Philips Unveils Job Cuts Amid Pressure from Device Recall, Supply Chain Woes

By Scott Kanowsky 

Investing.com -- Koninklijke Philips NV (AS:PHG) has announced that it will slash thousands of jobs in a bid to halt the financial fallout from a large-scale product recall and ongoing supply chain constraints.

In its third quarter trading update, the Dutch medical equipment maker said that its workforce would be reduced by around 4,000 roles globally, which amounts to 5% of its total employees based on 2021 figures. The restructuring effort is expected to cost approximately 300M euros over the coming quarters, Philips added.

Shares in the company were largely unchanged in early European trading on Monday.

Roy Jakobs, who took over as chief executive officer on October 15, called the decision "difficult, but necessary" to help the firm address lingering issues that have seen its shares lose more than 67% of their value over the past one-year period.

"My immediate priority is therefore to improve execution so that we can start rebuilding the trust of patients, consumers and customers, as well as shareholders and our other stakeholders," Jakobs said.

Much of this recent decline stems from a surprise recall in June 2021 of 5.5M respirators used in the treatment of sleep apnoea, with Philips warning that a foam in the machine may be toxic. The firm's market value has since shed nearly 30B euros.

Meanwhile, third quarter adjusted earnings before interest, taxes, and amortization slumped by 60% to 209M euros, while comparable sales also dipped 6% to 4.3B euros.

The results were as expected after Philips cut its profit guidance earlier this month and flagged that performance would be impacted throughout the rest of its fiscal year due to supply chain disruptions linked to continued COVID-19 lockdowns in China.