Osram increases returns and cash flow thanks to early structural changes and COVID-19-related measures

2020/05/07

  • Adjusted EBITDA margin increases by four percentage points to 11.7 percent in Q2

  • Group revenue declines on a comparable basis

  • Positive free cash flow of 64 million euros achieved

  • Kathrin Dahnke on board as new CFO

  • Medium term effects of COVID-19 pandemic not yet predictable

Osram has achieved a good second quarter given the global challenges and thus met the market expectations. Although revenue fell by almost 8 percent on a comparable basis to 821 million euros, a positive free cash flow of 64 million euros was achieved particularly through targeted cash management. The adjusted EBITDA margin improved by almost four percentage points year-on-year to 11.7 percent. Thanks to the structural measures and the conversion to IFRS 16, adjusted EBITDA was about a third higher than in the previous year at 96 million euros. Due to restructuring costs of 45 million euros, mainly for charges for the structural and personnel adjustments, the net result was negative at 39.3 million euros. “The measures we took very early on to counter the consequences of the COVID-19 crisis are having an effect throughout the company. It has been a challenge to maintain production largely on a regular basis in recent weeks, as our top priority is and remains the health and protection of our employees. Osram is also using the time to be well positioned after the Corona crisis. Our high equity ratio is of great benefit to us,” said Olaf Berlien, CEO of OSRAM Licht AG.

As part of company-wide crisis management, additional liquidity volume of around 200 million euros was identified until the end of the fiscal year through working time measures, the review of investments and consistent financing management, among other things.

Regardless of the acute measures, Osram is sticking to its existing performance programs, which will bring savings of 300 million euros from 2018 until the end of fiscal year 2022. In this way, the company is well prepared for economic challenges.

The Opto Semiconductors division reported a strong adjusted EBITDA margin of 21 percent in the past quarter. Sales in the semiconductor division decreased slightly to 362 million euros. At 431 million euros, comparable sales in the Automotive sector were significantly lower than in the previous year. The cause for this is, among other things, the initial effects of the COVID-19 crisis on the automotive industry, which was already weakened before the corona crisis. Revenues in the business unit Digital (DI) also fell significantly by about 12 percent. Here, the pandemic-related decline in the entertainment and cinema lighting business and in building illumination projects in China became noticeable. The DI division was nevertheless able to maintain its operating profitability, with adjusted EBITDA positive at 2 million euros.

Kathrin Dahnke joined the Osram Managing Board on April 16. She succeeds Ingo Bank, who became Chief Financial Officer at ams AG as of May 1. The crisis-tested financial manager can look back on a wide range of experience in medium-sized and listed companies. In her last position, she was a member of the board of the Wilh. Werhahn KG conglomerate.

In the medium and long term, the effects of COVID-19 on the global economy cannot yet be predicted. The situation is accompanied by operational and financial challenges for the entire economy. In particular, production shutdowns on the part of customers and disruptions in global supply chains are very likely to affect Osram's business development. As already announced in mid-March, the company therefore expects not to be able to achieve its original corporate targets for the 2020 financial year. Osram will only be able to update its forecast when the general market situation allows more clarity.

Starting in May, a larger number of Osram employees will be affected by short-time working. The Osram Managing Board has therefore decided to waive 10 percent of its May salary as well. It will decide on further measures according to the current situation. Managers also will make a corresponding solidarity contribution through their variable income components.

Osram is holding a telephone conference for journalists with the Managing Board of OSRAM Licht AG on Thursday, May 7, starting at 9:30 a.m. CEST. The meeting will be available online at https://87399.choruscall.eu/links/osram200507pr.html and a recording of the broadcast will be available at this link following the meeting. (German only)

From 2:00 p.m. CEST on May 7, you can follow the analysts' conference with the Management Board under the following link: https://87399.choruscall.eu/links/osram200507ir.html

 

Selected key figures for the OSRAM Licht AG (continued operations) in the second quarter

2nd quarter 2020 2nd quarter 2019 Change nominal
Revenue 821
862
(4.7%)
Comp. revenue growth1 (7.9%)
   
Adjusted EBITDA2 96
70
36.8%
…Margin 11.7%
8.1%
350bps
Profit after taxes (39)
(91)
56.7%
Free Cash Flow 64
(76)
n.a.
'000 Employees 22 25 (11.1%)

(Provisional, unaudited figures. Figures in millions of euros, margins in percent, employees as on March 31. Negative values in parentheses.)

( 1adjusted for currency and portfolio effects)

( 2Adjusted for special items including e.g. transformation costs, significant legal and regulatory issues, as well as M&A-related costs.)


Development of the reporting segments in the secondquarter

2nd quarter 2020 2nd quarter 2019 Change nominal
Opto Semiconductors
…Revenue 362
363
(0.3%)
...comp. revenue growth1
(1.8%)     
…adjusted EBITDA2 76
52
46.6%
...Free Cash Flow  60
(13)
n.a. 
Automotive
…Revenue 431
447
(3.6%)
...comp. revenue growth1 (8.7%)


…adjusted EBITDA2 30
43
(30.6%)
...Free Cash Flow  37  66
(43.9%)
Digital
…Revenue 200 227
(11.5%)
...comp. revenue growth1 (12.3%)


…adjusted EBITDA2 2
(3)
n.a.
...Free Cash Flow  (18)
(43) 58.9% 

(Provisional, unaudited figures in millions of euros. Negative values in parentheses.)

(1adjusted for currency and portfolio effects)

(2Adjusted for special items, including e.g. transformation costs, significant legal and regulatory issues, as well as M&A-related costs.)

 

ABOUT OSRAM

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 smart and connected lighting solutions in buildings and cities. OSRAM uses the endless possibilities of light to improve the quality of life for individuals and communities. OSRAM’s innovations enable people all over the world not only to see better, but also to communicate, travel, work and live better. OSRAM has approximately 23,500 employees worldwide as of end of fiscal 2019 (September 30) and generated revenue of about 3.5 billion euros from continuing activities. The company is listed on the stock exchanges in Frankfurt and Munich (ISIN: DE000LED4000; WKN: LED 400; trading symbol: OSR). Additional information can be found at www.osram.com.

Disclaimer

This document contains statements and information pertaining to our future business and financial performance and future developments that may constitute forward-looking statements – i.e. statements about processes that take place in the future, not in the past. These statements pertaining to the future can be identified by expressions such as "anticipate", "expect", "want", "intend", "plan", "believe", "aspire", "estimate", "will”, "predict" or words of similar meaning. Such statements are based on current expectations and certain assumptions of OSRAM‟s management. They are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are outside the control of OSRAM, have an influence over OSRAM's business activities, achievement, business strategies and results. These factors may cause the actual results to differ materially from the statements of OSRAM, successes and achievements to results, performance or achievements expressed or implied in the forward-looking statements or on the basis of earlier trends can be expected. These factors include in particular, but are not limited to, the matters described in the chapter “Report on Risks and Opportunities” in the Annual Report of OSRAM Licht Group. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of OSRAM may vary materially from those described in the relevant forward-looking statement as being expected, anticipated, intended, planned, believed, sought, estimated or projected. OSRAM neither intends, nor assumes any obligation, to update or revise these forward-looking statements in light of developments which differ from those anticipated. Due to rounding, numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures they reference