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Today, Philips reported a 9% YoY drop in orders due to a slowdown in China’s market, despite Q3 core profit soaring to 457 million euros ($483 million). Despite this setback, the company forecasts a 6-7% comparable sales growth in 2023, outperforming its previous mid single-digit prediction. The firm also anticipates a profit margin of 10-11%, up from the former high single-digit aim.
In response to these developments, J.P.Morgan noted that the year-to-date growth necessitated a guidance upgrade. However, Bernstein expressed concerns over potential negatives from upcoming news on the consent decree tied to Philips’ settlement attempts with U.S. authorities after a significant recall of respiratory devices.
As part of a strategy shift, Philips has reduced its workforce by 7,500 and plans to eliminate a total of 10,000 roles by 2025. CEO Roy Jakobs credited the improved operational performance to a focus on patient safety and quality, supply chain reliability, and a simplified operating model.
Despite geopolitical instability, Philips raised its full-year 2023 outlook based on this performance and a robust order book. The company now expects free cash flow at the upper end of the target range of $744.5 million to $957.3 million.
Philips continues its remediation efforts related to the Respironics recall, with over 99% of registered sleep therapy devices already addressed. In collaboration with the FDA for additional testing, Philips has received preliminary court approval to settle all economic loss claims associated with the recall in the U.S.
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