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

Abhijit Bhattacharya: No, so let me — it’s a good point on cash guidance. Look, we had given a range of EUR0.7 billion to EUR0.9 billion which was, let’s say, quite a broad range. We will have improvements in earnings as you’ve seen. We have upped the guidance there to the higher end of the range. I expect that it will take a bit longer for us to get our inventories down as much as we would have liked this year because let’s say to get all the matching inventories and flowthrough to customers will probably take till middle of next year. So again, we would probably be at the higher end of that guidance, but not at this stage to raise that guidance amount by a small amount. So we are confident of beating the range. We have started well and we will continue down that track.

Regarding margins in PH, we have already got into the — I think it was 100 basis points already in this quarter. Growth will continue in Q3 and Q4, so you should see also margin improvements coming in Q3 and Q4. So there’s nothing that I would signal in terms of — of course, given where we are in demand, we are going to need to invest in advertising and promotion to kind of stimulate some demand to drive that growth, but not really much different. Then your last question was on the order intake and in the modality. There’s not really something significant to call out there. I think most of the lumpiness we see across the portfolio. So we had, let’s say, good order intake across modalities in Q1 and we see, let’s say, the mirror impact in Q2.

And as we work down the backlog in MR, which currently is long, we hope to, let’s say, start getting more and more order intake there because currently given the lead times we are a bit hindered there, what there’s not any specific modality, which is, let’s say, hugely different in terms of the pattern that we see.

Robert Davies: That’s great. Thank you very much.

Operator: Thank you. We will now go to our next question. And your next question comes from the line of Graham Doyle from UBS. Please go ahead. Your line is open.

Graham Doyle: Good morning, guys. Thanks a lot for taking my questions. Just one on D&T, one on the consent decree. The margin was obviously down sequentially — obviously looking strong but down sequentially in D&T in Q2. And I think at the start of the year, we were kind of still talking about relatively normal phasing in that typically each quarter goes by, you generate more revenue, you generate a better margin. How should we think about Q3 and Q4? So when you think about that mix effect you flagged Abhijit, how do we think about that going through the next couple of quarters? And then just a sort of broader question on consent decree which isn’t the specifics of timing, it’s just — we think about the process, it’s been going on for a year now.

Is it — presumably that is a sort of negotiation and there are things that you want that you are trying to push for and vice versa. But is it feasible that we just don’t get an agreement on a consent decree on what happens there? Thank you very much.

Abhijit Bhattacharya: Yeah. So on D&T, I don’t — like I mentioned in the speech, right, there is a shift of phasing of cost as well as mix between Q1 and Q2. I would not read that too much as structural. Yes, we will have a stronger Q2 — second half in terms of margin in Diagnosis and Treatment. So I think if I remember right in 2020 or 2019, we were at the 12.7%, we will make a kind of good recovery towards that. So there will be strong improvement year-on-year. And again, between one quarter and the next, I would not read too much into it. We had also a higher mix if I recall correctly of Ultrasound in Q1 and a slightly stronger mix of DI in Q2 that affects it a bit and a certain phasing of service cost between Q1 and Q2. So I would not read too much into that at this stage. We will continue improving as the year goes by.