Philips shares fell 16% on the day due to weaker demand in China

Shares in Philips plunged 16% in one day, the biggest drop in 26 years. The reason for such a sharp decline was the company's announcement of a significant reduction in demand in China, which forced it to revise its sales forecast. The information was provided by Reuters.

According to the company, comparable orders fell 2% compared to 2023. Although growth in other regions partially compensated for the problems in the Chinese market, its negative impact nevertheless became decisive for the overall situation.

Philips, known for selling products ranging from toothbrushes to medical imaging systems, cut its 2024 comparable sales growth forecast to 0.5%-1.5%. Previously, the company expected growth at the level of 3%-5%. This decrease is explained by the fact that in other regions the company still has prospects to meet the forecast.

Shares in Philips are up nearly 50% this year as the company struggles to recover from a massive recall of sleep-enhancing devices. However, concerns about possible high legal costs have caused Philips' market value to fall by around two-thirds between 2021 and 2023.

In addition, the company noted that it was affected by factors such as deteriorating consumer confidence in China and an anti-corruption campaign that affected orders from Chinese hospitals. This was another indication of the difficult situation in the Chinese market, which continues despite the efforts of the Chinese government to stabilize the economy.

The company's adjusted earnings before interest, taxes, depreciation and amortization (EBITA) amounted to 516 million euros, up 13% from last year, thanks to lower costs and an increase in the profit margin to 11.8%. Philips also expects its annual core profit margin to be around 11.5%, which is the upper end of its previous forecast.