Setbacks keep piling up for Philips. The company was forced to issue a warning on Wednesday due to disappointing figures. In addition, the costs for the recall of sleep apnea devices rise to almost three quarters of a billion euros.
The turnover for the past quarter was 4.9 billion euros, about 350 million euros lower than expected. a year earlier Philips achieved a turnover of 6 billion euros in the same period. The annual turnover is expected to amount to 17.2 billion euros.
Philips is suffering from shortages of electronic components such as computer chips. The pressure on shipping – such as shortages of sea containers – also means that Philips can make and sell fewer products than it would like.
Hospitals are also delaying the installation of Philips equipment. For example, due to staff shortages or the crowds due to corona care.
At the start of the pandemic, Philips still held up remarkably well. Turnover and profit rose sharply. The company benefited from selling far more ventilators and patient monitoring systems than usual. Last April, the stock market value of the company was still 45 billion euros (now 25 billion).
But shortly after, the company made a statement that would have major consequences. The company’s sleep apnea devices have been shown to pose health risks. In 2008 Philips bought Respironics for 4.3 billion euros, an American company that makes sleep apnea devices, among other things. Since then, Philips has been responsible for the machines. For Philips, these devices are a huge headache file. It is expected that 5.2 million devices will need to be replaced or repaired. It is a mega operation, the costs of which are increasing all the time. Half a billion had already been earmarked for this earlier, and an additional 225 million was added on Wednesday.
Sound-absorbing foam
People with sleep apnea suffer from breathing stops in their sleep. As a result, some are so tired that they develop other diseases or pose a danger in traffic. In principle, the machines are a godsend for users, were it not for the fact that they do not appear to be completely safe.
The problem lies in the sound-damping foam. It is a few grams of plastic foam (polyester-polyurethane) that should prevent the device from vibrating and making noise. The foam appears to be coming loose with a limited number of users. For example, particles of it were visible in the mouth-nose mask and it is expected that those particles have also been blown into the nose and mouth of people.
When the foam was examined, it was also found that gases are released from the foam in the first days of use. Philips now knows, based on even more research, that these gases (with the examined types of equipment) remain within the health standards.
Another study into the risk of health damage from the particles that are released is now underway. Philips wants to publish about this in the second quarter of this year.
The company has already tentatively suggested a link between the problems of particulate matter and devices that clean with harsh cleaning agents such as ozone and ultraviolet light. Especially in the US, such machines are sold, they are a kind of bins in which users can put their sleep apnea device. That’s easier than cleaning it yourself with soapy water every day. SoClean, one of the makers of such devices, has announced it will file a lawsuit against Philips over “false and misleading” allegations.
The link with these machines would only be part of the explanation, problems with the foam also exist (but to a lesser extent) in countries where such machines are not in demand.
Strict watchdog
Most users of the machines live in the US and the US health watchdog FDA has been particularly critical of Philips so far. In the autumn it visited the relevant American factory of Philips, requested documents and came up with strict findings. According to the FDA, Philips had had signals since 2015 that the sound-absorbing foam was not good, but those signals have not been properly valued.
Philips has said it has received a total of 1,254 complaints about the foam in recent years, which the company sees as a modest number given the many millions of devices sold. But the FDA believes that inventory missed a significant number of complaints due to the misuse of search terms. Philips employees are now manually going through several hundred thousand comments and complaints about the machines to count how many complaints are (or can be) related to the foam.
The question of whether Philips acted on time could become important in lawsuits. Philips has not yet set aside money for legal costs that will arise from the recall. That is too early to estimate, the company believes, lawsuits are still in their infancy.
In the US, in any case, it is a mass claim to which dozens of people are affiliated. Law firm SAP has held Philips liable in the Netherlands; that office stands up for Dutch people who have complaints – ranging from headaches to lung cancer – and want to know whether the machines have anything to do with it. It is estimated that fifty thousand Dutch people use the machines.
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