Signify Nv Ord

Hello and welcome to the Signify First Quarter 2025 Results Conference call hosted by Eric Rondelat, CEO, Zeljko Kosanovic, CFO, and Telke Gerdes, Head of Investor Relations. Throughout today's call, all participants will be in a listen-only mode. Later, we will conduct a question and answer session. You may register for questions at any time by pressing star 1 on your telephone keypad. We kindly ask you to limit the number of your questions to 1 plus one follow-up. And now I'm pleased to hand the call over to Telke Gervis. Please go ahead, ma'am.

Good morning, everyone, and welcome to Signify's earnings call for the first quarter 2025. With me today are Eric Gondola, CEO of Signify, and Zeljko Kosanovic, CFO. During this call, Eric will first take you through the first quarter highlights, after which Zeljko will present the company's financial performance. Eric will then come back to discuss the outlook for the remainder of the year. After that, we will be happy to take your questions. Our press release and presentation were published at 7 o'clock this morning. Both documents are available for download from our investor relations website. The transcript of this conference call will be made available as soon as possible. And with that, I will hand over to Eric.

Thank you, Selke. Good morning, everyone. And thank you for joining us today. Let's start with some highlights for the first quarter 2025 on slide four. Our first quarter performance landed in line with our expectations, showing sequential improvements in most of our businesses with a strong contribution of our connected offers. Indeed, we increased the installed base of connected light points from 126 million in Q124 to 153 million at the end of the last quarter. Nominal sales decreased by 1.3% to 1,448,000,000 including a positive currency effect of 1.4%. Comparable sales declined by 2.8% as growth in the consumer business across all regions was offset by weakness in professional Europe and the OEM business. Comparable sales declined by 0.9% without the negative drag of of the conventional business. Connected sales grew in the professional and consumer businesses. In China, we saw a faster than expected return to growth in both professional and consumer segments, which brings optimism for the rest of the year. The adjusted dividend margin decreased by 30 basis points to 8%, mainly due to the under-absorption of fixed costs, as well as the weakness of the high-margin professional business in europe causing an adverse segment mix effect these two effects offset the benefits from the cost reduction program net income and came at 67 million compared to 44 million euros into one last year the year-on-year improvement is mainly driven by lower restructuring costs and financial expenses finally our free cash flow generation was 40 million euros this quarter Let me now move on to our four businesses, starting with professional business on slide five. Nominal sales in Q1 were €942 million, with comparable sales showing a decline of 1.8%. During the quarter, we saw sequential improvements across most of our businesses and robust growth of agricultural lighting. In Europe, we saw continued softness particularly in the trade channel and the public segments. The adjusted EBIT MRG decreased by 30 basis points to 7.1% and showed great resilience. Indeed, the negative contribution of Europe was partially compensated by a profit expansion in all of the other businesses and the contribution from our cost reduction program. Let's now move on to the consumer business, and we move to slide six. Nominal sales in Q1 were 311 million euros and the business achieved the combined sales growth of 3.1% with a positive contribution of all the regions. During the quarter, we continue to see strong demand for our connected home offerings, in particular driven by online sales. We are also happy to report that our Chinese consumer business has returned to moderate growth. As a result, the top line growth and the cost reduction program, our adjusted EBITDA margin grew by 40 basis points to 10.8%. Continuing with the OEM business on slide seven. Nominal sales were 92 million euros with comparable sales showing a decline of 10.7%. I would like to give a little more perspective on that performance. About half of that decline is attributable to two major customers, And we believe that this effect will persist in the quarters ahead. In addition to this, we also are seeing a market environment with intensified price pressure on the gross margin, very specifically in the company business. Consequently, the adjusted EBITDA margin decreased to 4.2% due to the gross margin impact and under absorption of fixed costs. Given the start of the year, we anticipate an adjusted EBITDA margin in the mid-to-high single digit in 2025, still remaining above industry average. And finally, let's go to the conventional business on slide 8. Nominal sales in Q1 were €92 million, with comparable sales showing a decline of 23.9%, reflecting the structural decline of that business. the business retained a solid adjusted EBITDA margin of 18.4%, also driven by positive pricing. On the next slide, this is slide nine, I would like to discuss a couple of business highlights. Starting off with the latest Corporate Kings, Corporate Nights rankings. We were ranked 15th globally in the global 100 most sustainable corporations by corporate nights. But we also ranked third in our sector, which is a testament to our leadership in sustainability. Our professional business upgraded the landmark lighting of the Pasupati Bridge in Bandung in Indonesia. For this project, we partnered with Bandung and city governments to install dynamic lighting on the Pasupati Bridge. The new lighting will enhance the visual appeal of this landmark and reinforce its status as a city icon. The installation enables flexible, scene-based lighting. And through the automated control, the city will achieve 47% of energy savings. The professional business also delivered the lighting for Renault's concept store in Milan, Italy. We equipped this new concept store with customized lighting solutions using 3D printing and providing connectivity through the Interac retail management platform. The lighting design enhances the immersive customer experience and supports Renault's brand identity focused on innovation, design and sustainability while delivering 60% energy saving. Moving on to the consumer business. So we rolled out new features for the Philips Hue secure cameras. These include smoke alarm sound detection, allowing users to receive instant alerts and activate navigational lighting during emergencies. We also enhanced the compatibility with other smart home systems, such as Amazon Alexa, Google Nest Hub, and more. These updates improve a real-time safety response and enable broader integration into smart home ecosystems. Next, on slide 10, I would like to discuss our sustainability performance. The first quarter of 2025 marked the start of Signify's fifth and final year of its Brighter Lives, Better Worlds 2025 sustainability program commitments. During the first quarter, we were tracking ahead of our 2025 target to reduce emissions across the entire value chain by 40%, against the 2019 baseline. Circular revenues increased to 36%, up 1% versus the previous quarter and surpassing the 2025 target of 32%. The main contribution was from serviceable luminaires in the professional business with a strong performance from horticultural lighting. Brighter light revenues remained at 33% and beyond the 2025 target of 32%. This includes a strong contribution from both consumer and professional products with high comfort that supports health and well-being. The percentage of women in leadership positions decreased by 1% to 27%, which is not in line with our 2025 ambitions. And with this, I would like now to hand over to Zelko, who will take you through our financial performance in more detail.

