Lighting Roundup

In honor of LightFair being next week, thought it good timing for a little “Reading Roundup” with a focus on lighting … tidbits we’ve heard and seen that relate to lighting:

• PoE, power over ethernet, was a topic at the recent Graybar National Training Conference held earlier this month as reported by someone on LinkedIn.  With that in mind, is this form of lighting growing? It must be if Graybar would take valuable time during a conference to offer / support (if a manufacturer did) this topic.  Here’s a survey from our friend Karl Griffith on the topic.  Take the survey and Karl will share the results with ElectricalTrends.
• GE Lighting cut a BIG deal with Lowes for its LED lighting business (the lamp side).  Reportedly multi-year many hundreds of millions of dollar (some said the number starts with a B) commitment with exclusivity elements for both sides. Perhaps a savior for the GE Lighting brand as the company is up for sale? Reportedly sourcing much of the product from what some hope will be a buyer of the company … and if not, the new owner will need to “live” with the outsourced supplier.
  • Speaking of GE, round 1 bids for the combined lighting business (Current by GE and GE Lighting) are in. It will be interesting to see what an LED lighting company is valued at.
• Interesting post by David Schiller at Lighting Solution Development on lighting manufacturer acquisitions recently.  He identified 30 deals.  If you know of others, please add in Comments below.  Coincidentlally we had an LED eCommerce company, represented by an M&A firm, recently reach out to us … sells to consumers, landscapers, property management and similar for outdoor lighting (decorative and seasonal).
• Philips Lighting is closing the manufacturer facility of the old Lightolier plant in Fall River, MA.  It was Lightolier’s headquarters (which many distributors visited years ago.)  The work is being moved to Mexico and Canada.  Here’s a link to a local article.  Some key points in the article:
  • “The company said that closing the facility is part of a plan to “optimize production and supply” and enhance its ability to compete in the marketplace.Kennedy (Congressman Joe Kennedy III) and the others, however, cite the company’s plan to buy back $187 million in stock and accuse the company of using tax cuts to enrich stockholders instead of investing in their employees.“Choosing not to reinvest in efforts to remain competitive strikes us as inconsistent with the reason given for the closing of Fall River, particularly when the company is stepping away from a skilled workforce and a community that has demonstrated a willingness to be a partner,” the delegation wrote.”

160 manufacturing jobs in southeastern MA.

