Philips Cuts Guidance After Supply-Chain Snarls Hit Sales

(Bloomberg) -- Royal Philips NV reduced its growth and earnings guidance after global supply-chain disruptions weighed on sales in the third quarter.

Philips now expects to deliver low single-digit sales growth for 2021, down from the low-to-mid-single digit increase it forecast previously, it said Monday in a statement. The Amsterdam-based company sees just a “modest” increase in its profit margin, compared to the 60-basis-point improvement it anticipated previously.

“Supply chain volatility has intensified globally,” Chief Executive Officer Frans van Houten said, citing a shortage in electronic components. “We expect this headwind to continue in the fourth quarter.”

Philips also suffered a setback early on in its new era focused entirely on health products, recalling roughly 3.5 million ventilation devices used to treat sleep apnea in June. Some of the machines use sound-abatement foam that can degrade and be ingested or inhaled, potentially having toxic or carcinogenic effects.

The maker of respiratory gear and body scanners previously doubled its provision for expected costs related to the recall to 500 million euros ($579 million). Philips didn’t give an update on the number on Monday, saying it’s unable to reliably estimate the financial impact amid a number of lawsuits linked to the issue.

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