Philips delivers growth, improved profitability, and strong cash flow in Q4 and 2024; continues solid execution of its three-year plan

Rhea-AI Summary

Philips reported its Q4 and 2024 financial results, showing growth and improved profitability. Key highlights include:

Sales reached EUR 18.0 billion in 2024 with 1% comparable growth, despite significant decline in China. The company achieved an Adjusted EBITA margin increase of 90 basis points to 11.5% in 2024, and generated EUR 906 million in free cash flow.

Notable developments include finalization of Respironics recall-related settlements in US, maintained dividend at EUR 0.85 per share, and increased productivity savings target from EUR 2 billion to EUR 2.5 billion for 2023-2025. For 2025, Philips projects 1-3% comparable sales growth, with China expecting mid to high-single-digit decline.

The company strengthened its innovation pipeline with FDA clearances for new CT systems and expanded collaboration with Amazon Web Services for cloud-based diagnostics solutions.

Positive

• 1% comparable sales growth in 2024, reaching EUR 18.0 billion
• Adjusted EBITA margin increased 90 basis points to 11.5%
• Strong free cash flow of EUR 906 million in 2024
• Productivity savings target increased to EUR 2.5 billion for 2023-2025
• Resolution of significant US litigation relating to Respironics recall
• FDA clearances for new CT systems and expanded AWS collaboration

Negative

• Double-digit decline in China across consumer and health systems
• Expected mid to high-single-digit decline in China for 2025
• USD 1.1 billion cash outflow expected in H1 2025 for Respironics settlements
• Mid-single-digit sales decline projected for Q1 2025
• Personal Health segment showed 2% comparable sales decrease in Q4

Insights

Financial Analyst

Philips' Q4 and full-year 2024 results demonstrate operational resilience amid significant headwinds. The 1% comparable sales growth masks a notable divergence in regional performance - solid 5% growth in most markets was substantially offset by double-digit declines in China, highlighting both opportunities and risks in geographic diversification.

The 90 basis point improvement in adjusted EBITA margin to 11.5% is particularly impressive given the challenging environment. This expansion stems from successful execution of productivity initiatives, which have already delivered EUR 1.7 billion in savings since 2023. The increased target of EUR 2.5 billion in savings through 2025 suggests further margin expansion potential, though careful monitoring of potential impact on innovation capabilities is warranted.

The balance sheet shows marked improvement with strong cash generation - EUR 1,285 million free cash flow in Q4 alone. However, the upcoming USD 1.1 billion Respironics settlement payment will impact 2025 cash flows significantly. The maintained dividend at EUR 0.85 with a cash/share option demonstrates management's confidence in financial stability while preserving flexibility.

The Connected Care segment's 7% growth and 15.0% margin in Q4 signals successful recovery post-Respironics issues. Meanwhile, Diagnosis & Treatment's performance (-1% growth but 12.1% margin) reflects market share resilience despite China headwinds.

Looking ahead, the 2025 guidance of 1-3% growth and 30-80 bps margin improvement appears conservative, factoring in continued China weakness. The emphasis on cloud-based diagnostics and AI partnerships positions Philips well in the evolving healthcare technology landscape, though execution in transforming innovation into profitable growth remains key.

February 19, 2025


Full Year and Q4 Group performance highlights

• Sales of EUR 18.0 billion in 2024, comparable sales growth 1%; EUR 5.0 billion in Q4, comparable sales growth 1%, despite double-digit decline in China
• Comparable order intake increased 1% in 2024; up 2% in Q4, despite double-digit decline in China
• Income from operations was EUR 529 million in 2024; EUR 199 million in Q4
• Adjusted EBITA margin increased 90 basis points to 11.5% of sales in 2024; up 60 basis points to 13.5% in Q4
• Net cash flow from operating activities was EUR 1,569 million in 2024; EUR 1,459 million in Q4
• Free cash flow was EUR 906 million in 2024; EUR 1,285 million in Q4
• Finalized Philips Respironics recall-related medical monitoring and personal injury settlements in US
• Proposed dividend maintained at EUR 0.85 per share, in shares or cash
• Increased productivity savings target for 2023-2025 from EUR 2 billion to EUR 2.5 billion, EUR 800 million in 2025
• Outlook for 2025 published

Roy Jakobs, CEO of Royal Philips:
“We delivered better care for more people by enhancing execution and focusing on driving improvements in profitability and cash flow, as well as order and sales growth. We strengthened our fundamentals and resolved significant US litigation relating to the Respironics recall.