Thank you, Eric, and good morning to everyone on the call. So let me dive straight into the financial highlights on slide 12, where we are showing the adjusted EBITDA breach or total signifier. The adjusted EBITDA margin decreased by 30 basis points from 8.3% in Q1 2024 to 8% in Q1 this year with the following developments. The negative volume was 50 basis points. The combined effect of price and mix was a negative 200 basis points. The effect of price erosion remained stable compared to the previous quarters. And this effect is partially compensated by our bill of material savings and other COGS savings, which had a positive effect of 120 basis points. It's also good to highlight that the Q1 2024 gross margin comparison base was at a historically high level 41.2%. Indirect costs improved by 120 basis points on adjusted EBITDA margin level, reflecting the capture of savings from our cost reduction program. We are also continuing to see a segment mix in our total business driven by the decline of our high margin professional euro business, as Eric had mentioned earlier. Finally, the currency has a small negative effect of 20 basis points. On slide 13, I'd like to zoom in our working capital performance during the quarter. Compared to the end of March 2024, working capital reduced by 31 million euros or by 10 basis points from 7.3% to 7.2% of sales. Inventory decreased by 41 million euros. Receivables reduced by 23 million euros. Payables were 38 million euros lower And finally, other working capital items reduced by 5 million euros. And with that, I would like to hand back to Eric to wrap up with the outlook and closing remarks.

