Delays in restarting production at its facility in Cleveland and soft markets led to a decrease in sales and profitability for Philips Healthcare in its fourth quarter.
For the period (end-December 31), Philips had sales of 2.849 billion euros ($3.237 billion U.S.), up 1% on a nominal basis and down 3% on a comparable basis from the 2.828 billion euros ($3.214 billion U.S.) reported in the fourth quarter of 2013.
Philips' Imaging Systems unit had a double-digit decline in comparable sales, while its Healthcare Informatics Solutions and Services business had a low-single-digit dip in comparable sales.
Equipment order intake after currency adjustment in its Imaging Systems unit experienced a midsingle-digit decline. The production delays affected overall Philips Healthcare sales and order intake by approximately four percentage points, according to the firm.
Philips reported earnings before interest, taxes, and amortization (EBITA) of 390 million euros ($443.1 million U.S.), compared with 541 million euros ($614.6 million U.S.) in the fourth quarter of 2013. The company attributed the EBITA decline mainly to operational losses from the voluntary production suspension at the Cleveland facility, an increase in overhead costs, and negative currency impacts.
Shipments of the vendor's Brilliance iCT systems from the Cleveland facility have resumed in January following a successful third-party audit of its updated quality management system. However, the effect on EBITA of a slower-than-anticipated ramp up of production and shipments was larger than previously expected, Philips said. The delays had a 225 million euro ($255.6 million U.S.) impact on Philips' 2014 EBITA.
Philips said that it's also increasing CT system production at its facilities in Haifa, Israel, and Suzhou, China, with shipments targeted initially for customers outside the U.S. Global CT system production and shipment volume will only gradually return to 2013 levels by the end of the year, according to the firm.
In positive news, Philips pointed to market-share gains in image-guided therapy and strong orders in Europe and the Middle East. The company also said that a new "Agile" software development methodology in its Healthcare Informatics Solutions and Services unit increased the number of new software releases by four times over the year and led to a record number of new clinical informatics introductions at the RSNA 2014 meeting in Chicago.
