Philips (NYSE: PHG) reported first-quarter sales growth, plus a litigation update around its ongoing Respironics recall.
Shares of PHG ticked up 14% at $21.70 apiece in early-morning trading today. MassDevice’s MedTech 100 Index — which includes stocks of the world’s largest medical device companies — rose 0.1%.
Sales for the Dutch medtech giant increased by 6% year over year to approximately $4.6 billion (€4.2 billion). That topped Wall Street estimates by about $0.37 million (€0.3 million). Earnings per share totaled 24¢ (€0.22), topping expectations of about 9¢ (€0.08).
Philips reported a $642.9 billion (€583 million) loss, mainly due to provisions for accelerated restructuring and a new litigation development. As part of the restructuring, Philips previously announced plans to reduce its workforce by 10,000 employees. The company said it completed about 5,400 of the 10,000 reductions. (Read more about layoffs across the industry here).
New litigation provision related to Respironics recall
The company announced a $634.1 million (€575 million) litigation provision. It relates to the anticipated resolution of the Respironics recall-related economic loss class action in the U.S. Here’s a timeline of the Respironics recall, which has affected Philips’ business since the summer of 2021.
“Resolving the Philips Respironics recall for patients remains our highest priority,” Philips CEO Roy Jakobs said in a news release. “In the first quarter, we have recorded a provision in anticipation of a resolution of the economic loss class action in the U.S. This is an important step in addressing the litigation related to the recall.”
Philips reported an adjusted EBITA increase to $396 million (€359) and an increase in operating cash flow to $222.8 million (€202 million). The company says the simplification of its operating model and restructuring remains on track.
“I am encouraged that we delivered a solid start to the year, with sales, profitability and operating cash flow improvements in the quarter, a first step to drive progressive value creation,” Jakobs said. “We are executing on our three priorities to enhance patient safety and quality, strengthen our supply chain reliability, and establish a simplified, more agile operating model.”
Philips reports segment performances
According to Jakobs, supply chain improvements enabled growth for Philips’ diagnosis & treatment businesses, as well as in-hospital patient monitoring.
Diagnosis & treatment sales increased by 15% in the quarter, while connected care sales increased 3%. Hospital patient monitoring sales drove connected care, offset by a decline in sleep and respiratory care as a result of the recall. Philips’ personal health business saw sales dip by 6%.
“I realize that we are asking a lot from our employees to work through the necessary changes and deeply appreciate their tremendous efforts and ongoing commitment to deliver on our company purpose,” Jakobs said. “Looking ahead, based on our solid performance in the quarter, our order book, and the ongoing actions to further improve execution, we are confident in our plan for the year 2023, acknowledging that uncertainties remain.”