Royal Philips shares jumped 11% on Monday 24, as the company announced better-than-expected Q1 2023 financial figures. The Dutch technology company also said it is setting aside €575m ($634m) to cover litigation costs over the recall of its faulty ventilator devices.
Philips has faced ongoing financial issues due to several active lawsuits from its June 2021 recall of millions of respiratory ventilators. The US Food and Drug Administration (FDA) announced that problems with the polyester-based polyurethane (PE-PUR) sound abatement foam could potentially produce toxic effects when inhaled by users.
In the Q1 report, Royal Philips’ CEO Roy Jakobs stated that resolving the recall affair remains the company’s “highest priority”, and it has set aside a €575m ($634m) litigation provision to cover costs.
According to Philips, 95% of the replacement devices and repair kits have been produced and the company will soon report results on a new foam degradation solution for its DreamStation devices. Philips will still need to contend with an investigation by the US Department of Justice and a settlement with the FDA but has not announced any monetary buffers for these due to the unknown operational and financial implications.
Against the backdrop of uncertainty, Philips revealed that sales increased to €4.2bn with 6% comparable sales growth. The company highlighted its Diagnosis and Treatment businesses as a key driver with a 15% sales increase – ultrasound and image-guided therapy being a main area of growth.
Whilst its Q1 results have buoyed shares, Philips still currently sits nearly 70% worse off than a high from April 2021. Analysts from JP Morgan and Jefferies reiterated a sell rating.
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