FX.co ★ Royal Philips NV loses lion’s share of its income

During the coronavirus pandemic, demand for medical equipment has soared up. However, despite this fact, the quarterly income of Dutch company Royal Philips NV dropped four times.

In the first quarter of 2020, the Amsterdam-based company’s net profit reduced four times to €39 million. The indicator showed a real slump as in 2019, the income totaled €162 million. Notably, the economic crisis triggered by the coronavirus outbreak occurred exactly in the first quarter of the current year. Analysts also emphasized that income from financial operations tumbled to €42 million compared to €171 million in 2019.

At the same time, operating EBITA margin decreased to 5.9% from 8.8% recorded in the first quarter of the previous year. Quarterly revenue of Royal Philips inched down to €4.15 billion, whereas comparable sales fell just by 2%.

The department responsible for the development of diagnostic and therapeutic imaging equipment (Diagnosis&Treatment) is in a more positive situation. The revenue rose by 6% to €1.83 billion. The Connected Care department responsible for remote patient monitoring also showed strong figures. Its revenue advanced by 9% to €1.11 billion.

Demand for the professional medical equipment produced by Philips climbed amid the coronavirus pandemic. Diagnostic imaging equipment, as well as remote patient monitoring devices and artificial lung ventilators, are in great demand. The company’s management has invested more than €100 million to expand the production of these kinds of equipment. However, despite all efforts, demand for personal care products nosedived.

Experts cannot clearly explain such a slump. They suppose that the main reason is a global economic fallout caused by the coronavirus pandemic. Management of Royal Philips is sure that the negative consequences of the virus will have a long effect on the global economy. The company’s experts also think that the global crisis may cripple the production of medical equipment. According to estimates provided by analysts at Royal Philips, in the second quarter of 2020, revenues of such departments as Personal Health and Diagnosis&Treatment may tumble. At the same time, the Connected Care department is likely to earn a large amount of money.

Economists also logged a rise in the Royal Philips shares. The company’s representatives said that the payment of a dividend of €0.85 per share in cash for the 2019 financial year would be made in full. Investors are attracted by the promising future of the producer, including a stable forecast for 2020 and climbing orders.