Koninklijke Philips N.V.

The stable outlook reflects our expectation that, despite some near-term challenges from the pandemic, Philips' diversified and resilient business model should support recovery prospects. We project S&P Global Ratings-adjusted EBITDA of €2.5 billion-€2.9 billion in 2020 and 2021, while improving to over €3 billion in 2022. Continued strong cash conversion and disciplined capital allocation should allow for S&P Global Ratings-adjusted leverage to remain at about 2x over the next 24 months, which is well below 3x threshold for the current rating. We could lower our ratings on Philips if it cannot maintain S&P Global Ratings-adjusted leverage below 3x on average over the next 24 months. The most likely cause of deteriorated metrics would be: Large or a series of midsize

...Thanks to its broad portfolio, Koninklijke Philips N.V. has mitigated the impact of COVID-19 on its 2020 operating performance. Philips' connected care business, especially high demand for patient monitoring devices and hospital ventilators, mitigated lower sales from diagnostics devices like MRI scanners and personal health care products. During the pandemic, the company used its capabilities in digital technologies, promoting connectivity and interoperability of its products, while moving sales online (we understand that more than 80% of sales in China and above 60% in Europe are online, while the U.S. still remains below 40%). We assume Philips will generate revenue of about 19.4 billion, broadly unchanged from 2019. A pick-up in volume growth in second-half 2020, coupled with undergoing efficiency measures, will help to mitigate the impact from COVID-19, restructuring costs, and tariffs, and leading to S&P Global Ratings-adjusted EBITDA of about 2.4 billion, down from last year's 2.8...

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