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Osram Numbers Down in Q2

MUNICH, Germany — Osram’s performance in the second fiscal quarter was as expected. Revenue on a comparable basis fell by 13.5 percent to 862 million euros in the period from January to the end of March. The adjusted EBITDA margin was 8.1 percent. When preliminary key figures were published at the end of March, the lighting company had forecast a decline in sales of around 15 percent for the second quarter and an adjusted EBITDA margin in the mid to higher single-digit range. As announced at that time, the decline was due in part to the continuing weakness of the automotive, general lighting, and mobile device markets. This led to high inventory levels, particularly in China. In addition, the general economic slowdown is adversely affecting business development.

Adjusted for special items, EBITDA at EUR 70 million was 56 percent below the prior-year figure, while net income was EUR minus 91 million due to transformation costs and an impairment charge in the controls business. As communicated ad hoc at the end of March, the Management Board is responding consistently to the development of the markets and plans savings of over 200 million euros by 2021.

“In our 113-year history, we have repeatedly experienced challenging times, but each time we have emerged stronger than before. Our long-term strategy of implementing new applications in the LED sector remains intact. The focus is on optical semiconductors, automotive and digital applications,” said Olaf Berlien, CEO of OSRAM Licht AG. “Our second quarter developed in line with what we communicated end of March. The weakness in our core markets continues. Especially the downturn in the automotive segment leads to high inventories in the Chinese market. Together with a general downturn of the economy, this is the reason we are facing a decline in sales for our second quarter. In spite of these challenging environments, our long-term strategy along the implementation of new applications in the LED segment stays intact. Our focus is on optical semiconductors, automotive and digital applications. The board responds to the operational challenges systematically. Both our performance programs as well as the implementation of structural measures are in place and operate at full stretch. This gives us confidence for the rest of the year and we confirm our adjusted full year targets.”

In the past quarter, the Opto Semiconductors division recorded a decline in sales of around 18.8 percent on a comparable basis. This reflects not only the economic effects but also the weakness in the automotive industry and general lighting. High inventories in Asia further curbed development. Sales in the automotive division were 10.6 percent lower due to reduced expectations worldwide in the automotive industry. In the Digital division, sales fell by 8.5 percent due to the weakness in general lighting and the control gear business.

As announced in March, the Management Board expects a decline in revenue from continuing operations of 11 to 14 percent, an adjusted EBITDA margin of 8 to 10 percent and a negative free cash flow of between EUR 50 million and EUR 150 million for the 2019 financial year.

In mid-February, Osram announced that management was in closer talks with Bain Capital and The Carlyle Group about a possible takeover. The due diligence process continues. As communicated from the beginning, it remains to be seen whether an agreement will be reached. The Management Board conducts the discussions in the interests of the company and thus of shareholders, employees and other stakeholders such as business partners and customers.

Selected key figures for the OSRAM Light Group in the second quarter:

2nd quarter
2nd quarter
Revenue 862 938 (8.2%)
EBITDA 11 146 (92.4%)
…margin 1.3% 15.5% (1423bps)
Adjusted EBITDA1 70 159 (55.9%)
…margin 8.1% 16.9% (880bps)
Profit after tax (91) 56 n.a.
Free Cash Flow (76) (114) 33.1%
‘000 Employees 25.0 25.6 (2.0%)
(Provisional, unaudited figures from continued operations. Items stated in € million, margin in %, employees as at March 31. Negative values in brackets.)
(1Adjustment for special items (S.I.) includes e.g. transformation costs, substantial legal and regulatory matters, and costs related to mergers and acquisitions activities.)

Development of the reporting segments in the second quarter

2nd quarter
2nd quarter
Opto Semiconductors
…Revenue 361 426 (15.3%)
…EBITDA 8 105 (92.3%)
…adjusted EBITDA 53 105 (49.7%)
…Revenue 446 482 (7.4%)
…EBITDA 39 64 (38.9%)
…adjusted EBITDA 43 67 (35.9%)
…Revenue 222 215 3.0%
…EBITDA (8) 0 n.a.
…adjusted EBITDA (4) 4 n.a.
(Provisional, unaudited figures. Items stated in € million. Negative values in brackets.)
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