Philips stock rises as Q4 sales climb; supply chain issues, jobs cuts and 'slow start' in 2023

Philips (NYSE:PHG) is trading higher premarket on Monday after Q4 comparable sales grew Y/Y, however the company noted that its supply chain conditions remain challenging.

Adjusted income from continuing operations attributable to shareholders declined -28% Y/Y to €0.41.

The company said Q4 Group sales were €5.42B , with +3% comparable sales growth driven by component supply improvements.

However, Philips noted that Comparable order intake decreased by 8%, with a double-digit decline in the Connected Care businesses, due to lower demand for COVID-19-related acute care products compared to 2021, and a high-single-digit decline in the Diagnosis & Treatment businesses, mainly due to actions to improve the order book margin profile.

The Connected Care businesses' comparable sales grew +5% Y/Y to ~€1.37B, driven by driven by strong double-digit growth in Hospital Patient Monitoring, according to the company.

Diagnosis & Treatment businesses comparable sales increased +5% Y/Y to ~€2.81B, due to high single-digit growth in Ultrasound and Image-Guided Therapy, due to improved component supplies. However, Diagnostic Imaging recorded low-single-digit growth.

Meanwhile, Personal Health businesses saw comparable sales decline by -4% Y/Y to ~€1.06B, with low-single-digit growth in Oral Healthcare, which was more than offset by a double-digit decline in Personal Care, Philips noted.

The company is still reeling under the impact of recall of certain of its respiratory devices due to potential safety issues.

"2022 has been a very difficult year for Philips and our stakeholders, and we are taking firm actions to improve our execution and step up performance with urgency. When I took over as CEO in October 2022, I said that our priorities are first to further strengthen our patient safety and quality management and address the Philips Respironics recall; second, to improve our supply chain reliability to convert our order book to sales and improve performance; and third, to simplify how we work to increase agility and productivity," said Philips CEO Roy Jakobs.

The company said in a separate release that it is cutting 6,000 jobs worldwide by 2025, of which 3,000 will be implemented in 2023 in line with the relevant local regulations and processes. The reduction in workforce is in addition to the 4,000 job cuts announced in October 2022.

Philips noted that its leaner and more focused organization will have a significantly reduced cost structure.

Dividend: Philips intends to submit to the 2023 Annual General Meeting a proposal to declare a dividend of €0.85 per common share, and to distribute the dividend in shares.

Outlook:

Philips expects to deliver low-single-digit comparable sales growth and high-single-digit Adjusted EBITA margin in 2023. Considering the slowing of consumer demand and a gradual improvement of the order book conversion during 2023, Philips expects a slow start to the year, with improvements throughout the year supported by the ongoing productivity, pricing and other actions.

The company noted that the guidance excludes the impact of the ongoing discussion on the proposed consent decree beyond current assumptions (Sleep & Respiratory Care/Respironics CSGR 2023-2025 of 10%), and ongoing litigation and the investigation by the U.S. Department of Justice related to the Respironics field action.

PHG +7.83% to $18.32 premarket