Signify Q2 Fiscal 2022 Analysis: Signify Turns In Solid Top-Line Growth for Q2 While Headwinds Impact Earnings and Working

Signify (Euronext: LIGHT.AS) released Q2 2022 results on 29 July, reporting revenue of $1.84B (EUR 1.8B) – an increase in sales growth over the same Q last year of 5.1%.  Profit declined slightly to 9.5% EBITA compared to 10.9% in Q2 2021.  While ongoing cost of goods increases were mostly offset by price increases, FX (foreign exchange) decline in the EURO, particularly against the Chinese RNB, pushed EBITA lower.

CEO Eric Rondolat emphasized in his opening comments on the earnings webcast that the company’s 5.1% comparable sales growth (CSG) in Q2 was a strong execution despite facing headwinds of the war in Ukraine, the lockdowns in China, and an overall weaker consumer environment. He noted that consumer confidence is a little more dynamic in the US, but overall sees consumer confidence declining.

Signify successfully closed on two acquisitions in May 2022, with Fluence bolstering their global agricultural lighting growth platform and extending their North American horticultural market position, and  Pierlite strengthening Signify’s position in Australia and New Zealand while providing access to the wholesale channel in the Pacific.

Signify’s largest sales division, Digital Solutions, showed double digit growth in Q2 which CEO Rondalat indicated was driven by continued strength in the professional sales channel across most markets, with a healthy combination of volume, price and positive sales mix.  The Conventional Products division seems to be experiencing a faster-than-anticipated decline, with leadership commenting that the significant price increases implemented were not sufficient to offset the impacts of increases in energy and transport costs, along with the negative FX impacts.

CFO Javier van Engelen discussed the working capital increase (coming in at 10.5% in Q2 2022 versus 4.0% in Q2 2021) stating that it was impacted most significantly by higher inventories (due to longer supplier leadtimes) and higher receivables.  Van Engelen noted Signify’s continued goal to get working capital down to the low to medium single digits.  Leverage was 1.7x for Q2 2022, based on the acquisitions and a dividend payment – partially offset by the sales of some “non-strategic” real estate.

Signify maintained its outlook for comparable sales growth guidance in the range of 3-6% for the rest of 2022, but has reduced its 2022 adjusted EBITA outlook from the original 50bps increase to a flat 11.0 to 11.4%, “reflecting the lower margin performance of Q2 2022.”

Signify’s Q2 2022 quarterly highlights video can be found on YouTube (link below).  North America does appear in the highlight reel this time with a case study in Canada, and a number of images from Lightfair Las Vegas (June 2022) showing the well-attended Signify and Cooper Lighting exhibits.

Go Deeper:

Signify Q2 2022 Results Report: https://www.signify.com/static/quarterlyresults/2022/q2_2022/signify-second-quarter-results-2022-report.pdf

Signify Q2 2022 Presentation: https://www.signify.com/static/quarterlyresults/2022/q2_2022/signify-second-quarter-results-2022-presentation.pdf

Signify Q2 2022 YouTube Highlights Video: https://www.youtube.com/watch?v=feKQrZxp72M

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