COVID-19 takes bite out of Philips Q1 financials

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The COVID-19 outbreak "significantly affected" financial results at Philips and its Philips Healthcare business for the first quarter of 2020 (end-31 March). The company reported a 2% decline in revenues for the period after currency adjustment, while income also dropped.

For the first quarter, Philips posted revenues of 4.159 billion euros, flat before currency changes compared with sales of 4.151 billion euros a year ago, but down 2% after currency adjustment. The company's net income was 39 million euros, compared with 162 million euros in the first quarter of 2019.

In discussing the results, Philips said that COVID-19 significantly affected its sales for the quarter, with comparable sales growth affected by five percentage points and adjusted earnings before interest, taxes, and depreciation (EBITA) by three percentage points. This was due to direct costs of 10 million euros, including lost gross margin and lower factory coverage.

Sales declined 2% after currency adjustment, representing growth in the high single digits in the company's Connected Care segment and in the low single digits in its Diagnosis & Treatment unit. These gains were more than offset by a double-digit drop in Philips' Personal Health business, according to the company.

On a geographical basis, sales in growth markets fell 12%, led by a double-digit decline in China due to COVID-19. Revenues from mature geographic regions rose 2%, with growth in the mid-single digits in North America and low single digits in Western Europe. This was partially offset by a decline in the mid-single digits in other mature geographic regions.

With respect to orders, growth regions saw double-digital growth, led by China and Latin America. Additionally, Philips saw double-digit order growth in mature geographies, including Western Europe, North America, and other regions.

Philips also provided an update on changes in its executive committee. Rob Cascella, who has been the chief business leader of the company's Precision Diagnosis businesses and who has led the Diagnosis & Treatment segment with Bert van Meurs, will be taking on the role of strategic business development at Philips starting on 1 May. He will remain on the company's executive committee.

Succeeding Cascella will be Kees Wesdorp, PhD, who is currency general manager of the Diagnostic Imaging segment. Wesdorp will report to Philips CEO Frans van Houten and will also become a member of the executive committee.

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