Philips faces $69m hit from Trump trade war

The CEO of Royal Philips (NYSE:PHG) told analysts today that the Dutch healthcare giant is looking at a $69 million hit from Donald Trump’s trade war with China, as it transfers hundreds of millions worth of production between the countries.

“This is not peanuts,” Frans van Houten said today during a conference call to discuss Philips’ fourth-quarter and 2018 results, according to Reuters. “These are serious changes to our supply chains.”

The company said it still expects the trade war to deliver a €60 million ($68.5 million) hit to core profits this year.

Fourth-quarter profits were €678 million, or €0.91 per share, on sales of €5.59 billion during the three months ended Dec. 31, 2018, down -24.6% and up 5.3%, respectively, compared with the same period in 2017. Full-year profits were down -41.3% to €1.10 billion, or €1.75 per share, on sales growth of 1.9% to €18.12 billion.

The results, which topped expectations, plus a proposed dividend hike and a €1.5 billion stock buyback, sent PHG shares up 2.1% to $37.69 apiece in New York this morning.

“We continued to make progress during the year and delivered 5% comparable sales growth in the fourth quarter, with good mid-single-digit growth in our diagnosis & treatment businesses, low-single-digit growth in our personal health businesses in line with our expectations for this year, and higher IP royalties. I am encouraged by the comparable order intake growth in the connected care & health informatics businesses, which drove the 10% comparable order intake growth for the group. The adjusted EBITA margin improved by 70 basis points, despite a 40-basis-points adverse currency effect,” van Houten said in prepared remarks. “We reaffirm our overall targets of 4% to 6% comparable sales growth and an adjusted EBITA margin improvement of 100 basis points on average per year for the 2017–2020 period.”

($1 = €0.876001)

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