Philips scraps 6000 jobs in efforts to improve profitability

Half of the job cuts will be made this year, the company said, adding that the other half will be realised by 2025.

The new reorganisation follows a plan announced last October to reduce its workforce by 5%, or 4,000 jobs, as it grapples with the fallout from the recall of millions of ventilators used to treat sleep apnoea.

This was over worries that foam used in the machines could become toxic.

The reduced workforce should lead to a low-teens profit margin, as measured by adjusted earnings before interest, taxes and amortisation (EBITA), by 2025, and a mid-to-high-teens margin beyond that year, with mid-single-digit comparable sales growth throughout.

“Philips is not capitalizing on the full potential of strong market positions as it faces a number of significant operational challenges,” new Chief Executive Officer Roy Jakobs said.

The simplified organisation should also improve patient safety and quality and supply chain reliability, he added.

The company will continue to invest 9% of sales in research and development, but will focus on “fewer, better resourced, and more impactful projects”, he said.

Amsterdam-based Philips also reported fourth-quarter adjusted EBITA of 651 million euros ($707.18 million), nearly stable from 647 million euros a year before.