Philips Profit Shows How Plant Rejig Offers Trade War Remedy

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Philips Profit Shows How Plant Rejig Offers Trade War Remedy(Bloomberg) -- Royal Philips NV’s efforts to revamp supply chains to mitigate the impact of the U.S.-China trade dispute are paying off, with the Dutch health-care company reporting better-than-estimated profit.The maker of scanners and diagnostic gear needs China as state-owned facilities invest in the latest equipment and a private healthcare sector emerges. Demand there drove a double-digit increase in orders in the second quarter, with the Amsterdam-based company hitting the top end of its sales growth target range of 6%, beating analysts’ estimates.Philips’ results show the company is so far containing the fallout from the trade war that’s hit a cross-section of industries from cars to chemicals. BASF SE’s profit warning earlier this month highlighted how intricate global supply chains are being disrupted. Philips Chief Executive Officer Frans van Houten signaled the China-U.S. situation remains at the top of his concerns this year, yet he still predicted a stronger second half.“We are moving towards a regional manufacturing hub strategy as we manufacture in each of these large continents, making us more responsive than we might have been before,” van Houten said in a Bloomberg Television interview.Shares of Philips gained 4.3% to 40.60 euros as of 10:41 a.m. in the Dutch capital. Prior to today, they had climbed 26% this year, while rival Siemens Healthineers lost 2% as it struggled with its blood testing platform Atellica.Tariffs are affecting a broad range of products, from ultrasound gear and premium electronic toothbrushes to respiratory masks, that flow between China and the U.S. In addition, factories and assembly lines also have to contend with duties on many components, van Houten said.With an additional 20 million-euro tariff impact expected from the latest batch of announced duties that have yet to be implemented, van Houten is racing to get the company’s antidote in place. Whereas before, a facility in China supplied Philips’ customers globally with respiratory masks, the Americas will soon have its own production, the CEO said. China will also see production of ultrasound equipment bolstered to become more self sufficient.The CEO is betting the trade workaround, investment in innovation and an efficiency drive will see the company through any economic slowdown. New products are reinvigorating Philips’s Personal Health unit, which makes electric toothbrushes, shavers and equipment to help with sleep and respiratory disorders. Sales at the segment grew by 5%.Quarterly earnings before interest, taxes, and amortization of 549 million euros ($615 million) beat the the 542 million euro-estimate of analysts in a company compiled consensus.(Updates with share price in fifth paragraph.)\--With assistance from Nejra Cehic and Manus Cranny.To contact the reporter on this story: Ellen Proper in Amsterdam at eproper@bloomberg.netTo contact the editors responsible for this story: Tara Patel at tpatel2@bloomberg.net, Andrew Noël, Frank ConnellyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.


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