AMSTERDAM, Jan 30 (Reuters) – Dutch health-tech company Philips (PHG.AS) will cut an additional 6,000 jobs worldwide as it tries to restore profitability and improve the safety of its products in following a respirator recall that destroyed 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 made by 2025.
The new reorganization brings the total number of job cuts announced by new chief executive Roy Jakobs in recent months to 10,000, or around 13% of Philips’ current workforce.
This also adds to the series of technology-based companies to be laid off, after companies such as Alphabet’s Google (GOOGL.O), Microsoft (MSFT.O), Amazon (AMZN.O) and the manufacturer German software company SAP (SAPG.DE) has announced thousands of layoffs to cut costs as it prepares for tougher economic conditions.
Shares in Philips were up 5.5% at 0855 GMT, helped by much better-than-expected fourth-quarter earnings.
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“There is a significant beat in the fourth quarter and the operational improvement measures are very important,” ING analyst Marc Hesselink said in a note.
Jakobs took over the reins of the company last October as Philips continued to battle the fallout from the recall of millions of ventilators used to treat sleep apnea, over fears the foam used in the machines could turn toxic.
“I think what we are presenting today is a very solid plan to secure the future of Philips. The challenges we have are serious and we are tackling them head-on,” Jakobs told reporters.
Jakobs said patient safety would be placed “squarely at the center” of the new organization.
To improve profitability while investing in safety, innovations will be targeted to “fewer, better resourced and more impactful projects,” Jakobs said.
Combined, this is expected to lead to a low profit margin for teens, as measured by adjusted earnings before interest, taxes, depreciation and amortization (EBITA), by 2025, and a medium to high profit margin for teens beyond this year. with a mid-single-digit rate. comparable sales growth overall.
IMPROVING RESULTS, WITH A CAUTIOUS OUTLOOK
Amsterdam-based Philips remained cautious in its outlook for the year despite significantly better-than-expected fourth-quarter results.
Adjusted EBITA in the last three months of 2022 came in at 651 million euros ($707.18 million), nearly flat from 647 million euros a year ago, while analysts a survey compiled by the company had on average predicted that it would fall to 428 million euros.
Same-store sales edged up 3%, instead of the 5% plunge analysts had predicted, as lingering supply chain issues eased.
But despite the improvement in the component shortage that has plagued Philips for more than a year, Philips said the supply chain remains difficult and will only gradually improve.
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, Christian Schmollinger and Christina Fincher
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