Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Philips to cut 13% of jobs in safety and profitability drive

Published 01/30/2023, 01:10 AM
Updated 01/30/2023, 02:26 PM
© Reuters. FILE PHOTO: Philips Healthcare headquarters is seen in Best, Netherlands August 30, 2018. Picture taken August 30, 2018. REUTERS/Piroschka van de Wouw/File Photo

© Reuters. FILE PHOTO: Philips Healthcare headquarters is seen in Best, Netherlands August 30, 2018. Picture taken August 30, 2018. REUTERS/Piroschka van de Wouw/File Photo

By Bart H. Meijer

AMSTERDAM (Reuters) -Dutch health technology company Philips will scrap another 6,000 jobs worldwide as it tries to restore its profitability and improve the safety of its products following a recall of respiratory devices that knocked off 70% of its market value.

Half of the job cuts will be made this year, the company said on Monday, adding that the other half will be realised by 2025.

The new reorganisation brings the total amount of job cuts announced by new Chief Executive Roy Jakobs in recent months to 10,000, or around 13% of Philips' current workforce.

It also adds to the string of technology-based firms to make layoffs, after companies including Alphabet (NASDAQ:GOOGL)'s Google, Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and German software maker SAP announced thousands of layoffs to cut costs as they brace for tougher economic conditions.

Philips shares traded up 5.5% at 0855 GMT, helped by fourth-quarter earnings which were much better than expected.

"There is a significant beat on Q4 and the operational improvement measures are very large," ING analyst Marc Hesselink said in a note.

Jakobs took over the reins of the company last October, as Philips continued to grapple with the fallout from the recall of millions of ventilators used to treat sleep apnoea over worries that foam used in the machines could become toxic.

"What we present today I think is a very strong plan to secure the future of Philips. The challenges we have are serious and we are adressing them head on," Jakobs told reporters.

Jakobs said patient safety would be put "squarely at the center" of the new organization.

To improve profitability while investing in safety, innovations will be targeted at "fewer, better resourced, and more impactful projects", Jakobs said.

Together this should lead to a low-teens profit margin, as measured by adjusted earnings before interest, taxes and amortization (EBITA), by 2025, and a mid-to-high-teens margin beyond that year, with mid-single-digit comparable sales growth throughout.

RESULTS IMPROVING, WITH CAUTIOUS OUTLOOK

Amsterdam-based Philips remained cautious in its outlook for the year despite fourth-quarter results that were significantly better than expected.

Adjusted EBITA in the last three months of 2022 came in at 651 million euros ($707.18 million), nearly stable from 647 million euros a year before, while analysts in a company-compiled poll on average had predicted it would drop to 428 million euros.

Comparable sales edged up 3%, instead of the 5% plunge analysts had predicted, as ongoing supply chain problems eased.

But despite the improvement in the shortage of components that has troubled Philips for over a year, Philips said the supply chain remained challenging and would only further improve gradually.

This was expected to lead to low-single-digit comparable sales growth on a high-single-digit margin in 2023, it said.

© Reuters. FILE PHOTO: Philips Healthcare headquarters is seen in Best, Netherlands August 30, 2018. Picture taken August 30, 2018. REUTERS/Piroschka van de Wouw/File Photo

The outlook excludes the impact of ongoing discussions with the U.S. Department of Justice on a settlement following the recall, and of ongoing litigation and investigations.

($1 = 0.9206 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.