Philips (AS:PHG) on Wednesday reported modest growth in profitability and cash flow for 2024, despite a sharp decline in sales in China.
The company recorded a 1% increase in comparable sales for the full year, totaling €18 billion. In the fourth quarter, comparable sales rose by 1% to €5 billion.
Operating income for Q4 climbed to €199 million, an increase from €24 million in the same period of 2023.
The adjusted EBITA margin improved by 60 basis points, reaching 13.5% in Q4. For the full year, the adjusted EBITA margin rose by 90 basis points to 11.5%.
Net income, however, fell into negative territory. Philips posted a net loss of €333 million for Q4 2024, compared to a profit of €38 million in the previous year.
The company attributed the loss primarily to higher tax expenses, despite gains in gross margin and operational improvements.
Diluted earnings per share from continuing operations were a negative €0.36 in Q4 2024, down from €0.04 a year earlier. Adjusted EPS, which excludes one-time charges, rose to €0.51 from €0.40.
Philips' free cash flow increased sharply to €1.3 billion in Q4, driven largely by Respironics insurance proceeds, which helped offset working capital adjustments. For the full year, free cash flow totaled €906 million.
Regional performance showed a clear divergence. Sales in Western Europe and North America each grew by 6% in Q4. In contrast, sales in growth geographies — including China — fell 9%, largely due to a double-digit decline in Chinese demand.
Segment-wise, the Diagnosis & Treatment division reported a 1% decline in comparable sales for Q4, with an adjusted EBITA margin rising to 12.1%, driven by productivity gains and pricing strategies.
The Connected Care segment saw a 7% increase in comparable sales, maintaining an EBITA margin of 15%. Personal Health sales decreased by 2%, with an EBITA margin of 18%, weighed down by weak consumer demand in China.
Philips also reported a 2% rise in comparable order intake in Q4, fueled by strong demand in North America and other growth markets, though offset by a steep drop in orders from China.
Debt metrics showed improvement. Philips reduced its net debt to €5.2 billion by the end of 2024, improving the net debt-to-equity ratio to 30:70, compared to 36:64 in the previous year.
For the period of 2023-2025, Philips has reaffirmed its productivity savings target, while raising its total expected savings from €2 billion to €2.5 billion, with €800 million of those savings expected in 2025.
The company forecasts comparable sales growth of 1% to 3% in 2025, along with an improvement in adjusted EBITA margin of 30 to 80 basis points, resulting in a margin of 11.8% to 12.3%.
However, Philips anticipates a mid-to-high single-digit percentage decrease in sales within China.
The company has also finalized settlements related to the Philips Respironics recall in the US, with a $1.1 billion payout scheduled for 2025.