Despite double-digit declines in demand in both consumer and health systems in China, we returned to positive order growth and continued to drive margin expansion and cash-flow generation. With our strong balance sheet we are pleased to offer shareholders the option to receive the dividend in shares or cash.

Within a persistently challenging macro environment, our focus remains on executing our value creation plan, bringing industry-leading innovations to the market and driving a simplified, more agile operating model. We strengthened our team and culture of impact with care, with patient safety and quality as our number one priority.

Looking ahead, we remain confident in our long-term plan and will continue to work closely with customers as we build on our strong innovation pipeline and focus on execution excellence to drive profitable growth.”

Group and segment performance

Comparable order intake increased 2% in the quarter, with strong performance in the North America and Growth geographies, partly offset by a double-digit decline in demand in China. Group comparable sales increased 1% in the quarter, with solid growth of 5% in the rest of the world, largely offset by a double-digit decline in China, where market conditions are expected to remain uncertain.

Adjusted EBITA increased 60 basis points to 13.5% in Q4, driven by operational improvements and productivity measures. Free cash flow increased to EUR 1.3 billion in the quarter, driven by Respironics insurance proceeds, partly offset by phasing in working capital.

For the full year, comparable order intake and sales increased 1%, up 4% excluding China. Adjusted EBITA increased 90 basis points to 11.5% and free cash flow was EUR 0.9 billion.

Diagnosis & Treatment comparable sales decreased 1% in Q4, due to a double-digit decline in China, offsetting solid growth elsewhere. Adjusted EBITA margin was 12.1% in Q4, driven by productivity, mix and pricing. For the full year, the Diagnosis & Treatment businesses recorded 1% comparable sales growth, on the back of 11% growth in 2023, and an Adjusted EBITA margin of 11.6%.

Connected Care comparable sales increased 7% in Q4, on the back of a low comparison base. Adjusted EBITA margin was 15.0% in Q4, in line with last year. For the full year, the Connected Care businesses recorded a 2% comparable sales increase and an Adjusted EBITA margin of 9.6%.

Personal Health comparable sales decreased 2% in Q4 due to a double-digit decline in China, more than offsetting a strong performance elsewhere. Adjusted EBITA margin was 18.0% in Q4, including lower sales in China. For the full year, Personal Health comparable sales decreased 1% and the Adjusted EBITA margin was 16.7%.

Innovation highlights

• FDA clearance of the Philips CT 5300, featuring AI-based reconstruction software to reduce radiation dose and improve image quality, and of the Philips Spectral CT 7500 RT, enabling personalized radiation therapy planning.
• Expansion of Philips' strategic collaboration with Amazon Web Services to offer an integrated diagnostics portfolio in the cloud, such as AI advanced visualization solutions that unify diagnostic workflows, improve access to critical insights, and drive better outcomes across clinical specialties, including radiology, digital pathology and cardiology.
• Philips and Mayo Clinic will collaborate using their proprietary AI technologies to target breakthroughs in ease-of-use and efficiency to bring high- quality diagnostic MRI and better care to patients with heart disease. Philips also announced partnerships with Hôpital Fondation Rothschild in Paris for imaging platforms and health informatics and with Erasmus Medical Center in Rotterdam for ultrasound solutions and services.
• Together with its clinical partners, Philips continues to advance minimally invasive procedures to treat patients based on new technologies and methods, enrolling the first patients in the THOR clinical trial, which integrates two critical peripheral artery disease treatments into a single device. Achieving a significant milestone in the WE-TRUST clinical trial, Philips has now included one-third of the targeted 564 patients to evaluate how a new imaging method could impact workflow and improve outcomes for stroke patients.
• Philips renewed its mid-range Sonicare electric toothbrushes, Series 5000-7000, in Europe and launched new localized products in China, including the On-The-Go Compact Shaver, which earned a top ranking for new product sales from leading online retailer JD.com.
• Peer-reviewed life cycle assessment results were published in the leading sector publication Radiology, following close collaboration between the Vanderbilt University Medical Center radiology department and Philips. The analysis underscores the importance of joining forces to tackle significant operational and sustainability challenges, such as reducing the cost of care and reducing carbon footprint.
  
