December 1, 2023
[UPDATED] Signify Revamps Organization, Announces Cost Reductions
Company restructures into customer-centric business units, foreshadows more changes ahead
Signify, the world’s largest lighting company, has announced a significant reorganization of its business units, transitioning from a primary focus on product categories to a structure more aligned with customer channels. This restructuring represents a strategic shift aimed at enhancing customer engagement and market responsiveness.
As part of this reorganization, the company has initiated targeted cost-cutting measures aimed at saving over €200 million annually. These efforts focus on streamlining operations and optimizing resource allocation to improve financial efficiency and adapt to volatile and uncertain market conditions, as described by the company.
The new organization will comprise four vertically integrated business units, namely Professional, OEM (Original Equipment Manufacturer), Consumer and Conventional.
Signify’s new Business Units are as follows:
Professional: The Professional business offers LED lamps, luminaires, connected lighting systems, and services to customers in the professional segment. This division includes Cooper Lighting, Genlyte Solutions, Color Kinetics, commercial Philips lamps, and Advance and Bodine sales through various channels including Electrical Distribution.
Consumer: The Consumer business provides LED lamps, luminaires, and connected products, including Philips Hue and WiZ, to customers in the consumer segment.
OEM: The OEM business supplies lighting components to the industry. This includes sales of products to original equipment manufacturers, including certain Advance and Bodine sales to OEMs, and Philips lamp sales to OEMs.
Conventional: The Conventional business offers special lighting, digital projection, conventional lamps including fluorescent and HID sources, and lamp electronics. In 2022, Signify reported that LED-based sales comprised 83% of total revenues. Additionally, Signify recorded 793 million EUR (equivalent to $861 million USD) of Conventional product sales in the fiscal year 2022.
Signify's Business Units: Previous product-centric alignment since 2020
Streamlined Operations and Cost Reductions
In tandem with this reorganization, Signify has also unveiled plans for more cost-cutting measures. These adjustments, primarily targeting the central organization, are in response to what the company describes as persistent market volatility and uncertainty.
Initiated in Q4 2023, the restructuring process is expected to extend through 2024, with the bulk of the changes anticipated by the second quarter (Q2). Signify estimates these measures will yield annualized savings exceeding €200 million. However, according to the company, these changes "are subject to proceedings with Signify’s social partners, depending on local legislation."
[UPDATED Dec 4] Workforce Reductions
Signify's recent announcement stated that the company will "further adjust the size of our central organization and reduce our costs to support the company’s performance amid ongoing market volatility and uncertainty." The company confirmed that this statement pertains to a workforce reduction but did not provide details on how it might affect Signify's North American workforce. In November 2022, Signify reported employing approximately 3,000 employees in North America.
Additionally, the company informed Inside Lighting, "We need to bring our non-manufacturing costs to within 25-29% of sales, and we are committed to maintaining that ratio moving forward."
Signify indicated that it will provide further details regarding one-off restructuring costs in the future. With Signify reporting sales declines in recent quarters, implementing cost reductions is a common and responsible measure amidst such downturns.
Financial Reporting Adjustments
As part of its commitment to transparency and effective communication with stakeholders, Signify has stated that, beginning Q1 2024, it will release comparable financials for the fiscal year 2023, reflecting the new organizational structure. Moving forward, Signify will report its financials across the four restructured business units, each with its own vertically integrated profit and loss (P&L) statements.
By aligning its structure more closely with customer segments and streamlining operations, the company aims to bolster its market position and navigate ongoing economic challenges effectively.
