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Philips takes stock hit on profit warning, recall

by Thomas Dworetzky, Contributing Reporter | January 14, 2022
Business Affairs
Shares in Philips dove 15% on Wednesday, after it warned that its ongoing CPAP, BiPAP and ventilator recall would be expanded and that supply chain issues had slammed profits.

The combined troubles are estimated to drop Q4 adjusted earnings before interest, tax and amortization (EBITA) nearly 40% — about $739 million. The stock drop Wednesday eroded Philips market value about $5.1 billion, according to Reuters.

Group sales for the quarter dropped about EUR 350 million, or $401 million, from earlier expectations, to $5.6 billion, according to a company statement, a revenue rise from Q2 and Q3, but an 18% drop year-over-year. The company noted, “the comparable sales decline was approximately 10%, mainly due to these effects and the impact of the earlier announced Philips Respironics recall.”

Philips is expanding its estimate of the number of devices subject to recall to over 5 million, it reported.

Philips had announced in September, 2021, that it would replace as many as 4 million breathing devices after discovering that the polyurethane foam used to dampen the machines’ sounds could degrade and release small particles that irritate the airways and become toxic, potentially causing cancer, according to earlier reports.

“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 [volatile organic compounds] test results to date for the first-generation DreamStation devices, which we published in December 2021," CEO Frans van Houten said in the statement.

In December 2021, the company reported on its test findings to date concerning the first-generation DreamStation.

“Review of this assessment by an outside medical panel and Philips Respironics has determined that exposure to the level of VOCs identified to date for the first-generation DreamStation devices is not typically anticipated to result in long-term health consequences for patients,” it said in a statement,” advising that, “the update on these findings is intended to inform healthcare providers of the most recent data, but the overall guidance for physicians and patients in the recall notification remains unchanged at this time.”

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