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Introduction & Market Context
Profoto Holding AB (STO:PRFO) presented its Q1 2025 financial results on May 7, revealing continued challenges as economic uncertainty in the United States weighed on performance. The premium photography equipment manufacturer saw its stock price fall 3.02% to close at 25.7 SEK on May 6, ahead of the results presentation, extending its decline from its 52-week high of 78.6 SEK.
The company, which expanded into the cinema lighting market in late 2024, is now implementing significant cost-cutting measures while maintaining its strategic focus on LED product development to navigate the challenging market environment.
Quarterly Performance Highlights
Profoto reported a 4% decrease in net sales to SEK 164 million for Q1 2025, with organic growth declining by 5%. The company’s EBIT fell sharply to SEK 17 million from SEK 34 million in the same period last year, resulting in an EBIT margin of 10%, down from 20% in Q1 2024. Management noted that negative currency effects significantly impacted results, stating that the adjusted EBIT margin would have been 15% without these effects.
As shown in the following chart of quarterly performance, this represents a continuation of the downward trend in profitability:
Looking at longer-term performance, the last twelve months (LTM) results show adjusted EBIT down 19% to SEK 135 million, while LTM net sales decreased by 1% to SEK 724 million. The adjusted EBIT margin for the LTM period declined to 19% from 23% previously.
The company emphasized that new product launches, particularly in the LED segment, are expected to help reverse the declining trend:
Regional Performance Analysis
The sales decline was primarily driven by weakness in the Americas region, where sales fell by 12% to SEK 68 million. In contrast, both EMEA and APAC regions showed resilience, with sales increasing by 3% and 4% respectively. This regional disparity highlights the specific challenges Profoto faces in the US market.
The following chart illustrates the regional sales performance:
The company attributed the significant decline in US sales to broader economic uncertainty in the region. This aligns with previous quarters’ performance, where weak consumer confidence has affected sales across markets.
Strategic Initiatives
In response to the challenging environment, Profoto outlined several strategic initiatives to secure future profitability. The company announced a comprehensive savings plan expected to reduce its cost base by approximately 20%, which should improve cash flow by SEK 60-80 million annually, with approximately SEK 30 million positively affecting EBIT.
The company’s strategic priorities include:
Profoto is also responding swiftly to new US tariffs by implementing price increases of 10-15% on 60% of its product assortment starting May 15. This strategy aims to offset the impact of tariffs while maintaining profitability. The company noted that it has an advantage over competitors as only about 10% of its production is in China, with the majority in Thailand and Poland.
Another key strategic shift involves reducing R&D expenditure while refocusing development efforts toward LED products. After updating its flash portfolio and launching new LED products, including the L1600D which began shipping in Q1, Profoto aims to bring R&D spending back to historical levels of approximately 10% of net sales by the end of 2025.
The following chart shows the company’s R&D spending trend:
Financial Position and Outlook
To maintain financial strength during this challenging period, Profoto’s Board of Directors has withdrawn its dividend proposal for 2024. However, the proposal for a share buyback program of up to 10% of shares until the 2026 AGM remains in place.
The company’s net debt position has stabilized at SEK 211 million with a Net debt/EBITDA ratio of 1.0, as illustrated in the following chart:
Looking ahead, Profoto’s CEO Anders Hedebark emphasized that while the company is operating in a time of great uncertainty, it is taking measures to address challenges while maintaining a clear strategic direction. The focus remains on sales and marketing efforts alongside the strategic shift toward LED product development.
The company plans to release its second quarter report on July 18, 2025, which will provide further insight into whether the cost-cutting measures and strategic initiatives are beginning to yield results in an increasingly challenging market environment.
Full presentation:
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