Philips Sees Growing Demand for E-Toothbrushes

(Bloomberg) -- Royal Philips NV signaled orders are growing at a double-digit percentage rate for some products like electric toothbrushes and image-guided therapy used in operations, helping first-quarter earnings meet analysts’ estimates.

The maker of body scanners, imaging products and respiratory gear stepped up launches and increased marketing to counter weaker consumer confidence in markets like China. It reported first-quarter adjusted earnings before interest, taxes and amortization increased 5.8 percent to 364 million euros ($405.6 million). Analysts predicted 358 million euros.

Key Insights

• The personal health segment and emerging markets generally are performing well, but mature markets are off to “a slower start” to the year, Chief Executive Officer Frans van Houten said on a call to reporters. “The order book in mature markets is strong, and we know that in the course of the year that will materialize in revenue growth.”
• Philips is feeling the fallout from the trade war between the U.S. and China that’s prompting Van Houten to shift production to within the Asian country. Chief Financial Officer Abhijit Bhattacharya said Monday that the impact of the trade war could shave 45 million euros from profit this year.
• Having exited legacy products like light bulbs, TVs and CDs, van Houten is now seeking to improve margins from scanners and x-ray machines and sell add-on services to compete with General Electric Co., Siemens AG and newer entrants in markets like oral care. Philips reiterated a target for 4 percent to 6 percent sales growth per year through 2020.

Market Reaction

• The shares rose as much as 2.4 percent in Amsterdam, to their highest level in more than six months. The stock was trading at 36.85 euros, up 1.8 percent, as of 9:54 a.m. local time, valuing the company at around 34 billion euros.

Know More

• Click here for Philips’s earnings release.
• CEO says in Bloomberg Television interview: “This was a reasonable start to the year. I know a lot of people had questions about China, but I’ve always maintained a lot of optimism that the people there need more health care, and Philips in in a great position to grow.”

--With assistance from Manus Cranny.

To contact the reporter on this story: Ellen Proper in Amsterdam at eproper@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Andrew Noël

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