Philips Cuts FY25 Margin View On Tariffs, Despite Higher Q1 Income, Orders; Stock Down

(RTTNews) - Shares of Royal Philips N.V. were losing around 3 percent in the mid-day trading in Amsterdam, as well as around 5 percent in pre-market activity on the NYSE, after the Dutch consumer electronics giant on Tuesday trimmed its margin forecast for fiscal 2025 to reflect the estimated net tariff impact of 250 million euros to 300 million euros. Further, the firm maintained annual sales view, after reporting weak adjusted margin and comparable sales in its first quarter, but higher income and orders.

Roy Jakobs, CEO of Royal Philips, said, "Our order intake growth continued with strong momentum particularly in the US, coupled with positive growth in personal health, providing an encouraging start to the year. In an uncertain macro environment that has intensified due to the potential impact of tariffs, we are focused on what we can control. We are improving our supply chain agility, taking decisive cost actions to mitigate financial impact where possible, and ensuring we can continue to serve our customers and consumers."

Looking ahead, for fiscal 2025, the company now expects adjusted EBITA margin range to be 10.8 percent to 11.3 percent, a 100 basis points reduction from the previous outlook. The revised outlook includes an estimated net tariff impact of 250 million euros to 300 million euros after substantial tariff mitigations.

Free cash flow will be slightly positive for the full year, after the payout of 1.025 billion euros Philips Respironics recall-related medical monitoring and personal injury settlements in the US.

Further, Philips' outlook for comparable sales growth remains unchanged at 1 percent to 3 percent.

The company continues to anticipate 2025 performance will be skewed toward the latter part of the year, with second quarter showing modest improvement from first quarter.

The company said the outlook excludes ongoing Philips Respironics-related proceedings, including the investigation by the US Department of Justice.

Philips added that the assumed impact of tariffs includes current bilateral US-China and rest of world tariffs, the resumption of the paused US tariffs on July 9 and excludes potential wider economic impact.

In the first quarter, the company reported that income from operations increased to 154 million euros.

Adjusted EBITA margin, meanwhile, decreased 80 basis points to 8.6 percent, mainly due to the decline in sales, partly offset by higher gross margins from innovations and productivity measures.

Group sales were 4.1 billion euros. Group comparable sales decreased 2 percent, reflecting double-digit declines across all segments in China and a high comparison base in Diagnosis & Treatment globally.

The company noted that comparable sales increased slightly outside of China, mainly driven by positive Personal Health growth in most other markets.

However, the comparable order intake increased 2 percent, primarily driven by strong performance in North America, offsetting a decline in China. Further, Philips trimmed its fiscal 2025 margin outlook to include the assumed impact of currently announced tariffs, but maintained sales forecast.

In the quarter, Diagnosis & Treatment comparable sales decreased 4 percent, due to a double-digit decline in China and on the back of a high comparison base in prior years.

Connected Care comparable sales were broadly flat across businesses, mainly due to an unfavorable mix and cost phasing, partly offset by productivity measures and innovation.

Personal Health comparable sales increased 1 percent. High-single-digit growth was largely offset by a double-digit decline in China.

In Amsterdam, Philips shares were trading at 21.77 euros, down 3.3 percent.

In pre-market activity on the NYSE, the shares were at $24.38, down 4.9 percent.

For more earnings news, earnings calendar, and earnings for stocks, visit rttnews.com.