Philips expects continued growth in 2025 despite China slowdown

NETHERLANDS – Royal Philips has unveiled its full-year and Q4 group performance, demonstrating improved profitability, strong cash flow, and steady progress in executing its three-year plan.

In 2024, the company reported total sales of EUR 18.0 billion (US$18.83 billion), achieving a 1% growth in comparable sales.

Q4 sales reached EUR 5.0 billion (US$5.23 billion), also showing a 1% increase, despite a significant double-digit decline in China.

According to CEO Roy Jakobs, despite significant declines in consumer and health system demand in China, Philips achieved positive order growth while expanding margins and generating strong cash flow.

The performance report also revealed that comparable order intake rose by 1% over the full year and by 2% in Q4, with operating income totalling EUR 529 million (US$553.57 million) in 2024 and EUR 199 million (US$208.24 million) in Q4.

Moreover, the adjusted EBITA margin improved by 90 basis points to 11.5% for the year, and by 60 basis points to 13.5% in Q4.

Net cash flow from operating activities reached EUR 1,569 million (US$1,641.88 million) for 2024, while in the fourth quarter, it totaled EUR 1,459 million (US$1,526.77 million).

Additionally, free cash flow for the year was EUR 906 million (US$948.08 million), and in the final quarter, it amounted to EUR 1,285 million (US$1,344.68 million).

Philips has confirmed its proposed dividend of EUR 0.85 (US$0.89) per share, which shareholders can receive in either cash or shares.

 “With our strong balance sheet, we are pleased to offer shareholders the option to receive the dividend in shares or cash,” Jakobs remarked.

The company has also raised its productivity savings target for 2023–2025 from EUR 2 billion 9US$2.09 billion) to EUR 2.5 billion (US$2.61 billion), aiming to deliver EUR 800 million (US$837.16 million) in savings in 2025.

Productivity initiatives have already exceeded expectations, delivering over EUR 1.7 billion (US$1.77 billion) in savings since 2023, including EUR 163 million (US$170.57 million) in Q4 alone from various cost-efficiency programs.

Philips has recently announced that the FDA has approved two new CT systems.

The first is the Philips CT 5300, which uses AI-based reconstruction software to reduce radiation doses and enhance image quality.

The second is the Philips Spectral CT 7500 RT, designed to facilitate personalized radiation therapy planning.

 In addition, the company has expanded its strategic collaboration with Amazon Web Services to offer an integrated diagnostics portfolio in the cloud.

 This initiative combines advanced AI visualization solutions that unify diagnostic workflows, improve access to critical insights, and drive better outcomes across radiology, digital pathology, and cardiology.

Philips is also partnering with the Mayo Clinic to leverage proprietary AI technologies to enhance diagnostic MRI efficiency and deliver improved care for heart disease patients.

Philips has strengthened its market presence by partnering with Hôpital Fondation Rothschild in Paris for imaging platforms and health informatics, and with Erasmus Medical Center in Rotterdam for ultrasound solutions and services.

The company has also refreshed its mid-range Sonicare electric toothbrush series (5000–7000) in Europe and launched localized products in China, including the On-The-Go Compact Shaver—which quickly became a top seller on JD.com.

In recent settlement developments, Philips Respironics obtained final approval in December 2024 for a recall-related medical monitoring settlement, and by February 2025, a personal injury settlement was finalized following a successful registration process.

 The total settlement amounts to USD 1.1 billion, with payments expected in the first half of 2025.

Jakobs noted that Philips has improved care for more people by enhancing execution and focusing on profitability, cash flow, and growth—while also addressing significant US litigation related to the Respironics recall.

The company continues to reinforce its culture of impactful care, emphasizing integrity and prioritizing patient safety and quality.

At the same time, Philips is streamlining its operating model by consolidating end-to-end business accountability, simplifying central functions, and bolstering customer-facing teams across regions.

Since launching its three-year plan, 75% of the company’s executive hires have been drawn from the health technology sector, with recent additions to the Executive Committee—including leaders for Precision Diagnosis, the International Region, and Greater China, as well as a new Chief Financial Officer.

Looking ahead, Philips remains committed to executing its strategic plan to drive operational improvements and create sustainable value, even in a challenging macroeconomic environment.

For 2025, the company expects comparable sales growth between 1% and 3%, despite anticipating a mid- to high-single-digit decline in China.

Additionally, the adjusted EBITA margin is forecast to rise by 30–80 basis points, reaching between 11.8% and 12.3%.

The company anticipates that its free cash flow—before considering the US$1.1 billion cash-out related to the settlements—will fall at the lower end of the projected range of EUR 1.4 billion (US$1.46 billion) to EUR 1.6 billion (US$1.67 billion).

After accounting for the cash-out, the net free cash flow is estimated to be between EUR 0.4 billion (US$0.41 billion) and EUR 0.6 billion (US$0.62 billion).

Philips also expects that comparable sales growth will be back-end loaded, with a mid-single-digit decline in Q1 due to lower demand in China and phased royalties. This will result in a correspondingly lower adjusted EBITA margin during the first quarter.