Philips reaches DOJ agreement over device recall, books €288 million provision in Q3

By Lucie Barbier

Nov 3 (Reuters) - Philips has reached a preliminary agreement with the US Department of Justice to end investigations linked to the Dutch company's 2021 global recall of sleep and respiratory-care devices, it said on Tuesday.

The healthcare technology manufacturer recalled millions of devices in 2021 over concerns that sound-reducing foam could degrade and potentially become toxic.

Related probes and court cases have followed it since then. It most recently won a Dutch court battle with shareholders demanding an inquiry into allegations of misleading disclosures and management failures.

Philips said its Respironics unit had reached an agreement in principle with the DOJ to resolve previously disclosed investigations. It booked a €288 million ($322 million) provision in the third quarter for the proposed settlement, which remains subject to final documentation and is expected to be paid in the first quarter of 2027.

The company did not provide details on whether the agreement would include an admission of wrongdoing.

"We cannot provide details qualitatively at this point in time," CEO Roy Jakobs told journalists in a post-earnings call, adding that the agreement in principle was reached "in the last few days".

Philips reiterated its 2026 financial targets, but said those excluded other Respironics-related proceedings, including an investigation by US state attorneys general.

Jakobs said discussions with the state attorneys general were ongoing, but it was too early to provide details or book a provision.

CORE PROFIT BEATS MARKET VIEW

Philips, which sells products ranging from toothbrushes to medical imaging systems, beat market expectations for its third-quarter core earnings, but slightly missed them for sales, when excluding recall-related costs and other non-recurring effects.

It reported a 7.2% rise in its adjusted earnings before interest, taxes and amortisation to €569 million ($637 million), while analysts were expecting €522 million in a company-provided poll. Comparable sales rose 3% to €4.39 billion, below a forecast of €4.41 billion.

The adjusted EBITA beat was driven by higher sales, improved gross margin and productivity measures, which more than offset cost inflation, Philips said.

($1 = 0.8937 euros)

(Reporting by Lucie Barbier in Gdansk, editing by Milla Nissi-Prussak)