Philips scraps 6,000 jobs in drive to improve profitability.

Dutch health technology company Philips (PHG.AS) said on Monday it would scrap 6,000 jobs to restore its profitability following a recall of respiratory devices that knocked off 70% of its market value.

Half of the job cuts will be made this year, the company said, adding that the other half will be realised by 2025.

The new reorganisation comes on top of a plan announced last October to reduce its workforce by 5%, or 4,000 jobs, as it grapples with the fallout from the recall of millions of ventilators used to treat sleep apnoea over worries that foam used in the machines could become toxic.

The reduced workforce should lead to a low-teens profit margin, as measured by adjusted earnings before interest, taxes and amortization (EBITA), by 2025, and a mid-to-high-teens margin beyond that year, with mid-single-digit comparable sales growth throughout.

"Philips is not capitalizing on the full potential of strong market positions as it faces a number of significant operational challenges," new Chief Executive Officer Roy Jakobs said.

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

The company will continue to invest 9% of sales in research and development, but will focus on "fewer, better resourced, and more impactful projects", he said.

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