Philips reported second-quarter results on Monday that exceeded analysts’ expectations, driven by cost savings from job cuts and insurance income related to Respironics product liability claims. This positive news sent the company’s shares soaring by more than 7% in early trading.
The Dutch medical device maker’s earnings before interest, tax, and amortization (EBITA) rose by 9.3% to 495 million euros ($537.4 million) in the second quarter, surpassing the 433 million euros forecasted by analysts polled by the company. The adjusted EBITA margin increased to 11.1% of sales, compared to 10.1% in the same period last year, beating analysts’ expectations of a decline to 9.7%.
Philips has been working to restore profitability and improve product safety since late 2022 by cutting up to 10,000 jobs. “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 during a press call. “You see the benefits coming back in the quarter.”
Between April and June, the Amsterdam-based group saved 195 million euros through productivity improvements. Additionally, it received 538 million euros in insurance income from liability claims related to its recalled Respironics products. Earlier this year, Philips agreed to pay $1.1 billion to settle all personal injury claims in the U.S. connected to its Respironics breathing devices and ventilators.
Philips has been dealing with the repercussions of recalling millions of devices over the past three years due to concerns that foam used in them could degrade and become toxic, posing potential cancer risks.
Quarterly sales rose by 2% year-on-year to 4.5 billion euros, aligning with expectations. Philips reiterated its financial targets for the remainder of the year.
