--Philips posted third-quarter profit ahead of expectations

--The connected care and personal-health divisions drove a return to sales growth

--The Company is targeting accelerated sales growth and higher profitability in the 2021-25 period


By Adria Calatayud


Koninklijke Philips NV said Monday that third-quarter net profit rose and exceeded expectations, and that the company is targeting accelerated sales growth and higher profitability in the 2021-25 period.

The Dutch medical-technology group said sales returned to growth territory in the quarter despite challenging circumstances created by the coronavirus pandemic. Higher sales were driven by conversions of orders for patient monitors and ventilators and a robust rebound of demand for the company's personal-health portfolio, Philips said.

The company has felt a mixed impact from the pandemic, which boosted its connected care division on the back of soaring orders for patient monitors and ventilators, but hurt its diagnosis-and-treatment division due to delays in elective surgeries.

Philips made a net profit from continuing operations of 340 million euros ($398.4 million) for the quarter, compared with EUR208 million for the same period a year before. Analysts expected a net profit of EUR274 million, according to a consensus estimate provided by the company.

This included a EUR57 million charge following the partial cancellation of a ventilator contract with the U.S. Department of Health and Human Services, which prompted Philips to cut its outlook for 2020 in late August.

Quarterly sales increased to EUR4.98 billion from EUR4.70 billion a year before, Philips said. Comparable sales grew 10%, it said. Analysts expected third-quarter sales to come in at EUR4.82 billion with comparable sales growth of 5.4%, according to a company-provided consensus.

Adjusted earnings before interest, taxes and amortization margin for the third quarter was 15.4%, the company said

Philips said it continues to see uncertainty and volatility related to the impact of the coronavirus pandemic across the world, but reiterated its guidance of modest comparable sales growth and an unchanged adjusted Ebita margin for 2020.

"It is clear that the Covid-19 pandemic is far from over," Chief Executive Frans van Houten said.

For the 2021-25 period, the company said it is targeting an acceleration in the average annual comparable sales growth to 5%-6%, an adjusted Ebita margin improvement of 60-80 basis points on average annually from 2021 and a free cash flow above EUR2 billion by 2025.

Philips--which will outline of its strategic plan at a capital markets day next month--said it expects comparable sales growth to be weaker next year, with a low single digit percentage rise, as strong growth experienced this year in its connected care division will be followed by a decline in 2021.

The current high demand for acute-care equipment won't be sustained over the longer term, Mr. Van Houten said in a call with journalists.


Write to Adria Calatayud at adria.calatayud@dowjones.com


(END) Dow Jones Newswires

October 19, 2020 07:13 ET (11:13 GMT)

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