Thanks, Elko. Let's conclude with the outlook on slide 15. Our teams are highly focused on executing our mitigation plans for the short-term impact of tariffs in Q2, while also implementing more structural measures to address the second half of the year. We have built sufficient inventory in the US to cover our exposure in Q2 and have stopped all further imports from China to the US. Our global production and sourcing footprint is allowing us to quickly ramp up our sourcing from geographies other than China, which will be fully in place in H2. Based on our performance in Q1, our current market visibility and these measures to mitigate trade tariffs, we confirm our guidance for the year. So we continue to expect low single-digit comparable sales growth excluding conventional. We also expect a stable adjusted EBIT margin compared to 2024. And finally, we are continuing to expect a free cash flow generation in the range of 7% to 8% of sales driven by a strong cash conversion. Our share buyback program began in February, and we already completed the share repurchases to cover share-based remuneration. We are now continuing with the share repurchases for capital reduction. And with that, I will hand over back to the operator for the Q&A.

Thank you, sir. And as a reminder, to ask a question at this time, please signal by pressing star 1. If you wish to cancel your request, please press star 2. And we kindly ask you to limit the number of your questions to one plus one follow-up question. And our first question is for Martin Wilkie from Citi. Please go ahead.

Yeah, thank you. Good morning. It's Martin from Citi. The first question was just to dig deeper into the tariff comment you just made a moment ago. It sounds like you can shift all or certainly a good amount of the China sourcing in the second half. Does that cover all components? I'm guessing you're buying a lot of electronics and other things that are at the moment very heavily dependent on China for certain components. Just if you give us a bit of clarity as to where you can source those from. Is it 100% of what you buy from China? Just to understand how you're shifting that sourcing. Thank you.

Good morning, Martin. You know, when we talked at the end of Q4, you know, in the previous report, we talked about, you know, less than 20% being our imposter channel that was encompassing everything. Of course, you know, at the time, it was 25%. One hundred forty-five is slightly different. So, we have decided, you know, a few weeks ago that we needed to have a very flexible supply chain, especially given the uncertainties that are still lying ahead and the very high volatility that we've seen in the way the tariffs were implemented in the past weeks. So we are basically carrying many activities with suppliers, also with our own manufacturing plants, in order to be able to move the productions that are Chinese dependent, whether they are finished products or components to other countries. Now, what is important also, Martin, is to understand the notion of country of origin. So there's a percentage of added value that we need to reach in order to define that the content is local. So the teams are looking at all these different elements. So the answer is yes, we have a plan. and to be able to mitigate and flexibilize the supply chain to the absolute maximum, to have the choice to produce in China or in other countries. The countries that we are targeting at this point in time are mainly countries of Asia, with our suppliers or with our manufacturers.

Thank you, that's really helpful. And a follow-up on tariffs, obviously as an industry, their main lighting players that are fully sourced in China, particularly white label manufacturers, things like that. So competitors to you, it's probably too early to tell, but is this an opportunity for you to gain share then in the US if other smaller competitors of yours are much more dependent on China and perhaps are less able to do that sourcing shift that you're looking at?

Yes, we do believe so. Then it's a matter of... of time and it's a matter also of timing. But when you look at our footprint, basically, we talked a bit about it previously, but there's a limited portion of the imports that are coming from Europe. And here we can adjust through cost improvements or some price increases, which we have started to implement in the US. Then the big part of what we import to the US is coming from Mexico and Canada. And for this, we are under the USMCA agreement, meaning that most of what we import is not subject to tariffs. And that's a big advantage. And then we have less than 20% which is coming from China. And we think that that profile is much better effectively than other competitors that are much more dependent on China. So it's a game where we can have a lot of opportunities and speed is of the essence to be able to see customers that are depending from some competitors and try to convince them to work with us. So these are the actions that we also carry at this point in time on top of all the other actions that we do in the back office. So yes, Martin, we believe that our footprint is advantageous compared to others, and we could potentially, acting very quickly in the coming months, take some share.

Great. Thank you very much.

Our next question is from Mahan Young from Goldman Sachs. Please go ahead.

