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Signify more upbeat on 2023 profitability, skips sales outlook

Published 01/27/2023, 02:00 AM
Updated 01/27/2023, 03:46 AM
© Reuters. FILE PHOTO: Signify's logo is pictured at the headquarters in Eindhoven, Netherlands August 30, 2018. REUTERS/Piroschka van de Wouw

© Reuters. FILE PHOTO: Signify's logo is pictured at the headquarters in Eindhoven, Netherlands August 30, 2018. REUTERS/Piroschka van de Wouw

By Diana Mandia

(Reuters) - Signify, the world's largest lighting maker, on Friday gave a more upbeat forecast for operating profitability for 2023, on the back of an improving situation in China.

Signify, the former lighting arm of Philips, had earlier this month cut its full-year forecast for 2022 for both profit margin and sales growth, citing a steeper-than-expected China slowdown.

The company's shares were up 2.5% at 0834 GMT.

Signify said it expects operating profitability for 2023 to be in the range of 10.5%-11.5%, but did not give any outlook on sales, citing volatility in the current macroeconomic environment.

"The COVID measures, specially in the fourth quarter, have been affecting us (...) on the market side, but also on the production side," Chief Executive Officer Eric Rondolat told reporters.

"But if China is coming back to a normal level of economic activity, I think that's positive for us", he said.

The Eindhoven, Netherlands-based company's earlier forecast was for margin on earnings before interest, taxes and amortisation (EBITA) of about 10% for the fourth quarter and full-year 2022.

Rondolat also said the company's key priority in 2023 would be to improve profitability, as he expects container transport and raw material prices to continue to fall throughout the year.

"We see the potential that we have to rebuild the gross margin and the profit in 2023", he added.

Citi analysts said the margin outlook was encouraging, but lack of sales guidance pointed to uncertainty.

"We think that the adjusted EBITA margin guidance will be seen as better than expected, although there will be a debate around the bridge to improve profitability given the uncertain growth outlook," the analysts said in a note.

© Reuters. FILE PHOTO: Signify's logo is pictured at the headquarters in Eindhoven, Netherlands August 30, 2018. REUTERS/Piroschka van de Wouw

Signify reported adjusted earnings before interest, taxes and amortisation (EBITA) margin of 10.1% for 2022 and comparable sales growth of 1.2%, in line with its forecast earlier in January.

The group also said it would increase its cash dividend to 1.50 euros per share over 2022, while targeting annual free cash flow of between 6%-8% of sales.

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