AMSTERDAM (Reuters) -Philips (PHG, PHIA.AS) said on Monday demand in China has fallen significantly in recent months, forcing the Dutch medical device maker to cut its sales outlook for the year and sending its shares down 16%.
The company said it had been hit by a deterioration in consumer confidence in China and an ongoing state-led anti-corruption campaign, which has seen orders cut from Chinese hospitals.
“That compound effect showed a strong decline in China and a further deterioration from what we expected in July,” Chief Executive Roy Jakobs told reporters.
“The consumer market is very weak and we expect this to remain so in the short term,” he added.
Philips is the latest in a series of global companies to warn about the health of China’s economy, which continues to weaken despite Beijing’s efforts to turn things around.
Jakobs said orders in China had shown a “very material” decline in the third quarter, without giving an exact figure.
Overall, comparable orders fell 2% from a year earlier, as growth in the rest of the world partially offset problems in China.
Philips now expects comparable sales to grow just 0.5% to 1.5% in 2024, compared to a previous forecast of 3% to 5%, which it said it would still achieve in other regions.
Shares in Philips, which sells products ranging from toothbrushes to medical imaging systems, were down 16% at 0841 GMT, posting their biggest daily loss in 26 years.
Shares are up nearly 50% this year as the company recovers from a massive recall of sleep aid machines. Fears of major lawsuits had cut about two-thirds of Philips’ market value between 2021 and 2023.
The company is a major competitor of General Electric and Siemens Healthineers.
It says it gets almost a third of its sales from “growth regions” including China, but did not provide a specific figure for China.
The slowdown in the third quarter was most visible in the personal healthcare segment, where Philips sales fell 5% due to a double-digit decline in China.
The division that sells medical devices to hospitals (Diagnosis & Treatment) saw sales decline 1%, with “solid growth” outside China, the report said.
Overall, comparable sales were flat at 4.4 billion euros ($4.75 billion), missing the 2.1% growth that analysts on average had forecast.
Adjusted earnings before interest, taxes and depreciation (EBITA) were exactly in line with expectations at 516 million euros, an increase of 13% year on year, as the profit margin increased to 11.8% due to lower costs.
