Philips discloses conflict with US over defibrillators; Q4 earnings miss estimates

By Toby Sterling

AMSTERDAM (Reuters) - Medical equipment maker Philips on Tuesday disclosed a conflict with the U.S. government over defibrillators it sold in 2015 and before, along with fourth-quarter earnings in which it missed analysts' estimates.

Philips repeated its medium-term financial targets of 4 percent to 6 percent average comparable sales growth and a 1 percent improvement in adjusted EBITA margin per year despite the defibrillator matter, which it said was civil, not criminal, in nature and would "have a significant impact" on that business.

"We are currently in discussions on a civil matter with the Department of Justice representing the U.S. Food and Drug Administration, arising from past inspections in and before 2015, primarily on our external defibrillator business," CEO Frans van Houten said in a statement. "While the discussions have not yet concluded, we anticipate a meaningful impact on the operations of this business."

Philips was forced to close a plant in Cleveland in 2014 that made high-end medical scanners due to U.S. government concerns over quality control in its supply chain. The company is still recovering from that incident, which badly dented earnings, with production ramping to full capacity in the course of 2015 and margins at its Diagnosis division continuing to recover.

Van Houten said on Tuesday the company was committed to quality and had "over the last years made investments to enable significant progress in this area."

The company reported fourth-quarter adjusted earnings before interest, taxes and amortisation (EBITA) of 1 billion euros ($1.08 billion) compared with 842 million euros in the same period a year earlier. Sales rose 3 percent to 7.24 billion euros.

Analysts polled for Reuters forecast the EBITA figure at 1.04 billion euros and sales at 7.28 billion euros.

($1 = 0.9301 euros)

(Reporting by Toby Sterling; Editing by Christian Schmollinger)