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Tuesday, October 19, 2021

Philips beats earnings forecast as it mobilises for respiratory device recall

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Dutch health technology company Philips on Monday beat analysts’ expectations with a jump in second-quarter core earnings to 532 million euros ($626 million), boosted by its personal health and diagnosis businesses. Analysts had expected adjusted earnings before interest, taxes and amortisation (EBITA) to rise to 519 million euros, up from 390 million euros a year earlier.

The group also announced a 1.5 billion euro share buyback set to start in the third quarter and take up to three years.

Comparable sales increased 9%, beating an average expectation of a 7.3% rise, though its sales were dragged by its sleep and respiratory care business.

The company booked an additional provision of 250 million euros as it works to repair and replace up to 4 million breathing devices and ventilators it recalled in June, bringing the total provision to 500 million euros.

Philips recalled the devices because of a foam part that might degrade and become toxic, potentially causing cancer.

The U.S. Food and Drug Administration (FDA) last week classified the recall of Philips’ breathing devices and ventilators as the most serious type of recall, noting that over 1,200 complaints and 100 injuries had been reported.

In a call with reporters, Chief Executive Frans van Houten said the company was producing replacement and repair kits in anticipation of a green light from regulators, though once approved the deployment project could take up to 12 months due to the high number of devices in the field.

He added that the company was gathering evidence on the risks posed by the devices before the class action lawsuits that have been filed come to court.

Philips confirmed its 2021 sales growth forecast but narrowed down its profit margin expectations to the low end of its previous range.

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