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Philips pops higher after new round of job cuts

Published 30-01-2023, 04:04 pm
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By Geoffrey Smith 

Investing.com -- Philips (AS:PHG) stock jumped on Monday, defying the broader selloff in European equities, after the Dutch company announced another 6,000 job cuts to shore up profitability.

By 05:05 ET (10:05 GMT), Philips stock was up 5.8% in Amsterdam, making it the best-performing stock in the Euro Stoxx 50, which was down 0.9%.

The maker of medical devices, which was plagued last year by an expensive recall for its sleep apnea face masks and by a broad decline in demand for its respirators as the pandemic eased, said it will cut another 6,000 jobs worldwide. That takes the total number of job cuts announced by Chief Executive Roy Jakobs to some 10,000, or 13% of its global workforce. 

"We are taking firm actions to improve our execution and step up performance with urgency," Jakobs said in a statement. 

The stock was also helped by results for the fourth quarter that showed comparable group sales rising 3%, better than expected, even though the company said its supply chain conditions "remain challenging". Operating profit edged higher to €171 million (€1=$1.0915) from €162M a year earlier, but that couldn't stop the company sliding to an operating loss of over €1.5B for the full year, the result of a massive write-down of goodwill and previous R&D spending due to the mask recall. Jakobs said around 90% of the necessary remedial work to its devices has now been done. 

Underlying earnings before interest taxes and amortization was broadly flat at €651M in the fourth quarter, but order intake fell 8%, due partly to falling demand for COVID-19-related products. 

Philips said it expects comparable sales to grow this year, albeit by less than 5%, while it expects its underlying EBITA to be positive. Both of those details came as a pleasant surprise to the market, which had expected its operational problems to exert more of a drag on 2023 profits.

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