Koninklijke Philips N.V. (NYSE:PHG) Q4 2022 Earnings Call Transcript

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Abhijit Bhattacharya: So, for the pricing mix, actually, if you look, most of that is underpinned by the plans we shared with you. Part of that is pricing. And I think I also explained that the pricing that we are seeing now in the order book will start flowing into the P&L from the second half of this year. There is, of course, some assumptions on the savings that we will do in our bill of material. That is always an outlook that we take. But we do see that, let’s say, in the medium term, the huge spike that we saw in prices in the last couple of years, that will start easing. So, I think most of that we have taken in. Is it 100% underpinned? Obviously not, because a lot changes between now and 2025, but it gives us a good level of confidence on the basis of which we have presented that plan. You want to take the one on consumer demand?

Roy Jakobs: Yes. So, if you look to the consumer demand, we — and we saw it also in Q4, there is still quite some pressure on consumer demand globally given the macroeconomic environment consumers have to deal with. Also, we saw some particular pain in China. Now we expect that in the — especially early part of 2023 to continue. We do expect that it will ease towards more in the back of 2023. So, we also expect a return to growth in Personal Health, as we have shown to you in due course of this year, will be not yet as strong as the health system side, but we expect a gradual recovery as we work through the global crisis and then also the inflationary impact on the consumer side. So that’s the outlook there. Then in terms of your post-2025 question, I think that also really goes to the heart of what we present today in which we say, actually, we have a very compelling and strong portfolio.

But we need to go and differentiate it with our approach to actually extract the maximum value. Now, if you saw to the four buckets that I presented, the first bucket, accelerate growth and profit is a bucket that consists out of IGT, Ultrasound, HPM, PH, all of those businesses have been already in the range that you allude to, are 70% — close to 70% of our sales and actually dialing them up fast actually will get us very strongly into that range. Now then, it’s also about how we can scale informatics, where we have been investing. It becomes a really very interesting differentiator for us also with our customers. And we have the plan that we presented to you in which actually you see informatics really starting to contribute. Then we know that we have to improve our margins in imaging.

Now that’s very much on conversion of the order book, so supply chain, operational excellence, but also serves as pull-through. And then, ultimately, it’s the SRC part where if we get back into restoring our business and indeed, that is also what we expect beyond 2025, that, in totality, actually should allow us to get into that range. So, actually, we have been, releasing in our plan, looking at the strengths that we have across the portfolio and what needs to be done in each segment, in particular, to actually attract the most value.

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