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Philips Falls on Lower Outlook as Component Supplies, Recall Bite

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By Dhirendra Tripathi

Investing.com – ADRs of Philips (NYSE:PHG) fell 1.7% in Monday’s premarket trading as the medical devices giant lowered its annual outlook after sales declined in the third quarter.

The company struggled with a shortage of critical components that go into its equipment and warned the headwinds would continue in the fourth quarter. To make matters worse, Philips also had to deal with a massive recall of its respiratory devices, an exercise that has so far cost it more than $600 million since it first provisioned for it more than six months ago.

The recall affected the sale of certain breathing devices and respirators. Combined with shortage of raw materials, this pulled group sales down by around 8% to 4.2 billion euro ($4.87 billion).

Adjusted third-quarter earnings before interest, taxes and amortization totaled 512 million euros, or around 12% of sales, compared to 684 million euros in the same quarter last year, or about 16% of sales.

The Dutch company now expects to deliver around 2% comparable sales growth with a modest adjusted EBITA margin improvement for the full year.

The earlier forecast aimed at around 4% sales growth with an adjusted EBITA margin improvement of 70 basis points at center of the guidance range. One basis point is one-hundredth of a percent.

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