  

Leadership and culture

Philips is strengthening its culture of impact with care, acting with integrity with patient safety and quality as the number one priority. Philips continues to simplify its operating model, with end-to-end Businesses holding single accountability, supported by leaner central Functions and strong customer-facing organizations in the Regions and countries.

Since the start of the three-year plan, 75% of executive hires across the company have come from a health technology background. Recent appointments to the Executive Committee include leaders for Precision Diagnosis, International Region, and Greater China Region, plus a new Chief Financial Officer on the Board of Management.

Productivity

Productivity initiatives are ahead of plan and delivered savings of EUR 163 million in Q4: operating model savings of EUR 47 million, procurement savings of EUR 56 million, and other programs savings of EUR 59 million. Since 2023, productivity initiatives have delivered savings of more than EUR 1.7 billion.

Philips is raising its productivity savings target for the 2023-2025 period from EUR 2 billion to EUR 2.5 billion, driven by cost efficiencies and further simplification of its operating model, with EUR 800 million to be delivered in 2025.

Outlook

Philips remains focused on successfully executing its three-year plan to drive operational improvements and create value with sustainable impact, within a challenging macro environment. For 2025, Philips expects:

• 1%-3% comparable sales growth, including a mid- to high-single-digit decline in China
• Adjusted EBITA margin increasing 30-80 bps to 11.8%-12.3%
• Free cash flow before payment of the USD 1.1 billion cash-out relating to the US medical monitoring and personal injury settlements will be at the lower end of the range of EUR 1.4 billion to EUR 1.6 billion. Net of this cash-out, free cash flow will be EUR 0.4 billion to EUR 0.6 billion.

We anticipate comparable sales growth to be back-end-loaded in the year, with a mid-single-digit decline in Q1 mainly due to lower demand in China and royalties phasing, with correspondingly lower Adjusted EBITA margin.

The outlook includes the impact of the recently announced US-China tariffs. It excludes ongoing Philips Respironics-related legal proceedings, including the investigation by the US Department of Justice.

Respironics Recall

In December 2024, Philips Respironics obtained final approval for the recall-related medical monitoring settlement, and in February 2025, the personal injury settlement became final following a successful registration process. The aggregate amount of the settlements is USD 1.1 billion; payment is expected in the first half of 2025.

Capital allocation

Philips intends to submit to the 2025 Annual General Meeting of Shareholders a proposal to declare a dividend of EUR 0.85 per common share, in shares or cash at the option of the shareholder, with a maximum of 50% of the total dividend distribution to all shareholders being available for payment in cash. If more than 50% of the total dividend is requested by the shareholders to be paid out in cash, those shareholders who have chosen to receive their dividend in cash will receive their cash dividend on a pro-rata basis, the remainder being paid out in shares.

Click here to view the release online

For further information, please contact:


Michael Fuchs
Philips Global External Relations
Tel.: +31 6 1486 9261
E-mail: michael.fuchs@philips.com

Ben Zwirs
Philips Global External Relations
Tel.: +31 6 1521 3446
E-mail: ben.zwirs@philips.com

Dorin Danu
Philips Investor Relations
Tel.: +31 20 59 77055
E-mail: dorin.danu@philips.com


About Royal Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health technology company focused on improving people’s health and well-being through meaningful innovation. Philips’ patient- and people-centric innovation leverages advanced technology and deep clinical and consumer insights to deliver personal health solutions for consumers and professional health solutions for healthcare providers and their patients in the hospital and the home.

Headquartered in the Netherlands, the company is a leader in diagnostic imaging, ultrasound, image-guided therapy, monitoring and enterprise informatics, as well as in personal health. Philips generated 2024 sales of EUR 18 billion and employs approximately 67,800 employees with sales and services in more than 100 countries. News about Philips can be found at www.philips.com/newscenter.

Forward-looking statements and other important information

Forward-looking statements

This document and the related oral presentation, including responses to questions following the presentation, contain certain forward-looking statements with respect to the financial condition, results of operations and business of Philips and certain of the plans and objectives of Philips with respect to these items. Examples of forward- looking statements include statements made about our strategy, estimates of sales growth, future Adjusted EBITA*), future restructuring and acquisition-related charges and other costs, future developments in Philips’ organic business and the completion of acquisitions and divestments. Forward-looking statements can be identified generally as those containing words such as “anticipates”, “assumes”, “believes”, “estimates”, “expects”, “should”, “will”, “will likely result”, “forecast”, “outlook”, “projects”, “may” or similar expressions. By their nature, these statements involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these statements.

