Royal Philips (NYSE:PHG) today reported a big drop in 4th-quarter profits and said it was unlikely to hit its financial targets for the next 2 years, after the 2014 shutdown of a CT scanner plant in Cleveland that wound up costing some $265 million.
Philips Healthcare posted operating profits of €351 million ($394.2 million) on sales of €2.85 billion ($3.20 billion) for the 3 months ended Dec. 31, 2014, down 26.4% and up 07%, respectively, compared with the same period in 2013.
Philips, which began life making light bulbs, is preparing to split off its lighting business to expand its higher-margin healthcare and consumer arms. The group said it expected up to €400 million ($449.2 million) in costs this year from the shake-up, more than analysts expected.
Philips’ overall 4th-quarter profits plunged 67.5% to €134 million ($150.6 million), mostly due to the plant closure, on sales growth of 2.2% to €6.54 billion ($7.35 billion).
CEO Frans van Houten described the 2014 performance as a setback but said that Philips would overcome the problems in Cleveland, price erosion in lighting and slower-than-expected global growth.
The Ohio plant problems, which Philips said earlier this month cost €225 million ($265 million) in 2014, have been resolved, but it will take much of 2015 to restore full capacity, the company said.
PHG shares were down 5.4% to $28.67 apiece in mid-day trading today.
(€1 = $1.1231). Material from Reuters was used in this report.