Philips Confident of Sales-Growth Target Amid U.S. Weakness

(Bloomberg) -- Royal Philips NV said a strong order book and resilient performance in markets including China and India would allow the Dutch health-care equipment provider meet sales targets, even as uncertainty surrounding U.S. policy led hospitals there to delay spending.

The company reiterated a full-year revenue growth target of between 4 percent and 6 percent for its health technology businesses, which excludes the Philips Lighting NV unit that was spun off last year. First-quarter sales on the same basis rose 3 percent, meaning the Amsterdam-based company needs “to do more” in the second half, Chief Executive Officer Frans van Houten said.

There’s “nothing to worry about -- we are confident,” the CEO said on a call with journalists on Monday. “We saw a strong order intake growth in China, India and Europe. That compensates then for the somewhat slower U.S. market.”

Under Van Houten, Philips has sharpened focus on growing as a health-care technology company by spinning off Philips Lighting through an initial public offering last year, and the sale of its lighting-components unit Lumileds in December. The Dutch company aims to be seen as a provider of software, as opposed to a manufacturer of light bulbs, TVs and CD players that made up its core products during the company’s 125-year history.

The shares rose as much as 3.2 percent in Amsterdam, the highest intraday gain since October, and traded 2.9 percent higher at 31.38 euros as of 10:28 a.m. in Amsterdam. The stock is at a near 10-year high, and values the company at 29 billion euros.

Nervous Hospitals

U.S. President Donald Trump’s administration withdrew a bill to repeal and replace the Affordable Healthcare Act, often called Obamacare, in the face of opposition from within its own party. The Trump White House and congressional Republicans are at odds over whether to try for another vote on replacing the plan put in place by Trump’s predecessor, Barack Obama. That’s made hospital CEOs nervous, Van Houten said.

“I cannot exactly predict, if I put my ear to the ground, but I think we may still see more uncertainty in the second quarter,” he said. “Discussions in Washington are still going on around accountable care.”

Philips kept its outlook to raise profitability to the average industry standard for health care-equipment peers, including General Electric Co. and Siemens AG, over the next three to four years. The full-year sales growth target will be accompanied by a 100 basis point improvement on average in the Ebita margin. First-quarter adjusted earnings before interest, taxes and amortization increased 18 percent to 442 million euros, the maker of medical scanners and diagnostic gear said in a statement.

The Dutch company has warned of an impact on operations from discussions with the U.S. Department of Justice over its heart defibrillators, which it says is a relatively small business. The talks are still ongoing, Van Houten said.

Philips isn’t in a hurry to sell its remaining stake in Philips Lighting, which stands at 55 percent. It will do so over the next two years, according to the CEO.