Philips this week provided an update concerning its third quarter 2022 financial results prior to reporting the final results later this month amidst its continued work to fix devices impacted by its CPAP machine and mask recalls.
Philips states that its financial performance in the third quarter was largely impacted by continued supply chain challenges that were more significant than anticipated in Q3 2022, impacting deliveries and customer installations. As a result, sales for the group are expected to be approximately EUR 4.3 billion with a comparable sales decline of approximately 5%. Philips’ diagnosis and treatment businesses are expected to show a low-single-digit comparable sales decline and the connected care businesses a mid-teen decline. However, its personal health businesses are expected to show mid-single-digit comparable sales growth.
As a consequence of the lower sales, group adjusted EBITA for the quarter is expected to be approximately EUR 210 million or approximately 5% of sales.
On the back of strong 47% comparable order intake growth in the third quarter of last year, Philips’ comparable order intake in Q3 2022 declined approximately 6%. The book-to-bill ratio is 1.18 and the equipment order book grew further in the quarter.
Philips also expects to record a EUR 1.3 billion non-cash charge in the third quarter for the impairment of goodwill of its sleep & respiratory care business (Philips Respironics) due to revisions to the financial forecast of this business. The drivers for the revised forecast include current assumptions regarding the estimated impact of the proposed consent decree and changes to the pre-tax discount rate.
Philips is accelerating productivity initiatives and other actions to mitigate the ongoing headwinds, which will be further detailed on Oct 24, 2022. As a consequence of an initiative to enhance productivity in R&D by shifting the focus to fewer and better resourced projects in the innovation pipeline, Philips expects to record a non-cash charge in the third quarter of approximately EUR 165 million.
Looking ahead, Philips still expects a better second half of the year, compared to the first half of 2022. But the company sees prolonged supply chain disruptions and a worsening macro-environment. So the company now expects a mid-single-digit comparable sales decline for the fourth quarter of 2022 with a high-single-to-double-digit adjusted EBITA margin range.
In other Philips’ news, Roy Jakobs takes over as the company’s next president and CEO, effective tomorrow, succeeding current president and CEO Frans van Houten.
“I have enjoyed and feel deeply privileged for having been given the opportunity to shape Philips onto a path of future relevance as we embraced health and healthcare innovation as our company focus,” says Frans van Houten, CEO of Royal Philips, in a release. “Much has been achieved in the past 12 years and I want to thank the many passionate, talented colleagues who have made this possible. Nevertheless, much remains to be done, and this will now be the task of the Executive Committee under the leadership of my successor. I wish Roy and the team much success.”
Roy Jakobs, incoming CEO of Royal Philips, says in a release, “I am honored to be appointed as the next CEO of Philips, and together with our Philips colleagues continue to help improve people’s health and well-being with meaningful innovations. Philips is a unique company with a strong brand, more than 130 years of innovation power and a bright future as a leader in health technology solutions. I look forward to leading the company in a transparent way, empowering our people as we address the current challenges, while also shaping the next chapter of Philips.”
