How Can Philips CEO Roy Jakobs Turn Things Around?
Dutch medical and consumer technology firm Philips has slashed its annual sales-growth forecast from 5% to 1.5% in 2024, due to tepid demand from China.
Philips — perhaps still best known for its electric razors, electric toothbrushes, and irons — has suffered the biggest one-day fall in its share price in 26 years announcing its third-quarter results.
Philips' third-quarter sales of €4.38bn ($4.74 bn) were down from the €4.47bn reported this time last year.
Order intake decreased 2% in the third quarter due to the China slump, Philips announced.
The Amsterdam-based tech manufacturer has been blindsided by an anti-corruption campaign across China’s healthcare sector after the Asian nation began to scrutinise local medical-technology procurement. China has implemented strict domestic product requirements for many categories.
Uncertainty in China will remain in “the next few quarters,” Philips Chief Executive Officer Roy Jakobs told Bloomberg. “We see solid growth in the rest of the world.”
“Within a challenging macro environment, we remain focused on successfully executing our three-year plan to fully capture growth and margin expansion opportunities,” Jakobs said in a press release.
Group comparable sales were flat compared to the 11% growth in the same quarter last year, as demand from hospitals and consumers further deteriorated.
That said, Philips delivered growth in all other regions and from increased royalty income.
China remains a fundamentally attractive growth market for Philips in the long term, the company said, even if market conditions are expected to remain uncertain.
How CEO Roy Jakobs plans to turn Philips around
Despite the challenges, Philips CEO Roy Jakobs remains focused on executing his three-year plan to drive operational improvements and create sustainable value.
Philips' three-year plan, which covers the period from 2023 to 2025, has three core pillars:
Operational efficiency
Jakobs wants to implement a new operating model for more efficient ways of working. This includes reducing staff headcount, with 10,000 roles expecting to be lost by 2025.
Innovation
Jakobs and his Philips team are focused on AI-powered innovations to support healthcare systems. This includes developing new products such as next-generation ultrasound systems and mobile MRI systems.
Productivity initiatives
Philips says its productivity initiatives are on track and delivered savings of €188m in the third quarter: operating model savings of €54m, procurement savings of €58m, and other programmes savings €76m.
Since 2023, productivity initiatives under Jakobs’ leadership delivered savings of over €1.5 billion.
Who is Philips CEO Roy Jakobs?
Roy Jakobs was appointed CEO of Philips in October 2022, taking the helm during a challenging period following a major product recall of its breathing machines, including hospital ventilators.
“It had to be crystal clear from the moment I took charge that for me, safety was the number one priority,” Jakobs told Fortune.
Born in 1974, Jakobs joined Philips in 2010 and held various leadership positions before becoming CEO. His career spans multiple industries, including energy and scientific publishing.
Jakobs is known for driving digital transformations and focusing on innovation. As CEO, he has implemented a turnaround strategy for Philips emphasising patient safety, operational efficiency and AI-powered healthcare solutions.
“There is no single product in Philips that does not have AI,” Jakobs told Fortune. ““We can think about solving problems for our customers by bringing the latest technology to bear.”
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