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Osram Impacted by Market Weakness in the First Quarter

MUNICH, Germany — Unfavorable developments in the automotive industry, especially in China, as well as within the mobile devices sector impacted Osram in the first quarter of fiscal 2019. Political adversities such as international trade disputes, weakened demand for general lighting, and the after-effects of the emission test procedure WLTP also drove customer uncertainty. In addition, Osram’s customers reduced their inventories towards the end of 2018. On a comparable basis, quarterly revenue decreased by around 15 percent year-on-year to EUR 828 million. EBITDA, before special items, was also down compared to last year at EUR 93 million. The adjusted EBITDA margin reached 11.3 percent. These figures no longer include the business activities of Sylvania Lighting Solutions in North America, for which a sales agreement has been signed in January, or the European luminaire business, which is held for sale. These activities will be accounted for as discontinued operations from the first quarter of fiscal 2019.

“There was an increased headwind from our markets in the past quarter. In particular, the automotive cycle has deteriorated significantly. But demand has also declined in the mobile devices and general lighting sectors,” said Olaf Berlien, CEO of OSRAM Licht AG (OSAGF). “We have taken a number of measures to improve revenue and returns.”

The market weakness is reflected in all three of Osram’s business segments. The Opto Semiconductors division, for example, recorded a decline in revenue of around 17 percent on a comparable basis in the first quarter. This reflects not only the economic effects of customers in the automotive industry and general lighting, but also a reduction in customer inventories. Revenue in the automotive segment were 11 percent lower than in the same period of the previous year. During the reporting period, the automotive market declined significantly, especially in China, where according to the market researcher IHS Markit, car production fell by more than 15 percent on a quarterly basis. Numerous Western manufacturers have also lowered their expectations recently. In the Digital segment, revenue fell by around 17 percent mostly due to weak market development in the general lighting segment.

Because of the numerous uncertainties mentioned above, the perspective for the upcoming quarters remains significantly restricted. The Management Board has initiated a number of countermeasures, also aiming for an increase in revenue. Significant structural measures were initiated in the Opto Semiconductors division, in particular. This is intended to secure the forecast for the year. However, the achievement of the annual targets is subject to a revival due to incoming orders in the upcoming months.

As announced, Osram will in the future hone its focus on photonics and optical technologies beyond lighting. This is reflected within the new organizational structures that the company initiated at the start of the new fiscal year. Osram is further sharpening its profile and focusing on high-growth markets, including optical semiconductors, automotive and digital applications. With this, Osram is moving even closer to its markets and therefore will be able to balance its portfolio more effectively. This long-term growth strategy remains intact.

Meanwhile, the sale of the European luminaires business is progressing. Due to the classification of this business as discontinued operation, a value adjustment was made which impacted net income.

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