Philips plans to cut 13 percent of its safety and profitability jobs
Dutch health-tech company Philips is set to cut another 6,000 jobs worldwide as it tries to restore profitability and improve the safety of its products after a ventilator recall cost 70 percent of its market value.
Half of the job cuts will happen this year, the company said on Monday, adding that the other half will be implemented 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 about 13 percent of Philips’ current workforce.
It also adds to the string of tech-based companies making layoffs after the likes of Alphabet’s Google, Microsoft, Amazon and German software maker SAP announced thousands of layoffs to cut costs as they brace for tougher economic conditions.
Shares of Philips were up 5.5 percent as of 8:55 am, helped by fourth-quarter results that came in much better than expected.
“There is a clear hit to Q4 and the operational improvement measures are very big,” ING analyst Marc Hesselink said in a note.
Jakobs took over the helm of the company last October as Philips continued to grapple with the fallout from the recall of millions of ventilators used to treat sleep apnea over concerns the foam used in the devices could become toxic.
“What we are presenting today I believe is a very strong plan to secure the future of Philips. The challenges we face are serious and we are tackling them head-on,” Jakobs told reporters.
Jakobs said patient safety will be placed “right at the heart” of the new organization.
To improve profitability while investing in safety, innovation will target “fewer, better resourced and more impactful projects,” Jakobs said.
Combined, this should result in a low-teens profit margin as measured by adjusted earnings before interest, taxes, and amortization (EBITA) through 2025, and a mid- to high-teens margin in the mid-single digits post-year on consistently comparable revenue growth.
The Amsterdam-based company remained cautious on its outlook for the year, although fourth-quarter results came in significantly better than expected.
Underlying EBITA in the last three months of 2022 was €651 million, almost stable compared to €647 million last year, while analysts in a company-compiled survey had on average forecast a decline to €428 million.
Comparable sales rose 3 percent, rather than 5 percent as analysts had predicted, as ongoing supply chain issues eased.
But despite improving component shortages, which has worried Philips for over a year, Philips said the supply chain remains challenging and will only continue to improve incrementally.
This should translate into low-single-digit comparable revenue growth with a high-single-digit margin in 2023, it said.
The outlook excludes the impact of ongoing discussions with the US Department of Justice for a post-recall settlement, as well as ongoing litigation and investigations.
https://www.independent.ie/business/world/philips-to-cut-13pc-of-jobs-in-safety-and-profitability-drive-42318660.html Philips plans to cut 13 percent of its safety and profitability jobs