Royal Philips NV will lay off 4,000 people as it seeks to minimize operational expenses while dealing with a huge recall of its sleep-apnea treatment devices.
According to Philips, severance and termination-related costs would exceed €300 million ($295 million) in the coming quarters. The reform comes after Roy Jakobs took over as CEO from Frans van Houten, who had held the job for the preceding 12 years.
Philips’ goal is to “enhance execution so that we can begin to rebuild patients’, consumers’, and customers’ trust.”
Jakobs revealed the news in a statement. These efforts include “improving our supply chain operations as soon as feasible” and “raising patient safety and quality control.”
According to Philips CEO Roy Jakobs, the approach to increase efficiency and agility “includes the difficult, but the essential decision to immediately decrease our workforce by about 4,000 roles globally, which we do not take lightly and will implement with respect towards impacted colleagues.”
Mr. Jakobs stated, “These early measures are critical to beginning turning the firm around in order to fulfill Philips’ profitable growth potential and create value for all of our stakeholders.”
Operating cash flow was minus 180 million euros, owing mostly to reduced cash earnings, greater inventories, and higher provision consumption. Following a significant 47% increase in the third quarter of 2021, similar order intake fell 6%. The book-to-bill ratio was 1.18, and the equipment order book rose significantly throughout the quarter.
Jakobs was tasked with turning around the company’s Connected Care businesses in early 2020, as well as organizing the company’s reaction to the Covid-19 issue and mounting concerns about the recall of medical devices used to treat sleep apnea. The healthcare conglomerate’s stock has plunged 60% this year.
The company is still facing lawsuits regarding noise-canceling foam that disintegrates inside the ventilators and allegedly poses a cancer risk when inhaled. Philips began recalling the devices in June of last year and has set aside around €885 million in financial reserves.
Philips also declared a €1.3 billion charge for its sleep and respiratory care segment. The write-down reflects a variety of circumstances, including revised estimates of a potential settlement with US authorities about the sleep-apnea devices.
The company reported a net loss of €1.33 billion in the third quarter, compared to a profit of €2.97 billion the prior year. The medical device business lowered its projection earlier this month owing to worse-than-expected supply-chain challenges that are hurting deliveries and client installs.
More about Philips
Royal Philips, shortened as Philips, is a Dutch multinational conglomerate headquartered in Eindhoven that was formed in 1891. Since 1997, it has had its primary offices in Amsterdam, with the Benelux headquarters continuing in Eindhoven. Philips was previously one of the world’s largest electronics companies, but after divesting its other operations, it is now solely focused on health technology.
Gerard Philips and his father, Frederik, founded the company in 1891, with light bulbs as their first product. It currently employs about 80,000 people across 100 countries. The corporation obtained its royal honorary title in 1998 and dropped the word “Electronics” from its name in 2013 as its focus switched from consumer electronics to healthcare technology.
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