AB Fagerhult (0RQH.L): BCG Matrix [Dec-2025 Updated]

Fagerhult's 2025 portfolio shows a powerful duality: high-margin Stars-led by smart connectivity/Organic Response, premium iGuzzini architecture, and rapid-growth circular lighting-are poised to drive future value, funded by cash-rich Nordic, UK healthcare/education and Benelux operations that generate steady liquidity; meanwhile aggressive bets in North America, smart-city infrastructure and vertical farming are Question Marks demanding focused capital and execution to scale, and legacy non‑LED, low‑margin retail and basic outdoor lines are clear candidates for exit or consolidation-a capital-allocation roadmap that will determine whether Fagerhult converts potential into lasting market leadership.

AB Fagerhult (0RQH.L) - BCG Matrix Analysis: Stars

Stars

The Stars category for AB Fagerhult comprises high-growth, high-market-share business units that require continued investment to sustain leadership and capture future value. Key Stars are: Smart Connectivity and Organic Response solutions; High-end architectural lighting via iGuzzini; and Sustainable circular lighting and refurbished products. Each unit demonstrates above-industry growth, superior margins, and material contributions to group revenue and returns.

Smart connectivity and Organic Response solutions: The connectivity business unit holds an 18% share of the European smart lighting control market (late-2025) with a market growth rate of 12% p.a. This division receives 25% of group CAPEX allocation and posts a 16.5% operating margin. Measured performance shows a 22% return on investment for 2025, making it a principal growth engine and a clear Star in the BCG framework.

High-end architectural lighting via iGuzzini: iGuzzini holds a 14% share of the global luxury architectural lighting segment and accounted for 22% of group revenue by December 2025. The targeted market grows at approximately 9% p.a. amid urban renewal trends across Asia and Europe. iGuzzini delivers a premium EBITA margin of 15.8% and allocates 7% of its own sales to R&D, reinforcing product differentiation and design leadership.

Sustainable circular lighting and refurbished products: This nascent Star delivered a 35% year-on-year revenue increase in FY2025 and now represents 8% of total group revenue. EU regulatory pressure on embodied carbon has pushed market growth for refurbished/modular lighting to an estimated 15% p.a. Fagerhult commands a 12% market share in this niche and directs significant CAPEX toward specialized recycling and modular-design facilities to lock in competitive advantage.

Strategic implications and near-term priorities for Stars:

• Maintain CAPEX intensity: continue allocating ~25% group CAPEX to connectivity and material investment in circular facilities to preserve leads.
• Protect margins via scale and premium pricing: sustain operating/EBITA margins (16.5% / 15.8%) through product differentiation and service layers.
• Accelerate R&D and platform integration: expand Organic Response and integrate iGuzzini design IP with smart controls to increase wallet share per project.
• Commercialize circular capabilities: scale refurbished offerings to convert regulatory tailwinds into higher recurring revenue and higher lifetime customer value.
• Monitor ROI thresholds: ensure continued returns (targeting ≥20% ROI for Stars) to justify ongoing investment versus redeployment.

AB Fagerhult (0RQH.L) - BCG Matrix Analysis: Cash Cows

Cash Cows

The Cash Cows in the Fagerhult 2025 portfolio are mature, high-share, low-growth business units that generate surplus cash to fund Stars and new initiatives. Key Cash Cow segments are Premium indoor lighting in the Nordic markets (Fagerhult brand), Healthcare and education lighting in the United Kingdom (Whitecroft), and Professional lighting for the Benelux region. These divisions combine high operating margins, low incremental CAPEX requirements, strong cash conversion and above-average return on investment.

Premium indoor lighting in Nordic markets - Fagerhult brand: The core Fagerhult brand retains a commanding 30% market share in the Nordic professional indoor lighting sector as of December 2025. The market is mature with an approximate annual growth rate of 2%. This segment contributes 35% of group revenue. Operating margins are consistently high at 14.5%, driven by scale manufacturing efficiencies, long-established distributor relationships and strong brand loyalty. CAPEX needs are minimal relative to sales, producing an ROI of 28% and providing substantial free cash flow to the group.

Healthcare and education lighting in United Kingdom - Whitecroft brand: Whitecroft holds a 20% share of the UK public sector lighting market (hospitals and schools). The institutional market growth is capped at roughly 3% per year. The segment accounts for 15% of total Fagerhult Group turnover and delivers robust cash flows with an EBITA margin of 13%. CAPEX intensity is low at ~2% of sales, enabling redirection of capital toward high-growth product development and digital lighting systems. Calculated ROI stands at approximately 24%, reflecting efficient operations and stable contract pipelines.

Professional lighting for the Benelux region: Fagerhult's Benelux operations hold a 12% market share in the commercial office lighting market and contribute about 10% to consolidated revenue. Market growth has stabilized at ~1.5% annually, dominated by replacement and refurbishment demand. Operating margin is around 12.8%, with negligible needs for new infrastructure investment. Cash conversion is very high, and the unit functions as a predictable cash source for Group-level R&D and M&A financing.

Key financial characteristics and management implications for these Cash Cows:

• High free cash flow generation: combined units produce majority of Group liquid funds used to finance Stars and new technology development.
• Low reinvestment requirement: CAPEX needs are minimal (2-3% of sales), enabling aggressive dividend policy or bolt-on acquisitions.
• Margin stability: operating margins between 12.8%-14.5% provide resilience against short-term pricing pressure.
• Strategic allocation: surplus cash should be earmarked for LED+controls R&D, digital services and selective M&A in growth geographies.
• Risk considerations: maturity and low growth mean long-term revenue declines if product portfolios are not refreshed; cost discipline and product lifecycle management are essential.

