On October 28th, the world’s top electronic products company Philips announced that due to a significant decline in market demand in China, particularly in the reduced demand for medical equipment, they have to lower their annual sales expectations, leading to a 16% drop in stock prices.
The company, headquartered in Amsterdam, the Netherlands, stated that deteriorating consumer confidence and the ongoing nationally-led anti-corruption campaign have impacted orders from Chinese hospitals.
CEO Roy Jakobs stated: “This combination of factors has led to a significant decrease in sales in China, further deteriorating from our expectations in July.”
He mentioned that the consumer market in China is “indeed very weak” and anticipates that this situation will “continue in the short term.”
Jakobs noted that orders in China saw a “very clear” decline in the third quarter, without disclosing specific figures.
Overall, Philips reported third-quarter sales of 4.378 billion euros (4.75 billion U.S. dollars) this year, which is a decrease of 94 million euros compared to the same period last year, a decrease of 2%. Growth in other regions globally offset the issues in the Chinese market.
Philips is now projecting that their overall sales for 2024 may only grow by 0.5% to 1.5% compared to 2023, lower than the previous forecast of 3% to 5%. However, regions outside of China are still expected to achieve the 3% to 5% sales growth target.
The company stated that nearly one-third of its sales come from “growth regions,” including China, although specific numbers for China were not provided.
The slowing trend in the third quarter was most notable in the personal health sector, with sales in China dropping by over 10%, leading to a 5% decrease in global sales.
The division selling medical equipment to hospitals (diagnosis and treatment) experienced a 1% decrease in sales, but achieved “robust growth” outside of China.
Philips stock plummeted by 16% on Monday morning, marking the largest single-day decline since 1998.
Between 2021 and 2023, Philips recalled a large number of sleep apnea devices, and concerns over large litigation costs caused the company’s market value to shrink by about two-thirds during that period. This year saw some recovery as the stock price had surged by nearly 50% prior to this downturn.
Philips offers a wide range of products, from electric toothbrushes to medical imaging systems, and is a major competitor of General Electric and Siemens Healthcare.
Philips is the latest among many global companies to issue a warning regarding the economic health conditions in China. Despite efforts by the Chinese government to turn the situation around, the economy still remains sluggish.
(Reference: Reuters)