Good morning. It's Meihan Yang from Goldman Sachs. Thank you for taking my question. I have two. So first one is what have you observed on demand and pricing and what you have done in the first few weeks since tariffs got implemented in April? And I'll ask the second one. Thank you.

Yes, Meihan. Look, in terms of what we've seen in Q2 was a relative stability. when it comes to price in most of our businesses. As we have reported, we've seen a heightened intensity when it comes to price on the OEM business, but it's very specific with a very specific technology, but it's not been the case throughout the rest of the portfolio. We have started to increase price in the U.S. And we have communicated that to the market and it's already accepted. And we're monitoring the situation because pricing is a factor of two things. First, where is competition in order to stay competitive? And making sure that we have a price which is on the market below the thresholds above which there are stronger incidents on the demand. So it's a complicated equation, but this is what the teams are doing locally, trying to increase price, remaining competitive and still attractive on the market.

Understood. Thank you very much. The second question is, there has been talks on there could be a potential tariff deal with China if anything is negotiated and there could be a step down in the tariff. Should we expect a material step-up in your own inventories in 2Q if there is actually a deal?

That's not what we planned. That's not what we have simulated at this point in time. I think the time is... to what I would say extreme cautiousness also on our side, on the side of our customers because there's a lot of volatility, there's a lot of uncertainty. We're just trying to adapt having a very flexible supply chain. I think that's the name of the game and we can do it because we have a global footprint and we have manufacturing plants and suppliers all over the world and that's what we're trying to do at this point in time. I think it's not about dealing eventually at this stage. It's about making sure that we are extremely flexible to adapt to whatever we're going to have to face in the future.

Understood. Thank you so much.

And our next question is from Chase Coughlin from . Please go ahead.

Yes. Good morning. And thank you for taking my questions. I'll start off. maybe with regard to the professional demand in europe of course you mentioned in the press release and the presentation uh there was quite a bit of margin effect there from from the mix i'm curious on yeah we're seeing some rates come down are you seeing any sort of improvement in in the order book there or what are your expectations in terms of recovery for the for the rest of the year and good morning chase look we are as we said previously you know we cautious on europe

Yes, the rates are coming down, but we see also the economy is being in a situation of transition. We've seen still an economy in Germany, in the UK, now in France, being quite impacted at this point in time. So we've seen that slowness continuing. Of course, in Q1, this is where we still have a high compared. versus last year when it comes to our performance in Europe, both top and bottom line. But we're cautious. The rates are down. It's a positive. It has not translated at this point in time in an immediate business recovery. We are staying cautious for the rest of the year in Europe. And we are pretty much in line with what we said at the time, which is, of course, Q1 is a high compare. but we believe that the business should, you know, moving forward, stop degrading and stabilize, but we don't plan a rebound in Europe in 2025.

Okay, that's very clear. And then as my follow-up, regarding the full year 25 margin guidance, of course, you still expect a stable margin, no change there, but I'm curious because I think it sounds like the OEM margin was perhaps incrementally worse than last communicated and now Of course, there will be some effects from tariffs. And as you mentioned, again, maybe Europe stays weaker for longer. You're quite cautious there. So I'm curious on sort of what's your thought process there in terms of what are the positive margin drivers do you think that they will now, you know, the cost savings will be able to offset some of these more incrementally negative items now? Or how are you thinking about that?

Well, Chase, first of all, you may remember when we gave our guidance at the end of Q4, we were told that we were very conservative. So I think the guidance that we gave at this point in time, because when we give a guidance for the year, we try to make the right assumptions of what can happen. And I think we did well because maybe it was seen as cautious, but when we see where we are now, probably it was the right thing to do, to be cautious in an environment which is extremely, extremely volatile. So now we see, if you take a bit of distance and you look at the big ticket items, we believe that we're going to do better than we had forecasted initially on the consumer business. We believe that we're going to do a bit worse than we had initially forecasted on the OEM business, but we believe that one can compensate the other one, and we maintain our guidance for the year.

Okay, great. That's very helpful. Thank you, gentlemen.

