Philips expects sales to recover from supply chain problems after the summer

Philips (PHG.AS), a Dutch health technology firm, said on Monday that it expects sales should bounce back rapidly in the final part of the year, yet that a serious fall inferable from a worldwide shortage of parts is relied upon to stay before long. Philips cautioned recently that inventory chain issues would decrease benefits and that a ventilator review would should be extended, sending organization shares down over 15% on their most awful day on the financial markets in many years.

This should lead to between 3% and 5% growth in comparable sales in 2022, with a 40 to 90 basis points improvement in the adjusted earnings before interest, tax and amortisation (EBITA) margin, he added.

“We expect to start the year with a comparable sales decline, followed by a recovery and strong second half of the year,” Chief Executive Officer Frans van Houten said in a statement.

Overall growth will be held back by the sleep & respiratory care unit, which is still working on the massive recall of breathing-aid machines launched last year, amid concerns that a type of foam used in the devices could degrade and become toxic.

Philips has set aside 725 million euros ($820.41 million) to repair and replace some 5 million devices worldwide, but that sum does not cover the possible costs of litigation, with the company facing more than a hundred class action suits. Fears of a large claims bill already lopped around 15 billion euros off Philips’ market value in the past nine months.

Growth, excluding this unit, is expected to reach 5% to 6%, Van Houten said.

The Amsterdam-based company said its comparable sales fell 10% in the fourth quarter of 2021, while adjusted EBITA dropped 35% to 647 million euros, in line with provisional numbers released on Jan. 12.

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