Philips considering local production due to global trade war

By Janene Pieters on October 22, 2018 - 12:10
Philips Headquarters
Public domain via Wikimedia commons: http://commons.wikimedia.org/wiki/File:HeadPhilips.jpg. (Philips headquarters in 2005)

Philips is considering focusing on more local production to counterbalance global strains on trade, CEO Frans van Houten said in an explanation of the company's quarterly figures. For example, by making products in China itself, the tech company can circumvent expensive tariffs, ANP reports. 

According to Van Houten, so far the impact of the trade war hs been "modest". But this is mainly because the taxes have only just been implemented. In addition to focusing more on local production, Philips will also implement targeted price increases in certain markets to help offset the negative effects. This should help the health tech company achieve its previously set financial targets.

Van Houten also expressed concern about the Brexit. So far no deal has been reached about the future relationship between the United Kingdom and European Union after the UK's departure from the EU. Van Houten is concerned that his company will soon have to remove production from the United Kingdom, according to the news wire.

In the third quarter Philips suffered from adverse currency effects, partly due to the sharp depreciation of the Turkish lira and the Argentine peso. The company continued to improve its revenues, but turnover did not increase as much as expected. 

The company achieved solid growth in the 3rd quarter in the area of diagnosis and treatment, partly thanks to many new contracts with hospitals. The sales and personal care division also performed significantly better than earlier this year, but Van Houten notes that he had hoped for a stronger recovery in this division. 

The total turnover amounted to 4.3 billion euros, compared to 4.1 billion euros in the third quarter of last year. The adjusted operating result increased from 532 million euros to 568 million euros. Philips made a net profit of 292 million euros in the third quarter, compared to 423 million euros in the same quarter last year. This decrease can be attributed to the reduction of Philips' interest in the former lighting division Signify. 

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