Philips cuts outlook as supply chain problems grow

Dutch health technology company Philips on Monday cut its outlook for sales and profit growth this year and said the global supply chain problems that added to its growing list of worries in the third quarter would likely intensify.

Amsterdam-based Philips said comparable sales dropped 7.6 per cent in the July-September period to 4.2 billion euros ($4.9 billion) as a shortage of electronic components such as memory chips and a lack of shipping containers hampered production and delivery.

“It’s chips and ships”, Chief Executive Frans van Houten told Reuters in a telephone interview.

Memory chip producers were not able to keep up with Philips’ increased demand, Van Houten said, with orders for its products ranging from electric toothbrushes to patient monitoring systems rising 17 per cent last quarter.

Ships transporting Philips’ products were also backed up in ports worldwide as international trade rapidly recovered from the Covid-19 induced slump.

“We expect the port congestion to be temporary, while it could take until the second half of next year to get the shortage of chips under control”, Van Houten said.

The impact of the supply chain problems will likely increase to 200 million euros in missed sales in the final quarter of 2021, the CEO said, up from 150 million euros in the third quarter.

Although the issues will probably still hit sales into 2022, Van Houten said he expected growth to return in the course of next year.