Philips Drops as Healthcare Vision Clouded: Amsterdam Mover

Philips Declines as Health-Care Outlook Clouded
Royal Philips Electronics NV, the Dutch maker of hospital scanners fell as much as 5.3 percent to 14.45 euros, the most since May 2. Photographer: Jock Fistick/Bloomberg

Royal Philips Electronics NV dropped the most in three weeks in Amsterdam after Chief Executive Officer Frans van Houten signaled the outlook for health-care equipment for 2013 has been clouded by Europe’s debt crisis.

The hospital scanner maker fell as much as 5.5 percent to 14.15 euros, the most since Jan. 10. Demand for healthcare equipment in China is “a bit slower than it used to be,” adding to a decline in southern Europe, van Houten told analysts at the Electrical Products Group Conference in Florida yesterday.

Philips needs economic growth of about 2 percent to 3 percent to be at the “borderline” of achieving targets, van Houten said. While visibility for this year is “relatively OK,” the concern surrounds what happens next year, he said. European governments have cut budgets in response to dwindling growth in the region and the debt crisis in Greece.

“Europe, we definitely feel the pain, right?,” van Houten told analysts at the conference. “We don’t see immediately light at the end of the tunnel of the improvements in Europe.”

Shares of the Amsterdam-based company closed at 14.46 euros im Amsterdam. Siemens AG, a German rival in health-care equipment and lighting, fell as much as 2.1 percent to 66.17 euros in Munich trading before closing at 66.26 euros.

The European medical imaging market is poised to shrink by 3 percent to 4 percent this year, Bank of America Merrill Lynch analysts Mark Troman and Ben Maslen said in a note.

Van Houten reiterated the company’s earnings and sales outlook in his presentation.

Tourists Not Welcome

“Of key concern to us would be any renewed weakness in European health-care equipment markets which could drive further profit downgrades in the near-term,” the analysts, who rate Philips “underperform,” said in the note.

Philips’s response will be to accelerate an efficiency drive at the health-care division as there is “much more to be gotten and very good fundamentals,” van Houten said. Philips also competes with General Electric Co. in health care and lighting markets.

The Dutch company is already looking beyond van Houten’s 800 million-euro ($1 billion) savings program initiated last year that includes 4,500 job cuts. The program in place, called Path to Value, will cut spending at the headquarters, in infrastructure, information technology and real estate.

Philips has now switched more than one-third of its 200 top managers, and van Houten, who took the helm in April 2011, pledged more management changes will come.

“We are not done yet, we go deeper into the organization to see whether people truly sign up for the journey,” the CEO said. “There’s no room for tourists in the company.”

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