Osram Holds Its Ground in a Difficult Market Environment
WILMINGTON, Mass. & MUNICH--(BUSINESS WIRE)--Aug 1, 2018--Osram held its ground in a difficult market environment in the third quarter of its 2018 fiscal year. On a comparable basis, revenue remained consistent with the prior year’s level of €1.02 billion. At €133 million, EBITDA adjusted for special items was significantly below the prior year’s level. The adjusted EBITDA margin reached 13.1 percent. Foreign exchange effects as well as higher expenses for R&D and ramp-up costs burdened the adjusted EBITDA in Q3 with more than €40 million. In the first nine months of the current fiscal year, that impact came to more than €130 million, with €75 million due solely to foreign exchange rate fluctuations. Recently, global changes in the ordering behavior of our customers and distributors, due in part to existing and imminent trade restrictions, have weighed on the company’s revenue. The change in market dynamics due to the transition from allocation to normalization for some semiconductor products also have taken a toll on revenue. These effects are expected to have an impact in the coming months and led the Managing Board to adjust the annual forecast at the end of June. In this context, the Managing Board has decided to further sharpen the portfolio and as a first step, the company will divest its luminaires business.
Management is looking at a number of measures to rectify the current market situation. They are first looking to streamline the global administration, which should reduce cost by approximately 20 percent. Beyond that, several structural and operational programs have been implemented. This includes the improvement of efficiency in R&D, in the supply chain, and in the German factory alliance. These operational programs should result in €130 to €140 million in savings by 2020.
Negotiations with employee representatives about a reconciliation of interests were considerably expedited and have concluded. Charges for this reconciliation have been taken into account in the forecast for the current fiscal year.
In the third quarter of the fiscal year, the general economic slowdown and weak demand in the automotive industry was primarily reflected in our Opto Semiconductors (OS) and in the Specialty Lighting (SP) segments. The U.S. trade tariffs, more stringent European emission tests and lower production expectations from premium manufacturers also caused uncertainty. In addition, there were project delays with mobile devices and horticulture applications and a continued slowdown of the general lighting market.
The strategic revision of the Lighting Solutions (LS) business unit announced at the beginning of the year has been completed. In addition to the ongoing sale of the LS service business, the Managing Board is now planning to sell the luminaires business. The luminaires business as part of the reporting segment Lighting Solutions and Systems (LSS) is now on the right track due to numerous efficiency improvements.
Outlook for the current fiscal year
Osram adjusted its outlook for the current fiscal year at the end of June. Based on these changes, the Managing Board now expects a comparable revenue increase of 1.0 to 3.0 percent (previously: 3.0 to 5.0 percent) and adjusted EBITDA of €570 to €600 million (previously: approximately €640 million) for fiscal year 2018. In addition, earnings per share (diluted) of €1.00 to €1.20 (previously: EUR 1.90 to 2.10) are forecast for fiscal year 2018. This includes the expense already communicated in connection with the “OSRAM future concept.” Negative free cash flow at €150 to €200 million (previously: negative free cash flow €50 to €150 million) is now expected.
As previously announced, the Managing Board is currently revising the strategic development plan, and the results will be announced at a capital market conference on Nov. 7, 2018.
Osram’s long-term growth prospects remain good. LED and laser-based technologies are aligned with global megatrends and continue to serve growing high-tech markets. The group is actively shaping the ongoing technological shift and has recently expanded its portfolio with innovative future technologies. That includes the acquisition of US provider Vixar, which specializes in compact 3D identification technology, and the acquisition of the horticulture company Fluence. The closings of both acquisitions were completed in the beginning of FQ4, as was the takeover of the former Trilux subsidiary BAG electronics. The Osram Continental joint venture, which will shape the future of intelligent car lighting, went into operation at the beginning of July.
Selected key figures for the Osram Light Group in the third quarter
OSRAM, based in Munich, is a leading global high-tech company with a history dating back more than 110 years. Primarily focused on semiconductor-based technologies, our products are used in highly diverse applications ranging from virtual reality to autonomous driving and from smartphones to networked, intelligent lighting solutions in buildings and cities. OSRAM utilizes the infinite possibilities of light to improve the quality of life for individuals and communities. OSRAM’s innovations will enable people all over the world not only to see better, but also to communicate, travel, work, and live better. As of the end of fiscal year 2017 (September 30), OSRAM had approximately 26,400 employees worldwide. It generated revenue of more than €4.1 billion in fiscal year 2017. The company is listed on the stock exchanges in Frankfurt and Munich (ISIN: DE000LED4000; WKN: LED400; trading symbol: OSR). Additional information can be found at www.osram.com.
This document contains forward-looking statements and information, i.e. statements about events that lie in the future rather than the past. These forward-looking statements can be identified by words such as ‘expect’, ‘want’, ‘anticipate’, ‘intend’, ‘plan’, ‘believe’, ‘seek’, ‘estimate’, ‘will’, and ‘predict’. Such statements are based on current expectations and certain assumptions made by OSRAM’s management, so they are subject to various risks and uncertainties. A wide range of factors, many of which are beyond OSRAM’s control, have an influence on the business activities, success, business strategy, and results of OSRAM. These factors may cause the actual results, success, and performance of OSRAM to differ significantly from those expressly or implicitly communicated in the forward-looking statements or from those that are expected on the basis of past trends. In particular, these factors include, but are not limited to, the circumstances described in the report on risks and opportunities contained in the annual report of the OSRAM Licht Group. If one or more of these risks or uncertainties materializes, or should the underlying assumptions prove incorrect, the actual results, performance, and success of OSRAM may differ significantly from those described in forward-looking statements as being expected, anticipated, intended, planned, believed, sought, estimated, or projected. OSRAM assumes no obligation, nor does it intend, to update these forward-looking statements above and beyond the legal requirements or to adjust them in light of unexpected developments. Due to rounding, numbers presented in this and other reports may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures to which they relate.
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PUB: 08/01/2018 10:02 AM/DISC: 08/01/2018 10:02 AM