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Philips Earnings Impacted By Supply Challenges – Announces Job Cuts

Sam Boughedda
Sam Boughedda trader
Updated 24 Oct 2022

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Key points:

  • Philips reported Q3 results Monday
  • The company said it faces operational and supply challenges
  • Philips announced it will cut around 4,000 jobs globally

Royal Philips (NYSE: PHG) reported its third-quarter results on Monday, which the company said were impacted by operational and supply challenges and resulted in a workforce reduction.

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The company reported sales of €4.3 billion, with a 5% comparable sales decline, in line with its updated guidance on October 12. In addition, earnings per share reached €0.25 compared to €0.40 in the prior year’s quarter.

Comparable order intake fell by 6% following a 47% increase in Q3 2021. Therefore, the group reported income from operations amounting to a loss of €1.5 billion.

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According to Philips, the COVID situation in China, inflationary pressures, operational and supply issues, and the Russia-Ukraine crisis all affected the company’s performance.

Therefore, the group is taking immediate restructuring actions, with approximately €300 million in charges expected in the coming quarter.

Jakobs, who was appointed President and CEO of Royal Philips on October 15, said the company faces “multiple challenges and our Q3 2022 performance reflects this. Although Philips’ strategy and solutions resonate with our stakeholders, we have not lived up to their expectations in recent years.” As a result, the company is implementing a number of changes which includes strengthening patient safety and quality management, improving its supply chain operations, and simplifying its way of working to improve productivity, which includes the reduction in its workforce by around 4,000 jobs globally.

“These initial actions are needed to start turning the company around in order to realize Philips’ profitable growth potential and create value for all our stakeholders,” added Jakobs.

The company’s operating cash flow fell to an outflow of €180 million compared to an inflow of €256 million in the prior year.

Therefore, looking ahead, the company continues to face supply challenges and further uncertainty. Thus, Philips now expects mid-single-digit comparable sales decline for the fourth quarter and a high-single-to-double-digit adjusted EBIT margin range.

Philips fell 2.22% in premarket trading, adding to a loss of 65% in 2022.

Sam Boughedda
Sam is a trader and lead stock market writer at AskTraders. After starting his career in the forex market, Sam now focuses on stocks, specifically consumer staples.