Fitch prunes Fitch Philips

Fitch Ratings said it downgraded Royal Philips NV’s long-term issuer default rating and senior unsecured ratings to BBB+ from A-.

“The downgrade reflects pressure on Philips' profitability from recent internal inefficiencies, the recall of its Respironics devices as well as global inflation and supply-chain issues. We believe all this will result in lower-than-previously expected earnings and cash flows for a longer period and place key profitability metrics outside our expectations for an A- rating.

“This, along with the likelihood that the recent increase in gross debt will remain sustained through the medium term, will cause leverage to also be more broadly in line with a BBB+ rating and means that the company's financial profile is no longer commensurate with an A rating,” Fitch said in a press release.

The agency said it is likely Philips’ key profit margins will widen gradually from 2023 but not enough for an A- rating.

The outlook is stable.

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