January 12, 2022 Amsterdam, the Netherlands – Royal Philips (NYSE: PHG, AEX: PHIA), a global leader in health technology, today provided an update on the fourth-quarter 2021 and full-year 2021 financial results.
Group sales for the quarter are expected to be approximately EUR 4.9 billion, which is around EUR 350 million lower than Philips’ earlier expectations. This is mainly due to intensified global supply chain shortages (primarily related to electronic components and freight capacity), as well as the postponement of customer equipment installations. The comparable sales [1] decline was approximately 10%, mainly due to these effects and the impact of the earlier announced Philips Respironics recall.* Group Adjusted EBITA [2] for the quarter is expected to be approximately EUR 650 million, which is approximately 13% of sales, impacted by the decline in sales and higher supply costs.
Consequently, Group sales for the full year 2021 are now expected to be approximately EUR 17.2 billion, resulting in an expected Group comparable sales decline of approximately 1% for the year. The supply chain headwinds combined with the impact related to the Philips Respironics recall* amounted to an impact of approximately 5 percentage points on the Group’s full year comparable sales. Group Adjusted EBITA for the full year is expected to be around EUR 2.1 billion, or approximately 12% of sales.
Group comparable order intake growth in the fourth quarter has remained robust with 4% growth driven by double-digit-growth in the Diagnosis & Treatment businesses, resulting in 4% growth for the full year 2021. This further builds on the high-single-digit comparable order intake growth in Q4 2020 and full-year 2020.
“We continue to see good demand for our innovative products and solutions, resulting in an all-time high order book,” said Frans van Houten, CEO of Royal Philips. “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.”
Group restructuring, acquisition-related and other charges in the fourth quarter are expected to amount to EUR 420 million, which is EUR 315 million above the previously guided charges due to a further increase of the field action provision related to the voluntary Philips Respironics recall notification* (see below) and a provision for quality actions and other matters in the Connected Care businesses.
Update on voluntary Philips Respironics recall notification*
Philips Respironics is increasing the field action provision by around EUR 225 million, mainly due to the higher volume of devices now requiring remediation and increased supply costs. Philips Respironics expanded the scope to certain older devices in the interest of patients and in alignment with the relevant competent authorities and now expects to remediate a total 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,” said Frans van Houten. “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 [3].”
Philips will discuss today’s announcement in a conference call from 09.00 to 09:30 am CET, January 12, 2022. The fourth-quarter and full-year 2021 financial results will be reported on January 24, 2022.