And our next question is from Team Ehlers from Kepler Schiphol. Please go ahead.

Yes, thank you. And good morning, everyone. So the first question would be about the price development you mentioned and the cost savings that partially offset the price pressure and the gross margin development. Could you maybe elaborate a little bit more on what you see there in terms of trends? And do you see the ability to... offset declining prices with better input costs going forward? Or is there some downside risk that costs could come up eventually? Thank you.

Yes, good morning. So maybe to give a bit of perspective on the different components on the dynamics of the margin. As Eric mentioned earlier, first of all, what we've observed and that has been confirmed over the last quarter is stabilization. on the dynamic of pricing that we've seen confirmed also in Q1. At the same time, we've also seen the volumes improving sequentially. And then to your question on the effect and the contribution of, in particular, bill of material savings, we do have a very strong line of sight on the ability to extract further bill of material savings moving forward. So I think we have, with the different components, stability on price, improvement on the volume and continued contribution momentum of coming from the bill of material savings, which is also coming from all the efforts we are taking on the procurement side as we speak. So I think these are the different elements we see.

Okay, so net-net gross margin should come up again in the next quarters.

What we had indicated earlier, if you recall, I think the comparison base, of course, if you look at Q1 in particular, that was the highest comparison base. So we are positioned at, let's say, at a very solid 40.8 in Q1. So what we see is a stabilization moving forward with all those different components playing together. But again, it's good to remind that we are comparing ourselves to what was a relatively high comparison base in 2024. So stabilization of all the components of the gross margin playing as I indicated earlier.

Okay, great. Thanks for that. Then for our question on China, you mentioned that things are actually improving there better than expected. Could you explain the dynamics a little bit, maybe also comment a bit on the pricing environment, because I know that it has been very challenging for you guys. Which trends do you observe in China?

Good morning, Tim. Yeah, the, you know, 2024, has been very difficult for us in China. I think we explained it many times when we reported our results last year. But we worked a lot, especially in the second half of 2024, on adapting to the market, rebuilding some of the portfolio offerings. We also looked very specifically at some go-to markets And I think we're reaping what we have sown basically in Q1, understanding that Q1 is in 2024 the best quarter for China. We had a sequential degradation in Q2, Q3, and Q4. So at the end of the day, it's a very good sign that the efforts that we have done in the second half of 2024 are bearing fruit at this point in time. And we have, I would say, a performance which is first showing growth, both on the professional and the consumer business. The profitability has never been the problem because we adjusted it. But the profitability that we're recording for both of those businesses in Q1 2025, as we have said also previously, is a credit. So at the end of the day, it's a top line game there, and we're very happy with what we see in Q1. And as Q1 was our strongest quarter in 2024, it's a good thing for the rest of the year. But what we're doing there is solid. It's about the offer. It's about the channels. It's about the go-to markets. It's about the customers. Are we out of the woods? We're not out of the woods, but I think the good start that we take in 2025 Q1 is a very good sign for the rest of the year. So, you know, I was probably in the past discussions very cautious on China. We were, when we started the year, very cautious on China. What we see today is that China could be a positive contributor to the performance in 2025 and certainly above the expectations we had when we started the year.

Okay, great. Very clear. Thanks for that.

Our next question is from Mark Hessling from ING. Please go ahead.

Yes, thank you. First question is actually on the US market. I think in a previous update, you really called out the US as being one of the strong parts of the portfolio. I think it's still relatively strong, also looking at some of the comments on the geographies and, for example, also on horticulture. I just want to get your full picture on how you see that market. Is it as strong as it was last year? Is it changing a bit? And also given the tariffs on the demand side, did you see any impact there yet?

