Philips sets €575 mil. aside for respirator lawsuits; Suffered €583 mil. loss in Q1

Philips has set aside 575 million euros to cover the potential cost resulting from lawsuits and settlements in the United States over faulty respiratory devices. The announcement was revealed on Monday as part of the company’s quarterly results, which showed a 583 million euro operating loss despite a 6 percent increase in sales, taking sales up to 4.2 billion euros.

Philips had to recall millions of sleep apnea devices and ventilators due to potential health risks posed to users. If the sound-dampening foam in the devices made contact with certain cleaning materials, the foam could crumble, and users could breathe it in. “This quarter, Philips Respironics recorded a EUR 575 million provision in connection with the anticipated resolution of the economic loss class action, an important step in addressing the litigation related to the recall,” the company said.

The company said it would release data about the degrading foam in the second quarter. About 95 percent of affected machines have been replaced. “The remaining 5% of the registered devices are primarily ventilators, for which Philips Respironics is fully focused on working towards a solution.”

Last year, Philips expected the recall and resulting lawsuits to cost it at least 1.3 billion euros. The medical tech company is also facing a massive lawsuit from investors holding Philips liable for the around 16 billion euros in losses they suffered when the company’s stock price plummeted due to the recall. In October, Philips announced a reorganization, scrapping some 10,000 jobs worldwide, including at least 1,100 in the Netherlands.

Philips saw its turnover increase to around 4.2 billion euros in the first quarter of 2023. The department that makes ultrasound machines and scanners did particularly well due to fewer problems in the supply chains. Turnover on the devices hospitals use to monitor patients also decreased. The continuing problems with the sleep- and breathing products depressed the results. Philips also sold fewer consumer health products like electric toothbrushes and shavers.

The company’s profit before interest payments, taxes, and depreciation grew to 359 million euros in Q1 of 2023. But after all the depreciation, Philips suffered a net loss of 583 million euros.