Philips supply chains revamp to mitigate impact of US-China trade war pays off

Bloomberg

Royal Philips NV’s efforts to revamp supply chains to mitigate the impact of the US-China trade dispute are paying off, with the Dutch health-care company reporting better-than-estimated profit.
The maker of scanners and diagnostic gear needs China as state-owned facilities invest in the latest equipment and a private healthcare sector emerges. Demand there drove a double-digit increase in orders in the second quarter, with the Amsterdam-based company hitting the top end of its sales growth target range of 6 percent, beating analysts’ estimates.
Philips’ results show the company is so far containing the fallout from the trade war that’s hit a cross-section of industries from cars to chemicals. BASF SE’s profit warning earlier this month highlighted how intricate global supply chains are being disrupted. Philips Chief Executive Officer Frans van Houten signalled the China-US situation remains at the top of his concerns this year, yet he still predicted a stronger second half.
“We are moving towards a regional manufacturing hub strategy as we manufacture in each of these large continents, making us more responsive than we might have been before,” van Houten said in a Bloomberg Television interview.
Shares of Philips gained 4.3 percent to 40.60 euros as of 10:41 am in the Dutch capital. They had climbed 26 percent earlier this year, while rival Siemens Healthineers lost
2 percent as it struggled with its blood testing platform Atellica.
Tariffs are affecting a broad range of products, from ultrasound gear and premium electronic toothbrushes to respiratory masks, that flow between China and the US. In addition, factories and assembly lines also have to contend with duties on many components, van Houten said.
With an extra 20 million-euro tariff impact expected from the latest batch of announced duties that have yet to be implemented, van Houten is racing to get the company’s antidote in place. Whereas before, a facility in China supplied Philips’ customers globally with respiratory masks, the Americas will soon have its own production, the CEO said.