Fagerhult: At long last, the supply chain is easing

Nov. 1, 2022
Sales and profits rise in the third quarter. Logistical logjams haven’t gone away, but they’re much smaller than they were.

Another LED lighting vendor has reported that supply logistics are finally easing. The CEO of Fagerhult Group told analysts, “We see a more positive situation on the supply chain challenges that have been limiting us for a year,” as the company recorded rising third-quarter sales and profits.

The remarks by Bodil Sonesson, boss of the Habo, Sweden–based company, came during a web call with analysts to discuss financial results for the quarter ending Sept. 30.

Sonesson cautioned that the supply chain difficulties are “not completely over yet.” But, she noted, “the situation is clearly better than it has been.”

Fagerhult chief financial officer Michael Wood reaffirmed her observations, noting that “the previously reported supply-chain challenges we see as now subsiding, ebbing way, with other more geopolitical topics taking a little bit of a higher profile.”

Like companies across all industries, lighting vendors have struggled to receive goods — and to deliver them — owing to carryover shipping and transportation effects of the pandemic. It has been a theme in many quarterly reports, as LEDs Magazine has been chronicling, such as three months ago with Fagerhult, when Sonesson said that the situation in the second quarter was even “slightly worse” than in previous quarters, although there were some positive signs.

Logjams now seem to be abating.

The remarks by Sonesson and Wood echoed last Friday’s comment by Signify chief financial officer Javier van Engelen that “lead times have plateaued and are slightly coming down.” Based on the description by the two companies, Fagerhult might be further along in supply chain improvements. But the common thread between both companies is one of betterment.

The improvement helped Fagerhult report a 19.3% increase in sales for the quarter ending Sept. 30, to 2.08 billion Swedish krona ($188.3 million), up from SEK 1.75 billion in the same quarter a year ago. Net profit — earnings after tax — was SEK 156.9 million, up 23% from SEK 127.6 million a year ago, buoyed by price increases that Wood said helped offset increasing costs including energy and employees.

Order intake — a pre-sale activity by which customers book — slowed very slightly, by 0.2%, to SEK 1.891 billion.

Fagerhult owns at least 12 brands and divides its business into four divisions: design-oriented Collection division, with iGuzzini (including Montreal-based Sistemalux), ateljé Lyktan, LED Linear, and WE-EF brands; Premium, which focuses on European customers and bespoke solutions via the Fagerhult and LTS brands; Professional, which focuses on indoor lighting in local markets and includes Australia’s Eagle, the U.K.’s Whitecroft, and Turkey’s Arlight; and Infrastructure, aimed at robust environments and including the brands Designplan, i-Valo, and Veko.

As with last quarter, results were healthy in three of the four divisions but were what Wood described as “below expectations” in Professional, with that group’s U.K. and Australian operation struggling while its Turkish outfit fared well, Wood said.

Three months ago the company had started replacing management in the U.K. and Australia. Wood did not provide an update on the management search other than to refer to interim management in place. He noted that the company has started taking measures to reverse the slide, which could take another two to three quarters.

He attributed some of the difficulties in the U.K. to that country’s recently unstable government, in which three prime ministers have served over the last two months after leadership uncertainties prevailed over the summer months.

“The market conditions with the interesting political situation has been disruptive in the summer months,” Wood noted.

Meanwhile, the company is once again without a head of a business division, as Gert van der Meer, who had been the head of infrastructure, has now joined Acuity Brands’ eldoLED components division, working out of Eindhoven in the Netherlands, according to van der Meer’s LinkedIn page.

The Fagerhult web page lists CEO Sonesson as Infrastructure’s acting head. Not long ago she served in the same capacity, temporarily heading up the company’s Collections division until Fagerhult hired a permanent head, Mario Dreismann, in April.

Van der Meer had also served as acting head of connectivity (IoT) until Fagerhult hired Johan Lembre to the newly created post of chief technology officer.

On a division basis, sales in Collection were SEK 946.3 million, up 24% from SEK 763.8 million; Premium rose 14% to SEK 718.6 million from 629.3 million; Professional nudged up about 2% to SEK 267 million from SEK 262 million; and Infrastructure jumped 32% to SEK 236.4 million from SEK 178.7 million. Operating profit margin rose by over 45% in Collection to SEK 81.2 million; by about 18% in Premium to SEK 115.3 million; and by 42% in Infrastructure, to SEK 33.1 million.

But it tumbled 73% in Professional to SEK 5.9 million.

On the analysts’ call, Sonesson outlined a positive near term in which buyers are becoming more interested in LEDs as energy prices soar, and as a European ban on fluorescent lighting looms in September 2023. She also highlighted the company’s emphasis on design-oriented products including the iGuzzini and LTS brands, among others. LEDs will report on these in a separate article.

MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).

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