquartered in the Netherlands, the company is a leader in diagnostic imaging, ultrasound, image-guided therapy, monitoring and enterprise informatics, as well as in personal health. Philips generated 2023 sales of EUR 18.2 billion and employs approximately 69,300 employees with sales and services in more than 100 countries. News about Philips can be found at www.philips.com/newscenter.
Forward-looking statements and other important information
Forward-looking statements
This document and the related oral presentation, including responses to questions following the presentation, contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forward-looking statements include statements made about strategy, estimates of sales growth, future Adjusted EBITA *) , future restructuring and acquisition related charges and other costs, future developments in Philips’ organic business and the completion of acquisitions and divestments. Forward-looking statements can be identified generally as those containing words such as “anticipates”, “assumes”, “believes”, “estimates”, “expects”, “should”, “will”, “will likely result”, “forecast”, “outlook”, “projects”, “may” or similar expressions. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements.
These factors include but are not limited to: Philips’ ability to gain leadership in health informatics in response to developments in the health technology industry; Philips’ ability to keep pace with the changing health technology environment; macro-economic and geopolitical changes; integration of acquisitions and their delivery on business plans and value creation expectations; securing and maintaining Philips’ intellectual property rights, and unauthorized use of third-party intellectual property rights; Philips’ ability to meet expectations with respect to ESG-related matters; failure of products and services to meet quality or security standards, adversely affecting patient safety and customer operations; breaches of cybersecurity; challenges in simplifying our organization and our ways of working; the resilience of our supply chain; attracting and retaining personnel; challenges in driving operational excellence and speed in bringing innovations to market; compliance with regulations and standards including quality, product safety and (cyber) security; compliance with business conduct rules and regulations including privacy and upcoming ESG disclosure and due diligence requirements; treasury and financing risks; tax risks; reliability of internal controls, financial reporting and management process; and global inflation. As a result, Philips’ actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see also the Risk management chapter included in the Annual Report 2023. Reference is also made to section Risk management in the Philips semi-annual report 2024.
Third-party market share data
Statements regarding market share contained in this document, including those regarding Philips’ competitive position, are based on outside sources such as specialized research institutes, as well as industry and dealer panels, in combination with management estimates. Where information is not yet available to Philips, market share statements may also be based on estimates and projections prepared by management and/or based on outside sources of information. Management’s estimates of rankings are based on order intake or sales, depending on the business.
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This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.
Use of non-IFRS information
In presenting and discussing the Philips Group’s financial position, operating results and cash flows, management uses certain non-IFRS financial measures. These non-IFRS financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measure and should be used in conjunction with the most directly comparable IFRS measures. Non-IFRS financial measures do not have standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. A reconciliation of these non-IFRS measures to the most directly comparable IFRS measures is contained in this document. Further information on non-IFRS measures can be found in the Annual Report 2023.
Presentation
All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up precisely to totals provided. All reported data is unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 2023. Prior-period amounts have been reclassified to conform to the current-period presentation; this includes immaterial organizational changes.
Effective Q1 2024, Philips has revised the order intake policy to reflect the full contract value for software contracts that start generating revenue within an 18-month horizon, instead of only the next 18-months-to-revenue horizon. This change has been implemented to better align with the specific business model of our software businesses, simplify the order intake process, and better align with peers. Prior-period comparable order intake percentages have been restated accordingly. This revision has not resulted in any material changes to the order intake percentages for the periods presented.
Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares in the second quarter of 2024 in connection with the 2023 share dividend.
*) Non-IFRS financial measure. Refer to Reconciliation of non-IFRS information.
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