Signify announced adjustments to its structure to form four vertically integrated businesses

On December 1, the internationally renowned lighting manufacturer Signify announced that it would adjust its business structure to create four new vertically integrated businesses, increase its focus on customer-centered operating structures, accelerate the company's operational efficiency and reduce structural costs.

Previously, Signify was mainly divided into three major businesses, namely the digital solution business (Digital Solution) including smart lighting, indoor professional, and horticultural lighting; the digital product business (Digital Products) including consumer Internet, OEM and Klite lighting; and the traditional products (Conventional Products) business focusing on traditional lamps.

After adjustment, Signify's business will be divided into four parts, namely the Professional business (Professional), which provides LED lights, lamps, interconnected lighting systems and services to customers in the professional field;

The Consumer business (Consumer), which provides LED lamps, lamps and Internet products including Philips Hue and WiZ to customers in the consumer field;

OEM business that provides lighting components for the LED lighting industry; and conventional business that provides special lighting, digital projection, traditional lamps and lamp electronic products.

Signify’s new business structure will be officially implemented in Q1 of 2024, and most business adjustments will be completed in Q2. The new business structure is expected to save Signify more than 200 million euros per year.

Signify continues to reduce costs and increase efficiency to consolidate its position in the LED lighting market

Regarding the adjustment of this business structure, Signify stated that the company's new customer-centered structure is to further adjust the company's organizational scale, reduce costs, and support the company to maintain stable performance under continued market fluctuations and uncertainties. In addition, adjustments to the business structure will also accelerate Signify’s transformation into energy-saving connected lighting.

In recent years, the global economic downturn due to factors such as geopolitics and inflation has also led to sluggish demand in the LED lighting market. In 2023, the year when society returns to normal operations, the recovery of demand in the LED lighting market is not obvious. Signify, as a head lighting manufacturer, feels this deeply.

Since the beginning of this year, Signify’s performance has shown a downward trend compared with 2022. In the first three quarters of 2023, Signify achieved sales of 4.97 billion euros, a nominal decline of 10.2%; the adjusted profit margin before interest, taxes, and amortization was 9.3%, a decrease of 0.8 percentage points from the same period last year; net profit was 156 million euros, a decrease of 65.1% year-on-year.

Signify’s three major businesses: digital solutions, digital products, and traditional products The sales situation of the service is not ideal. From the perspective of sales regions, it can also reflect the poor market demand. Except for sales growth in some regions such as Latin America, Northern Europe, and Italy, Signify's sales in Europe, the Americas, and other countries and regions all declined.

Faced with poor market demand, Signify continues to adopt cost reduction and efficiency enhancement methods to increase the gross profit margin of the business. Since the beginning of the year, Signify's gross profit margin has continued to improve. By Q3 this year, Signify's adjusted gross profit margin increased to 39.7% year-on-year. In the first three quarters, Signify's adjusted gross profit margin was 39.3%, a year-on-year increase of 1.9%. With the adjustment of business structure, Signify may continue to maintain the main development theme of cost reduction and efficiency improvement in the short term, and increase the gross profit margin of each business.

While continuing to reduce costs and increase efficiency to consolidate its current market position, Signify is also continuing to strengthen its own capabilities and lay out various LED lighting market segments to prepare for the company's future development. In March this year, Cooper Lighting Solutions, a subsidiary of Signify, completed the acquisition of wired control system manufacturer Intelligent Lighting Controls. Further expand the intelligent interconnection product line.

Since 2017, Signify has completed more than 10 acquisitions, involving intelligent interconnected lighting, animal lighting, plant lighting, architectural lighting and other lighting market segments. After this business structure adjustment, it is expected to further promote Signify’s market development layout in the LED lighting segment.

Summary

Faced with the sluggish LED lighting market, major manufacturer Signify has begun to take the initiative to make changes. While maintaining its current market position, it has also made various preparations to cope with the unpredictable market in the future. Next, more lighting manufacturers in the industry may join the camp seeking change, maintain their own advantages, seek new directions in the fiercely competitive market, and continue to consolidate their place in the lighting field.