Philips (NYSE:PHG) shares took a hit today on second-quarter earnings that were adversely affected by supply chain headwinds.
CEO Frans van Houten also broke the news during today’s earnings call that the U.S. Department of Justice, acting on behalf of FDA, provided a proposed consent decree on July 18 following inspection of the Dutch medtech giant’s U.S. Philips Respironics facilities in 2021. The company has been engaged in a serious recall involving millions of ventilators, bi-level positive airway pressure (BiPAP) and continuous positive airway pressure (CPAP) machines with potential sound abatement foam breakdown problems.
“While we understand you may like to know more about it, we are in confidential discussions with the DOJ on the terms of a consent decree and cannot speculate on the outcome, the content or the timing of any agreement. It’s still early stages,” van Houten said.
Shares of PHG were down more than 8% to $20.37 apiece by the afternoon today. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was up slightly.
The Amsterdam-based company posted sales of $4.3 billion (Є4.2 billion), representing a 7% decline year-over-year. Philips attributed the revenue dip to continued supply shortages and prolonged lockdowns in China, while inflationary pressures and the Russian-Ukraine war also impacted results.
Profits came in at $11.3 million (Є11 million) for a bottom-line slide of 87.1% from this time last year.
The company’s connected care business saw a 13% sales decrease, mainly as a result of its massive Respironics recall and the impact of supply chain headwinds. In connection with the recall of CPAP, BiPAP and mechanical ventilators, Philips Respironics has produced 3 million replacement devices and repair kits to date.
Additionally, the company said in a news release that it has “comprehensive measures” in place to improve supply chain resilience and pricing.
Philips’ diagnosis and treatment business saw a 4% year-over-year sales decrease, and its personal health business dipped by 5%.
“Across our businesses, we have stepped up our actions on productivity, pricing, and strengthening supply chain resilience to mitigate the ongoing headwinds and associated risks,” van Houten said in the release. “The positive impact of these actions, together with the strength of our order book and improving component supplies, give me confidence that we will resume growth from the third quarter onwards, resulting in 6-9% comparable sales growth and improved profitability in the second half of the year.”
Philips had previously forecast growth between 3% and 5% for 2022, but today slashed its projections to a sales increase of between 1% and 3%. The company expects growth of between 6% and 9% for the second half of 2022.
Executive editor Chris Newmarker contributed to this story.
$1 = Є0.975902
