Cost savings drive Philips' profit beat, flags insurance payout
Adds order intake in paragraph 6, China sales paragraph 7
By Stephanie Hamel and Charlotte Eugenie Yvette Bawol
July 29 (Reuters) -Philips PHG.AS reported second-quarter results that exceeded analysts' expectations on Monday thanks to cost savings, partly from job cuts, and flagged a big insurance payout linked to liability claims, sending its shares more than 10% higher.
The Dutch medical device maker's adjusted earnings before interest, tax and amortisation (EBITA) rose 9.3% to 495 million euros ($537.4 million) in the quarter, beating the 433 million euros expected by analysts polled by the company.
Since late 2022, Philips has said it would slash up to 10,000 jobs in an attempt to restore profitability and improve product safety.
"We announced that we would reduce 10,000 roles. We did 8,000 in the first year, 2023. This year, we have reduced 1,000 roles," said CEO Roy Jakobs in a press call. "You see the benefits coming back in the quarter."
The Amsterdam-based group said it saved 195 million euros between April and June through such productivity improvements.
Quarterly order intake, an indicator of future sales, returned to growth for the first time in two years with a 9% year-on-year rise, bolstered by the North American market, Philips said.
Sales rose 2% to 4.5 billion euros in the same period, in line with expectations, although Philips said the growth was partially upset by a decline in China.
The company also received 538 million euros of insurance income from liability claims related to its recalled Respironics products, not accounted for in the adjusted figures.
Philips said during the first quarter it had agreed to pay $1.1 billion to settle all personal injury claims filed in the U.S. related to Respironics breathing devices and ventilators.
For three years, it has grappled with the fallout of its recall of millions of devices, because of concerns that foam used in them could degrade and become toxic, carrying potential cancer risks.
The company reiterated its financial targets for the rest of the year.
($1 = 0.9211 euros)
Reporting by Stéphanie Hamel and Charlotte Bawol in Gdansk; Editing by Milla Nissi
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