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Trade tariffs hit profitability at Philips

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AFP The Hague
Electronics giant Philips said Monday that trade tariffs had begun to bite into the profit margins at one of its medical equipment units and that orders were flat in the third quarter.
The Dutch firm that has largely shifted to building medical equipment in recent years reported that net profits fell by nearly 30 per cent to 208 million euros (USD 231 million) in the three months to September, thanks largely to 78 million euros in writedowns.
It was in the business line which makes equipment that helps doctors and hospital staff monitor patients that Philips said tariffs have begun to erode margins.
The operating profit margin in the Connected Care businesses declined to 11.3 per cent from 15.8 per cent, "due to increasing headwinds from tariffs," chief executive Frans van Houten said in a statement.
He also cited the delayed impact of measures meant to mitigate the impact of tariffs, under-utilisation of factories and its product mix as factors for the unit's performance.
Overall, sales rose by six per cent on a comparable basis, with China leading the way with double-digit growth.
But order intake was flat after surging 11 per cent in the third quarter of last year.
While van Houten described the third quarter performance as "mixed results" for the firm, he said Philips still expects adjusted sales growth of 4.0-6.0 per cent for the year, with its overall operating margin to rise slightly.
Shares in Philips fell 3.2 per cent in midday trading on the Amsterdam exchange, where the AEX index was 0.2 percent lower.

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First Published: Oct 28 2019 | 5:40 PM IST

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