Philips cuts 6,000 jobs to improve profitability

AMSTERDAM (Reuters) – Dutch health-tech company Philips said on Monday it would cut 6,000 jobs to restore profitability following a respiratory device recall that sent its market value plummeting 70%.

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

The new reorganization comes on top of a plan announced last October to cut its workforce by 5%, or 4,000 jobs, as it grapples with the fallout from the recall of millions of ventilators used to treat sleep apnea. sleep due to the foam used in the machines. could become toxic.

The reduction in the workforce is expected to result in a low profit margin for teenagers, measured by adjusted earnings before interest, taxes, depreciation and amortization (EBITA), by 2025, and a margin for middle to high teenagers above. beyond this year, with average singles. comparable sales growth figures everywhere.

“Philips is not capitalizing on the full potential of strong market positions as it faces a number of significant operational challenges,” new CEO Roy Jakobs said.

The streamlined organization is also expected to improve patient safety and quality and supply chain reliability, he added.

The company will continue to invest 9% of its sales in research and development, but will focus on “fewer, better resourced and more impactful projects,” he said.

Amsterdam-based Philips also reported fourth-quarter adjusted EBITA of 651 million euros ($707.18 million), nearly flat from 647 million euros a year earlier.

Analysts in a survey compiled by the company had on average predicted that base profit would fall to 428 million euros.

Same-store sales edged up 3% in the final months of 2022 as ongoing supply chain issues eased.

A shortage of components has plagued Philips throughout the year, sending sales down 3% for the whole of 2022.

Despite the improvement in the last quarter, Philips said the supply chain remained challenging and would only improve gradually.

That should lead to low-single-digit comparable sales growth on a high-single-digit margin in 2023, he said.

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

($1 = 0.9206 euros)

(Reporting by Bart Meijer; Editing by Tom Hogue, Sherry Jacob-Phillips and Christian Schmollinger)

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