Philips Settles Recall Controversy with FDA

Royal Philips, a Dutch health-technology group, has reached an agreement with the U.S. Food and Drug Administration (FDA) regarding the recall of its Respironics ventilators. The company has provisioned 363 million euros ($394 million) in the fourth quarter to cover remediation activities, inventory write-downs, and onerous contract provisions associated with the consent decree.

Philips Respironics Compliance Update

Philips Respironics has released a long-awaited update regarding its compliance with regulatory requirements. The company has been issued a decree outlining specific actions, milestones, and deliverables that are necessary to ensure compliance and restore the business.

During this time, Philips Respironics will temporarily halt the sale of new CPAP or BiPAP sleep therapy devices, as well as other respiratory care devices, within the country. However, the company will continue to service existing sleep and respiratory care devices. Additionally, Philips Respironics will provide accessories, consumables, and replacement parts.

The consent decree update was accompanied by the company's fourth quarter results. Philips expects a growth in comparable sales of 3% to 5% by 2024. Moreover, it aims for an adjusted earnings before interest, taxes, and appreciation margin to fall within the range of 11% to 11.5%. While these estimates align with the company-compiled consensus, which predicts 4.0% growth and a margin of 11.1% for the year.

Overall, Philips Respironics is committed to rectifying its compliance issues and looks forward to a prosperous future.

Quarterly Sales Report

In the fourth quarter, the Amsterdam-listed group recorded EUR5.06 billion in sales, reflecting a 3% growth in comparable figures when excluding provisions charged to sales. However, including these provisions, there was a 1% decline. Despite this, consensus estimates had predicted EUR5.33 billion in sales with a 2.6% growth in comparable sales.

The adjusted Ebita margin for the quarter was recorded at 12.5%, excluding the provisions, and 12.9% when including them. This exceeded the expected margin of 12.6%.

Unfortunately, the net profit attributable to shareholders for the three-month period ending on December 31 was EUR38 million, falling short of the consensus expectations of EUR331 million.