These factors include but are not limited to: macro-economic and geopolitical changes, including protectionism measures such as announced and proposed tariffs and retaliatory trade measures in response thereto; Philips’ ability to keep pace with the changing health technology environment; Philips’ ability to gain leadership in health informatics and artificial intelligence in response to developments in the health technology industry; integration of acquisitions and their delivery on business plans and value creation expectations; ability to meet expectations with respect to ESG-related matters; securing and maintaining Philips’ intellectual property rights, and unauthorized use of third-party intellectual property rights; failure of products and services to meet quality or security standards, adversely affecting patient safety and customer operations; the resilience of our supply chain; challenges in simplifying our organization and our ways of working; attracting and retaining personnel; breach of cybersecurity; challenges in driving operational excellence and speed in bringing innovations to market; treasury and financing risks; tax risks; reliability of internal controls; compliance with regulations and standards involving quality, product safety, (cyber) security and artificial intelligence; and compliance with business conduct rules and regulations including privacy, existing and upcoming ESG disclosure and due diligence requirements. As a result, Philips’ actual future results may differ materially from the plans, goals and expectations set forth in such forward-looking statements. For a discussion of factors that could cause future results to differ from such forward-looking statements, see also the Risk management chapter included in the Annual Report 2023. Reference is also made to section Risk management in the Philips semi-annual report 2024.

Third-party market share data

Statements regarding market share contained in this document, including those regarding Philips’ competitive position, are based on outside sources such as specialized research institutes, as well as industry and dealer panels, in combination with management estimates. Where information is not yet available to Philips, market share statements may also be based on estimates and projections prepared by management and/or based on outside sources of information. Management’s estimates of rankings are based on order intake or sales, depending on the business.

Market Abuse Regulation

This press release contains inside information within the meaning of Article 7(1) of the EU Market Abuse Regulation.

Use of non-IFRS information

In presenting and discussing the Philips Group’s financial position, operating results and cash flows, management uses certain non-IFRS financial measures. These non-IFRS financial measures should not be viewed in isolation as alternatives to the equivalent IFRS measure and should be used in conjunction with the most directly comparable IFRS measures. Non-IFRS financial measures do not have standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. A reconciliation of these non-IFRS measures to the most directly comparable IFRS measures is contained in this document. Further information on non-IFRS measures can be found in the Annual Report 2023.

Presentation

All amounts are in millions of euros unless otherwise stated. Due to rounding, amounts may not add up precisely to totals provided. All reported data is unaudited. Financial reporting is in accordance with the accounting policies as stated in the Annual Report 2023. Prior-period amounts have been reclassified to conform to the current-period presentation; this includes immaterial organizational changes.

Effective Q1 2024, Philips has revised the order intake policy to reflect the full contract value for software contracts that start generating revenue within an 18-month horizon, instead of only the next 18-months-to-revenue horizon. This change has been implemented to better align with the specific business model of our software businesses, simplify the order intake process, and better align with peers. Prior-period comparable order intake percentages have been restated accordingly. This revision has not resulted in any material changes to the order intake percentages for the periods presented.

Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares in the second quarter of 2024 in connection with the 2023 share dividend.

*) Non-IFRS financial measure. Refer to Reconciliation of non-IFRS information.

 

FAQ

What is Philips (PHG) projected sales growth for 2025?

Philips projects 1-3% comparable sales growth for 2025, although this includes an expected mid to high-single-digit decline in China.

How much will the Philips Respironics settlement cost PHG in 2025?

The Respironics settlement will cost USD 1.1 billion, with payment expected in the first half of 2025.

What is PHG's dividend proposal for 2025?

Philips proposed to maintain its dividend at EUR 0.85 per share, payable in either shares or cash, with a maximum of 50% of the total dividend available for cash payment.

How much did Philips (PHG) improve its EBITA margin in 2024?

Philips improved its Adjusted EBITA margin by 90 basis points to 11.5% of sales in 2024.

What is PHG's new productivity savings target for 2023-2025?

Philips increased its productivity savings target from EUR 2 billion to EUR 2.5 billion for the 2023-2025 period, with EUR 800 million to be delivered in 2025.