• Comparable Sales Growth: 1% in Q4 and full year 2024.
• Orders Growth: 2% in Q4, driven by strong growth in the US and growth regions.
• Adjusted EBITA Margin: 13.5% in Q4 and 11.5% for the full year, a 90 basis point improvement from 2023.
• Free Cash Flow: EUR 1.3 billion in Q4 and EUR 0.9 billion for the full year.
• Productivity Savings: Over EUR 1.7 billion in the last two years.
• Dividend Proposal: EUR 0.85 per share, payable in shares or cash, with a maximum of 50% in cash.
• Net Income Decrease: EUR 371 million in Q4 due to higher tax expenses and restructuring charges.
• Adjusted Diluted EPS Growth: 35% in Q4 and 17% for the full year.
• Leverage Ratio: 1.8 times net debt-to-adjusted EBITDA.
• Diagnosis and Treatment Sales: Decreased 1% in Q4, increased 1% for the full year.
• Connected Care Sales: Increased 7% in Q4, 2% for the full year.
• Personal Health Sales: Decreased 2% in Q4, 1% for the full year.

• Warning! GuruFocus has detected 5 Warning Signs with PHG.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Koninklijke Philips NV (NYSE:PHG) reported strong profitability improvement and cash flow for Q4 and the full year 2024.
• The company achieved significant milestones in resolving the Respironics recall, including final approvals for medical monitoring and personal injury settlements.
• Adjusted EBITA margin improved by 90 basis points to 11.5% for the full year, with strong free cash flow generation.
• More than 50% of sales stem from new and upgraded products launched in the last three years, showcasing successful innovation.
• The company proposed a dividend of EUR0.85 per share, payable in shares or cash, reflecting a strong balance sheet and shareholder value return.

Negative Points

• Comparable sales and orders grew only 1% for the full year, with significant declines in China impacting overall performance.
• High restructuring and other charges were incurred due to the Respironics recall and company-wide changes.
• Net income decreased by EUR371 million in the quarter, mainly due to higher tax expenses and restructuring charges.
• The company expects a mid- to high single-digit decline in China sales in 2025, impacting overall growth.
• Incidentals and restructuring costs remain high, with ongoing efforts to reduce them over time.

Q & A Highlights

Q: Could you comment on your top-line guidance for the Rest of the World, excluding China, and the additional cost savings? A: Roy Jakobs, CEO: We see uncertainty globally but expect continued strong CapEx environment outside China, driving orders and growth. We are expanding our productivity plan by EUR500 million, focusing on cost activities, role reduction, and procurement savings while maintaining innovation spend, especially in AI.

Q: How are you positioned in the Diagnosis & Treatment (D&T) market, particularly in China, and any updates on the DOJ timing? A: Roy Jakobs, CEO: In China, we face challenges with slower procurement but see momentum in MR and ultrasound. We are competitive with our helium-free MR and new ultrasound suite. Regarding the DOJ, we are in collaboration but have no timing updates.

Q: Can you explain the drivers of high single-digit order growth in Q4 and the margin bridge for 2025? A: Roy Jakobs, CEO: Order growth was driven by strong performance in ITT, MR, and ultrasound. Charlotte Hanneman, CFO: Margin expansion will come from high-margin business growth, improvements in DI, Enterprise Informatics, and S&RC, and increased productivity savings.

Q: What are the dynamics in China between consumer and equipment sales, and is your long-term margin target still valid? A: Roy Jakobs, CEO: The consumer segment in China is experiencing the highest impact, with double-digit declines. We see some improvement in health systems. Charlotte Hanneman, CFO: We remain confident in our long-term margin expansion plans and will discuss them at the upcoming Capital Markets Day.

Q: Can you provide an update on patient monitoring trends and Respironics' performance outside the US? A: Roy Jakobs, CEO: Demand for patient monitoring remains strong, with positive order intake growth. In Respironics, we are competitive outside the US, with new mask launches and FDA approvals, contributing to improved profitability in 2024.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.