Fagerhult (FAG) Q3 2024 earnings summary

Executive summary

• Q3 2024 results were below ambitions due to softer market conditions, delayed projects, and longer decision cycles, prompting intensified cost reduction and restructuring in three entities, including a full exit from the horticulture segment.

• Opportunities are emerging in retrofit and renovation projects, supported by the EU ban on fluorescent lighting and sustainability trends.

• Strategic focus remains on smart lighting, sustainability, and talent, highlighted by the launch of new cloud-based smart lighting service models and continued product innovation.

• No project cancellations observed, but investment decisions are delayed due to economic and political uncertainties.

• Restructuring expenses of 64.7 MSEK were recognized in Veko, LTS, and Arlight, expected to yield benefits in 2025 with a full payback in 1.6 years.

Financial highlights

• Q3 order intake was SEK 1,873 million (down 7.6% year-over-year, -5.1% organic), net sales SEK 1,919 million (down 7.7% year-over-year, -5.2% organic), EBIT SEK 181 million (9.4% margin), and EPS SEK 0.58.

• Year-to-date order intake SEK 6,106 million (down 3.3% year-over-year, -2.5% organic), net sales SEK 6,266 million (down 2.9% year-over-year, -2.2% organic), operating profit SEK 598 million (9.5% margin), EPS SEK 1.99.

• Q3 operating profit before IAC: SEK 181.3 million (margin 9.4%); after IAC: SEK 116.6 million (margin 6.1%).

• Q3 operating cash flow was SEK 214 million (was SEK 312 million in Q3 2023); year-to-date operating cash flow was SEK 608 million.

• Net debt at period end: SEK 2,460 million (SEK 1,700 million adjusted for IFRS 16); net debt/EBITDA ratio below 2.

Outlook and guidance

• Cost reductions and restructuring are expected to improve operating margin in Q4 and 2025, with benefits from these actions anticipated in late 2024 and 2025.

• Positive signs from the fluorescent ban and upcoming EU directives are expected to drive renovation demand.

• Market recovery in new builds anticipated in 2025, with renovation activity supported by legislation and sustainability trends.

• No further restructuring costs expected beyond Q3.

• Continued emphasis on innovation, smart lighting, and M&A agenda to drive future growth.