Philips announced job cuts after other companies
2023.01.30 05:30
Philips announced job cuts after other companies
By Kristina Sobol
Budrigannews.com – Following a respiratory device recall that cost the Dutch health technology company Philips 70% of its market value, Philips will eliminate an additional 6,000 jobs worldwide in an effort to regain profitability and enhance product safety.
The company said on Monday that half of the job cuts will take place this year, and the other half will happen by 2025.
With the new reorganization, Roy Jakobs, Philips’ new CEO, has announced 10,000 job cuts in recent months, or roughly 13% of the company’s current workforce.
It also adds to the list of technology-based businesses that have laid off employees, following Alphabet (NASDAQ:) Microsoft, Google (NASDAQ:), (NASDAQ:) Amazon in addition, the German software company SAP announced tens of thousands of layoffs in preparation for more difficult economic times.
At 0855 GMT, Philips shares were up 5.5% thanks to better-than-expected fourth-quarter earnings.
In a note, ING analyst Marc Hesselink stated, “There is a significant beat on Q4 and the operational improvement measures are very large.”
When Jakobs took over as CEO in October of last year, Philips was still dealing with the aftermath of the recall of millions of ventilators used to treat sleep apnea due to concerns that the foam used in the devices might become toxic.
Jakobs told reporters:
“I believe the strategy we present today is very solid in securing Philips’ future,” “We are confronting the serious challenges we face head-on.”
Jakobs stated that the new organization would place patient safety “squarely at the center.”
Jakobs stated that innovations will target “fewer, better resourced, and more impactful projects” in order to invest in safety while simultaneously increasing profitability.
By 2025, this should result in an adjusted earnings before interest, taxes, and amortization (EBITA) profit margin of the low teens and a margin of the middle to high teens after that, with comparable sales growth in the middle single digits throughout.
Despite significantly better-than-expected fourth-quarter results, Philips, with headquarters in Amsterdam, maintained a cautious outlook for the year.
In the third quarter of 2022, adjusted EBITA was 651 million euros, or $707.18 million. This was almost the same as the previous year, when adjusted EBITA was 647 million euros, but analysts in a poll compiled by the company had predicted that adjusted EBITA would fall to 428 million euros on average.
As ongoing issues with the supply chain eased, comparable sales increased by 3% rather than the 5% decline that analysts had anticipated.
However, Philips stated that the supply chain remained challenging and would only gradually improve in spite of an improvement in the component shortage that had been a problem for the company for more than a year.
It stated that this was anticipated to result in comparable sales growth of the low single digits in 2023 on a margin of the high single digits.
The outlook does not take into account the effects of ongoing litigation and investigations as well as discussions with the United States Department of Justice regarding a settlement following the recall.
