Philips
(NYSE: PHG)
today reported 9% year-over-year sales growth in its second quarter, but investors appeared to sour on an 8% decline in comparable order intake.
The Dutch medtech giant’s stock closed down more than 5% at €19.63 apiece on the Amsterdam stock exchange today. PHG shares were also down more than 5% at 21.84 apiece on the NYSE this afternoon. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was down slightly.
Excluding the impact of export control procedures related to Russia and its invasion of Ukraine, the order intake decline would have been 4%. Philips CEO Roy Jakobs acknowledged that order intakes will be “lumpy” this year, but he said the company is working hard to deliver strong order intake growth in the second half of the year.
Jakobs reported positive news and not-so-positive news: “The order funnel remains healthy, and we see signs of improvement in cost inflation and staff shortages in hospitals compared to 2022. But we also continue to expect hospitals and healthcare systems in the U.S. and other mature geographies to exhibit cautious buying behavior in the short term, given the global macroeconomic conditions.”
Related: How device manufacturers are mitigating high-risk exposure to hospital budgets
DOJ talks and layoffs continue at Philips
Jakobs declined to speculate on when Philips will resolve ongoing consent decree talks with the U.S. Justice Department related to its massive recall of CPAPs and other respiratory devices. He had previously expressed hope that the talks would be resolved during the first half of 2023, but said the timing was out of Philips’ control.
“This needs to be done diligently. And as we said before, this is a significant one, given that the sleep and respiratory recall was a sizable affair. So I think that is what we are working through together, and that’s also what we will bring to conclusion at the right time,” Jakobs said.
In addition, Philips continues to engage in major belt-tightening. It’s already cut 6,600 jobs out of a planned reduction of 7,000 roles by 2023 and 10,000 roles in total by 2025.
Operating model productivity cut costs by €112 million in the second quarter. Add in procurement savings and other productivity programs, and Philips reported a total cost reduction of €237 million in the quarter.
Philips’ Q2 results included positive news, too
Overall, Philips’ sales were up 9% year-over-year to €4.5 billion in the second quarter. Income from operations was €221 million, compared to €11 million in Q2 2022. Philips said its order book continued to grow year-on-year.
Philips is raising its full-year 2023 outlook to mid-single-digit comparable sales growth and an adjusted EBITA margin at the upper end of the high-single-digit range.
Said Jakobs: “I’m very confident that our innovation portfolio is well-positioned to help hospitals worldwide address their staffing shortages, enhance productivity and improve patient and staff experience.”