Philips led a downturn in European markets on Monday, as investors responded negatively to the Dutch conglomerate’s outlook even as second-quarter earnings were a touch ahead of estimates.
shares dropped 5% in Amsterdam after the company reported a 28% decline in profit due to a €250 million provision for recalling a respiratory care device in the U.S., which it had previously flagged. Philips slightly topped estimates on its adjusted profit and announced a €1.5 billion stock buyback, though it said its margin guidance was reduced to a 60 basis -point improvement, from a previous range of 60-to-80 basis points.
CEO Frans van Houten told analysts the company has had several rounds of discussions with the U.S. Food and Drug Administration on how to repair the device, and that repair kits have been sent to warehouses in a few countries. On the margin guidance, CFO Abhijit Bhattacharya said there wasn’t really a change.
“We are half a year down and we think the 60 basis points step up year-on-year with the issues that we have in Sleep & Respiratory Care I think with what we know today is just a more accurate view of where we will end up,” said Bhattacharya.