In its first quarterly report of the fiscal year, Acuity Brands Inc. posted a 6% decrease in net sales compared to the same period last year. Still, the industrial technology company saw an adjusted gross profit margin of 45.8% and an adjusted operating profit margin of 14.2%.
Acuity Brands reported $935 million in net sales for Q1 2024, down $63 million from Q1 2023. At the same time, its operating profit grew 22%, an increase of $24 million to $133 million; its adjusted operating profit increased 10%, an increase of $14 million to $154 million; and its adjusted diluted EPS rose from $3.29 to $3.72, according to the report.
Additionally, the company reported a $3.4 million increase in net cash flow to $190 million year-over-year, and it repurchased approximately $50 million worth of stock.
“We’re taking the company to levels of performance that it has never seen before,” said Acuity chairman, president, and CEO Neil Ashe during the company’s Q1 2024 earnings conference call. “The margin performance in this quarter is the result of [our] strategy and the work that we’ve been doing around product vitality, around service, around technology, and around productivity.”
Business segment performance
Acuity Brands has two segments that contribute to its overall performance: Acuity Brands Lighting and Lighting Controls (ABL), which creates products for commercial and residential applications, and Intelligent Spaces Group (ISG), which delivers energy management, wayfinding, and real-time asset tracking solutions.
The two segments saw divergent performance during the first quarter of the fiscal year.
According to the report, ABL reported a 7% decrease in net sales, sliding from $947 million in the first quarter of 2023 to $876 million in the first quarter of 2024.
Acuity senior vice president and CFO Karen Holcom provided context to these figures during the conference call, noting that ABL’s year-over-year net sales comparison was challenging because Q1 2023 included a backlog that drove up net sales.
Despite lower net sales compared to 2023, ABL’s profits were up. “ABL’s adjusted operating profit increased 11% to $154 million on lower net sales, and we delivered [an] adjusted operating profit margin of 17.5%, a 280–basis point improvement over the prior year,” Holcom said.
Ashe described ABL’s performance as excellent. “Today, our products are perceived as being more valuable in the marketplace at the same time we are lowering costs,” he said during the call.
While ABL’s net sales were down and its profits were up, the opposite was true for ISG. The group saw its net sales rise 13% from $57 million to $64 million while its operating profit dipped 15% from $12 million to $10 million, and its adjusted operating margin declined from 21.3% to 16% — a 530–basis point difference.
“Our ISG is obviously growth accretive, margin accretive, and return accretive,” Ashe said.
Remainder of the year
Going forward, Ashe said the company will continue to focus on delivering on margin and cash flow in ABL and to grow geographically and add to its product line in ISG.
He noted that the company has found a good rhythm with normalized lead times (consistent order and shipment rates) and an effective strategy for managing price in the marketplace. He said that these efforts combined with product innovations and cost control measures will ensure steady success.
“We don’t need to continue at this level for the rest of the year to deliver outstanding results, but we feel very good about the how in these margins,” Ashe said.
“We believe that we’ve found kind of a new normal,” he continued. “We’re not expecting anything extraordinarily positive or extraordinarily negative between now and the end of the year.”
JENNY JONES is an award-winning freelance writer based in Northern Virginia. She has more than 20 years of editorial experience and specializes in making complex subjects clear and engaging.
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