Premstaetten, Austria, and Munich, Germany — ams (SIX: AMS), a leading worldwide supplier of high performance sensor solutions, reports robust first quarter 2021 group results with revenues of USD 1,549 million and an adjusted operating (EBIT) margin of 11%. This attractive performance was driven by healthy overall demand including strong demand in the automotive market, despite typical seasonality in the consumer market. Referring to the final published expectations for the historical ams business, this business recorded very good first quarter revenues in the upper half and a healthy adjusted operating margin near the top end of the expected range. For the second quarter 2021, ams OSRAM expects a further positive business development in light of certain seasonal effects with revenues of USD 1,430-1,530 million.
Emphasizing the group’s collective position as a worldwide leader in optical technologies, the combined company will be known as “ams OSRAM.” ams OSRAM has developed a visual corporate identity strategy featuring the ams and OSRAM logos and plans to change the legal name of ams AG in its upcoming Annual General Meeting. The combined group is referred to as ams OSRAM group. To reflect its business structure, ams OSRAM has moved to a new presentation and financial reporting framework for the combined group with the two segments Semiconductors and Lamps & Systems. This framework fully maps onto the taxonomy of the group’s solution portfolio and will be used in the segment reporting for the group. The Semiconductors (Semis) segment comprises the historical ams business and the historical OSRAM Optical Semiconductor business while the Lamps & Systems (L&S) segment includes the historical OSRAM Automotive and Digital businesses.
First quarter group revenues were USD 1,549 million, 9% lower sequentially compared to a very strong fourth quarter 2020. Comparable prior year financial figures are not available due to the acquisition of OSRAM. The revenue development reflects expected seasonal effects against the background of overall healthy demand. The Semis segment accounted for 65% of total revenues while L&S accounted for 35%. Adjusted group gross margin for the first quarter 2021 was 35%, unchanged from 35% for the fourth quarter 2020 with comparable prior year figures not available.
The adjusted group result from operations (EBIT) was USD 172 million or 11% of revenues for the first quarter compared to USD 285 million or 17% for the fourth quarter 2020 (including adjustments: USD 81 million or 5% of revenues for the first quarter) with comparable prior year figures not available. Referring to the final published expectations for the historical ams business, first quarter revenues for this business were USD 525 million and adjusted operating profitability was 22% of revenues, in the upper half and near the top end of the expected range. Adjusted group net income was USD 89 million for the first quarter compared to USD 183 million for the fourth quarter 2020 with comparable prior year figures not available (including adjustments: USD -2 million for the first quarter). Adjustedbasic/diluted earnings per share for the first quarter were USD 0.38/0.38 or CHF 0.34/0.34 based on 260,986,741/262,009,178 shares and USD 0.03/0.03 or CHF 0.03/0.03 including adjustments (fourth quarter 2020: USD 0.62/0.48 or CHF 0.55/0.43 based on 260,696,784/294,130,349 shares; all weighted average).
For the first quarter 2021, the group operating cash flow was positive at USD 249 million while group free cash flow reached USD 151 million. Net debt for the group stood at USD 2,023 million on 31 March 2021, this corresponds to a group leverage of 1.7x net debt/adjusted1 EBITDA which is ahead of expectations. Cash and cash equivalents were USD 1,929 million on 31 March 2021, unchanged from year-end 2020.
With the domination and profit and loss transfer agreement (DPLTA) between ams and OSRAM becoming effective in early March, ams achieved the expected operational control of OSRAM. The business integration of ams and OSRAM is now fully underway via multiple programs to implement the new group organization, drive the creation of synergies and execute on optimizing the business portfolio of the group. ams confirms an increased total of expected cost savings of EUR 350m which expands on the previously announced EUR 300m expected run-rate pre-tax synergies over a three-year period. These expected run-rate pre-tax synergies will now be realized against a first quarter 2021 baseline of already achieved cost savings of EUR 50m which OSRAM has implemented since last summer. The group is also engaged in several M&A processes as part of the announced portfolio alignment and will provide updates in due course.
ams has announced a delisting offer for all remaining OSRAM shares with a cash consideration of EUR 52.30 for each OSRAM share. This offer is an important step on the path to the full business and legal integration of OSRAM into the ams OSRAM group and will also serve to streamline resources and optimize costs. In line with the group’s financial strategy, no additional financing is needed for the offer. The four week offer period is expected to commence on or around 21 May, following the expected regulatory approval of the offer document. The delisting of the OSRAM shares from the regulated market is anticipated to happen after the end of the offer period. ams invites all remaining OSRAM shareholders to take advantage of this attractive cash offer when available.
The Lamps & Systems (L&S) business recorded a very solid overall performance in the first quarter. The automotive market performed strongly with good revenue growth and higher profitability year-on-year. Sustained very robust demand across regions reflects the ongoing recovery of automotive demand compared to last year. A strong order situation is continuing into the current quarter which also echoes demand/supply imbalances in the market. With production fully utilized despite year-on-year efficiency improvements, customer demand exceeds available volumes in several areas. As a global market leader and driver of innovation, the focus for the coming years is on next generation lighting, including highly pixelated headlamp systems offering very innovative driver assistance and higher safety, supported by the group’s strong aftermarket position.
The L&S business in the industrial and medical market saw a mixed picture given different effects from Covid-19 and market developments. Reduced end market demand continues to impact the majority of the construction- and building-related L&S business in major regions while certain areas of the Digital Systems business show a recovery of demand. The entertainment-related market remains strongly challenged across geographies. The disposal process for the Digital Systems business, which had been initiated by OSRAM earlier, continues to progress as part of the group’s portfolio alignment.
The ams OSRAM business is seeing a strong order situation, particularly in the automotive and, to a lesser extent, industrial market, which is continuing into the current quarter. At the same time, ams OSRAM notes maximum capacity utilization in several areas as well as certain allocation situations towards existing customer demand. The company is also aware of tight supply chain conditions in certain segments of the semiconductor industry. Given the complex nature of supply chains and currently constrained forecasting of supply chain participants ams OSRAM may therefore experience indirect or direct revenue effects or swings related to product availability and customers’ manufacturing plans in the future.
Starting this quarter, the financial outlook relates to the ams OSRAM group. The overall business is expected to continue to develop positively across segments in the second quarter. This expectation is particularly driven by the ongoing dynamic recovery of global automotive demand despite a generally tight supply chain. Solid demand trends in other business areas support this development in light of seasonal effects in the consumer market. At the same time, pandemic-related effects continue to influence regional economies and end markets with different intensity. For the second quarter 2021, ams OSRAM therefore expects group revenues of USD 1,430-1,530 million, 5% lower sequentially at the midpoint, with an expected adjusted operating (EBIT) margin of 7-10%, all based on currently available information.
ams OSRAM currently expects a more limited seasonality for this year with group revenues for the second half presently expected to be slightly higher compared to the first half. This is due to the expected automotive production situation in light of continued strong automotive demand as well as an expected lower market share in the consumer market, the latter with a net revenue effect of below 5% of currently expected full-year group revenues. At the same time and based on our strong relationships, we have multiple ongoing development and program activities for all of our largest customers in the consumer and automotive market.
In addition, the group re-confirms its overall financial target model which looks for double-digit average yearly revenue growth in % and an adjusted operating profitability of 20-25%. The expectations above assume no unforeseen negative effects from the Covid-19 pandemic that would result in a meaningful negative impact on the group’s business.
Additional financial information for the first quarter 2021 is available on the company website at https://ams.com/financial-reports.
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