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Philips is running out of chances to reassure

Philips CEO Frans van Houten presents financial results in Amsterdam, Netherlands, January 29, 2019. REUTERS/Eva Plevier

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LONDON, July 25 (Reuters Breakingviews) – Philips’ (PHG.AS) problems are mounting faster than Chief Executive Frans van Houten can treat them. Six months after seeing its shares slump on disappointing sales guidance, the 17 billion euro medical technology group has served up a repeat. Van Houten has cut his estimate for full-year sales growth to between 1% and 3%, from 3% to 5%, blaming Chinese lockdowns and the Ukraine war.

It would have been harsh to expect van Houten to accurately predict either. And this fresh disappointment, which pushed shares down 10%, doesn’t undermine the substance of his turnaround plan, which aims to flog expensive equipment like CT scanners in rich countries with ageing populations. Meanwhile, mid-term guidance has only been cut a little, and Philips hopes for second-half growth of 6% to 9% on a strong order backlog.

Unfortunately for van Houten, Philips has other issues to contend with. The pandemic should have served as a warning for supply chain contingency planning. As for the relative good cheer longer term, JPMorgan waspishly notes that “investors are likely to question whether this management team will be around to deliver on this mid-term guidance”. Ouch. (By Dasha Afanasieva)

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Editing by George Hay and Oliver Taslic

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