Philips to cut 4,000 jobs amid falling sales
The Dutch conglomerate says that plans to simplify the organisation and reduce operating expenses. This will include an immediate reduction of around 4,000 positions globally.
Philips’ performance in the quarter was impacted by operational and supply challenges, inflationary pressures, the COVID situation in China and the Russia-Ukraine war, resulting in group sales of EUR 4.3 billion, reflecting a 5% comparable sales decline. Order intake during the quarter was also affected and declined 6% compared to the same quarter last year.
The group also became a loss-making business in the third quarter as income from operations amounted to a loss of EUR 1.5 billion. Philips says that this is mainly due to a previously disclosed EUR 1.5 billion non-cash goodwill and R&D impairment. During the same quarter last year, Philips recorded an income of EUR 358 million.
Due to this, the group is initiating immediate restructuring actions, with approximately EUR 300 million in charges expected.
Philips has initiated general productivity actions, including simplifying the organisation to streamline the way of working and reduce operating expenses. This includes an immediate reduction of around 4,000 positions globally across the organisation. The group expects severance and termination-related costs to be approximately EUR 300 million in the coming quarters.
Philips expects that these measures will result in annualised savings of approximately EUR 300 million. The group says in its quarter report that it will continue to review areas to further improve its supply operations, invest in quality, simplify the way of working and remove organisational complexity – which is expected to result in additional restructuring and associated costs in 2023.
In a phone interview with Reuters, CEO Roy Jakobs – who's just one week into the role – said that the layoffs will be concentrated in the United States and the Netherlands and primarily affects business lines with falling sales.
Looking ahead, Philips sees prolonged operational and supply challenges, a worsening macro-economic environment and continued uncertainty related to COVID-19 measures in China, which will be partly offset by the company's productivity and pricing actions. Consequently, Philips now expects a mid-single-digit comparable sales decline for the fourth quarter of 2022.