Philips CEO Says Helium Crunch Triggers ‘Immediate Challenges’

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(Bloomberg) — Royal Philips is facing difficulty sourcing helium for its MRI and CT scanners that rely on the gas to function with the closure of the Hormuz waterway crimping deliveries. 

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“Medical imaging has a huge global footprint and unfortunately indeed with the Strait of Hormuz we saw that the vulnerability of the dependency of such a finite material,” Chief Executive Officer Roy Jakobs said Wednesday in an interview. The supply snags have “led to immediate challenges.”

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While Philips has been working on products that use next to no helium for roughly a decade, most of the devices rely on the gas — also important in chip production — to operate. Qatar accounts for roughly 40% of supply to the European Union, according to the Munich-based Ifo Institute, with flows disrupted and prices stoked by the Strait of Hormuz closure.

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Demand for the helium-free scanners has jumped, according to Jakobs, also following recent energy outages in Spain and Portugal though “technically it’s not an easy solution,” he said. 

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US peer GE Healthcare Technologies Inc.’s shares fell last week after the firm cut its profit outlook citing supply issues and higher costs for memory chips, oil, freight and other inputs. Aside from higher costs and material availability issues, Philips and Siemens Healthineers AG also need to navigate the hit from import duties for their products into the US. 

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In September last year, the Trump administration launched an investigation into imports of medical devices, which is still ongoing and could risk intensifying existing country-based levies on imported equipment like imaging machines and ventilators. 

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On Wednesday, Philips, which makes scanners but also electric toothbrushes and devices to treat sleep apnea, pledged more savings and productivity measures to withstand an increasingly volatile environment marked by the tariffs and rising costs. 

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The Amsterdam-listed company said it’ll “focus on what we can control” to protect earnings, including strengthening its supply chain. Philips also reported first-quarter results that beat expectations following strong orders. Jakobs said costs are set to rise further as pricing is reset with the war in Iran dragging, noting gains for plastics and energy.

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Despite the pressures, Philips reported adjusted Ebita of €353 million ($414 million) for the first quarter, beating expectations. The company also reiterated its outlook for the year. 

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The personal health division’s comparable sales jumped 8.8% from last year, while while diagnosis and treatment, the biggest unit, was slightly below expectations with tariffs and cost inflation weighing. 

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The firm has also been mitigating a slowdown in its Chinese market where muted consumer confidence and sweeping anti-graft measures across the country’s healthcare sector have dampened demand from hospitals.

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