Investing.com -- Philips has announced that it has reached a settlement to resolve legal claims regarding the safety of its recalled respiratory devices in the U.S. that analysts said was smaller than investors had initially anticipated, sending shares in the Dutch firm soaring on Monday.
In a statement, Philips said that it had agreed to pay $1.1 billion following mediation with a judge to bring an end to the litigation. The firm added that it does not admit "any fault or liability," or that any injuries were caused by the devices.
At issue are worries that Philips' Respironics devices, which aim to help with breathing disorders during sleep, contained a foam that could degrade over time and eventually pose possible cancer risks.
Analysts at UBS said in a note to clients that the settlement amount is "below investor concerns." Philips shares surged in mid-morning European trading, touching their highest mark since 2022. However, the stock price is still well below its level in 2021, when the devices were first recalled.
The payments will be made in 2025 from free cash flow generation, Philips said. It added that it recognized a provision worth 982 million euros in the first quarter of its current fiscal year.
Despite acknowledging that "uncertainties remain," Philips also reiterated its 2024 guidance for 3%-5% comparable sales growth and adjusted earnings before interest, taxes and amortization margin of 11% to 11.5%. It noted that the outlook excludes the potential impact of "other previously disclosed Philips Respironics-related legal proceedings" including an investigation by the U.S. Department of Justice.