Philips lays off employees ‘to start turning company around’

AMSTERDAM – Philips will reduce its workforce by about 4,000 roles globally, the company announced as part of its third quarter financial results.

The immediate restructuring actions will result in EUR 300 million in charges in the coming quarters but will save EUR 300 million annually.

“My immediate priority is to improve execution so that we can start rebuilding the trust of patients, consumers and customers, as well as shareholders and other stakeholders,” stated Roy Jakobs, CEO. “We will do this by further strengthening our patient safety and quality management and addressing the various facets of the Philips Respironics recall; second, by urgently improving our supply chain operations so that we can deliver on our strong order book and improve performance; and third, by simplifying our way of working to improve productivity and increase agility. This includes the difficult, but necessary decision to immediately reduce our workforce by around 4,000 roles globally, which we do not take lightly and will implement with respect toward impacted colleagues. These initial actions are needed to start turning the company around to realize Philips’ profitable growth potential and create value for all our stakeholders.”

Philips expects further restricting in 2023.

The company reported group sales of EUR 4.3 billion for the third quarter of 2022, a 5% decline compared to the same period last year, in line with the update it provided on Oct. 12. It reported sales for its Connected Care business, which includes its sleep and respiratory care products, declined 15%, mainly due to operational and supply chain challenges.

Philips reiterated a EUR 1.3 billion non-cash charge in the third quarter related to the financial forecast of Philips Respironics, driven by the estimated impact of the proposed consent decree and changes to the pre-tax discount rate.

The company is still in talks with the U.S. Department of Justice on the decree to resolve identified issues related to a large recall of certain CPAP and other devices.

Philips now expects a mid-single-digit comparable sales decline for the fourth quarter of 2022, due to prolonged operational and supply challenges, a worsening macro-economic environment and continued uncertainty related to COVID-19 measures in China, partially offset by its productivity and pricing actions.