A lag in price hikes dampened Fagerhult profits in the second quarter, but sales rose even as an already difficult supply chain environment worsened, CEO Bodil Sonesson said. She also revealed that the company has now hired the person who will take on the new role of IoT strategy.
“We saw the supply chain challenges continue in the second quarter, and I would say they were slightly worse than in previous quarters,” Sonesson said on a web call to discuss results for the quarter ending June 30. “Currently we see some slight signs of improvement, although challenges are not over yet and will continue to have an influence.”
Sonesson also alluded to “the challenges in the world around us” and to inflationary pressures including energy prices as impacting both profits as well as sales, which, despite the rise, could have been higher. World challenges included lockdowns in Shanghai and Russia’s invasion of Ukraine.
As an example of disruption, she noted that the Habo, Sweden–based LED lighting company has had to redirect a China-to-Europe supply route to maritime channels rather than sending goods overland by rail via Russia.
Fagerhult Group sells under 12 different brands. For the quarter, overall sales rose to 2.05 billion Swedish Krona, up from SEK 1.85 billion in the same quarter year ago. When adjusted for currency effects, the 10.8% increase was 6.5%, the company said.
While sales rose, net profits (earnings after tax) took a hit, dipping 5% to SEK 131.1 million from SEK 137.7 million a year earlier.
Like most lighting companies, Fagerhult has been raising prices to offset inflationary and supply chain stress. But Sonesson noted that some of the quarter’s price increases did not come soon enough to counterbalance rising costs, one reason being that Fagerhult typically sells on a project basis which locks in prices.
Both Sonesson and chief financial officer Michael Wood expressed confidence that the price increases would soon neutralize costs.
Wood also noted that of a roughly 7% increase in sales for the first six months of the year (January through June), 3% is attributable to price increases and 4% to volume of goods.
Meanwhile, in a written presentation accompanying the results, Sonesson reminded analysts that IoT lighting, also known as “connectivity,” is one of the key strategic areas for the company. To that end, Fagerhult has at last hired the person who will step into the newly created corporate position of chief technology officer. She did not identify the individual, who begins next week.
“On September 1st a new Group CTO starts,” Sonesson wrote. “The market pull for connectivity solutions continues to grow and we see many opportunities.”
As LEDs Magazine has been reporting, the company decided early this year to create the new corporate post to coordinate connected lighting efforts across brands. In its search, Fagerhult has been relatively unconcerned with the person’s lighting industry experience; rather it has been looking for an individual with marketing and thought leadership kudos.
Sonesson reiterated that to analysts on this week’s call.
“Our biggest competitor is the ignorance of the market,” she said. “That means that the CTO that we have employed will come a lot with a market-oriented perspective, being able, together with the brands, to develop thought leadership both internally and externally to help us to make sure that we take then next steps in growth in terms of connectivity and getting a much wider penetration.”
IoT lighting has progressed more slowly than the lighting industry in general had hoped. Fagerhult’s new CTO will be tasked with awakening potential users to its many benefits. At the most straightforward level, those include smarter lighting controls that Fagerhult says can increase energy savings by 70%.
Enthusiasts also note that lighting outfitted with sensors and communication chips can gather and analyze data, offering myriad operational insights to businesses.
Fagerhult is holding a Capital Markets Day on Wednesday a week from today, when it is likely to say more about the new CTO.
In this week’s second-quarter results, the company also revealed management difficulties at one of its four business divisions. In a more positive vein, it disclosed several new innovative luminaires designed with a sustainability ethos. LEDs Magazine will report on these developments separately.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).
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