Signify announces Q3 results, plant and connected lighting business growth

Recently, Signify announced its Q3 results for fiscal year 2024. Signify’s performance gradually recovered during the reporting period. Although sales declined year-on-year, Signify's performance gradually recovered month-on-month due to the recovery of horticultural lighting, the continued growth of connected lighting, and the growth of OEM and consumer businesses in multiple regions.

In Q3, Signify achieved sales of 1.537 billion euros (approximately RMB 11.894 billion), a year-on-year decrease of 6.8%; compared with Q1 and Q2, sales increased. The adjusted profit margin before interest, taxes, and amortization (Adj. EBITA margin) was 10.5%, which was basically the same as the same period last year (10.7% in Q3 2023). Signify achieved net revenue of 108 million euros, a year-on-year increase of 30.3%; free cash flow was 119 million euros (152 million euros in Q3 2023). In Q3, Signify’s LED technology product sales accounted for 90% of total sales year-on-year. In addition, during the reporting period, Signify’s installed base of connected lighting points increased to 139 million.

In the first three quarters, Signify’s sales were 4.488 billion euros (approximately RMB 34.852 billion), down 9.7% year-on-year; the adjusted profit margin before interest, taxes, and amortization (Adj. EBITA margin) was 8.9%; net income was 215 million euros, a year-on-year increase of 38%; free cash flow was 249 million euros.

Signify said that the company’s sales data showed a trend of continuous improvement year-on-year, and the company’s team effectively responded to the accelerated decline of traditional business and the continued weakness of the Chinese market. If the above negative factors are excluded, the company's sales will only drop 1.3% year-on-year.

In order to increase the focus on customer-centered business structure, speed up the company's operating efficiency and reduce structural costs, Signify's business structure is currently divided into professional business (Professional), consumer business (Consumer), OEM business (OEM), and traditional business (Conventional).

Q3, although Signify’s professional business and consumer business sales declined year-on-year, compared with Q1 , Q2 all increased. Among them, the professional business achieved sales of 995 million euros in Q3, a year-on-year decrease of 5.6%; the consumer business achieved sales of 304 million yuan in Q3, a year-on-year decrease of 3.8%.

In terms of professional business, during the reporting period, Signify’s plant lighting products ushered in a recovery, and its networked product business also continued to grow. From a regional market perspective, European distribution channels remain weak, especially in Eastern and Southern Europe, while performance in the Nordic market grew.

It is worth noting that plant lighting is one of the few lighting highlight areas in 2024. According to the TrendForce consulting report "2024 Global LED Lighting Market Analysis - 2H24", it is pointed out that in the first half of 2024, the demand for LED lighting in greenhouses, which mainly focuses on fruit and vegetable cultivation, will recover. Coupled with the investment and construction of vertical farms, especially small and medium-sized vertical farms, new demand will pick up, and orders from LED plant lighting companies will increase significantly.

Judging from Signify’s financial report, Q3 plant lighting is still continuing to recover. TrendForce predicts that the LED plant lighting market will grow to US$1.317 billion in 2024 (+6.8% YoY). After 2025, it will be the peak period for the replacement of old and new plant lighting. By then, the demand for plant lighting is expected to increase again. . In addition to plant lighting, new LED application scenarios such as beauty, fishery, animal husbandry, and microalgae are also key market segments worthy of attention in the future development of the lighting industry.

In terms of consumer business, Signify said that except for the Chinese market, the company has achieved business growth in other regions. Excluding the impact of Chinese market factors, business sales will achieve a year-on-year growth of 2.6%.

Signify’s OEM business mainly provides lighting component OEM services for the LED lighting industry. Thanks to the stability of customer inventory levels and the excellent performance of the European market, Q3 sales of this business were 126 million euros, a year-on-year decrease of 1.6%.

On the other hand, affected by the sales ban on fluorescent lamps issued by four major states in Europe and the United States, Signify's traditional business sales in Q3 were 102 million euros, a year-on-year decrease of 29.9%; Q1 and Q2 sales also declined.

Faced with the continued decline of traditional business this year, Signify also stated that the company will gradually reduce its traditional business in the future and continue to increase investment in networking and professional lighting products. These products have accounted for 30% of Signify's overall business, providing Signify with good growth opportunities in the professional, consumer and OEM business segments.

Looking forward to Q4, Signify expects that the adjusted profit margin before interest, taxes, and amortization will be at the low end of the range of 10.0% to 10.5%, and free cash flow will account for 6% to 7% of sales.