(Bloomberg) -- Royal Philips NV, the Dutch provider of hospital equipment, warned that it will miss its profitability goals because of higher tariffs and continuing challenges with its Connected Care division that supplies wireless gear and monitors.
The issues threaten Chief Executive Officer Frans van Houten’s push to improve productivity after he streamlined Philips to focus on health products. Margin improvement for 2019 will be a maximum 20 basis points, snapping three straight years of 100 basis-point improvements, the company said Thursday in a statement.
The Amsterdam-based company also reported third-quarter profit that missed estimates as it lowered production to reduce unsold inventory. Earnings before interest, taxes and amortization is expected to be about 583 million euros ($640 million), with profitability of about 12.4% of sales, down from 13.2% a year earlier, Philips said. Analysts had estimated 628 million euros in profit, according to a company-compiled estimate.
Van Houten pledged to step up efforts to improve the performance of the Connected Care business. Third-quarter sales will be in line with estimates, buoyed by hospital and clinic demand for diagnostic gear.
Shares of Philips, which was scheduled to report earnings on Oct. 28, have added 35% this year, for a market value of 38 billion euros.
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