Philips to cut 5% of its workforce after medical equipment recall

AMSTERDAM -Dutch medical equipment maker Philips said on Monday it expected to scrap around 4,000 jobs as it tried to streamline its organization after a massive recall slashed about 70 percent off its market value in the past year.

The move was the first announcement by newly appointed CEO Roy Jakobs, who took over the reins earlier this month as the company continued to grapple with the fallout of its costly recall of respiratory machines and with ongoing supply chain problems that led to a profit warning last month.

“My immediate priority is to improve execution so that we can start rebuilding the trust of patients, consumers and customers,” Jakobs said in a statement.

“This includes the difficult, but necessary decision to immediately reduce our workforce by around 4,000 roles globally, which we do not take lightly.”

The cuts represent just over 5 percent of the company’s workforce based on last year’s total of 78,000.

The company said it expected the reorganization to cost about 300 million euros ($295.41 million) in the coming quarters.

As flagged in a profit warning earlier this month, Philips said its adjusted earnings before interest, taxes and amortisation (EBITA) had tumbled 60 percent in the third quarter, to 209 million euros.

Comparable sales dropped 6 percent to 4.3 billion euros as Philips said problems with supply shortages had been much greater than anticipated and would continue to weigh on sales in the last months of 2022.

Philips has lost around 30 billion euros of its market value since it shocked investors in June last year by recalling 5.5 million ventilators used to treat sleep apnoea, over worries that foam used in the machines could become toxic.

($1 = 1.0155 euros)