Tariffs cost Philips 300m euros

The ongoing US-China trade war is expected to have a significant impact on Royal Philips, with the company estimating a €300 million reduction in profits despite implementing substantial tariff mitigations. The latest financial data from the Dutch medical electronics giant indicates a one percentage point decrease in earnings for the year, equivalent to 100 basis points, directly attributed to the tariffs. Additionally, the company is bracing for a challenging business environment in China, where sales have declined by over 10%.

Addressing the uncertainties brought about by the macroeconomic landscape, Roy Jakobs, the CEO of Royal Philips, emphasized the importance of focusing on controllable factors. Jakobs stated, “We are improving our supply chain agility, taking decisive cost actions to mitigate financial impact where possible, and ensuring we can continue to serve our customers and consumers.” These strategic measures are aimed at navigating the complexities arising from the trade tensions.

• As part of its strategic realignment, Philips has divested its MEMS foundry business, now operating under the name Xiver.

Despite the challenges posed by the trade war and other financial obligations, Royal Philips anticipates that its free cash flow will remain slightly positive for the full year. The company recently disbursed €1.025 billion for Philips Respironics recall-related medical monitoring and personal injury settlements in the US, excluding ongoing legal proceedings, such as the investigation by the US Department of Justice.

In the first quarter of the year, Royal Philips reported sales of €4.1 billion, reflecting a 2% decline in comparable sales growth primarily attributed to the market conditions in China. To streamline operations and enhance efficiency, the company is undergoing a restructuring process aimed at reducing costs by €800 million, which includes the elimination of 6,000 jobs announced at the beginning of 2023. Noteworthy cost-saving initiatives have already yielded positive results, with productivity initiatives contributing €147 million in savings during the quarter.

Since the inception of its cost-cutting measures, Royal Philips has successfully reduced costs by €1.9 billion through various productivity initiatives. The company remains committed to enhancing operational efficiency and adapting to the evolving economic landscape to sustain its long-term growth and profitability.