Philips recovery will take ‘some time’

PITTSBURGH – Philips is still in talks with the U.S. Department of Justice on a consent decree to resolve identified issues related to its recall of certain CPAP devices, company officials said during an Oct. 12 conference call with analysts to preview its financial results for the third quarter. 

The consent decree is among the reasons the company said it will record a EUR 1.3 billion non-cash charge in the third quarter to address revisions to the financial forecast of its Sleep & Respiratory Care business. 

When asked during the call if Philips expects additional charges related to the consent decree, outgoing CEO Frans van Houten said: 

“The details of the consent decree have not been fully negotiated at this time and, therefore, we are, to the best of our abilities, looking at the future with an impact of a combination of margins, sales. It’s early days and there’s not much more detail we can give today, other than this is our reasonable estimate, and I would leave it to a future update, but at this time, this is it.” 

The charge will also address changes to the pre-tax discount rate. 

In addition to the charge, Philips alerted analysts that it expects Group sales to be about EUR 4.3 billion for the quarter, a comparable decline of about 5%. It expects sales for the Connected Care business, which includes the Sleep & Respiratory Care business, to decline in the mid-teens. 

Company officials blamed a larger than expected impact from continued supply chain challenges, which have affected deliveries and installations, as a big reason for the decline in sales. 

“While we see sequential improvement in the supply chain situation, our progress has been slower than expected,” van Houten said.  

The call marked van Houten’s last with analysts, as Roy Jakobs will take the reins as CEO ahead of the release of the Q3 financial results on Oct. 24. 

“I would have wished this final analyst call to be under different circumstances,” van Houten said. “It is what is. I express a deep conviction about the potential the company has. We will come back to past performance, and I know Roy and the executive committee are entirely committed to do that and they know what to do, and they’re working on it. It just takes some time.”