Philips posted its Q3 2022 report as the company grapples with the fallout from a medical equipment recall.
Royal Philips NV reported on Monday, October 24th, its Q3 2022 earnings which surpassed analysts’ forecasts for the period. However, the Dutch multinational conglomerate corporation’s revenue fell short of expectations. During the third quarter, Philips saw earnings per share of 0.25 euros on revenue of 4.30 billion euros. Meanwhile, analysts polled by Investing.com had it at 0.24 euros in earnings per share on revenue of 4.54 billion euros. For its Q3 2022 outing, Philips recorded a massive loss of 1.3 billion euros as a result of depreciation. In addition, the company’s sales declined by 5% to 4.3 billion euros for the period ended September 30th.
Philips’ shares are currently down 64.53% from the beginning of the year, and 68.67% lower from its 52-week November 2021 high of 42.01 euros. Following news of its Q3 financial report, shares of the multi-divesting company dipped 0.83% in intra-day trade. However, a separate Bloomberg report also states that Philips stock rose as high as 20 cents, or 1.6%, to 13.47 euros in Amsterdam, after falling 1.8% in early trading.
Amid Q3 2022 Report, Philips Plans Substantial Downsizing
Amid its latest quarterly report, Philips announced that it would cut 4,000 jobs. This development comes just days after a new chief executive officer assumed leadership of the Amsterdam-based corporation. Philips sees the intended downsizing as a necessity to significantly reduce operational costs. The company is currently under pressure due to expensive problems with ventilators. The problem was a massive recall that slashed around 70% off Philips’ medical equipment maker’s market value in the past year. Commenting on the unsavory development, new Philips CEO Roy Jakobs, explained:
“We have now had five quarters of declining sales, declining profit, and now in the third quarter we also have become loss-making. You really need to work your cost base to stay competitive and to support your profit. I am also looking at simplifying the organisation.”
According to Jakobs, Philips is experiencing rapidly slowing demand in China and to a lesser extent Western Europe due to inflation. However, North America still appears to be holding strong.
Where exactly Philips wants to cut jobs remains unknown at the moment. However, reports suggest that the plans would reflect in the figures for the fourth quarter. Besides its home base of Amsterdam, Philips also has European locations in Germany, including in Aachen and Böblingen. The company’s German headquarters is in Hamburg.
Cost Implication of Philips Job Cuts
The projected cuts will amount to 5% of Philips’ workforce. The company will also book severance and termination-related costs. In all, this would amount to a massive cost implication of 300 million euros, or $295 million, in the coming quarters. As Jakobs sees it, Philips’ main objective is “to improve execution so that we can start rebuilding the trust of patients, consumers and customers”. This includes, among other things, “urgently improving our supply chain operations.”
Formerly one of the world’s largest electronics companies, Philips is currently focused on health technology.