(Bloomberg) — Royal Philips NV’s efforts to revamp supply chains to avoid tariffs from the U.S.-China trade dispute are paying off, with the Dutch health-care company reporting better-than-estimated profit.
Chinese demand for the latest diagnostic equipment and image-guided therapy devices drove a double-digit increase in orders in the the second quarter, the Amsterdam-based company said Monday. Philips hit the top end of its sales growth target range, with an increase of about 6%, beating the 4.5% uptick expected by analysts.
While Chief Executive Officer Frans van Houten signaled the ongoing trade war remains at the top of his concerns this year, results show Philips is containing the fall out for now. The company has created local production hubs to serve the Chinese and U.S. markets to avoid tariffs on such products as ultrasound gear and electric toothbrushes. Philips predicted a stronger second half of the year.
“We are moving towards a regional manufacturing hub strategy as we manufacture in each of these large continents, making us more responsive than we might have been before,” van Houten said in a Bloomberg Television interview.
Shares of Philips gained 3.2% to 40.17 euros as of 9:11 a.m. in the Dutch capital. Prior to today, they had climbed 26% this year, while rival Siemens Healthineers lost 2% as it struggled with its blood testing platform Atellica.
The CEO is betting investment in innovation and an efficiency drive will see the company through any economic slowdown. New products are reinvigorating Philips’s Personal Health unit, which makes electric toothbrushes, shavers and equipment to help with sleep and respiratory disorders. Sales at the segment grew by 5%.
Quarterly earnings before interest, taxes, and amortization of 549 million euros ($615 million) beat the the 542 million euro-estimate of analysts in a company compiled consensus.
(Updates with share price in fifth paragraph.)
–With assistance from Nejra Cehic and Manus Cranny.
To contact the reporter on this story: Ellen Proper in Amsterdam at [email protected]
To contact the editors responsible for this story: Anthony Palazzo at [email protected], Andrew Noël, Tara Patel
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