Philips to cut 4,000 jobs globally; CEO says ‘difficult, but necessary decision’
Dutch health technology company Royal Philips NV on Monday (October 24) announced that it will cut 4,000 jobs globally with the new CEO describing the move as a “difficult, but necessary decision”.
While announcing third-quarter results, Philips said the firm’s performance in the quarter was impacted by operational and supply challenges, inflationary pressures, the COVID situation in China and the Russia-Ukraine war.
The group sales amounted to euros 4.3 billion, with a 5% comparable sales decline, in line with the update provided on October 12, 2022, the company said in a statement.
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“Operating cash flow was an outflow of euros 180 million, mainly due to lower cash earnings, increased inventories and higher consumption of provisions. Comparable order intake declined 6% on the back of strong 47% growth in Q3 2021. The book-to-bill ratio was 1.18, and the equipment order book grew further in the quarter,” it added.
On reducing its workforce, it said, “Philips has initiated general productivity actions, including simplifying the organisation to streamline the way of working and reduce operating expenses. This includes an immediate reduction of around 4,000 positions globally across the organisation, subject to consultation with the relevant workers councils and social partners, with severance and termination-related costs expected to be approximately euros 300 million in the coming quarters. The associated cost savings are expected to amount to annualised savings of approximately euros 300 million.
“Philips will continue to review areas to further improve its supply operations, invest in quality, simplify the way of working and remove organisational complexity, which is expected to result in additional restructuring and associated costs in 2023.”
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Roy Jakobs, CEO of Royal Philips, said, “We face multiple challenges and our Q3 2022 performance reflects this.”
To improve productivity and increase agility, he said among the steps taken include “the difficult, but necessary decision to immediately reduce our workforce by around 4,000 roles globally, which we do not take lightly and will implement with respect towards impacted colleagues. These initial actions are needed to start turning the company around in order to realise Philips’ profitable growth potential and create value for all our stakeholders.”
Jakobs was appointed as President and CEO of Royal Philips on October 15. Currently, the 130-year-old company Philips has employed nearly 80,000 people in 100 countries.
