WEBVTT - Philips CEO Roy Jakobs Talks Company Earnings, Expectations

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<v Speaker 1>Phillip's annual order intake has increased for the first time

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<v Speaker 1>in three years. Yes, we're focused now on the earning story.

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<v Speaker 1>That's as the Dutch medical equipment maker mostly resolved issues

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<v Speaker 1>related to its faulty sleep apnea machines, robust demand in

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<v Speaker 1>markets including North America offsetting persistent headwinds in China. Very

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<v Speaker 1>pleased to say join me now is the Phillips CEO

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<v Speaker 1>Roy Jakobs. Roy, good morning, thank you for joining us

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<v Speaker 1>on a busy day for you and the team. So

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<v Speaker 1>comparable order intake growing one percent last year, that is

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<v Speaker 1>the first annual growth since twenty twenty one. What percentage

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<v Speaker 1>growth are you targeting for this year?

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<v Speaker 2>So we were indeed very happy to see us returning

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<v Speaker 2>to polsive orientic growth which as you called our was

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<v Speaker 2>Wiislow China and a strong order intake of four percent in.

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<v Speaker 3>The rest of the world.

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<v Speaker 2>Now we have for this year an order positive arientic

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<v Speaker 2>year ahead of us, so that's what we are targeting.

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<v Speaker 2>Were also seeing the momentum continuing in the rest of world.

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<v Speaker 2>We see still will China continue to be slow, but

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<v Speaker 2>China frost is one story, so when it will be

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<v Speaker 2>back there will be growth and there will be marching

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<v Speaker 2>because it's an attractive market on the long term needs

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<v Speaker 2>healthcare and also consumers will come back, but that's currently

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<v Speaker 2>still not exactly clear when that's when that will happen.

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<v Speaker 2>But we are dialing down on delivering the innovations across

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<v Speaker 2>the world, and there we have seen good markets like

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<v Speaker 2>North America.

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<v Speaker 3>We were a close to double digit in the in

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<v Speaker 3>the year.

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<v Speaker 2>So you see that there's really a two speed world

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<v Speaker 2>currently that we are tracking on.

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<v Speaker 1>Okay, two speed growth. Let me push you roy on

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<v Speaker 1>the order intake outlook for the rest of the year.

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<v Speaker 1>You see that growing. What are we are we talking

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<v Speaker 1>one percent two percent? You achieved that in the fourth quarter.

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<v Speaker 1>How many percentages of order intake growth can you expect

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<v Speaker 1>in twenty twenty five.

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<v Speaker 2>So we have not given an exact number. We say

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<v Speaker 2>we will continue with positive order intake growth. We also

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<v Speaker 2>expect it will be a similar combination of still a

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<v Speaker 2>slower China and.

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<v Speaker 3>Positive growth outside of the world.

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<v Speaker 2>But we have ladded deer for now based on that,

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<v Speaker 2>we also will deliver growth in sales and that then

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<v Speaker 2>also helps us to expand further our margin by a

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<v Speaker 2>not a thirty to eighty BIPs and deliver song cash,

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<v Speaker 2>which also actually based on our casualization in twenty twenty four,

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<v Speaker 2>has given us the ability now to get back into

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<v Speaker 2>dividend and offer diffidant in cash to our shoholders.

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<v Speaker 1>Let me get to the tail of two markets, then

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<v Speaker 1>double digit decline in China. To be clear, right, you

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<v Speaker 1>do not see the Chinese market turning around for Phillips

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<v Speaker 1>in twenty twenty five. This is not a twenty twenty

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<v Speaker 1>five story.

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<v Speaker 2>So what we said is that for sure, for the

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<v Speaker 2>first half, we see the momentum continuing that we had

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<v Speaker 2>in the second part of twenty twenty four, and that

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<v Speaker 2>was indeed slow consumer demand and we saw still slow

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<v Speaker 2>procurement in the healthcare site. Now we also know that

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<v Speaker 2>China is working its way back into economic growth as

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<v Speaker 2>well as we know that they're working through the reforms

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<v Speaker 2>in healthcare. So we expect it will come back. We

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<v Speaker 2>just don't know exactly when it's going to happen. So

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<v Speaker 2>therefore we are not going or running ahead of that timing,

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<v Speaker 2>but it will come back at a certain point in time.

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<v Speaker 3>Now.

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<v Speaker 2>In the meanwhile, we are dialing up the engine and

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<v Speaker 2>indeed deliver the innovations to the rest.

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<v Speaker 3>Of the world.

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<v Speaker 2>As I mentioned, we're next to North America. Also there

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<v Speaker 2>are good growth engines in Saudi and Indonesia. We also

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<v Speaker 2>see pocuts of Europe where actually growth is coming back.

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<v Speaker 2>So there are other areas we will go after the growth.

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<v Speaker 2>And we have been really strengthening our fundamentals. So we've

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<v Speaker 2>been launching exciting innovation AI fueled that will help us

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<v Speaker 2>to deliver the growth and also deliver in China local

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<v Speaker 2>for local products when the demand turns back.

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<v Speaker 1>How big is the China market for Phillips now.

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<v Speaker 2>Around ten percent of our total revenue, so it's still

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<v Speaker 2>sizable and we also expect that to continue. But we

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<v Speaker 2>have also the other ninety percent to play for, and

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<v Speaker 2>that's a great combination of different markets. Latin America, for example,

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<v Speaker 2>was a great positive story last year. They had a

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<v Speaker 2>few challenging years before that they came back strongly. So

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<v Speaker 2>we see the capex environments in general strengthening across the world.

