Royal Philips (NYSE:PHG) announced today that its fourth-quarter revenue will likely come in shy of previously announced expectations.
Amsterdam-based Philips projects approximately $5.6 billion (€4.9 billion) in group sales for the quarter, which registers about $399.2 million (€350 million) short of earlier projections and can be mainly attributed to global supply chain shortages and the postponement of customer equipment installations.
On the back of the news, shares of PHG were trading down 15.6% at $32.71 per share in pre-market trading.
“We continue to see good demand for our innovative products and solutions, resulting in an all-time high order book,” Philips CEO Frans van Houten said in a news release. “However, we faced significantly intensified global supply chain issues across our businesses, in addition to customer postponement of equipment installations in hospitals. We are closely working with suppliers and governments to address the shortages in the healthcare supply chain and ensure they recognize the importance of prioritizing life-saving medical equipment.”
The comparable sales decline for the quarter comes in at approximately 10%, mainly as a result of last year’s urgent medical device recall for Philips’ DreamStation continuous positive airway pressure (CPAP) devices, which the FDA classified the as Class I, the most serious kind, in July.
Philips said last summer that it is no longer taking orders of sleep therapy systems as it handles the recall, which may knock it out of the sleep therapy market for a year. The recall, combined with the supply chain headwinds, affected the full-year sales for Philips by approximately 5 percentage points, while the overall sales decline for the year totals approximately 1%.
The company said it will increase field action provision by about $256.5 million (€225 million) mainly due to the higher volume of devices now requiring remediation and increased supply costs.
Philips expanded the scope to include certain older devices, with the company now estimating the remediation of approximately 5.2 million registered devices globally.
“Patient well-being is at the heart of everything we do at Philips, and we aim to get a solution to patients as fast as possible,” van Houten said. “To date, Philips Respironics has produced a total of approximately 1.5 million repair kits and replacement devices, of which approximately 700,000 have reached customers. I am also encouraged by the positive VOC test results to date for the first-generation DreamStation devices, which we published in December 2021.”