Fagerhult Q2 2025 slides: Sales decline 10.4% as market volatility persists

Introduction & Market Context

Fagerhult AB (STO:FAG) shares plunged 9.57% to 39.2 SEK following the company’s Q2 2025 earnings presentation on July 18, 2025, as the lighting solutions provider reported significant declines in sales and profitability amid persistent market volatility. The stock is now trading closer to its 52-week low of 36.9 SEK, well off its high of 73.9 SEK.

The Swedish lighting group acknowledged "unsatisfactory" results and order intake in its quarterly presentation, citing ongoing market challenges despite some positive signs in the renovation sector. An IT incident at its Whitecroft unit further impacted performance during the quarter.

Quarterly Performance Highlights

Fagerhult reported Q2 2025 net sales of 1,848 MSEK, representing a 10.4% organic decline from the 2,167 MSEK recorded in the same period last year. Operating profit before items affecting comparability (IAC) fell more dramatically, dropping 39.3% to 119 MSEK from 196 MSEK in Q2 2024.

As shown in the following chart of Q2 financial performance:

The company’s operating margin before IAC contracted to 6.5% from 9.1% a year earlier, while earnings per share before IAC declined to 0.32 SEK from 0.62 SEK. Operating cash flow also weakened to 162 MSEK compared to 280 MSEK in the prior-year period.

Year-to-date performance showed similar trends, with net sales down 10.7% organically to 3,788 MSEK and operating profit before IAC falling 36.5% to 265 MSEK:

Segment Performance

Performance varied across Fagerhult’s four business segments:

The Collection segment, which includes premium brands like iGuzzini and LED Linear, showed resilience with Q2 order intake growing 3.9% organically, though net sales declined 8.2% organically. Operating margin before IAC fell to 9.6% from 11.4% in Q2 2024.

The Premium segment, featuring the Fagerhult and LTS brands, saw a 10.8% organic decline in order intake and an 8.0% organic drop in net sales. Despite these challenges, the segment improved its operating margin before IAC to 14.0% from 12.4% a year earlier.

The Professional segment experienced a 6.5% organic decline in order intake and a substantial 23.8% organic decrease in net sales, with performance significantly impacted by the IT incident at Whitecroft.

The Infrastructure segment showed the weakest performance with order intake down 33.8% organically and net sales falling 16.4% organically. Operating margin before IAC turned negative at -0.4% compared to 4.9% in Q2 2024.

Fagerhult’s operating model is structured around these four distinct business areas:

Strategic Initiatives

Despite current market challenges, Fagerhult continues to pursue strategic acquisitions to strengthen its market position. The company highlighted two recent acquisitions in its presentation:

Trato-TLV, a French market leader in retail and healthcare interiors founded in 1947, which expands Fagerhult’s presence in retail, public transport, and hospital equipment sectors.

Capelon, a Swedish pioneer in connected street lighting and smart city applications with over 20 years of industry experience. This acquisition aligns with Fagerhult’s 2030 vision for smart lighting, particularly as the EU ban on HPS lamps from February 2027 will drive cities toward LED luminaires with smart technology.

The strategic rationale for the Capelon acquisition is illustrated in this slide:

The company noted that the smart lighting market in Europe is projected to grow by 22%, representing a significant opportunity as outdoor lighting can constitute up to 50% of municipal electricity costs.

Forward-Looking Statements

Fagerhult cited Euroconstruct data showing expectations for growth in the construction sector between 2025 and 2027, despite some downward revisions. The renovation market is projected to increase its share to 50.4% by 2025, up from 44.4% in 2000, providing potential opportunities for the company’s lighting solutions.

The following chart illustrates the long-term trend in the renovation market share:

In its conclusion, Fagerhult acknowledged that market volatility remains but highlighted continued cost reductions and positive signs in renovation, with "very early signs" in new build activity. The company expressed optimism about integrating its Trato and Capelon acquisitions.

Detailed Financial Analysis

A closer examination of Fagerhult’s financial trends reveals concerning patterns in sales and profitability. The company’s rolling 12-month net sales have been declining since Q1 2023, as shown in this chart:

Similarly, operating margins have been on a downward trajectory, with the rolling 12-month margin declining consistently since Q4 2022:

Cash flow generation has also weakened, though the company maintains a positive operating cash flow:

On a more positive note, Fagerhult’s net debt position has improved, with the Net debt/EBITDA ratio trending downward to approximately 2.2 in Q2 2025:

Earnings per share have followed the overall declining trend, with rolling 12-month EPS falling to around 1.8 SEK by Q2 2025:

The company also announced the appointment of Oscar Wallstén as its new CFO effective July 7, 2025, adding to the organizational changes as Fagerhult navigates this challenging period.

While Fagerhult’s presentation emphasized strategic acquisitions and potential market improvements, the financial results reflect significant operational challenges that have contributed to the negative market reaction. Investors will be watching closely to see if the company’s strategic initiatives and cost reduction efforts can reverse the declining performance trends in coming quarters.

Full presentation:

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