Royal Philips NV raised its sales forecast for the year following better supply of parts, rising demand in China and a restructure that slashed thousands of jobs.
(Bloomberg) — Royal Philips NV raised its sales forecast for the year following better supply of parts, rising demand in China and a restructure that slashed thousands of jobs.
The Dutch medical equipment maker, which is still working through a costly product recall, also beat analyst forecasts for second-quarter earnings.
Philips boosted sales and returns on double-digit growth in China and “tough measures like taking jobs out,” Chief Executive Officer Roy Jakobs, who took the company’s reins in October and slashed 10,000 jobs, said Monday in an interview with Bloomberg Television. The recall of breathing devices for sleep apnea remains the biggest priority, he said.
The company has set aside around €1 billion ($1.1 billion) for a recall of around 5.5 million devices globally and booked additional provisions of €575 million as part of a planned settlement in the US to compensate patients. Philips is a defendant in several class-action lawsuits and individual personal injury claims in the US as consumers claim its machines use foam that can degrade and be ingested, possibly presenting a cancer risk.
Philips shares are up 55% so far this year. Still, the stock is under pressure as it slid as much as 74% after the firm initiated its first recall of potentially faulty sleep apnea products in June 2021. The US Food & Drug Administration labeled it as a Class 1 issue — the most serious type.
Ongoing Investigation
Philips is also being investigated by the US Department of Justice and remains in ongoing discussions with the FDA regarding a proposed consent decree. The company has not yet made any provisions for these matters.
“We are still waiting and working through the consent decree which will be upcoming as well as working through further litigation,” Jakobs said.
Revenue this year should rise by a mid single-digit percentage, compared with previous guidance for low single-digit growth, Philips said. Second-quarter adjusted earnings before interest, taxes and amortization rose to €453 million, beating the average estimate of €389 million in a Bloomberg survey of analysts.
The company also lifted its Ebita margin outlook to the upper end of the high-single-digit range from a high single-digit adjusted operating profit margin earlier. The change to the outlook excludes impacts from the recall beyond Philips’ current assumptions, it said.
Revenue to rose 9% to €4.5 billion in the second quarter. Comparable order intake declined 8% in the period on high base even as order book continued to grow.
(Updates with CEO interview in third and seventh paragraphs)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.