Signify released Q1 2022 results on 29 April, reporting revenue of $1.9B USD (EUR 1.8B) – an increase in sales growth over the same Q last year of 6.4%. Profit declined slightly to 10.5% EBITA compared to 10.8% in Q1 2021 – a situation that would have been worse if not for price increases helping to offset higher costs and negative foreign exchange impacts in the quarter.
Laying out the challenges of the current operating environment, CEO Eric Rondolat emphasized in his opening comments on the earnings webcast that the company’s main priority in the quarter has been to support their employees in Ukraine. He also noted that since 25 February, investments in Russia were stopped, and all new business there was paused. Other Q1 headwinds cited include inflation (in particular, sharp energy cost increases) and disruptions to supply chain with the reinstatement of lockdowns in China.
Signify reported Comparable Sales Growth (CSG) and profit for Q1 by Division:
Digital Solutions: up +16.9% at $1.04B USD (EUR 981M), EBITA up +70 bps to 9.7%
Digital Products: up +0.2% at $637M USD (EUR 601M), EBITA down -140 bps to 12.8%
Conventional Products: down -15.1% at $213M USD (EUR 201M), EBITA down 460 bps to 16%
Sales growth by division indicates that Digital Solutions carried the day. Signify does not report any breakdown by geography on a quarterly basis, but notes in the presentation indicate that there was good traction in the professional lighting segment, particularly in the US. CEO Rondolat noted that connected lighting was growing strongly, now representing 20% of Digital Solutions’ revenue. He commented that the connected lighting business was extremely strong in the US for both Signify and Cooper Lighting (Cooper was acquired by Signify in 2020). Horticultural Lighting, also a part of the Digital Solutions Division, was credited with a strong performance in Q1, but no detail on size or profitability of that segment.
During the Analysts’ Q&A in the earnings webcast, Rondolat was questioned on the strategy and results for traditional products, noting Signify’s earlier-stated intention to “be the last man standing” as the legacy products market declines. Rondolat noted that they are closely monitoring the substantial impact of increased energy prices in the Conventional Products division and that rising costs may drive a faster decline of traditional products than Signify had forecast. However, Signify feels there may be short term bumps in market share available to Signify as other competitors drop out. He also noted that new price increases in traditional products have been implemented based on increased costs, and that the positive impact of these increases were not yet fully realized.
CFO Javier van Engelen presented the details on working capital increasing during Q1 from 3.5% to 7.9% of sales – driven mainly by the buildup of higher inventory levels in order to meet customer expectations in spite of supply chain challenges.
Signify maintained its guidance on the outlook for the rest of 2022, including comparable sales growth in the range of 3-6%, with a stated assumption that the Chinese market and global supply chain dynamics do not deteriorate further.
Signify issued its usual quarterly highlights video to YouTube (link below). Lots of great case study images from markets across Europe, as well as China, Iceland and a mention of the Pierlite acquisition pending that will bolster the brand in Australia and New Zealand, but nary a reference to the North American market . With Cooper Lighting now in the fold, as of the end of FY2021, North America overtook Europe as Signify’s largest geographic cluster at 38% of sales, with Europe at 31%. Let’s get North America into next quarter’s highlight reel!
Signify Q1 2022 Results Report: https://www.signify.com/static/quarterlyresults/2022/q1_2022/signify-first-quarter-results-2022-report.pdf
Signify Q1 2022 Presentation: https://www.signify.com/static/quarterlyresults/2022/q1_2022/signify-first-quarter-results-2022-presentation.pdf
Signify Q1 2022 YouTube Highlights Video: https://www.youtube.com/watch?v=_–qSzLLJYw