Philips to cut 5% of its workforce as new CEO acts to counter falling sales

AMSTERDAM, Oct 24 (Reuters) – The new chief executive of Philips (PHG.AS) announced on Monday plans to cut around 4,000 jobs following a slump in sales and after a massive recall slashed around 70% of the market value of the Dutch manufacturer of medical equipment over the past year. .

“We’ve now had five quarters of down sales, down profits, and now… (in the third quarter) we’ve also gone loss-making,” CEO Roy Jakobs said, just a week after taking office. during a telephone interview. .

“You really need to work on your cost base to stay competitive and sustain your profit…I’m also looking to simplify the organization.”

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He described the layoffs, which will be concentrated in the United States and the Netherlands and mainly affecting trades whose sales are falling, as “unfortunate, but necessary”.

He said the company was seeing a rapid slowdown in demand in China and, to a lesser extent, Western Europe due to inflation, North America “still strong”.

Jakobs took the top job as the company grapples with the fallout from its costly respiratory device recall and ongoing supply chain issues that led to a profit warning on Oct. 12.

The job cuts represent just over 5% of the company’s workforce, based on a total of 78,000 last year.

The company said it expects the reorganization to cost around 300 million euros ($295.41 million) over the next few quarters.

It recorded a net loss of 1.3 billion euros for the third quarter due to a write-down in the value of its Sleep & Respiratory Care business which manufactures the recalled machines.

Philips is in talks with the US Department of Justice on a settlement following the recall.

Comparable sales fell 6% to 4.3 billion euros in July-September as Philips said supply chain issues were worse than expected and would continue to weigh on sales in the final months of 2022 .

Jakobs said his top priorities were to repair the company’s reputation by ensuring the recall is over as soon as possible and resolving supply chain issues. These involve both shortages of components such as microchips, as well as unexpected stops and starts in availability, he said.

Philips has lost around 30 billion euros of its market value since it shocked investors in June last year by recalling 5.5 million ventilators used to treat sleep apnea, over fears that the foam used in machinery from becoming toxic.

($1 = 1.0155 euros)

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Reporting by Bart Meijer and Charlotte Van Campenhout; Editing by Josephine Mason, Christopher Cushing and Susan Fenton

Our standards: The Thomson Reuters Trust Principles.

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