Philips Q1 Loss Widens, Backs FY24 View, Settles Respironics Litigation; Stock Surges

(RTTNews) - Shares of Philips Electronics NV surged around 47 percent in the morning trading in Amsterdam as well as around 44 percent in the pre-market activity on the NYSE after the Dutch consumer electronics giant announced Monday that Philips Respironics will pay a total of $1.1 billion to settle personal injury and medical monitoring litigation in the US. The company also announced a wider loss in its first quarter and maintained annual outlook.

Roy Jakobs, CEO of Royal Philips, said, "We started the year in line with our plan, with order intake growth outside China turning positive and strong margin improvement. Supported by key innovation launches and strong focus on our execution priorities, we remain confident in our performance improvement plan for 2024.... The approved consent decree and economic loss settlement, and now the resolution of the personal injury and medical monitoring litigation in the US, are significant milestones and provide further clarity on the way forward for Philips."

For the full year 2024, Philips continues to expect 3 percent-5 percent comparable sales growth and an adjusted EBITA margin of 11 percent to 11.5 percent.

Philips reiterated its confidence in delivering the 2025 plan, acknowledging that uncertainties remain.

Further, Philips said that the company and plaintiffs have reached an agreement, following mediation with Judge Diane Welsh, to settle personal injury litigation and a medical monitoring class action in the US, aiming to resolve uncertainties associated with litigation.

The settlement addresses claims filed in US courts and potential claims submitted to the census registry. Meanwhile, Philips and Philips Respironics do not admit any fault or liability, or that any injuries were caused by Respironics' devices.

Under the settlement, Philips Respironics will make the $1.1 billion payments in 2025, funded from Philips' cash flow generation. Consequently, a 982 million euros provision was recognized in the first quarter 2024.

In April 2024, Philips Respironics signed a court-approved consent decree and obtained final court approval for a previously announced economic loss settlement in the US, for which a provision was recognized in the first-quarter 2023.

Furthermore, Philips concluded an agreement with insurers to receive 540 million euros to cover Respironics recall-related product liability claims. This income is anticipated to be recognized in the second-quarter of 2024, with payment expected during the same year.

In its first quarter, net loss attributable to shareholders widened to 999 million euros or 1.10 euros per share from last year's net loss of 665 million euros or 0.72 euros per share.

The results were hurt by Respironics litigation provision and higher tax expense, partly offset by improved operational performance.

Philips' adjusted income from continuing operations attributable to shareholders for the first quarter was 235 million euros or 0.26 euros per share compared to 192 million euros or 0.21 euros per share in the prior year.

Sales for the first quarter declined 1 percent to 4.14 billion euros from 4.17 billion euros a year ago. Group comparable sales increased 2.4 percent, driven by growth in the Diagnosis & Treatment and Personal Health segments, partly offset by a decline in Connected Care.

Comparable order intake, meanwhile, was down 4%.

In Amsterdam, Philips shares were trading at 28.98 euros, up 46.8 percent.

In pre-market activity on the NYSE, the shares were trading at $30.31, up 43.9 percent.

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