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In order to mitigate the effects of the perceived risks, the company is going to be introducing a lot of cost-cutting measures across the board.
Dutch multinational industrial firm and conglomerate Corporation, Koninklijke Philips NV (AMS: PHIA) has released its performance report for the first quarter (Q1) 2022 in which it recorded a total sales of EUR 3.9 billion. Despite growing its demand base by 5% over the time period, the overall sales are 4% lower than the sales printed in the same period last year.
Philips has had a somewhat tumultuous quarter and this is notably showcased as the income from continuing operations amounted to a loss of EUR 152 million, compared to a loss of EUR 34 million in Q1 2021. The Amsterdam-based company said its adjusted EBITA came in at EUR 243 million, or 6.2% of sales, as compared to the 9.5% of sales in the first quarter of 2021.
Philips’s potential growth trend is currently being hampered by the uncertainties in the broader global financial ecosystem. The uncertainties emanating from the impacts of inflation as well as the geopolitical turmoil between Russia and Ukraine have a lot of impacts that are likely to slow down the rate of growth of the company, as affirmed by the CEO of Royal Philips, Frans van Houten.
“It is important we recognize the increasing risks related to the COVID-19 situation in China, the Russia-Ukraine war, supply chain challenges, and inflationary pressures, which may potentially impact our ability to convert our strong order book to sales and achieve our margin target if conditions deteriorate further”, Houten said in a statement.
In order to mitigate the effects of the perceived risks, Houten said the company is going to be introducing a lot of cost-cutting measures across the board and explained:
“Our teams are fully focused on everyday execution, delivering on the customer demand and strong order book, and addressing the supply chain risks. We are implementing additional cost measures, as well as price increases, to mitigate the inflationary headwinds.”
Philips Shares amid the Ventilator Recall Dilemma
At the time of writing, Philips shares were down 11.18% to EUR 25, cementing the bearish slump that has caused the firm to shed as much as 15 billion euros off its market value since June last year.
The loss of trust from investors hinges on the woes the company is facing based on the recall of its ventilator machines. As reported by Reuters, the firm’s sleep and respiratory care business is recalled assets and is set to repair as many as 5.5 million ventilators worldwide on account that a foam used inside the machines could deteriorate over the years and cause health hazards.
While the sum of EUR 900 million has been earmarked for these device fixing, the more than 100 class-action lawsuits against the company are a bad enough outlook that is pushing investors to the side.
“We expect this provision to be enough to cover the remediation risks”, Van Houten said.