FX.co ★ Philips Q1 Loss Widens, Backs FY24 View, Settles Respironics Litigation; Stock Surges

Philips Electronics NV's shares skyrocketed about 47% during morning trading in Amsterdam and close to 44% during pre-market activity on the New York Stock Exchange. This comes after the Dutch electronics giant confirmed that Philips Respironics would shell out $1.1 billion to conclude personal injury and medical monitoring lawsuits within the United States. The firm also reported a wider loss for the first quarter yet remained confident about its annual outlook.

According to Royal Philips' CEO, Roy Jakobs, the firm had started the year positively, boasting growth in order intake outside China and substantial margin enhancement. Coupled with significant introductions of groundbreaking innovations and a strong emphasis on executing their planned strategies, the firm remains optimistic about its performance development plan for 2024. In particular, the approved legal agreements on financial losses and the resolution of the medical monitoring and personal injury lawsuits in the US have provided clearer direction for Philips' future.

The company retains its outlook for a 3% to 5% rise in comparable sales and an adjusted EBITA margin of 11% to 11.5% for the full year 2024. Philips also reaffirmed its commitment to carrying out its 2025 plan, despite certain uncertainties.

Additionally, Philips and the plaintiffs have settled the personal injury and medical monitoring class-action lawsuits in the US following mediation with Judge Diane Welsh. This settlement targets to clear all uncertainties related to legal proceedings. It incorporates lawsuits filed in US courts and potential claims from the registry. However, neither Philips nor Philips Respironics concede any fault or liability, or that any injuries resulted from the use of Respironics's devices.

Philips Respironics will fund the agreed $1.1 billion compensation from Philips' cash flow, with payments due in 2025. As a consequence, Philips recognized a provision of 982 million euros in the Q1 of 2024.

In April 2024, Philips Respironics signed a court-approved consent decree and gained final judicial approval for an economic loss settlement earlier announced in the US, triggering a provision acknowledged in the first quarter of 2023.

Philips also reached out to insurers and managed to secure 540 million euros to cover product liability claims connected to a Respironics recall. Philips anticipates recognizing this income in the second quarter of 2024, with payment expected to be made within the same year.

During the first quarter, the firm's net loss attributable to shareholders enlarged to 999 million euros per share, up from a net loss of 665 million euros per share last year. The amplified loss was due to higher tax expense and provisions related to Respironics litigation, partially balanced by refined operational performance.

Adjusted income from ongoing operations attributable to shareholders for the initial quarter was 235 million euros per share, a slight upward shift compared to 192 million euros per share in the previous year.

Sales for the first quarter dropped by 1% to 4.14 billion euros, from 4.17 billion euros the preceding year. Group equivalent sales ascended by 2.4%, spurred by growth in the Personal Health and Diagnosis & Treatment segments, somewhat offset by a drop in Connected Care. All the while, similar order intake retreated by 4%.

Philips shares were traded at 28.98 euros in Amsterdam, a rise of 46.8%, while pre-market activity on the NYSE listed the shares at $30.31, an ascent of 43.9%.