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

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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.

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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.

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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.

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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.

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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

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