• Schools are considering tunable lighting and doing pilot initiatives to test for energy savings and other benefits. Take a look at this article in Buildings magazine.  Could you work with educational facilities in your market to sell, or fund (with a manufacturer and contractor) a pilot? Could this article be a sales tool for you?
• Speaking of Philips Lighting, here’s info on their Q1:
  • Sales of EUR 1,501 million, a comparable decrease of 3.5%
  • Total LED-based comparable sales growth of 5.6%, representing 68% of total sales (Q1 2017: 61%)
    • Professional Market (distribution) up 3.2% (comparable to Acuity, lags our Q1 Pulse of  Lighting Market Report findings.)
  • Cost reduction initiatives on track; adjusted indirect costs down 13%
  • “As previously indicated, the first quarter marks a soft start to the year, mainly due to a weak performance in Home (retail), most notably in the United States.”
  • Feels market conditions in US continue to be soft, especially with small to mid-sized projects (more like, missing the market which is why they launched their lower cost offering.)
  • “the company launched Interact, its new Internet of Things platform. Interact is designed to collect, process and analyze large volumes of data from the growing number of connected light points, sensors, devices and systems. The IoT platform can create data-enabled services for customers that deliver benefits beyond illumination. Philips Lighting also introduced connected lighting systems under the Interact name. “ (supposedly competes with Acuity offering. Will be interesting to see how sold and adoption rate as well as how distributors are trained and involved in sales and long-term financially.)
  • Outlook
    • “It will continue to focus on its cost reduction initiatives, and expect to benefit from higher savings as of the second half of 2018. It also aims to deliver positive comparable sales growth for the full year on the basis of a strong second half.” (so, more cost cutting worldwide. Wonder why they expect a strong second half? What makes tomorrow different than today? Perhaps distributors know of a new offering? Perhaps sales has major projects closing in second half?)
• “Right-sizing coming to Cree Lighting” is the headline of this local article.  Some points in the article:
  • Cree executives told Wall Street analysts Tuesday that the semiconductor, power product and LED lighting firm is launching a plan to “right size” its Lighting Products group.
  • the Lighting Products operation has been struggling
  • a “right size” plan normally indicating job layoffs or other cuts.
  • “During Q4 [the current quarter] we are implementing a plan to right size our Lighting Products resources to align with our business strategy,” McDevitt (CFO) warned. (a number of $7M was mentioned.)
  • According to the CEO, Greg Lowe, ” We’ve also improved relationships with our channel and distribution partners giving us a larger footprint and a better customer facing presence.” (would distributors agree? Amazing it could change that fast given the admitted challenges. Perhaps they are hearing what they want to hear?)
• More from the Cree quarterly report (their Q3) with a focus solely on lighting:
  • Goals for lighting are “fixing the business and modest growth” (Once GE Lighting is sold, could Cree look at the amount GE gets and consider putting Cree Lighting on the market to divest this division and reinvest into other parts of its business?)
  • Cree did a “fair value” test on its business.  Determined it was worth less than its carrying value and it resulted in a $247.5M goodwill impairment charge. (Interesting test, probably a realistic indicator.  Could be applicable, conceptually, for others also.)
  • In Q3, Lighting Product revenues decreased 10%, GP increased 9% for a 19.1% GM
  • Q4 lighting revenue (essentially springtime) projected to be up 9%.
  • Aside from $7M in lighting restructuring by September, expect $15M annual operating expense reductions. (probably implemented Q1 FY2019 … this fall … money may go into Wolfspeed … a clear indication of the future of the company.)
• And Cree increased wages and added some technology at their Racine plant to improve competitiveness for people and efficiency.
• Kansas City has a street lighting program that they started with Philips Lighting.  It’s shown to save significant energy savings for the city.  It’s gone well and there is a strong ROI. There are currently 178 connected LEDs downtown and 500 LED lights throughout the city. The lights have data analysis points on top that the city’s Chief Innovation Officer Bob Bennett said are making an impact.  “In the case of our pothole predictor, we are at the point today where we can predict at an 85-degree level of certainty where a pothole is likely to form and that’s allowed us to do preventative street maintenance, instead of doing a repair after something bad has happened,” Bennett said.
  • In the article it was mentioned that the energy savings are 50-60% of what is currently saved plus there would be a $5M maintenance savings. There are also public safety and environmental benefits.
  • They are issuing an RFP and expect a cost of $5M.

So, wonder if a distributor is involved? Distributors, are you calling on your local municipalities to present them the overall potential benefits (and have you talked to your fixture manufacturers to envision potential benefits … potholes! maintenance costs!  Seems like a no-brainer decision for a municipality and assume that someone can offer financing plans to help municipalities who don’t have the budget … natural ESCO play.

• Lastly, there have been a number of research reports and pilot projects on circadian rhythm in hospitals and office space.  Here’s research in hospitals as reported in the Wall Street Journal.  Some manufacturers do a great job of providing this research.
  • Idea for distributors … launch some pilot programs in your areas with a / couple of fixture manufacturers (different manufacturer, different customer segment), to develop your own case study and become an “expert” in that customer segment. Use manufacturer research to create the opportunity.  This form of “demand creation” can then turn into a sales and marketing program.

Hope there are some ideas that spark conversation and opportunity!  Add your thoughts about what you are seeing from some of the lighting manufacturers or what customers are saying about LED lighting.

Or is the market slow as large manufacturers want everyone to believe?

Posting in Progress