Osram looks back on extraordinarily successful fiscal year

NOTE: Unless indicated otherwise, all figures relate to continuing operations (i.e. excluding lamps).

• Revenue rises about 6 percent on a comparable basis in 2016
• Adjusted EBITA margin increases to 12.5 percent
• Proposed dividend of €1.00 per share
• Osram managing board expects growth pace to continue in 2017

"Our fiscal year 2016 was extraordinarily successful. We achieved another record year and met our forecasts while implementing the biggest reorganization in Osram's history. This was an outstanding achievement. Today, Osram is a high-tech company with almost 17,000 patents and leading positions in its markets. We want to expand this position and attack in areas where we are not yet number one," said Olaf Berlien, Chief Executive Officer of OSRAM Licht AG.

In the fiscal year ended September 30, Osram benefited from continuing strong demand, particularly for its premium opto semiconductor products. On a comparable basis, i.e. adjusted for portfolio and currency effects, revenue from continuing operations rose about six percent year on year and reached €3.78 billion. All reporting segments contributed to this increase. On a nominal basis, revenue grew by six percent. Adjusted for special items, EBITA¹ from continuing operations increased around ten percent to €471 million, translating into a margin of 12.5 percent. As a result of the book gain from the sale of the Felco shares, net income from continuing operations more than doubled to €532 million. A dividend of €1.00 per share is to be proposed to the Annual General Meeting. Going forward, Osram will use earnings before interest, taxes, depreciation and amortization (EBITDA) as the main measure of operating profit to reflect its new positioning as a technology company. For fiscal year 2017, the company expects comparable revenue growth of five to seven percent and an adjusted EBITDA margin of at least 16 percent.

¹ Earnings before interest, taxes, and amortization.

Osram Group in the fourth quarter

As announced, the fourth quarter of fiscal 2016 was strongly influenced by the fact that deliveries had been brought forward in the preceding quarter in view of the separation of the IT systems of Osram and the general lighting lamps business. Against this background, revenue from continuing operations was €909 million, which is a decline of 0.6 percent on a comparable basis from a year earlier. On a nominal basis, revenue was down around three percent. The adjusted EBITA margin decreased by more than three percentage points to 8.9 percent. A large part of the deliveries brought forward in the third quarter was related to high-margin products. Net income from continuing operations was €44 million in the fourth quarter.

Osram reporting segments in the fourth quarter

Opto Semiconductors (OS) continued to benefit from strong demand for its premium products in the fourth quarter, particularly in the area of infrared. Revenue rose around nine percent on a comparable basis. With 18.4 percent, the EBITA margin again reached a good level and included expenses relating to the signing of a license agreement. Construction of the new LED chip factory in Kulim, Malaysia, is still progressing according to plan.

In the fourth quarter, the above-mentioned pull-forward effects had an impact on the Specialty Lighting (SP) reporting segment, which includes the Automotive Lighting and Professional & Industrial Applications units. The segment's comparable revenue declined about two percent year on year, despite continued robust demand from the automotive industry. The adjusted EBITA margin reached 8.6 percent. Besides the reduction in volume due to the pull-forward effects, profitability was influenced by the rising revenue share of LED-based products, as had already been the case in the preceding quarters. SP’s entertainment lighting products were recently used at events such as the opening ceremony of the Summer Olympics in Brazil.

The Lighting Solutions & Systems (LSS) reporting segment, which comprises the luminaires and systems business, also felt the impact from the pull-forward effects in the fourth quarter, with comparable revenue falling around four percent. Apart from that, demand particularly for indoor lights and LED drivers remained favorable. The adjusted EBITA margin reached break-even. Osram is currently converting several BMW plants in Germany and Austria to modern and energy-saving LED technology. This is one of the biggest orders to date in the Lighting Solutions business unit.

Discontinued operations in the fourth quarter

In view of the agreed sale, the general lighting lamps business is now reported under discontinued operations. In this context, the fourth quarter figures were impacted by a fair value adjustment as well as expenses related to the carve-out and the disposal of the business. Together with the operating result of the general lighting lamps business, this led to a net loss from discontinued operations of €92 million.

Outlook for fiscal year 2017

The following outlook relates to continuing operations and therefore does not include the general lighting lamps business, which in July Osram agreed to sell. For fiscal year 2017, the managing board expects comparable revenue growth of five to seven percent. The adjusted EBITDA margin is anticipated to be at least 16 percent and will be affected, among other factors, by rising investments on a group level for research and development in the context of the Diamond initiative. Diluted earnings per share are expected in the range of €2.35 to €2.65, provided the share buyback program that started in 2016 continues as planned. Free cash flow is targeted to be around zero. The managing board is confident about Osram's positive medium-term prospects and is therefore aiming for a dividend of at least €1.00 per share also for fiscal 2017.

Starting at 9 a.m. CET today, the company will hold its annual press conference with the managing board of OSRAM Licht AG. The conference will also be broadcast via the internet at www.osram-group.de/en/media/download-center/media-kits/mk-2016. A recording will be made available there afterwards.

Starting at 11 a.m. CET, you can follow the conference call for analysts at www.osram-group.com/en/investors/result-center.

The annual report of OSRAM Licht AG will be published on December 5, 2016 on the Investor Relations website at www.osram-group.com/en/investors/publications/2016.

Key financial data of OSRAM Licht Group (cont. operations) in the fourth quarter

^{(Preliminary, unaudited figures. Figures in millions of euros, margins in percent, employees as of September 30. Negative values in brackets.)}

Reporting segment performance in the fourth quarter²

^{(Preliminary, unaudited figures in millions of euros. Negative values in brackets.)}

² Fiscal year 2015 figures are reconciled to reflect the new OSRAM cost allocation and segment structure.

Key financial data of OSRAM Licht Group (cont. operations) in fiscal 2016

^{(Preliminary, unaudited figures. Figures in millions of euros, margins in percent, employees as of September 30. Negative values in brackets.)}

Reporting segment performance in fiscal 2016³

^{(Preliminary, unaudited figures in millions of euros. Negative values in brackets.)}

³ Fiscal year 2015 figures are reconciled to reflect the new OSRAM cost allocation and segment structure.