Philips Posts Q3 Loss, Warns On Q4 Sales; Cuts Around 4,000 Jobs

Shares of Philips Electronics NV were losing around 3 percent in the morning trading in Amsterdam as well as in pre-market activity on the NYSE after the Dutch consumer electronics giant reported a loss in its third quarter, compared to prior year’s profit, with weak orders.

Looking ahead for the fourth quarter, Philips expects a mid-single-digit comparable sales decline, with a high-single-to-double-digit Adjusted EBITA margin range.

Further, Philips said it has initiated general productivity actions aiming to simplify the organization and reduce operating expenses, including an immediate reduction of around 4,000 positions globally across the organization.

The company projects severance and termination-related costs of approximately 300 million euros in the coming quarters. The associated cost savings would amount to annualized savings of around 300 million euros. Further related actions are expected to result in additional restructuring and associated costs in 2023.

Roy Jakobs, the newly appointed President and CEO, said, “These initial actions are needed to start turning the company around in order to realize Philips’ profitable growth potential..”

The company will elaborate further on its plans at fourth quarter results publication in January 2023.

Going ahead, the company sees prolonged operational and supply challenges, a worsening macro-economic environment and continued uncertainty related to COVID-19 measures in China. These will be partly offset by Philips’ productivity and pricing actions.

Regarding its ongoing recall activities at Philips Respironics, the company said around 4 million replacement devices and repair kits have been produced to date. Philips Respironics aims to complete around 90 percent of the production and shipments to customers in 2022.

In its third quarter, net loss was 1.33 billion euros, compared to last year’s profit of 2.98 billion euros. Loss per share was 1.50 euros, compared to profit of 3.24 euros a year ago.

Income from operations amounted to a loss of 1.5 billion euros, mainly due to the previously disclosed 1.5 billion euros non-cash goodwill and R&D impairment, compared to an income of 358 million euros last year.

Adjusted income from continuing operations was 0.25 euro per share, compared to 0.40 euro per share a year ago.

Adjusted EBITA was 209 million euros, or 4.8 percent of sales, compared to 512 million euros, or 12.3 percent of sales last year.

Sales grew 4 percent to 4.31 billion euros from last year’s 4.16 billion euros. Sales fell 5 percent on a comparable basis.

Comparable order intake decreased 6 percent on the back of 47 percent growth in the same period last year.

Philips said its performance in the quarter was impacted by operational and supply challenges, inflationary pressures, the COVID situation in China and the Russia-Ukraine war.

In the quarter, the Diagnosis & Treatment businesses’ comparable sales decreased 2 percent, while comparable order intake increased 3 percent.

The Connected Care businesses’ comparable sales decreased 15 percent, mainly due to operational and supply challenges, and comparable order intake fell 24 percent.

However, the Personal Health businesses’ comparable sales increased 4 percent, with good growth in North America and Western Europe.

In Amsterdam, Philips shares were trading at 12.93 euros, down 2.53 percent. In pre-market activity on the NYSE, the shares were trading at $12.69, down 2.91 percent.

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