Philips’ core first-quarter profit slumps as supply chain issues persist

Dutch health-tech company Philips said on Monday its first-quarter core profit fell about a third from a year earlier to 243 million euros ($262 million), driven by an ongoing global parts shortage and a massive ventilator recall was affected.

Comparable sales fell 4% to 3.9 billion euros as the Amsterdam-based provider of medical systems and personal healthcare products continued to struggle with supply chain issues and had to expand its global ventilator recall again.

Analysts polled by the company had, on average, forecast adjusted core earnings — earnings before interest, taxes, depreciation and amortization — of €236 million and a nearly 8% decline in sales.

Philips said it still expects sales and profitability to recover in the second half of the year, assuming current problems don’t worsen.

“Risks related to the COVID-19 situation in China, the Russia-Ukraine war, supply chain challenges and inflationary pressures… may impact our ability to convert our strong order book into sales and meet our margin target if conditions change continue to deteriorate,” said CEO Frans van Houten.

Growth is also being held back by the company’s sleep and ventilation unit, which is still working through the massive recall of ventilators launched last year amid fears a type of foam used in the devices is degrading and toxic could become.

Philips increased its provision for repairing or replacing more than 5 million devices worldwide by 165 million euros in the first quarter, bringing the total cost to date to nearly 900 million euros.

This sum does not cover potential litigation costs as the company faces more than a hundred class action lawsuits. Fear of a major loss bill has reduced Philips’ market value by around 15 billion euros since June last year. Philips’ core first-quarter profit slumps as supply chain issues persist

Chrissy Callahan

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