In a recent financial update, Philips has forecasted a double-digit sales decline in the Chinese market for the first half of 2025. The company's CEO, Roy Jakobs, highlighted ongoing economic challenges as the primary reason for this downturn. This prediction comes after a significant drop in demand from Chinese hospitals and a slowdown in national renewal programs, which have impacted Philips' performance over the past year. Despite some positive signs, such as increasing stimulus activity and hospital tender growth, the company remains cautious about a substantial recovery in the near term.

Details of Philips' Struggles in China and Global Outlook

In the golden autumn of 2024, Philips faced a significant deterioration in demand from China, particularly from hospitals, leading to a sharp cut in its 2024 forecast. The fourth quarter results revealed that the challenges persisted through the final months of the year, with double-digit declines in comparable sales and orders in China, limiting global growth to just 1%. When the markets opened on Wednesday, Philips' stock plummeted by more than 12%.

Jakobs noted that while there are some "green shoots" indicating potential improvement, including growing hospital tenders and progressing sales funnels, these have not yet triggered a significant change in the market situation. He emphasized the need for a consistent and sustained uptick before concluding that the market is regaining momentum. Regarding the second half of 2025, Jakobs was hesitant to make firm predictions but indicated that Philips expects the rate of sales decline to slow down, resulting in a mid- to high-single-digit drop for the full year.

The composition of Philips' business makes it particularly vulnerable to the current market conditions in China. Weak demand for imaging equipment and personal health products has been compounded by falling sales in these segments. Jakobs acknowledged that personal health products contribute significantly to the drag on performance in China. However, he defended Philips' competitive position against local imaging companies, citing the relaunch of a helium-free MRI machine and the rollout of new ultrasound software as strengthening factors.

Despite the challenges in China, Philips has made progress in other regions. Order intake has returned to growth, driven by capital spending outside of China. The company forecasts global sales to increase by 1% to 3% this year. Jakobs also mentioned the uncertainty surrounding global trade policies, particularly the impact of tariffs imposed by the Trump administration on Chinese imports. Philips has taken steps to mitigate the effects of these tariffs but remains cautious about their potential expansion.

Momentum is returning to Philips' Respironics sleep and respiratory care business as the company resumes selling products outside the U.S. This week, Philips received approval to resume sales in France, completing its return to ex-U.S. markets. To achieve its target savings of €800 million ($835 million) this year, the company will implement cost-cutting measures, including some headcount reductions, though layoffs will not be the primary focus.

From a reader's perspective, this report underscores the complex interplay between global economic trends and corporate strategy. It highlights the importance of adaptability and resilience in navigating uncertain markets. Philips' cautious approach and strategic adjustments demonstrate a commitment to long-term stability and growth, even in the face of significant challenges.