Good morning, Marc. You know, when we look at the portfolio of countries and geographies, probably things are changing a little bit because we see now India being very strong, we see China becoming also strong. It's very important for us because these are countries where we are well implemented and for a very long time. enjoying very high market share in India, probably much lower market share in China, but in markets that have their own dynamics. So we believe that these markets are going to contribute positively. You've talked about horticulture. Then would come the US market, which has still been, you know, in Q1, performing still, you know, better than Europe. But you start to see, you know, small signs in the US of, you know, investment that is could take place and maybe are not taking place out of cautiousness because not only about the tariffs, also because of an expectation on the rates. I think the US market has been for us systematically much more sensitive to rates than the European market. It takes a bit more time in the European market, but it goes very quickly in the US. So look, we don't see alarming signs in the US in Q1, but we are cautious. We know that price increases could at one stage impact the demand. If you remember Mark, this is also the reason why we didn't transfer all the inflation to price in 2021 and in 2022, just to make sure that we were staying at the level that was helping the demand not to fall. Now, you know, what the future is made of, we don't know. We will just adapt. We will just adjust. Now, what we also think is when it comes to price increases, given our footprint and given our strong footprint in Mexico and Canada, we probably will have to increase prices much less than others, you know, in order to cover for the tariffs. So at this point in time, No signs that the market is impacted by the tariffs, but we know that there can be and there will be a bit of a pressure on price that can, on one hand, impact the demand, but the price will also increase the top line. So we're navigating in those two different types of situations and we try to find the right balance. This is where we are at this point in time now.

Yes, clear, thanks. And then the second question on the OEM. You call out the two large clients and the price pressure. But also, sometimes in the past, there's also been a bit of a division that is sort of a bellwether for the rest of the industry. Maybe also because of stocking effect. Just try to separate that. Is this two clients, is that a one-off element?

is it more structural uh does it concern you that these businesses deteriorate a bit of a more quarterly blip just just a bit more detail please yeah important question mark look um first of all we see that business is very different from the other ones given the technology that uh it's using and also given the competitive landscape and its nature, which is more, you know, a global business than the regional business. But at the end of the day, yeah, we wanted to call two large clients because they're part of, you know, they make half percent of the decline that we have experienced. So for one of them, it's in the U.S. and it's a known story, you know, that one of our customers bought a business which is similar to our OEM business to insource. And that had been an ongoing situation because we were doing big volumes with that customer and we've seen a regulation over probably a year to a year and a half. So it's still continuing at a lower level, but we have also with that customer, you know, agreed volumes and the volumes in Q1 were much lower than the agreed volume between us. So that's the reason why we want to call it. The second case is another big customer that this time it's very specific and it's in Europe. And we believe that this customer is facing slight headwinds on the market. That's why they're buying less from us. But at the same time, we also believe that these customers may have found other suppliers. So I would say these two situations have a structural element in it. That's the reason why we see that... They're going to be somehow a bit of what we have experienced in Q1 continuing in the upcoming quarters. This is also the reason why we see that business performing for the full year in terms of the adjusted margin in between single to high, the mid to high single digit performance. So this is where we're positioning that business at this point in time. When you take a bit of distance and you look at the industry, with that level of performance, we are probably two to three times more profitable than the other competitors on that market. So our performance still stays high above the industry. Is it announcing anything specific on the other businesses? I don't think so. Mark, even at the time of component, that was very, very specifically targeted on that specific business.

Okay, great. Thanks. Very clear. Thanks. And also thanks for the cooperation in the last couple of years. It was really great, Eric. Thanks.

Yes, same here, Mark. Thanks a lot. Our next question is from Claire Liu from Morgan Stanley. Please go ahead.

