At Philips, the renewed provision overshadows the good quarterly figures

At the Dutch medical technology group Philips, the renewed provision overshadows the good quarterly figures. On a comparable basis, sales increased by nine percent to 4.2 billion euros, mainly because business with consumer products such as electric toothbrushes was booming. The operating result (Ebita) rose by more than a third to 532 million euros and exceeded expectations. Of this, however, 250 million euros go into compensation for allegedly harmful ventilators in the case of sleep disorders. To reassure shareholders, Philips announced a new share buyback program. In June, the Dutch recalled up to four million devices designed to prevent breathing pauses in sleep (sleep apnea). A foam used in them could become carcinogenic over time. CEO Frans van Houten said Philips was already producing replacement and repair kits in anticipation of regulatory approval. The write-offs for the recall add up to half a billion euros. The net profit attributable to the shareholders fell to 150 million euros. The US health authority FDA had spoken of 1200 complaints and 100 damage reports in the past week. It gives the callback the highest priority level. The Philips boss said the company wanted to look for evidence of the dangers of the ventilators before the previously announced class actions in the United States would go to court. Regardless of this issue, Philips remains with its forecast of low to mid single digit sales growth for the full year. The operating return on sales (Ebita margin) will only improve by 0.6 percentage points - that is the lower end of the range mentioned so far. The group also announced that it would buy back its own paper for 1.5 billion euros. At the current price, the group could acquire four percent of the shares in the next three years. The current program in the same volume expires at the end of the year. Nevertheless, the Philips share fell by more than two percent on Monday. The business figures were received with disappointment on the stock exchange. The Philips shares became cheaper. Berenberg pointed out that the Philips share had been significantly below the market average in the quarter to date. There are fears that the problem with the devices will lead to legal disputes. Apart from that, Philips' business is proving to be resilient and the announcement of a share buyback shows confidence in the future. Although a higher provision than the currently available total of 500 million euros could be necessary for legal disputes, the risk is currently manageable. A "Monsanto" like the one at Bayer is unlikely.