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Philips tariff refund lifts margins, but orders and legal overhang cloud results
Philips reported second-quarter sales growth and raised free cash flow guidance, but its margin beat was largely driven by a one-time US tariff refund, while Connected Care orders in North America slipped and Respironics legal issues remain unresolved.
Philips reported second-quarter sales of €4.4 billion, up 4% on a comparable basis, alongside higher adjusted EBITA margin and improved cash flow guidance, but the quarter was not as strong as headline figures suggest, according to analysis by Yahoo Finance.
The adjusted EBITA margin rose to 16.4%, with Yahoo Finance noting that a €186 million US tariff refund accounted for most of the improvement, adding 4.2 percentage points out of €609 million in operating income. Stripping out the refund, underlying margin actually slipped.
Orders pointed to additional pressure. Yahoo Finance said comparable intake fell 1%, driven by several major Connected Care contracts in North America that slid into next quarter, while Europe posted strong double-digit order growth and all three divisions still grew.
Management left full-year sales guidance unchanged at 3% to 4.5%, but raised margin guidance to 13.5% to 14% and lifted free cash flow guidance to €1.5 billion to €1.7 billion. Yahoo Finance also highlighted that Philips excluded the still-unresolved Respironics legal mess, including active US investigations, and said investors sent shares lower despite the improvements.