Part shortages and a ventilator recall hurt Philips’ Q4 profitability

Philips said on Wednesday that it expects its fourth-quarter core profit to decrease by roughly 40% to around 650 million euros ($739.25 million), due to global scarcity of electronic components and the aftermath of a huge ventilator recall.

Philips said in its profit warning that comparable sales declined 10% year on year to 4.9 billion euros, owing to a shortage of parts, a lack of freight capacity, and consumers deferring purchases.

Philips’ sales were roughly 350 million euros lower than planned, resulting in a 1% drop in comparable sales in 2021, despite the company’s guidance for a slight gain.

The supply-chain issues exacerbated concerns about the ventilator recall, for which Philips said it had made a new provision of 225 million euros because more devices needed to be serviced than originally anticipated.

Philips set aside 500 million euros for the operation last year, estimating that it would have to repair up to four million ventilators and breathing devices around the world due to a polyurethane foam component that could degrade and become poisonous.

Since the recall was issued in April of last year, Philips stock has lost about a third of its value.

On January 24, the corporation will release its full quarterly and annual results.

(1 dollar = 0.8793 euros)