By Leo Marchandon
(Reuters) – Shares in Signify, the world’s biggest lighting maker, jumped 8% on Friday after its third-quarter results largely met market expectations, soothing investors, while analysts pointed to potential margin improvement in the fourth quarter.
“After two quarters of material miss early in the year … in-line results will be good enough today with prospect of strong Q4,” J.P.Morgan analysts said in a note to clients.
Signify has been impacted by the gloomy economic situation in Europe and greater price competition and sluggish economy in China. It has also flagged potential tariff risks from the trade spat among the United States, the European Union and China.
The Dutch group, spun off from Philips in 2016, has been seeking to cut costs to combat the tough market environment, including announced layoffs of some 1,000 employees by the end of this year.
“Given that the major cost savings should be back-end loaded we expect bigger margin improvements only in Q4,” UBS analyst Sven Weier said.
Signify’s adjusted core profit (EBITA) margin was 10.5% in the third quarter, up from the 7.9% in the previous quarter but slightly below analysts’ consensus of 10.6%.
“Despite the shrinking contribution of the Conventional business to EBITA, we have maintained a resilient bottom-line as our cost reduction program delivers the expected benefits,” CEO Eric Rondolat said in the earnings statement.
The company reiterated its full-year outlook, including an adjusted EBITA margin at the low end of its 10% to 10.5% range.
Its adjusted EBITA fell 8.7% to 161 million euros ($174.3 million) in the quarter, just below analysts’ average forecast of 163 million, hit by continued weakness in the Chinese market and its professional business in Europe.
Quarterly sales declined 5.2% on a comparable basis to 1.54 billion euros, matching market expectations.
($1 = 0.9236 euros)
(Reporting by Leo Marchandon in Gdansk; editing by Milla Nissi)
