Philips has posted 33.6% higher losses for 2024 compared to 2023 as the company continues to battle weaker demand in China and settlements for its faulty sleep apnoea devices.
Philips reported losses of €698m for the full year 2024, up from the €463m it lost the year before. Nominal sales growth decreased by 1%, with the Dutch medtech giant bringing in revenue just over $18bn. Earnings per share missed estimates by Zacks-surveyed analysts by $0.01.
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Shares in Philips at market open on the 19 February reflected the weaker than anticipated financials, opening 5.2% down on the Amsterdam exchange. Shares continued to slump on the 20 February, losing a further 4.4% in value compared to the previous day’s opening price. Bank of America Securities analyst Julien Ouaddour reiterated a ‘hold’ rating on the company’s stock.
Philips CEO Roy Jakobs made no secret of the reason for the lack in profitability, citing the lower demand in China – a pressure that is affecting much of the medtech industry. Despite positive performance in the US, the company experienced a double-digit decline in demand for consumer and health systems in China.
The anti-corruption drive by the Chinese government has come down hard on international companies supplying medical devices to the country. GE HealthCare cut its 2024 revenue growth outlook last year due to the supply freeze, whilst Siemens’ Q3 sales were hit by order delays in China. Philips already slashed its full year forecast in November citing a “significant deterioration” in demand from the country.
Despite progress in other markets, China ultimately dragged down Philips’ revenue in 2024, and 2025 may also fall victim to macroeconomics according to Jakobs. The CEO expects a continuation of headwinds from the country at least in the first portion of the upcoming year.
“In China, we expect consumer demand to remain subdued. We expect demand from hospitals to continue to be impacted by the consequences of the anti-corruption and the slow implementation of the national renewal program, at least into the first half of the year,” Jakobs said.
In its earnings report, Philips stated that the market conditions in China are “expected to remain uncertain.” This has been compounded by the tariffs imposed by President Donald Trump on the Asian country, thrusting the relationship between the two manufacturing powerhouses into unknown territory. Jakobs did not provide detailed comment regarding the tariffs, saying only it was “hard to speculate on what will happen next.” The company did, however, include the impact of the tariffs on its outlook, which includes a mid-single-digit decline in comparable sales growth in Q1.
Respironics settlement and restructuring
After years in and out of courts, Philips is nearing the end of its ventilator recall saga. The company received final approval for the medical monitoring and personal injury settlements – a $1.1bn payment is expected to be made in the first half of 2025. Despite agreeing to pay out proceeds to end the long-lasting legal battle, Philips has neither admitted fault nor liability.
Restructuring is also in the pipeline this year as Philips targets saving of about $835m. The company expects restructuring costs to be 100 basis points in 2025, with “some headcount reductions” according to chief financial officer Charlotte Hanneman.
