Philips new CEO starts by slashing 4,000 jobs amid device recall woes
Just days after stepping into his new role as CEO of Royal Philips (NYSE:PHG) Roy Jakobs on Monday said that the company was cutting about 4,000 jobs globally as it tries to save cost amid a recall of its medical device.
Jakobs issued the news along with reporting the company's Q3 results which saw comparable sales decline by 5%.
"My immediate priority is therefore to improve execution so that we can start rebuilding the trust of patients, consumers and customers," Jakobs said in the Q3 earnings release.
Jakobs added that the steps include strengthening patient safety and quality management and addressing the various aspects of the Philips Respironics recall, and "urgently improving our supply chain operations."
The company added that severance and termination-related costs are expected about €300M in the coming quarters. The associated cost savings are expected to amount to annualized savings of €300M.
Before helming Philips starting Oct. 15, Jakobs served as executive vice president and chief business leader of Connected Care at Philips and had led the respiratory device recall initiatives. He took over from Frans van Houten, who led Philips for nearly 12 years.
The Amsterdam-based company has been grappling with the recall of several of its medical devices over safety concerns.
Jakobs noted that, "we face multiple challenges and our Q3 2022 performance reflects this. Although Philips' strategy and solutions resonate with our stakeholders, we have not lived up to their expectations in recent years."
Q3 group sales were €4.3B (+3.71% Y/Y nominal growth). The company said the Q3 comparable sales declined by 5% mainly due to operational and supply chain challenges, the COVID situation in China and the Russia-Ukraine war.
The Diagnosis & Treatment businesses' comparable sales decreased 2%. Q3 sales in the segment were €2.29B (+6.4% Y/Y).
Meanwhile, Philips noted that Connected Care businesses' comparable sales fell 15%, mainly due to operational and supply challenges. The segment's revenue amounted to €982M (+5.6%Y/Y).
The Personal Health businesses' comparable sales increased by 4%, with good growth in North America and Western Europe, according to the company. The division's sales were €902M (+11.63% Y/Y)
Philips said looking ahead it sees prolonged operational and supply challenges, a worsening macro-economic environment and continued uncertainty related to COVID-19 measures in China, which will be partly offset by the company's productivity and pricing actions.
The company now expects a mid-single-digit comparable sales decline for Q4 2022, with a high-single-to-double-digit Adjusted EBITA margin range.
PHG -3.98% to $12.55