Philips sees ‘step up’ in Sleep & Respiratory Care 

AMSTERDAM – Uncertainty in China dimmed its overall financial results, but Philips pointed to continued improvements by Sleep & Respiratory Care, part of its Connected Care business, as a highlight for the third quarter of 2024. 

While comparable sales were flat for Connected Care, adjusted EBITDA increased 360 basis points to 7.3% with improvements across all businesses, including “an encouraging margin step up in Sleep & Respiratory Care,” said Charlotte Hanneman, CFO. 

“The Sleep & Respiratory Care return to market is going really well and according to plan – customers really want us back in the market and they like our innovation,” she said during a conference call to discuss the latest financial results. “Then from a profitability perspective, we saw an encouraging margin step up in Sleep & Respiratory Care and in fact in our whole Connected Care segment, which speaks to the underlying resilience and strength in our EBITDA margins, which keep on improving and which we are laser focused on now in Q4 and also next year.” 

For all Philips, adjusted EBITDA increased 160 basis points to 11.8% of sales in the third quarter. 

Other highlights from the call included: 

Deteriorated demand in China: It’s the main reason Philips updated its guidance for full year 2024. It now expects comparable sales growth within an updated range of 0.5%-1.5%; adjusted EBITA margin at around 11.5%, the upper end of the current range; and free cashflow at around EUR 0.9 billion, at the lower end of the current range. For Connected Care, the company expects sales growth at the lower end of the 3% to 5% range. That’s compared to slight growth in Diagnosis & Treatment and flat to slight decline in Personal Health, both also part of the Connected Care business. 

Restructuring charge: Philips expects to incur a EUR 165 million restructuring charge in the fourth quarter, which includes EUR 100 million for Connected Care. Hanneman said, “Connected Care is a very big part of this as there were consent-decree related charges, respond field actions, (other) charges and what have you. So, really, if you look at Q4, our EUR100 million guidance for Connected Care doesn't really stand out much. We've seen some higher numbers. We've seen some lower numbers. And there's really no further impairment included in those numbers, either. And we're really laser-focused on driving the same financial discipline that we're driving in our adjusted EBITDA margin also in our adjusted items.” 

Election outcome: When asked about the risk of U.S. tariffs making a comeback, depending on the outcome of the upcoming presidential election, CEO Roy Jakobs said, “We have been really working on making our supply chain resilient to also be prepared for scenarios that could evolve across the world, because, actually, that's of course happening in multiple potential countries. So, we are now kind of building three regional strong axis where we can supply from. We also have dual sourcing introduced. So, a lot of focus and progress made on that to be ready for any adjustments that we need to kind of adjust to.” 

• Related: Philips consent decree outlined.