Philips makes $631 million provision for recall litigation costs of respiratory machines

AMSTERDAM (Reuters – 24 April 2023) – Dutch health technology company Philips (PHG.AS) on Monday said it had set aside 575 million euros ($631 million) for possible litigation costs related to its global recall of respiratory machines.

Amsterdam-based Philips is grappling with the fallout of a global recall of millions of respirators used to treat sleep apnoea, announced in June 2021 over worries that foam used in the machines could become toxic.

The recall has knocked off around 70% of Philips’ market value over the past two years as investors fear the costs of a string of lawsuits launched by concerned patients.

Philips is still working on a settlement with the U.S. Food and Drug Administration (FDA) and is subject to an investigation by the U.S. Department of Justice.

It said the outcomes of these events were still too uncertain to make a provision.

Philips also reported much better-than-expected first-quarter results, as core profit jumped almost 50%, to 359 million euros, and comparable sales were 6% higher than a year before.

Analysts in a company-compiled poll on average had forecast adjusted earnings before interest, taxes and amortisation (EBITA) would fall 15%, on sales growth of less than 2%.

($1 = 0.9108 euros)

Reporting by Bart Meijer; Editing by Edmund Klamann