Philips lowers 2025 profit guidance, expects tariffs to increase costs by 300 million euros | Earnings report insights
Philips has lowered its full-year operating profit margin by 100 basis points to between 10.8% and 11.3%, but maintains its comparable sales growth forecast for this year at 1% to 3%. The company stated that it plans to address tariff threats through measures such as price adjustments and supply chain modifications
Facing tariff pressures, Koninklijke Philips N.V. lowers full-year profit expectations.
On Tuesday before the U.S. stock market opened, the Dutch medical technology giant Koninklijke Philips N.V. announced its Q1 2025 financial report, with first-quarter sales of €4.1 billion, a year-on-year decrease of 2%, exceeding analysts' average expectation of €4.02 billion.
The statement indicated that due to the increasingly severe costs of trade barriers, the company will lower its full-year profit expectations. The adjusted operating profit margin is expected to be between 10.8% and 11.3%, a decrease of 100 basis points from previous expectations.
The company stated that despite having taken "a large number of tariff mitigation measures," the tariff policies will still have a net impact of €250 million to €300 million (approximately $283 million to $340 million).
Although Koninklijke Philips N.V. has lowered its profit expectations, it reaffirmed its comparable sales growth forecast of between 1% and 3% for this year. After the financial report was released, Koninklijke Philips N.V. shares fell more than 4% in early trading.
Tariff Clouds Loom
Given that the U.S. is Koninklijke Philips N.V.'s largest market, the company is facing challenges brought about by the rapidly changing trade policies of the Trump administration.
According to media statistics, the U.S. market accounts for about 40% of Koninklijke Philips N.V.'s projected sales for 2024 and one-third of its tax contributions, with the company importing various medical devices such as Respironics respiratory masks, electric shavers, toothbrushes, and other equipment.
Company CEO Roy Jakobs stated in the announcement:
"In an uncertain macro environment exacerbated by potential tariff impacts, we focus on what we can control."
Previously, Koninklijke Philips N.V.'s main competitor GE HealthCare also warned that tariffs could affect its full-year profits, with expected losses of about $500 million. Siemens Healthineers will announce its first-quarter results on Wednesday.
To mitigate the potential impacts of trade tensions, Jakobs stated that the company plans to respond through measures such as pricing and supply chain adjustments.
Reports indicate that Koninklijke Philips N.V. is accelerating production at its 46 factories in the U.S. and further localizing its operations in China.
It is noteworthy that the tariff rates and timelines concerning the healthcare industry remain unclear, and analysts expect that if these tariffs are implemented, the company will likely have to bear short-term costs. According to previous media reports, Washington has launched an investigation into the pharmaceutical industry to lay the groundwork for potential taxation
