Philips Settles $1.1bn US Medical Recall Case

Royal Philips has reached a settlement in the US for its Respironics medical equipment recall case, agreeing to pay $1.1 billion. This development comes as the company reported its first-quarter results, with sales totaling €4.1 billion, marking a 2.4% increase. However, the order intake experienced a decline of 3.8%, primarily attributed to challenges in the Chinese market. The provision of €982 million for the Respironics case resulted in a quarterly loss of €824 million.

Despite the settlement, both Philips and Philips Respironics have not admitted any fault or liability, nor have they acknowledged that any injuries were caused by Respironics' devices. Additionally, an agreement worth €540 million has been reached with insurers to cover product liability claims related to the recall. This income is anticipated to be recognized in the second quarter of 2024, with payments expected to be made during the same year.

CEO of Royal Philips, Roy Jakobs, expressed confidence in the company's performance improvement plan for 2024, citing positive order intake growth outside China and significant margin improvement. He emphasized the company's commitment to patient safety and quality, highlighting the progress made in addressing the consequences of the Respironics recall. Jakobs reassured that the remediation of the sleep therapy devices is nearly complete, with test results indicating minimal harm to health.

Regarding the Chinese market, ongoing anti-corruption measures and subdued consumer demand continue to impact the industry. The government recently announced a subsidy program aimed at upgrading aged medical equipment in hospitals, which is expected to contribute to the gradual enhancement of the market. Despite these challenges, Philips maintains its outlook for 2024, anticipating a 3-5% growth in comparable sales for the full year.

As Philips navigates through the aftermath of the Respironics recall, the company remains focused on innovation and execution priorities to drive performance. The resolution of the recall-related litigation in the US, along with the settlement agreements, signifies significant milestones for Philips. Looking ahead, the company is poised to leverage its strengths and strategic initiatives to deliver sustainable growth and uphold its commitment to delivering high-quality healthcare solutions.