THE DUTCH health technology giant Philips on Monday announced that it would slash 6,000 employees to return to profitability in the aftermath of a recall of a respiratory device that dropped its market value by 70 per cent.

The company said that half of the job cuts will be executed this year and the other half will be realised by 2025.

A proposal to cut its workforce by 5 per cent or 4,000 positions was announced last October as the company deals with the fallout from the recall of millions of ventilators used to treat sleep apnoea amid fears that foam used in the devices could become hazardous.

By 2025, the reduced workforce should result in a profit margin (adjusted EBITA) in the low teens, increasing to the mid-to high teens afterwards, and maintaining consistent comparative sales growth in the mid-single digits, as reported by Reuters.

“Philips is not capitalizing on the full potential of strong market positions as it faces several significant operational challenges,” new Chief Executive Officer Roy Jakobs was quoted as saying by Reuters.

“The simplified organization should also improve patient safety and quality and supply chain reliability,” he further added.

Apart from that, Philips, based in Amsterdam, reported fourth-quarter adjusted earnings before interest, taxes, and amortisation (EBITA) of 651 million euros (USD 707.18 million), which was nearly unchanged from 647 million euros a year earlier.

In a poll conducted by the company, analysts predicted that core earnings would fall to 428 million euros on average.

When the company publishes profits on earlier Monday, the newly appointed CEO Roy Jakobs is expected to outline his strategic plan for it.

This is the second round of layoffs reported at Philips after a recall. In October of last year, the company slashed almost 4,000 workers.

(With Agency Inputs.)

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