Profit margins are expected to be lower for the third quarter of 2019 (end-September 30) due to the effects of tariffs, according to Royal Philips, the parent company of Philips Healthcare.
In an update, Philips reported that its overall profit margin will fall to 12.4% of sales, compared with a profit margin of 13.2% in the third quarter of 2018. While margins improved in its Diagnosis & Treatment and Personal Health businesses, margins fell 4.5 percentage points in its Connected Care business, to 11.3% of sales.
The company said that the lower margins were due to "increasing headwinds from tariffs" and a delay in the impact of actions Philips took to mitigate the tariffs. Other contributing factors included factory undercoverage, as production levels were lowered to reduce inventory, and an adverse product mix.
Philips expects its earnings before interest, taxes, and amortization (EBITA) for the quarter to be around $642.6 million. The company expects its group sales for the period to increase by 6%, amounting to $5.1 billion, and its net income to reach approximately $231.4 million.
Full results will be posted on October 28, Philips said.
