Philips' Second-Quarter Results 2024 (2024)

Second-quarter highlights

• Group sales amounted to EUR 4.5 billion, with comparable sales growth of 2%

• Comparable order intake increased by 9%

• Income from operations EUR 816 million, including EUR 538 million insurance income*)

• Adjusted EBITA margin increased to 11.1% of sales

• Operating cash inflow of EUR 89 million, with a free cash outflow of EUR 64 million
  

Roy Jakobs, CEO of Royal Philips:

“I am encouraged by our return to order intake growth this quarter, primarily driven by North America. Within a challenging macro environment we achieved strong margin improvement, supported by our productivity program, solid operational cashflow due to improved working capital management and comparable sales growth in line with our plan.

Performance improvement was driven by progress on our execution priorities and industry-leading innovations. These included FDA-cleared AI tools within our next-generation cardiovascular ultrasound platform to increase automation and productivity.

We continue to focus on enhancing execution, improving end-to-end supply chain resilience and increasing agility and productivity through simplifying our operating model. Patient safety and quality remains our number one priority.”

Group and segment performance

Group comparable sales increased 2%, on the back of strong growth in Q2 2023. Growth in mature and growth geographies was partly offset by the decline in China. Comparable order intake grew 9% in the quarter and 3% in the first half of 2024, reflecting quarterly unevenness in the order-intake pattern. China remains a fundamentally attractive growth market with strong underlying demand while the government’s anti-corruption measures continued to impact short-term hospital order lead times.

Adjusted EBITA margin for the group increased to 11.1% compared with 10.1% in Q2 2023, with improvement across all businesses. Free cash outflow was EUR 64 million and included payments of EUR 415 million in connection with the Respironics economic loss settlement in the US, partly offset by initial receipt from insurers of EUR 150 million.

In the quarter S&P Global Ratings and Moody’s Ratings upgraded their credit ratings outlook for Philips to stable. Philips now has stable outlooks for its strong credit ratings across all main global credit rating agencies. The relevant reports and additional credit ratings information can be found here.

Diagnosis & Treatment comparable sales increased 4%, on the back of double-digit growth in Q2 2023, with growth across Image Guided Therapy and Precision Diagnosis. Adjusted EBITA margin improved to 12.2%, mainly driven by improved sales, pricing and productivity measures.

Connected Care comparable sales increased 2%, driven by strong growth in Enterprise Informatics, while Monitoring comparable sales growth was flat on the back of strong double-digit growth in Q2 2023. Adjusted EBITA margin improved to 8.8%, mainly driven by productivity measures and pricing.

Personal Health comparable sales increased 2% globally, driven by sales growth outside of China. Adjusted EBITA margin improved to 16.9%, mainly driven by operational improvements and productivity measures.

Productivity

Total productivity savings of EUR 195 million in the quarter: operating model savings of EUR 57 million, procurement savings of EUR 71 million, and other programs' savings of EUR 67 million.

Outlook

Philips reiterates its confidence in delivering the 2025 plan, acknowledging that uncertainties remain. For the full year 2024, Philips continues to expect 3-5% comparable sales growth, an Adjusted EBITA margin of 11-11.5%, and free cash flow of EUR 0.9-1.1 billion.

The outlook excludes the potential impact of the ongoing Philips Respironics-related legal proceedings, including the investigation by the US Department of Justice.

Customer, innovation and ESG highlights

• Philips signed multi-year partnerships for monitoring and image-guided therapy with several university hospitals in the Netherlands and will provide patient monitors for the new Grand Hôpital de Charleroi in Belgium, as well as roll out its ePatch and AI-driven analytics platform across 14 hospitals in Spain.

• Philips secured customer wins in the US including a major multi-year strategic partnership with Bon Secours Mercy Health, one of the country’s largest health systems, standardizing innovative patient monitoring solutions across its 49 hospitals, driving better patient outcomes and reducing burdens on staff.

• Reinforcing its #1 global position in cardiovascular ultrasound, Philips is launching its next-generation AI-enabled cardiovascular ultrasound platform with new FDA-cleared AI tools integrated into the company’s EPIQ CVx and Affiniti CVx ultrasound system to advance cardiovascular imaging and increase automation and productivity.

• Demonstrating its innovation leadership in minimally invasive treatments, Philips announced the first implant of the Duo Venous Stent System following pre-market approval from the US FDA. The system’s flexible design allows clinicians to better treat patients with deep venous disease.

• Philips unveiled a series of consumer health innovations in the Greater China market, meeting key consumer needs across the region. This includes the launch of the first medical-grade Philips Lumea 8000 Series IPL hair removal device with cooling technology, the limited-edition Transformers-themed 5000, 7000 and 9000 series shavers, and the new Sonicare 5300 power toothbrush.

• S&P recognized Philips as a leader in ESG as one of the first ‘Light green’ scores in their newly launched Climate Transition Assessment. Philips was also included in the ‘FTSE4Good’ ESG index, and NGO Health Care Without Harm confirmed that Philips meets its Climate Excellence Standard for Health Care Suppliers.

• Philips won 43 Red Dot design awards, including special recognition for LumiGuide, the company’s 3D medical device guidance solution that’s paving the way for radiation-free minimally invasive surgery.
  

Capital allocation

In the second quarter, Philips completed the EUR 1.5 billion share repurchase program for capital reduction purposes that was announced on July 26, 2021, and canceled the 4,437,164 shares acquired this year. Philips also distributed a dividend of EUR 0.85 per common share in the form of shares only, resulting in the issuance of 30,860,582 new common shares. Following the distribution of dividend and the cancellation of shares, the total number of issued shares amounts to 939,939,384 common shares. More information is available via this link.

*) Related to Respironics product liability claim.

Conference call and audio webcast

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