Amsterdam, the Netherlands : Royal Philips today provided an update on its third-quarter 2022 financial results and full-year outlook. The company will report the final results on October 24, 2022.
Group sales and profitability
Philips’ financial performance in the third quarter was largely impacted by continued supply chain challenges that were more significant than anticipated in the quarter, impacting deliveries and customer installations. As a result, sales for the Group are expected to be approximately EUR 4.3 billion with a comparable sales decline of approximately 5%. Philips’ Diagnosis & Treatment businesses are expected to show a low-single-digit comparable sales decline and the Connected Care businesses a mid-teen decline, while the Personal Health businesses are expected to show mid-single-digit comparable sales growth. As a consequence of the lower sales, Group Adjusted EBITA for the quarter is expected to be approximately EUR 210 million or approximately 5% of sales.
On the back of strong 47% comparable order intake growth in the third quarter of last year, Philips’ comparable order intake in the third quarter of 2022 declined approximately 6%. The book-to-bill ratio remained strong at 1.18 and the equipment order book grew further in the quarter.
Goodwill impairment charge
Philips expects to record a EUR 1.3 billion non-cash charge in the third quarter for the impairment of goodwill of its Sleep & Respiratory Care business (Philips Respironics) due to revisions to the financial forecast of this business. The drivers for the revised forecast include current assumptions regarding the estimated impact of the proposed consent decree and changes to the pre-tax discount rate.
Actions to improve performance and resulting charges
Philips is accelerating productivity initiatives and other actions to mitigate the ongoing headwinds, that will be further detailed on October 24, 2022. As a consequence of the earlier announced initiative to enhance productivity in R&D by shifting the focus to fewer and better resourced projects in the innovation pipeline, Philips expects to record a non-cash charge in the third quarter of approximately EUR 165 million.
Looking ahead, Philips still expects a better second half of the year, compared to the first half of 2022. However, the company sees prolonged supply chain disruptions and a worsening macro-environment. Consequently, Philips now expects a mid-single-digit comparable sales decline for the fourth quarter of 2022 with a high-single-to-double-digit adjusted EBITA margin range.
Conference call and audio webcast
Philips will host a conference call for investors and analysts from 08:30 – 09:00 am CET today to discuss the third-quarter financial performance update.