Philips EV300 ventilator supply contract with U.S. Department of Health and Human Services to end after delivery of 12,300 bundled ventilator configurations
Royal Philips (NYSE: PHG) announced a partial termination of its ventilator contract with the U.S. Department of Health and Human Services (HHS), reducing the original order of 43,000 ventilators by 30,700 units. Philips has successfully delivered 12,300 ventilator configurations to the Strategic National Stockpile by the end of August 2020. CEO Frans van Houten stated that while the reduction will impact financial performance, the company expects to achieve modest sales growth and an Adjusted EBITA margin comparable to last year by year's end.
- Successfully delivered 12,300 ventilator configurations to HHS in August 2020.
- Achieved a fourfold increase in ventilator production within five months.
- Partial termination reduces future ventilator deliveries by 30,700 units, impacting financial performance.
August 31, 2020
Amsterdam, the Netherlands – Royal Philips (NYSE: PHG, AEX: PHIA), a global leader in health technology, today announced that it has received notice from the U.S. Department of Health and Human Services (HHS) of the partial termination of the April 2020 contract to deliver 43,000 bundled EV300 ventilator configurations to HHS through December 2020. Philips will complete the deliveries for this month, resulting in a total of 12,300 bundled ventilator configurations supplied to the Strategic National Stockpile by the end of August 2020, in line with the contract. As directed by HHS, Philips will not supply the remaining 30,700 Philips EV300 ventilators to the Strategic National Stockpile.
Philips’ hospital ventilator contract with HHS was one of several contracts that the department announced in April 2020 for the production and delivery of a total of more than 156,000 ventilators to the Strategic National Stockpile by the end of August 2020, and a total of more than 187,000 ventilators by the end of the year [1].
“To date, we have delivered on our commitments to HHS,” said Frans van Houten, CEO of Royal Philips. “I am proud that with great urgency and under intense pressure, we achieved a fourfold ventilator production expansion with substantial investments: we hired hundreds of new colleagues for our factories in the U.S. and called upon our supply chain partners to massively step up, all in response to the COVID-19 pandemic. While we are disappointed in light of these vast efforts, we will adjust our plans and work with HHS to effectuate the partial termination of this contract.”
Frans van Houten added: “The COVID-19 pandemic is far from over, and we will continue to focus on our triple duty of care: meeting critical customer needs, ensuring business continuity, and safeguarding the health and safety of our employees. In the U.S., Philips is committed to work with the government and several of its agencies to support healthcare providers with the diagnosis, treatment, monitoring and management of COVID-19 patients, as well as the provision of regular health care.”
As the epicenter of the pandemic started to shift to the West in February 2020, Philips reached out to various governments around the world to discuss how to collaboratively combat COVID-19. From March 2020 onwards, Philips achieved a massive fourfold increase in ventilator production in just five months, adding production lines in the U.S. as well as creating hundreds of new jobs. Employees in Philips’ factories in Western Pennsylvania and California have been working around the clock to produce these ventilators.
Frans van Houten ended: “While we continue to see uncertainty and volatility related to the impact of COVID-19 across the world, our order book remains solid. The reduction in our ventilator deliveries to HHS will obviously impact Philips’ financial performance, but we continue to expect to return to growth and improved profitability in the second half of the year, starting in the third quarter. For the full year 2020, we now expect to deliver modest comparable sales growth with an Adjusted EBITA margin of around the level of last year.”
Philips has a comprehensive portfolio of products, services and solutions to support the delivery of high-quality care to COVID-19 patients worldwide. Solutions include secure, connected and intelligent approaches to diagnosis, treatment and predictive monitoring in the hospital, plus screening, remote patient monitoring and care at home. Philips’ telehealth and AI-enabled data analytics can help support workflows, facilitate remote collaboration and optimize resources. Philips’ COVID-19-related solutions are designed for rapid deployment and scalability.
[1] HHS Announces Ventilator Contract with Philips under Defense Production Act; HHS Announces Ventilator Contract with GM under Defense Production Act; HHS Announces New Ventilator Contracts, Orders Now Totaling Over 130,000 Ventilators; HHS Announces Ventilator Contract with GE Under Defense Production Act.
For further information, please contact:
Steve Klink
Philips Global Press Office
Tel.: +31 6 10888824
E-mail: steve.klink@philips.com
Leandro Mazzoni
Philips Investor Relations
Tel.: +31 20 59 77222
E-mail: leandro.mazzoni@philips.com
About Royal Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health technology company focused on improving people's health and enabling better outcomes across the health continuum from healthy living and prevention, to diagnosis, treatment and home care. Philips leverages advanced technology and deep clinical and consumer insights to deliver integrated solutions. Headquartered in the Netherlands, the company is a leader in diagnostic imaging, image-guided therapy, patient monitoring and health informatics, as well as in consumer health and home care. Philips generated 2019 sales of EUR 19.5 billion and employs approximately 81,000 employees with sales and services in more than 100 countries. News about Philips can be found at www.philips.com/newscenter.
Forward-looking statements
This release contains 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 the strategy, estimates of sales growth, future EBITA, future developments in Philips’ organic business and the completion of acquisitions and divestments. 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.
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