Signify’s CEO Eric Rondolat Asked about Trump, China and Conventional Business in Quarterly Webcast Call
One of the best ways to gain insights into a publicly traded company’s quarterly performance is by tuning into the Q&A session of their earnings call. Unlike the prepared remarks, the CEO must respond spontaneously, offering a unique glimpse into their perspective. During Signify’s recent earnings webcast, CEO Eric Rondolat provided valuable insights into the company’s strategies and challenges as he was asked about Trump and China among other topics.
Election Uncertainty and Trade Tariffs
A particularly relevant question addressed the potential impact of the upcoming U.S. election.
The question was along these lines: With a significant portion of production based in China and an increasing likelihood of a Trump presidency, how did the tariffs imposed in 2017 and 2018 affect profitability? Additionally, what impact might future tariffs have if reintroduced at a substantial rate?
Rondolat explained that tariffs are not a new challenge for Signify. When tariffs rose in previous years, the company adjusted its production footprint by relocating certain product lines closer to the U.S. to remain price competitive. Although only a limited part of the portfolio was affected, some production was shifted to Mexico to mitigate the impact.
Today, Signify’s approach diversifies production to other low-cost countries, specifically focusing on India and Indonesia. Additionally, they are enhancing certain plants in Mexico, enabling a quick production transfer if tariffs rise again. This flexibility is especially important if tariffs escalate from the current 20-25% range to as high as 60%, allowing Signify to maintain cost efficiency by sourcing outside China.
Another critical challenge is the reliance on Chinese-made components, an issue common across the industry. While final assembly may occur elsewhere, many essential components are sourced from China. To address this, Signify has prepared contingency plans to respond quickly if new tariffs are imposed.
Regional Performance and Market Trends
In a question about market performance, Rondolat confirmed that the American market continues to perform strongly, outpacing Europe and China. He expects this trend to persist through the fourth quarter. However, he noted, “I would say that probably the market that does better than the Americans today is India for us.”
Navigating the Decline of Conventional Lighting
Rondolat also discussed the company’s approach to the inevitable decline of conventional lighting, a segment once highly profitable for Signify. When the company went public, its goal was to be the “last man standing” in conventional lighting; Rondolat updated this to be the “last company standing.” However, the decline in Conventional Lighting has been steeper than anticipated, with annual decreases of 15-20%, and certain areas experiencing drops as high as 30%.
Despite these declines, Signify has developed adaptive strategies to manage the phase-out effectively. The company has segmented its conventional lighting business into three main components:
- General Lighting and Electronic Ballasts: This category is seeing the sharpest decline and is projected to continue falling rapidly in 2025. Rondolat confirmed that Signify has adapted its production facilities to handle this downturn, maintaining efficiency despite the decrease.
- Digital Projection: Signify holds a dominant global market share in this segment, which is facing potential obsolescence. As LED technology increasingly replaces traditional projection lamps, the digital projection segment may phase out entirely over the coming years.
- Specialty Lighting: Unlike the other segments, specialty lighting offers a more promising outlook, with growth potential and investment opportunities. Signify views this niche as a relatively stable area within the conventional lighting segment and plans to continue supporting it.
A Personal Note on Leadership Transparency
Since this article began discussing politics—something we try to avoid—please allow me a personal comment. Listening to Rondolat’s responses, your humble editor noticed how directly and thoroughly he answered each question. Whether brief or detailed, he provided honest insights without deflection.
Wouldn’t it be nice if our politicians did the same thing!