Philips has “fallen short” of expectations in recent years, admits its new CEO Roy Jakobs.
The Dutch group Philips, weighed down by a huge recall of defective breathing apparatus for sleep apnea, announced on Monday the elimination of 4,000 jobs. The company, which currently employs nearly 80,000 people worldwide, recorded a third-quarter charge of 1.3 billion euros for faulty machinery, which largely led the company to a net loss of the same amount.
The company is in talks with U.S. authorities about a final settlement for defective respirators, and is the subject of several “individual and collective lawsuits». Philips n’a «not up to the markexpectations in recent years, acknowledged its new CEO Roy Jakobs during a call with investors. “We face multiple challenges“, he added while sharing results”disappointingfor the third trimester.
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Stating that his immediate priority is “improve executionMr. Jakobs shared the “difficult but necessary decision to immediately reduce our workforce by approximately 4,000 positions worldwide“. The job losses are mainly in the United States, the Netherlands, India and China, he said. The group expects around 300 million euros in charges over the next few quarters for these restructuring actions, but estimates that the reorganization should generate the same amount in annual savings.
The group recorded a fall in comparable sales of 5% compared to the same period last year, to 4.3 billion euros. Philips also adjusted its operating profit (Ebitda) to €209 million, or 4.8% of revenue, from €512 million, or 12.3% of sales, in the same period last year. last. “Philips’ performance in the quarter was impacted by operational and supply challenges, inflationary pressures, the Covid situation in China and the Russian-Ukrainian war“, underlined the group in a press release. Listed on the Amsterdam Stock Exchange, the Philips title lost 0.75% around 10:30 a.m. (8:30 a.m. GMT), in an AEX index down 0.46%.
Extended Challenges
The Amsterdam-based company recalled the respirators in June last year after announcing that users risked inhaling or swallowing pieces of toxic sound-absorbing foam which could cause irritation, headaches. Philips also mentioned a risk “potential» of long-term cancers.
Philips had already planned nearly 900 million euros for the replacement and repair of the devices. To date, around 4 million replacement devices and repair kits have been produced, said the group, which warned nearly two weeks ago to expect to record a charge of 1.3 billion euros. euros in the third quarter. Due to continuing problems at Philips, former chief executive Frans van Houten stepped down last week – six months ahead of schedule – after 12 years at the helm of Philips during which the company, electronics giant , became a healthcare company.
The company anticipates prolonged operational and supply challenges, a deteriorating macroeconomic environment, and continued uncertainty related to health restrictions in China going forward. These challenges will bepartly offset by Philips productivity and pricing measures”, according to the company which expects a decline in sales for the fourth quarter of 2022, with an Ebitda margin in the single or double digits.
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