Tariff Shock Absorbed Better than Expected: Philips (PHG.US) Raises Full-Year Profit Forecast

According to our sources, Royal Philips (PHG.US) has slightly raised its adjusted operating profit rate forecast. The company states that the actual impact of trade tensions has been less severe than previously anticipated. This Dutch medical technology company currently expects its full-year adjusted operating profit margin to be within the range of 11.3% to 11.8%, an increase of 50 basis points from previous expectations.

According to its statement released on Tuesday, second-quarter sales increased by 1% year-on-year, reaching €4.3 billion (approximately $49.8 billion).

In May this year, the Amsterdam-listed company had downgraded its full-year profit forecast, attributing the reason to the costs of addressing tariffs and estimating related losses could reach up to €300 million.

At that time, the company released its first-quarter report, stating that although sales were slightly higher than expected, it still downgraded its full-year core profit forecast, predicting an adjusted EBITA margin of 10.8% to 11.3%, lower than previous estimates of 11.8% to 12.3%. The company stated that despite taking "massive tariff relief measures", US tariffs would still have a net impact of €250 million to €300 million (approximately $283 million to $339 million).

A report released in February shows that Philips primarily operates consumer electronics, home appliances, and medical equipment businesses, paying over €38 million in tariffs alone for products imported from the US last year. The report also notes that the company will reduce tariff impact through tariff relief measures and the "Nairobi Protocol" (which regulates certain medical devices used to treat chronic diseases and provides tariff exemption).

The US is Philips' largest market, accounting for approximately 40% of its 2024 sales and one-third of its tax revenue. The company imports various products from China, including respiratory masks, electric razors, toothbrushes, and medical equipment, while purchasing medical devices from Europe.