Philips Shares Surge 10.5% on Strong Q2 Sales Despite Weakness in China

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On Monday morning, shares of the Dutch company Philips soared over 10.5% following the release of their second-quarter earnings, which surpassed analyst expectations.

By 9:32 am London time, the stock had slightly retracted to a 10.45% increase.

Philips reported a 2% rise in group comparable sales, reaching €4.5 billion ($4.88 billion), primarily driven by robust demand in North America, while sales in China saw a decline.

The company, known for its medical devices and personal care products like electronic toothbrushes, also experienced a 9% increase in comparable orders during the quarter.

Philips attributed the reduced demand in China to the country’s push for self-sufficiency in critical technologies, including healthcare, amid escalating tensions with the United States. Despite this, the company maintains that China remains a “fundamentally attractive growth market.”

CEO Roy Jakobs expressed optimism about the solid second-quarter performance and reiterated confidence in meeting the company’s full-year forecast of 3-5% comparable sales growth.

“In a challenging macroeconomic environment, we achieved strong margin improvement, supported by our productivity program, solid operating cash flow due to improved working capital management, and comparable sales growth in line with our plan,” Jakobs stated.

Philips has reported significant cost savings during the period, including €195 million in productivity savings, €57 million from operating model efficiencies, €71 million in purchasing savings, and €67 million from other programs. Since 2022, the company has been undergoing a reorganization that will result in a reduction of approximately 10,000 jobs, or 13% of its workforce as of January last year.

Additionally, Philips announced a $1.1 billion settlement for a personal injury lawsuit and a medical monitoring class action lawsuit in the United States, related to its defective sleep apnea devices recalled in June 2021 due to health concerns.

Jakobs noted that this settlement brings “finality” to the U.S. case, allowing the company to refocus on innovation, although other cases remain pending outside the United States.

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