AB Fagerhult (0RQH.L) - BCG Matrix Analysis: Question Marks

Dogs - segments currently classified as low market share and low-to-moderate growth but, per internal strategy, often treated as Question Marks given targeted investment. This chapter examines three such business lines where Fagerhult has allocated resources in pursuit of scale: North American market expansion, infrastructure and smart-city urban lighting, and specialized vertical farming lighting.

North American market expansion initiatives: Fagerhult targets the North American professional lighting market growing ~10% annually. The group's market share is ~2% as of December 2025. Significant CAPEX has been deployed to build a local sales and distribution network; short-term ROI stands at ~4% while the segment contributes ~5% of group revenue and operates near break-even as the company prioritizes aggressive penetration over immediate profitability.

Key operational priorities for North America:

• Scale local commercial sales teams and distributor partnerships to improve share from 2% toward a target 8-10% over 3-5 years.
• Optimize inventory turns and regional supply chains to reduce working capital and lift short-term ROI from 4% toward a mid-teens target.
• Transition pricing strategy from penetration discounts to margin recovery once brand and channel reach are established.

Infrastructure and smart city urban lighting: The infrastructure segment targets the global smart city market projected to grow ~14% through 2026. Fagerhult holds a modest ~4% share in international outdoor/urban lighting. R&D investment is high at ~10% of segment revenue to develop connectivity, sensors, and platform integrations. Current margins are compressed (~6%) due to elevated customer acquisition costs and competitive public bidding dynamics; the division consumes more cash than it generates and could become a Star if R&D and tender-win rates improve.

Strategic levers for infrastructure:

• Prioritize wins in medium-sized municipalities with faster procurement cycles to build reference projects and reduce CAC.
• Form strategic technology partnerships to lower R&D burn and accelerate product-to-market timelines.
• Deploy modular product-platform approach to improve margins through reuse and aftermarket services (maintenance, data services).

Specialized lighting for vertical farming applications: The horticultural LED niche is expanding ~18% annually. Fagerhult has launched a specialized product line capturing <3% of the global market. The total addressable market for horticultural LED solutions is estimated at ~$2.0 billion. Initial CAPEX and spectral research investment have produced negative short-term ROI; contribution to group revenue is <2%, reflecting an early-stage strategic bet on future agricultural trends.

Actions to advance vertical farming unit:

• Leverage pilot farms and research partnerships to validate yield/energy benefits and build strong case studies for growers.
• Focus on scalable product modules and recurring revenue through service contracts and lighting-as-a-service pilots.
• Seek co-funding or grants to offset early R&D CAPEX and accelerate breakeven.

AB Fagerhult (0RQH.L) - BCG Matrix Analysis: Dogs

The following section classifies specific low-growth, low-share business units within AB Fagerhult's 2025 portfolio as Dogs-legacy activities that generate limited returns and consume managerial attention despite minimal strategic value.

Legacy non-LED component manufacturing: The manufacturing of traditional non-LED components contributed 1.8% of total group revenue in December 2025. Market demand is contracting at an estimated -20% CAGR as global phase-outs of fluorescent and other legacy technologies complete. Fagerhult's market share in this declining segment is 5%, down from 12% in 2020 due to deliberate divestment and reallocation of resources. Operating margin for the division is 3%, and standalone EBITDA margin is approximately 2.6%. No new CAPEX has been budgeted for 2026-2028; maintenance CAPEX for 2026 is SEK 9 million (vs SEK 45 million allocated to LED and smart-systems R&D). The segment employs roughly 120 staff, representing 2.4% of group headcount.

Standard retail lighting in competitive markets: The standard retail lighting division faces severe price erosion from low-cost overseas manufacturers and private-label programs. Growth in this specific market niche is near flat at +1% annually as major retailers pivot to experiential and architectural lighting solutions. The unit holds a 4% market share in the commoditised retail channel and contributes 6% to group revenue (SEK 320m). EBITA margin stands at 4.5%; ROI has declined to 6% versus a group WACC of 9.8%, indicating value destruction. Inventory turnover is 3.2x (down from 4.1x in 2022), and average selling price has fallen by 12% since 2021. Strategic reviews and potential consolidation or divestiture are in process; scenarios modeled include sale, exit, or conversion to a low-cost supply hub.

• Revenue share: 6% of group (SEK 320m)
• Market share in retail channel: 4%
• Market growth: +1% annually
• EBITA margin: 4.5%
• ROI: 6% (vs group WACC 9.8%)
• Inventory turnover: 3.2x

Basic outdoor functional lighting components: Commodity outdoor components represent a low-margin, low-differentiation activity. This segment accounts for 4% of group revenue (SEK 210m) and holds a global market share of 3% in the commodity space. Market growth is modest at 2% annually, with procurement heavily price-driven among municipal and infrastructure buyers. Operating margin is 5% and the segment shows a single-digit ROI that is below the group average. Product-level gross margins have compressed by 7 percentage points since 2019. Fagerhult has transitioned strategic focus toward integrated, IoT-enabled outdoor systems, reducing emphasis on basic components and limiting future investment to cost-optimization projects (2026 cost-reduction program targeting SEK 14m in annualized savings).

• Revenue share: 4% (SEK 210m)
• Market share (commodity outdoor): 3%
• Market growth: +2% annually
• Operating margin: 5%
• Planned cost savings: SEK 14m annualized
• Product gross margin decline since 2019: -7 pp