Sale and profits both swung up for Swedish lighting group Fagerhult in the third quarter as the pandemic slowdown eased in many ways except for one in particular: A clogged and sputtering supply chain limited revenue growth to about half of what it could have been.
“We continued to see a very good recovery in the market,” CEO Bodil Sonesson told analysts on a conference call. She described the general state of business as having arrived at “almost back to normal” over the summer.
For the quarter ended Sept. 30, sales rose 2.6% to 1.75 billion Swedish Krona (US$204 million), up from SEK 1.7B the same quarter a year ago. When adjusted for currency effects and other factors, Fagerhult said the sales increase was 3.7%. Net profit after tax for the quarter was SEK 128M ($15M), way up over the SEK 4.9M of a year ago.
But the same general state of component shortages and logistical challenges that has hit many industries did not spare Fagerhult. Just as lighting industry leader Signify noted in its third quarter, Fagerhult experienced an anomaly in its order books, reporting a “record order backlog,” some of which is attributable to orders that would have converted into sales had it not been for backed-up shipping ports, component unavailability, and the like.
The 3.7% sales growth rate “would have been 7.7% if it wouldn’t have been for the supply chain challenges,” Sonesson said. “We determined that we had 68 million Swedish crowns that could not be delivered in the quarter. This was caused by a delay in the components, but also global logistics, and also slight delays for other services and material.”
Chief financial officer Michael Wood said more than half of the unrealized SEK 68M ($8M) was in the company’s architectural and design unit, called Collections, which includes iGuzzini, ateljé Lyktan, LED Linear, and WE-EF brands. Those brands together left SEK 37M ($4.3M) uncollected.
Fagerhult, a Habo-based group of 13 decentralized brands, has slogged through the supply quagmire in part by raising prices, a common tactic for other companies including Signify. Fagerhult began hiking price tags around the second quarter.
“Supply chain challenges and cost pressure is something everyone faces,” Wood said. “We are passing on those cost increases through our luminaire price increases. Many of our luminaire brands have put at least one, some have put two price increases to the market, and then some are gearing up ready for a next one — either a second round or a third round at the beginning of the new year. We’re not getting complaints from that because I think the world is understanding we’re in this inflationary time.”
An internal buying group that procures for the 13 brands has also helped Fagerhult through the difficult supply times, CEO Sonesson added. She noted that the supply difficulties will not ease overnight. She referred to the situation as “unpredictable” and noted that improvements will be “more slow and steady” rather than in “big movements.” Wood anticipated some amount of supply challenges through the second quarter of 2022.
In another development during the quarter, Sonesson noted that Fagerhult is well positioned to ramp up its North American presence, following its August acquisition of the shares in Montreal’s Sistemalux that it did not already own. Sistemalux has its own brand of lighting products and has a longstanding partnership with Fagerhult’s iGuzzini, which predates Fagerhult’s acquisition of Recanati, Italy-based iGuzzini in March 2019.
The Fagerhult brand count is 13 if you include Sistemalux; Fagerhult sold off South Africa’s Lighting Innovations last year. Rounding its brand list, it also owns Fagerhult, Whitecroft, LTS, Arlight, Eagle Lighting, Designplan Lighting, i-Valo, and Veko.
It also offers Internet of Things (IoT) lighting systems through its Organic Response and Seneco operations.
Editor's note: Fagerhult financials are reported in Swedish Krona; conversions to US dollar amounts are current to the exchange rate at time of publication.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).
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