Koninklijke Philips N.V. (NYSE:PHG) Q2 2023 Earnings Call Transcript

Hassan Al-Wakeel: Perfect. And sorry, final one, just to follow-up on the margin commentary. Just given the strength in Q2 and the impact from workforce reduction, how far are we through that in terms of the realization of benefits and what should we expect for the remainder of the year? Thank you.

Abhijit Bhattacharya: Hi, Hassan. This is Abhijit. Good morning. We’ve been moving at a pretty good pace in terms of our reduction of headcount. So we just said that we’ve done about 6,600 of the 7,000 planned for the year. So that should give us a benefit going into the second half. The original plan was roughly — we had 3,000 last year, plan was 4,000 this year, evenly split through the quarter. So we are slightly ahead and are confident of making that plan. So I think that’s where I would leave it.

Operator: Thank you. We will now go to your next question. And your next question comes from the line of Veronika Dubajova from Citi. Please go ahead.

Veronika Dubajova: Hi, Roy. Hi, Abhijit. [indiscernible]. Thanks so much for taking my questions. I have two please. The first one is just going back to the guidance. I mean, if I just look at the mid-single digit growth guidance that you’ve given for the year against the delivery in the first half, it does imply pretty significant in deceleration in growth into sort of flat to low single digit range. Just want to understand, is there anything that you’re seeing at the moment that makes that a likely out or are you just embedding a degree of conservatism? And then if you can maybe talk through, I don’t know, I know July has barely started, but just maybe comment on what you are seeing in the quarter-to-date against that guide, that would be helpful.

And then my second question is on the order book momentum and clearly pretty significant deceleration here versus what you delivered the prior quarter. I appreciate there are some difficult comparisons in there. But I — just maybe curious to get your thoughts for I mean, if I look at across your performance and your peers’ performance, we are clearly seeing some slowdown in order growth this year. Just kind of put it into context for us because at the outset of the year, I think everyone was pretty excited about China, that’s growing pretty healthily from what we understand. So is this a problem in the US? Is this a problem in Europe? Is this is a problem somewhere else? And kind of what gives you the confidence that this can improve as you move into back half of the year and that it can support that sort of mid-single digit growth in the D&T and Connected Care businesses that most of us expect 2024?

I know there’s a lot of moving parts there, but if you can just give us a little bit of that, that would be helpful. Thank you.

Abhijit Bhattacharya: Hi, Veronika. Let me take the first part of the question. I think if you look — if you take a step back, we had planned for actually a back-end loaded year. We ultimately saw that the supply chain improvements came in earlier. And therefore, we have had a strong start to the year. As you’ve seen in the second quarter, our good growth was a bit flattered also because of our royalty income. So if you take that into account and look at the second half, we see good momentum going into third quarter, but also you should remember that the fourth quarter we are battling tougher comps. If you remember last year in the fourth quarter, health systems businesses grew mid-single digit. So of course, therefore the growth will be, let’s say, the year-on-year growth in the fourth quarter would not be as strong as it has been for the first two quarters this year.