Philips falls as profit disappoints, trade war impact looms

Bloomberg

Royal Philips NV shares fell to the lowest level in seven years after missing earnings expectations and warning trade wars and Brexit will weigh on its business.
The Dutch health-technology company’s profit and sales growth missed estimates, with the shortfall most notably at the personal-health unit that makes products like electric toothbrushes, shavers and equipment to help with sleep and respiratory disorders. The results sent the stock down as much as 9.9 percent on Monday, the most since June 2011.
Chief Executive Officer Frans van Houten acknowledged in an interview with Bloomberg TV that he would have liked the earnings “to be stronger.” Adjustments , he said, will have to be made to prices in some emerging markets such as Argentina and Turkey, where local currencies have weakened considerably, and to the company’s manufacturing footprint due to tit-for-tat tariffs imposed by the U.S and China. The impact of the trade war could shave 60 million euros ($69 million) from profit next year, he said.
“We will redesign some of our supply chains” and create regional manufacturing hubs, he said. “We are in the good position of having factories in the United States, in Europe and in Asia. We can rebalance those going forward in order to avoid some of the duty impact.”
Philips is not alone among European manufacturers grappling with the emerging trade war between the US and China and currency volatility. Swedish compressor make Atlas Copco AB warned that makers of semiconductors and cars will order fewer tools and equipment in the coming months due to concerns about issues like trade. For Philips, the UK’s plans to split from the European Union also threatens to upend its production.
“We do need to look at our manufacturing facility in the UK,” Van Houten said. “We need frictionless trade and if that is in any way hampered, then the future of that factory may be at risk.” UK and EU negotiators are deadlocked in talks over the divorce treaty that will govern exchanges between the two sides and this will shape how manufacturers like Philips can circulate factory supplies and finished products.
Philips reported third-quarter adjusted earnings before interest, taxes and amortization increased 7 percent to 568 million euros, less than the 584 million euro-estimate of analysts in Bloomberg survey.