Hi, good morning, Eric and Zeko. Thanks for taking my question. My first one is just on tariff and related kind of China competition. What do you expect or what do you see as the risk of, you know, intensifying competition in China and Europe with all these excess capacity from Chinese players potentially if their products cannot go into U.S. anymore and any kind of related pricing pressure in Europe and China? Thank you.

good morning claire look it's difficult because we don't have a crystal ball so we try to have an understanding of how the industry is performing and how the industry is behaving on the basis of what we know our assumption is the following one first there's a lot of chinese competition which is already in europe so it's not uh as if Europe was a new territory that could be taken. The Chinese companies today that are operating in the US, if they want to operate in Europe, they will have to adapt their productions. Because we don't manufacture the same products in Europe than in the US. Nothing is impossible. But if you are a relatively small company in China and you're operating in the US, you have to change the products, you have to get them certified, and then you have to go on a market which is already very populated. It's a complicated undertaking, and we believe that given that situation, given that the market in Europe is not growing at this point in time, that risk, is limited and we are monitoring it as we speak. We know that our customers today are not in a situation where they want to take new suppliers because the market in Europe has been shrinking. We are supporting these customers to the best of our abilities. We know the go-to-market, we know the technology, we have the existing connections. Look, we don't want to sound complacent. but we think it's going to be a difficult move. We're monitoring it and we are ever more present in front of our customers and also proposing to our customers, you know, an A brand and a B brand. The B brand operating, you know, at a lower level and at a more competitive level. So these are, you know, the answers that we bring to the market and we are there. We have feet on the ground. We talk to our customers on a daily basis and, you know, We're here to defend that territory, but also try to grow and take share. So we'll see, but we see that the risk of having an invasion of new players because of them not being able to sell on the U.S. market is remote at this point in time, but we'll keep informing you as we go.

Thank you. That's very helpful. And second one is just quickly to confirm the structural measures that you mentioned to implement in the second half. diversifying the sourcing out of China. Would this bring any restructuring costs for second half and any impact on margins?

That's not the way we have planned it. Maybe when we talked about structural measures, we should have been a bit clearer, Claire. This is structural measures on our manufacturing footprint. So at this point in time, we have listed, I think, 75 to 80 I think we have 75 to 80 projects where we are bringing in some of our suppliers' factories or our own factories new offers to be produced. And that's part of the diversification and the flexibilization of the supply chain that I was talking about. We think it's absolutely paramount to do that. And this is why we've talked about structural measures, because these measures will stay. We think that at this point in time, we need to be able very quickly to decide if we want to keep production in a given space or move it in a different geographical entity, whether it is an entity that belongs to our suppliers or belongs to us. You may have seen also, Claire, that part of the strategy that we also had indicated previously, we have signed a JV with Dickson in India, which is a very important move for us. So it's similar to what we have done with K-Lite in China in order to make sure that in a major country, major country for us because it is a major country a major market but also a major country because the market has a huge huge potential that we have the capability to manufacture locally for that market but also use that manufacturing capability to be able to export so these are some of the structural measures that we have talked about they are on the footprint working on our own manufacturing plants our supplies manufacturing plants and we have not planned for any restructuring as far as distancing.

Okay, thank you very much.

Thank you. We will now move to our next question from Adam Parr from Redburn. Please go ahead.

Good morning. Thanks for taking my question. First, a question on pricing, if I may. Given OEM worse than expected, is it fair to say that you have increased prices more than expected in professional and consumer? And very quickly, a second question. Have you seen any improvement in discussions with customers due to the German infrastructure spending plan, please? Thanks very much.

Yes, good morning. So maybe on the pricing look, As we mentioned, the dynamic that we've seen on price across the businesses, for most of the businesses, practically all the businesses, has been stability. In some cases, even it's a positive contribution. So what we've seen in the components part, specifically on the components part of OEM, and also mostly in particular in the outdoor segments, has been an acceleration and a further price erosion. But I think it's not necessarily because of the price increases, as we said before, depending on how we see also, of course, the effect of the tariffs that should lead to a more inflationary dynamic moving forward. But so far, what we've seen in the last quarter has been pretty much stabilization across all the businesses. And yes, further intensity. observed on the components part of the OEM business that has very different dynamics, as Eric was mentioning earlier. So I think it's very specific to certain areas within the OEM business, while it has stabilized across the board on all the other businesses.

