By Bart H. Meijer
The Dutch health technology company said core earnings surged 74% in the first quarter to 362 million euros ($438 million) compared with the year earlier period, on a 9% rise in comparable sales, easily beating analysts’ expectations.
“Revenue growth was a bit stronger than we originally expected”, Chief Executive Frans van Houten told reporters.
“On that basis and expecting a strong second quarter, we are raising our guidance.”
Philips, which sells products ranging from electrical toothbrushes to medical imaging systems, said it now expects “low-to-mid-single-digit comparable sales growth” for 2021, up from earlier guidance for low growth.
All business segments and markets contributed to the strong growth in the first months of 2021, Van Houten said, as hospitals resumed elective procedures and investments which were put on hold during the first wave of the pandemic last year.
Demand also remained strong at the Connected Care division, which supplies equipment needed to treat COVID-19 patients such as respiratory machines and monitoring and software platforms that allow remote care.
Philips still expects the growth of this division to slow over the course of this year, following a surge in demand in the second half of 2020.
The company’s shares openend roughly flat on Monday, having risen around 15% since the start of the year.
PROVISION DAMPENS NET PROFIT
However, Philips also said it had made a 250 million euro provision to deal with risks it detected in some of its respiratory care devices.
It said sound abatement foam used in some of its sleep and respiratory care devices could degrade when cleaned incorrectly or when used in hot and humid conditions.
“We have seen a very low incident rate”, Van Houten said. “But out of precaution we feel we need to take action and repair affected machines and change this component.”
The provision meant net profit was stable at 40 million euros in the first quarter from the year earlier period.
Analysts had expected 326 million euros in adjusted earnings before interest, taxes and amortisation (EBITA) and a 6% rise in comparable sales.
Last year’s results were restated to reflect the 3.7 billion euro sale of the household appliances business to Hillhouse Capital announced last month.
(Reporting by Bart Meijer; Editing by Edwina Gibbs, Kirsten Donovan)