July 23, 2018 / 6:04 AM / 5 months ago

UPDATE 2-Philips says sales growth to improve after China causes Q2 miss

* Philips Q2 sales growth falls short of analyst expectations

* Sales of personal healthcare products decline in China

* Philips CEO says sales growth will improve in H2 (Adds CEO quotes, share price, analyst comment, more detail on outlook for H2)

By Bart Meijer

AMSTERDAM, July 23 (Reuters) - Temporary problems in China led to disappointing second quarter sales at Dutch healthcare technology company Philips but sales growth is expected to strengthen in the second half of the year, it said on Monday.

Philips reported a 4 percent increase in comparable sales last quarter to 4.29 billion euros. That was the bottom end of the company’s targeted range and below the average of 4.9 percent predicted in a Reuters poll, as sales of personal healthcare products declined in China.

Chief Executive Frans van Houten said this was mainly caused by a fall in demand for air purifiers, as China makes strides in its fight against air pollution, and by Chinese on-line sellers trimming their inventories.

“We are not worried by these developments”, Van Houten told Reuters in a telephone interview. “There are no structural problems in China. The second half of the year will be better, for our personal health division and overall.”

Philips maintained its full year forecast of “mid single digit” growth for the personal health division, whose products range from toothbrushes to machines to relieve sleep apnea. Sales of the division rose 2 percent in the second quarter.

Philips shares fell 3.1 percent to 35.53 euros at 0835 GMT, making them the worst performer on Amsterdam’s blue chip AEX index, with analysts citing the performance of the personal health division as their main concern.

“The top line was a little soft, mainly stemming from personal health, however, new launches should see this improve in H2”, Berenberg analyst Scott Bardo said in a note.

Despite Monday’s loss, Philips shares are still up 13 percent since the start of the year.

HOSPITAL ORDERS CONTINUE TO GROW

Van Houten said his optimism for the coming months was mainly fuelled by ongoing strong growth in orders for hospital equipment, such as medical scanners and ultrasound machines, especially in China and the United States.

Hospital orders in these markets showed double digit growth again in the second quarter, leading to an overall increase in new orders of 9 percent.

“We have seen this rate of growth in orders for several quarters now”, Van Houten said. “This tells us we are on the right track.”

The strength in the Diagnostics and Treatment division helped adjusted earnings before interest, taxes and amortisation (EBITA) rise 10 percent to 482 million euros ($565.5 million) in the second quarter, in line with analyst expectations.

Van Houten confirmed Philips’ sales growth target of 4 to 6 percent for this year, but said trade worries and the unknown consequences of Brexit continued to cause uncertainty.

$1 = 0.8524 euros Reporting by Bart Meijer; Editing by Sherry Jacob-Phillips, Subhranshu Sahu and Kirsten Donovan

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