Philips scraps 6,000 jobs in drive to improve profitability

Half of the job cuts will be made this year, while the other half will be realised by 2025

Dutch health technology company Philips said on Monday it would scrap 6,000 jobs to restore its profitability following a recall of respiratory devices that knocked off 70% of its market value.

Half of the job cuts will be made this year, the company said, adding that the other half will be realised by 2025.

The new reorganisation comes on top of a plan announced last October to reduce its workforce by 5%, or 4,000 jobs, as it grapples with the fallout from the recall of millions of ventilators used to treat sleep apnoea over worries that foam used in the machines could become toxic.

The reduced workforce should lead to a low-teens profit margin (adjusted EBITA) by 2025, and a mid-to-high-teens margin beyond that year, with mid-single-digit comparable sales growth throughout.

"Philips is not capitalising on the full potential of strong market positions as it faces a number of significant operational challenges," new Chief Executive Officer Roy Jakobs said.

The simplified organisation should also improve patient safety and quality and supply chain reliability, he added.

Amsterdam-based Philips also reported fourth-quarter adjusted earnings before interest, taxes and amortisation (EBITA) of 651 million euros ($707.18 million), nearly stable from 647 million euros a year before.

Analysts in a company-compiled poll on average had predicted core profit would drop to 428 million euros.