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<v Speaker 2>We saw that in the US where they came out

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<v Speaker 2>of a negative twenty two for the hospitals twenty three

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<v Speaker 2>was already stronger, and now in twenty four we saw

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<v Speaker 2>that really picking up and therefore they're investing more because

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<v Speaker 2>the cues.

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<v Speaker 3>In healthcare are still big.

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<v Speaker 2>The need for healthcare is growing, and therefore we also

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<v Speaker 2>expect that demand for our innovations that are really relevant

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<v Speaker 2>for them will continue to be there.

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<v Speaker 1>So what assumptions roy are you making about the tariff

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<v Speaker 1>impact when it comes to your outlook, particularly with that

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<v Speaker 1>focus on the key North American market.

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<v Speaker 3>So we have.

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<v Speaker 2>Included the terriffs that currently are known and put into force,

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<v Speaker 2>and those are the terrors between US and China, So

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<v Speaker 2>those we have been catering for. We also, as part

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<v Speaker 2>of the plan, have been really working through the last

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<v Speaker 2>three years to really strengthen our supply chain, further regionalize it,

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<v Speaker 2>making it more robust, also adapted. We don't speculate of

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<v Speaker 2>the rest of terrors, but what we do advocate for

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<v Speaker 2>is that patients are really taken central when we talk

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<v Speaker 2>about terras because it has an impact on supply chain

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<v Speaker 2>and we have still a short lived memory from the

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<v Speaker 2>COVID crisis where with the breakd and of supply chains,

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<v Speaker 2>we had massive shortages in providing care to our patients.

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<v Speaker 2>So patients first when we think about terrors, but at

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<v Speaker 2>the same time we take also that's in our own

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<v Speaker 2>hands by really working the supply chain and going into more.

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<v Speaker 3>Local for local delivery, because that is the trend.

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<v Speaker 2>Healthcare is global, but delivery needs to be more localized

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<v Speaker 2>than we're working that.

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<v Speaker 1>Does it mean you may have to put up prices

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<v Speaker 1>or do you absorb the cost and you absorb the

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<v Speaker 1>squeeze on the margin.

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<v Speaker 2>So this point in time, we are working very strongly

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<v Speaker 2>on productivity. So for example, we have been delivering one

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<v Speaker 2>point seven billion of productivity in the plant to date.

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<v Speaker 2>We're expanding that for next year to two point five

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<v Speaker 2>billion productivity, so that actually we can deal with costs

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<v Speaker 2>and continue to invest behind the innovation. So we spend

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<v Speaker 2>one point seven billion of innovation whilst we at the

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<v Speaker 2>same time also saved one point seven billion of productivity

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<v Speaker 2>in the same period.

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<v Speaker 3>So actually that is.

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<v Speaker 2>The way how we continue to innovate and deliver exciting innovation,

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<v Speaker 2>especially now also where AI is really an important new

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<v Speaker 2>technology to deliver a great value, like for example, some

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<v Speaker 2>of the launches that we had that are fueled by AI.

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<v Speaker 2>That's the way how you can deal with terriers and

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<v Speaker 2>or cost increases.

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<v Speaker 1>Roy are you really looking at the portfolio of businesses

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<v Speaker 1>right now. In January, you saw you've agreed to sell

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<v Speaker 1>the emergency care unit to bridge Field Capital. Are you

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<v Speaker 1>looking at further divestments?

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<v Speaker 2>So we continue to look at how we move Phillips

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<v Speaker 2>forward and in that we actually scale the innovations that

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<v Speaker 2>we believe are the ones that have the best potential

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<v Speaker 2>for the future. That emergency care business was a smaller business,

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<v Speaker 2>so didn't have that big skill potential. The portfolio that

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<v Speaker 2>we have with imaging, monitoring, interventional and personal health, we

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<v Speaker 2>believe are force very strong pillars and then actually all supported.

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<v Speaker 2>We had a very strong informatics layer. So those are

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<v Speaker 2>exciting portfolio blocks. They're all delivering value to many customers

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<v Speaker 2>in the world. We have leading positions in that. We

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<v Speaker 2>also keep innovating in each of those pillars, and those

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<v Speaker 2>are the ones we also take into the future.

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<v Speaker 1>All right, before we let you go, are you ready

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<v Speaker 1>to re enter the US market when it comes to

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<v Speaker 1>those sleep apnea devices? Where is that? DOJ investigation? Right now?

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<v Speaker 3>So on sleep and respiratory care.

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<v Speaker 2>Actually, we had a great year in twenteen twenty four

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<v Speaker 2>outside of the US. We could we turn back into

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<v Speaker 2>the markets and we saw that we re resulting in

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<v Speaker 2>growth in sleep and respiratory care and also we had

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<v Speaker 2>strong profit delivery in sleep and respiratory care, which was

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<v Speaker 2>the first year.

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<v Speaker 3>Indeed, after the we call, we closed the litigation.

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<v Speaker 2>As you know, DOJ investigation is still going on, but

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<v Speaker 2>we are actually excited about some of the new innovations

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<v Speaker 2>and we just got two new approvals and two new

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<v Speaker 2>masks that we're bringing into the market. So actually as

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<v Speaker 2>our see is coming back as an engine and we

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<v Speaker 2>are working behind that. Tips.

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<v Speaker 1>Yeah, ro Jakobs, thank you. On the back of those earnings,

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<v Speaker 1>Audit intake for Phillips comparable audit intake growing for one

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<v Speaker 1>percent last year for the first time since twenty twenty one.