Adam, on your German infrastructure stimulus question, so we're monitoring it. At this point in time, we don't see a direct impact on our top line. Of course, we are equipping infrastructure with energy-efficient lighting, so we believe that there should be opportunities in the coming weeks and months. We're monitoring it, but nothing that shows in the numbers in Q1.

Thanks very much. That was very helpful.

Thank you. We will now move to our next question from Anna Ratcliffe from Bank of America. Please go ahead.

Hi, thanks for taking the questions. Appreciate all the regional cover. I was wondering if you could give us an update on what you're seeing by end market, maybe any pockets of strength or weakness to call out.

Yep. The issue is that I need to, now the situation is so contrasted that I need to look at end markets and sometimes also geographies. But let me try to sum it up. What we are seeing, we are seeing a good traction on the consumer business. So that's something that we are seeing in all the geographies where we operate. You may remember that after a very strong 2020 and 2021, the market on the consumer business, when people were able to go out and go again on holidays and spend less time on equipment. So we had then a negative performance in 22 and 23. At the same time, we saw 24 as the year where things would stabilize and that we would reach the bottom. That's the case. We've been in the past quarters seeing a very good intake on the consumer business, and I would say worldwide. also very strong in the US. We see also a good performance on the consumer business in Europe. So what we had envisaged is actually happening. After a big growth, a decline, a stabilization, and now we are back on the normal growth path. The good elements behind this, and then I can expand it more globally, we see also that the connected parts of our business, it's not exactly an end segment because we do connectivity in the consumer business, but we do also connectivity in the professional business. So we see that overall category of offers on all the segments that it reaches being also fairly strong in Q1. Maybe we have to put on the side Europe, where we see that connected in Europe, especially on the public segment, has been weaker. But otherwise, we see also very good traction in the connected part of the business. Now, moving forward, we see China and India strong. I've talked about it. And when we go more into the segments that are touching at this point in time, our professional business and indoor, This is where we see also a bit of weakness in the US, to a given extent also in Europe. And this is the market that goes also to very diffuse customers, the small installer. And this is a translation of the fact that if there are projects that people had planned, maybe They don't do them at this point in time. They cancel or they delay. And we see also that trend, which is a direct consequence of the uncertainty, which is lying in the markets when it comes to some fundamental economic parameters or when it comes also from what is going to happen to the rates. So you see there's a lot of very different segments, a lot of different situations that we need to deal also by geographies. Another business that we're very happy with, but once again, it's been a business that has grown, gone down, and is growing again, is horticulture. So horticulture has been very strong in 2024 after a very difficult 2023, and it's showing very, very good signs also in 2025. We've done a stellar Q1, and we see with the order intake that we have at this point in time that it should be a good business for the full year.

Great. I appreciate all the color. And then I just wanted to, if I could sneak in another one, ask a little bit about the consumer margin. It stepped up year over year, but it stepped down substantially, even though growth was resilient. Is there anything to call out there, or is that just normal Q1 seasonality?

Normal Q1 seasonality. you know, Q4 is from far the biggest quarter in the consumer business. So you would expect to have basically Q4 is the equivalent of two quarters, you know, in terms of volume. And so you can imagine that you can value the cost much better when you have two times the volume. So it's totally normal.

Great. Thank you very much.

Thank you all. And we have time for one last question today. Team Ehlers from Kepler Chevrolet. Please go ahead.

yes good morning thanks for letting me ask another question uh just a quick one on consumer so would you attribute the recovering consumer to the new products you introduced to the market last year or was it a recovery of existing products thanks for that i think it's it's both uh i think we see a clear rebound on the connected offers and new products existing products in china we have developed new offers we have positioned

on special segments, which is probably explaining it, but that team is both.

Okay, great. And then also from my side, all the best, Eric, for your time after Signify.

No, thanks a lot. Thank you. With this, I'd like to hand the call back over to our speakers for any additional or closing remarks.

Ladies and gentlemen, thank you very much for joining our earnings call today. If you have any additional questions, please do not hesitate to contact Noelle or myself. Again thank you very much and enjoy the rest of your day.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.