By Bart H. Meijer
AMSTERDAM (Reuters) -Philips said on Monday that demand in China slumped significantly in recent months, forcing the Dutch medical devices maker to lower its sales outlook for the year and sending its shares down 16%.
The company said it had been hit by a deterioration of consumer confidence in China and by an ongoing state-led anti-corruption campaign there which dragged down orders from Chinese hospitals.
"That compounded effect showed a strong decline in China and a further deterioration versus also what we expected in July," Chief Executive Roy Jakobs told reporters.
"The consumer market is really subdued and we expect that to continue for the near term," he added.
Philips is the latest in a string of global companies to warn about the health of the Chinese economy, which continues to flag despite Beijing's efforts to turn things around.
Jakobs said orders in China had shown a "very material" decline in the third quarter, without giving an exact number.
Overall, comparable orders fell 2% from a year before, as growth in the rest of the world partly made up for the problems in China.
Philips now expects its comparable sales to grow by only 0.5% to 1.5% in 2024, down from a previous forecast of 3% to 5% which it said would still be met in other regions.
Shares in Philips, which sells products ranging from toothbrushes to medical imaging systems, were down 16% by 0841 GMT and set for their biggest one day loss in 26 years.
The shares had risen almost 50% this year as the company recovered from a massive recall of sleep aide machines. Fears of large litigation bills had slashed about two thirds off Philips's market value between 2021 and 2023.
The company is a main competitor of General Electric (NYSE:GE) and Siemens Healthineers.
It says it gets almost a third of its sales from 'growth geographies' including China, but has not given a specific number for China.
The slowdown in the third quarter was most visible in the personal health segment, where Philips' sales fell 5% due to a double-digit decline in China.
The division that sells medical devices to hospitals (Diagnosis & Treatment) saw sales decline by 1%, with "solid growth" outside China, it said.
Overall, comparable sales were flat at 4.4 billion euros ($4.75 billion), missing the 2.1% growth analysts on average had predicted.
Adjusted earnings before interest, taxes and amortisation (EBITA) were exactly in line with expectations at 516 million euros, up 13% year-on-year, as lower costs pushed the profit margin up to 11.8%.
Philips said it expects its full-year core profit margin to come in around 11.5%, the upper-end of its previous outlook.
($1 = 0.9266 euros)