Philips recovered most of the money lost to former President Donald Trump’s tariffs on Chinese-made medical devices, reporting a €186 million ($212 million) refund in the second quarter.
The company’s net income for the period reached €386 million, with the refunds accounting for nearly half of that total. Philips had initially estimated the tariffs would cost up to €300 million, later revising that estimate to €200 million after trade deals reduced some pressure.
Refunds follow Supreme Court ruling
Philips stated it “largely completed the U.S. tariff refund process” in the quarter, according to CEO Roy Jakobs. The refunds followed a Supreme Court decision striking down many of the Trump administration’s tariffs, allowing companies to reclaim payments.
Jakobs described the refunds as evidence of the company’s ability to respond quickly to changes. Conditions in the wider economy, however, remain challenging. Philips continues to face cost inflation, currency fluctuations, and remaining tariffs, all of which affected profit margins in the quarter.
CFO Charlotte Hanneman noted that the company’s inflation forecast had risen slightly from its earlier high-single-digit projection. Philips is expanding its cost-mitigation efforts, though some expenses remain difficult to control.
Hanneman highlighted a sharp increase in electronic component costs, which the company has no hedges against. Freight costs are also rising due to tensions in the Middle East. Energy prices pose another concern, though their impact is smaller and partially offset by hedges.
China slowdown offsets gains elsewhere
Philips is experiencing growth in North America, Europe, and India, but challenges in China are limiting overall performance. The company expects third-quarter sales growth to fall at the lower end of its full-year target range, partly because of disruptions in the Chinese market.
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A centralized procurement policy there has created instability, Jakobs said, as hospitals and suppliers adapt. The policy has also reduced margins for basic medical technologies, pushing Philips toward higher-value, innovative products.
The company is now focusing selectively on markets where it can stand out. The slowdown in China has forced it to rely more on other regions for growth.
North America remains a strong market. Underlying demand is solid, though order intake dropped 1% in the second quarter. Jakobs attributed the decline to delayed deals rather than a broader trend, expecting those orders to close in the third quarter.
Europe is also improving. Jakobs noted increased investment, particularly in the Nordic countries and Central Europe. Even the U.K., facing budget constraints, is boosting digital healthcare spending.
India has become another important market. The country delivered double-digit growth in the quarter, and Jakobs called it a promising opportunity. Philips is discussing with the Indian government about expanding the use of its devices in hospitals, including AI-powered systems.
The company’s ability to balance China’s struggles with gains elsewhere shows adaptability in a divided global market. Inflation and supply chain pressures, however, continue to pose risks. Philips will need to keep adjusting to sustain its progress.
The €186 million refund provides temporary relief in a quarter marked by rising costs and shifting demand.