As the COVID-19 pandemic intensified in the second quarter of 2020, the outbreak reduced revenues in the second quarter at Philips and its Philips Healthcare business. The company reported that demand for CT scanners, ventilators, and other acute care products has partly compensated, however.
Announcing the results on 20 July, the company's CEO Frans van Houten noted that as the economic and societal impact of COVID-19 intensified during Q2, Philips ramped up the production volumes of acute care products and solutions to help diagnose, treat, monitor, and manage COVID-19 patients while over 6,000 field service engineers have been supporting healthcare providers around the world, according to van Houten.
"Under the circumstances, I am pleased at the way we have performed and I am grateful and proud of how all our employees have stepped up," noted van Houten.
In Philips' Healthcare's Diagnosis & Treatment division, which includes its medical imaging operations, Philips posted revenues of 1.919 billion euros, down 7% on an actual basis compared with sales of 2.063 billion euros in the same period last year and down 9% after adjusting for currency conversion. The decline was due to the postponement of installations and elective procedures during the period.
Although overall sales in the diagnostic imaging segment were in line with Q2 2019, ultrasound showed a mid-single-digit decrease, and image-guided therapy a double-digit decline.
On a profit basis, Diagnosis & Treatment posted income from operations of 104 million euros for the quarter, compared with income of 168 million euros in the same period the year before. Adjusted earnings before interest, taxes, and appreciation (EBITA) margin decreased to 8.6% compared with 12.3% in the second quarter of 2019, mainly due to the sales decline.
These declines were partly offset by a strong 14% growth for the Connected Care businesses, with double-digit growth in sleep and respiratory care products and mid-single-digit growth in monitoring and analytics products.
During the quarter, Philips signed 14 strategic partnerships and obtained authorizations through the FDA's Emergency Use Authorization (EUA) process for the expanded use of several of its devices during the health crisis. It also received FDA clearances to market its Biosensor BX100 for early patient deterioration detection in the general ward, and to market a wide range of its ultrasound solutions for the management of COVID-19-related lung and cardiac complications.
"There are new markets for the whole industry, with COVID a catalyst for their adoption," van Houten told participants at Philips' round-table event on Monday.
He pointed to the company's wireless monitoring devices, which allow for surveillance of COVID-19 patients outside of the intensive care units (ICUs) on the COVID-19 wards and remotely in their homes, as a means to catch deterioration early and understand trend lines for patients who end up in ICUs.
The company expects to return to growth and improved profitability for the group in the second half of the year, provided that it can convert its existing order book for the Diagnosis & Treatment and Connected Care businesses, elective procedures normalize, and consumer demand gradually improves.
"I have no doubt our order book will be converted and don't see a major reason for further delays unless COVID takes over. I'm confident of a return to growth in the third quarter," van Houten noted, adding that revenues from digital health would be generated when demand for ventilators eventually dried up.
In other news, Philips has announced the appointment of Deeptha Khanna as the chief business leader of the Personal Health businesses, effective on 20 July 2020, and the appointment of Edwin Paalvast as chief of international markets, effective on 1 August 2020. Khanna and Paalvast will become members of Philips' Executive Committee, reporting to Philips CEO Frans van Houten.
