Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Return to growth in order intake and net sales for Q2 2024.
- Improved gross profit margins despite higher operating expenses.
- High product innovation activity with new launches from We-ef and Iguzzini.
- Strong focus on sustainability with significant progress on science-based targets.
- Positive outlook for the renovation market, which is a key focus area for the company.
Negative Points
- Operating margin impacted by higher operating expenses.
- Newbuild market remains constrained by high interest rates.
- Higher operating costs in the early part of the quarter affected profitability.
- Challenges in the infrastructure business area, particularly in the Vehicle segment in Holland.
- Continued need for significant investment in smart lighting solutions, impacting short-term profitability.
Q & A Highlights
Q: Regarding the stronger order intake momentum towards the end of the quarter, could you perhaps say anything about which segments this affected and maybe even provide us some additional color?
A: It's a good question. I don't think there is anything that stands out specifically. We see a continued good uptake in renovation projects and urban spaces projects. Infrastructure and professional had stronger quarters compared to Q1. Overall, it was more of a business-as-usual quarter.
Q: Could you provide us with some detail on what has been the driver of the gross margin expansion year-on-year?
A: The gross margin improvement is due to a combination of pricing improvements and input cost reductions. Last year, we focused on pricing to recover supply chain cost impacts. This year, we continue to benefit from those pricing improvements and see reductions in input costs, particularly in base metals and LED electronics.
Q: Would you say that you continued to experience positive business momentum and client reception for smart lighting, or is it perhaps a little bit stagnant due to dampened investment sentiment?
A: We see a higher uptake in renovation projects, where smart lighting is very beneficial. The push from the European Green Deal and upcoming legislation will also support smart lighting adoption. Internally, we are working to integrate smart lighting across our product portfolio.
Q: Could you be a bit more specific regarding what measures you have implemented to improve profitability and operating margins in the second half?
A: We took early action on discretionary spending and slowed down recruitment. These measures have already shown positive impacts in June, and we expect further improvements in the second half of the year.
Q: In the premium segment, you mentioned investments in smart lighting and organic response. Will this level of investment continue in the second half?
A: Yes, the investment will continue but not as rapidly as in the first half. We see smart lighting as essential for the future and expect it to shape the industry. The investments are necessary to stay competitive and meet our 2030 ambitions.
Q: Do you see opportunities to make additional acquisitions, or is it more of a wait-and-see game?
A: It is a bit of both. We are moving forward with second and third-round conversations with potential acquisition targets. We remain optimistic about future M&A opportunities.
Q: Can you say anything regarding the growth within new builds compared to renovation in the quarter?
A: It's difficult to quantify, but we are more focused on renovation than new builds. The renovation market shows positive growth, and we expect the new build market to become positive from 2025, depending on interest rates.
Q: Are there any specific one-off impacts on operating costs during the quarter?
A: No, the operating costs were quite clean with no one-off impacts.
Q: How does seasonality impact your business?
A: Seasonality used to be more pronounced, but with our global footprint and diverse product portfolio, it is now more evenly spread. The last two to three years have been atypical due to COVID recovery and supply chain impacts, but we expect 2024 to be a more normal year.
Q: Could you provide more details on the measures taken to improve profitability and operating margins?
A: We took early action on discretionary spending and slowed down recruitment. These measures have already shown positive impacts in June, and we expect further improvements in the second half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
