Philips makes $631 million provision for recall litigation costs

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Amsterdam-based Philips is grappling with the fallout of a global recall of millions of respirators used to treat sleep apnoea, announced in June 2021 over worries that foam used in the machines could become toxic.

The recall has knocked off around 70% of Philips’ market value over the past two years as investors fear the costs of a string of lawsuits launched by concerned patients.

CEO Roy Jakobs said the provision taken in the first quarter was “in anticipation of a resolution of the economic loss class action in the U.S.” and marked an “important step in addressing the litigation.”

Philips is still working on a settlement with the U.S. Food and Drug Administration (FDA) and is subject to an investigation by the U.S. Department of Justice.

It said the outcomes of these events were still too uncertain to make a provision.

Philips also reported much better-than-expected first-quarter results, as core profit jumped almost 50%, to 359 million euros, and comparable sales were 6% higher than a year before.

Analysts in a company-compiled poll on average had forecast adjusted earnings before interest, taxes and amortisation (EBITA) would fall 15%, on sales growth of less than 2%.

($1 = 0.9108 euros)