Sales jumped for Swedish LED lighting vendor Fagerhult Group although net profits declined 10% in the second quarter, ending a string of three consecutive rises in both revenue and net earnings. High interest rates hit income, and the company’s design-oriented division stubbed its toe.
Fagerhult, which owns and operates 12 lighting companies, reported sales of 2.15 billion Swedish krona (SEK; $206.8 million) for the quarter ending June 30, a 5% increase over the SEK 2.05 billion in the same quarter a year ago. Net profit slipped to SEK 119 million ($11.4 million), down 10% from SEK 131.1 million a year earlier.
The Habo-based company divides its 12 outfits into four business areas, all of which grew except for the largest, the design-oriented Collection, where sales slipped by 1.6% to SEK 947 million ($91.1 million) from SEK 962.5 million a year ago. Collection’s operating profit took a 25% dive to SEK 64.1 million ($6.2 million) from last year’s SEK 85.7 million.
Collection houses Fagerhult’s four premium brands: iGuzzini (including Montreal-based Sistemalux), ateljé Lyktan, LED Linear, and WE-EF.
“We see the global high-end businesses facing some difficult market conditions as investment decision making is taking longer in less favorable markets conditions where interest rates are higher,” the company explained in a quarterly report.
As LEDs Magazine recently reported, Fagerhult’s former head of Collection, Mario Dreismann, left the company after a stint of less than year. He will be replaced by a new executive, Edwin Roobol, who comes from outside the industry with a data networking background that could help the company boost its hoped for growth in connected or IoT lighting.
Group CEO Bodil Sonesson will continue as acting head of the division until Roobol’s arrival.
Sales in Fagerhult’s three other divisions all rose: Premium by 6.4% to SEK 754.6 million, Professional by 8.1% to SEK 265.7 million, and Infrastructure by 24% to SEK 256.9 million.
Premium focuses on European customers and bespoke solutions via the Fagerhult and LTS brands. Professional focuses on indoor lighting in local markets and includes Australia's Eagle, the U.K.'s Whitecroft, and Turkey's Arlight. Infrastructure aims at robust environments and includes the brands Designplan, i-Valo, and Veko.
Operating profits grew in those three areas. And they rose 8.1% across the company as a whole, to SEK 201.6 million from SEK 186.5 million. The 10% drop in net profits reflected, among other things, the increased cost of borrowing, a spokesperson told LEDs.
High interest rates were thus a double whammy, as they undermined both the company’s profits and customers’ ability to finance high-end lighting projects.
Still, CEO Sonesson issued a positive outlook.
“The mega-trends remain positive and for these, the Group's lighting brands develop value propositions and business models to promote lighting solutions that offer energy savings, carbon reduction, and smart lighting,” she said in the report. “The demand to reduce energy costs has never been so high and our solutions achieve this by up to 90%. During the quarter we significantly increased our success rate in winning refurbishment and retrofit projects. The ban on fluorescent lamps later in the year will increase this further.”
The renovation market and the EU’s fluorescent ban have been strong themes for Fagerhult over the last eight months or so.
In addition to its four business areas, Fagerhult also has a technology group that oversees developments in IoT lighting including the outdoor Citygrid group and the indoor Organic Response team. Both report to chief technology officer Johan Lembre and provide wares for all four operating divisions, but Fagerhult includes business results for Citygrid within the Collection division, which will soon be headed by connectivity specialist Roobol.
The company includes results for Organic Response in the Premium area.
Unusually for Fagerhult, the company did not host an analysts’ call to discuss the results. It told LEDs that it skipped the call this time because of peoples’ availability during summer holidays. It has held second-quarter calls in the past.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).
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