The parts supply problems that Philips faced last year appear to be less severe. Experts generally count on the Dutch company’s improved financial results. But investors and analysts are equally focused on news of the major recall that has dogged the medical technology group for two years, when Philips released its second-quarter performance on Monday.
In the summer of 2021, it was announced that Philips had to recall millions of apnea devices worldwide because the sound-absorbing foam could collapse. These issues have already cost the company a lot of money for repairs, but potential damage claims can also be very expensive. Earlier this year, the company set aside more than half a billion euros for claims from the United States.
Philips itself has confirmed on several occasions that it is well on its way to replacing or repairing faulty appliances for sleep apnea patients. However, there are a number of issues surrounding the recall process that may still cause unpleasant surprises, ING analysts wrote in a preview. They are still awaiting the completion of the recall, settlement with the US Department of Justice and other compensation agreements.
The recall isn’t the only problem with Philips. In recent years, due to problems with chip delivery, for example, the company has been able to produce fewer products that have been ordered. The group announced further rounds of layoffs and reorganizations in October and earlier this year to cut costs. As a result, a total of 10,000 jobs will disappear in the coming years.
The situation now seems to be improving. When providing first-quarter numbers in April, Philips actually said that it had managed to produce more, so sales volume had increased as well. Analysts believe revenue is likely to pick up again on a like-for-like basis in the second quarter. They expect profits to be higher than the previous year.
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