Osram records successful fiscal year with a strong finish

2013/11/12

Growth and clear profitability improvements in the fourth quarter
Company targets further profitable growth on a comparable basis in 2014
Gross savings from Osram Push now expected at €1.2 billion

Osram has fully achieved and partially even exceeded its targets for the fiscal year that ended in September 2013. Revenue rose two percent year over year on a comparable basis – meaning excluding portfolio and currency effects – to almost €5.3 billion, with a rising dynamic in the final quarter. The revenue share of LED-based products and solutions increased from around 25 percent in fiscal 2012 to 29 percent in the past year. EBITA [1] almost doubled compared with the previous year to €99 million. Excluding special items, EBITA increased 31 percent to €410 million, which equals 7.7 percent of revenue. Osram’s net income turned clearly positive with €34 million in fiscal 2013. Free cash flow amounted to €284 million. Looking ahead, the company expects the positive trend to continue in fiscal 2014, which started in October.

“Fiscal 2013 was in a number of ways a positive year for Osram. Following our successful listing, we also saw a strong finish in our business. We have made significant progress in our company reorganization and execution continues to be ahead of schedule. We are confident that we will stay on our profitable growth path in the current fiscal year as well. As we are still ahead of our savings target, we aim to reach an adjusted EBITA margin of more than eight percent already in the current fiscal year – earlier than expected. We also assume that Osram will surpass its earlier announced 2013 to 2015 cumulative savings target, further improving our long-term competitiveness,” said Wolfgang Dehen, Chief Executive Officer of OSRAM Licht AG, on the occasion of the company’s annual press conference in Munich.

Osram Group in the fourth quarter

Osram recorded a four percent rise in revenue year over year on a comparable basis in the fourth quarter. All reporting segments and regions contributed to this growth. The EBITA margin adjusted for special items increased to 8.1 percent from 7.4 percent in the third quarter and one percent in the year-earlier period, reflecting cost savings from the company’s transformation program. The revenue share of semiconductor-based products (“solid state lighting,” or SSL) rose from 27 to 31 percent year over year, further demonstrating the rising acceptance of LEDs in the lighting market and Osram’s strength regarding this technology.

Osram reporting segments in the fourth quarter [2]

Osram’s opto-semiconductor components reporting segment (Opto Semiconductors, or OS) continued to post growth across all regions in the final quarter, with revenue rising 13 percent year over year on a comparable basis. Apart from high demand for general lighting components, growth was again driven by telecommunications industry products. The segment recently secured two design wins for flash light applications from leading smart-phone makers. The EBITA margin amounted to almost 15 percent. In fiscal 2013,
OS exceeded the billion-euro revenue mark for the first time ever. OS is planning to put its second LED assembly plant in Wuxi, China, fully into operation in the third quarter of fiscal 2014 to be prepared for the growing demand, particularly from Asia.

Specialty Lighting (SP), with its Automotive Lighting and Display/Optics units, continued its positive trend. Thanks to strong demand for halogen lamps and sustained growth in semiconductor-based light sources, the segment achieved a comparable revenue increase of eight percent. The EBITA margin was above 13 percent, or almost 16 percent when adjusted for special items. Automotive Lighting received a design win for laser light front lights and is also engaged in predevelopment projects regarding organic light-emitting diode (OLED) rear lights in vehicles.

The largest reporting segment, Lamps & Components (LC), which covers the product business with lamps, light engines and electronic control gears, recorded its first revenue gain on a comparable basis after five quarters. The increase of two percent means that the LED business was able to offset declines in the traditional business. LC’s business with LED-based products rose by 38 percent. EBITA was impacted by higher transformation costs than in the previous year. The adjusted EBITA margin amounted to almost three percent due to savings and productivity increases resulting from the Osram Push program.

The Luminaires & Solutions (LS) reporting segment comprises luminaires for professional customers, products for consumers, as well as the service and solutions business. LS recorded comparable revenue growth of four percent in the final quarter, in particular due to higher sales from LED outdoor luminaires. The segment’s loss was significantly higher than in the previous year because of transformation measures initiated in the luminaires and in the service business. The adjusted EBITA margin was about minus seven percent.

Outlook for fiscal 2014 and the ongoing company reorganization

For fiscal 2014, the Managing Board expects revenue growth on a comparable basis to exceed the global real GDP growth, which is currently forecast at approximately three percent (source: IHS Global Insight). This takes into account a negative revenue impact at Luminaires & Solutions due to the initiated restructuring. Regarding EBITA adjusted for special items, Osram expects a margin of more than eight percent. In addition, the Managing Board expects net income to rise sharply this fiscal year. Free cash flow should reach a triple-digit million-euro figure, but stay below the high prior-year figure, mainly due to higher cash outflows for the transformation and capital expenditure. Furthermore, Osram expects to generate a return on capital employed (ROCE) above the cost of capital (WACC) of 8.5 percent.

Osram employed more than 35,000 people globally at the end of fiscal 2013. This represents a drop of around ten percent year over year and shows the restructuring progress in the context of Osram Push. The company’s worldwide, continuous and comprehensive improvement program aims to ensure that Osram remains competitive in the long term. Based on a number of measures – including in the area of procurement and the reorganization of the global production landscape – the company has already realized 36 percent of the cost savings planned for the time until 2015. Including the transformation measures in the Luminaires & Solutions segment that were initiated in the fourth quarter, Osram will cut approximately 8,700 positions by the end of 2014 as part of the realignment that has been running since 2012. The cumulated gross savings realized in this context are expected to total €1.2 billion by the end of 2015, roughly €200 million more than originally expected. Transformation costs will total up to €600 million between 2012 and 2014, as already announced.

Business Highlights of fiscal 2013

In September, Opto Semiconductors celebrated 40 years of LED expertise at its Regensburg location. This underlines that also in this area technical progress has been part of Osram’s culture for decades. The company also drove forward a number of key technology projects in 2013, such as essentially achieving road suitability for organic light-emitting diodes (OLEDs) used in rear lights of vehicles or combining fluorescent and laser light for the first time to achieve maximum image quality in projection applications. Osram also concluded a number of high-profile lighting projects and contracts in the past fiscal year. One highlight is the implementation of a comprehensive lighting solution for Munich’s Städtische Galerie im Lenbachhaus, which opened its doors again in May after years of refurbishment and where now more than 170,000 light-emitting diodes and an intelligent light management system are putting the gallery’s works in the best possible light. An enhanced version of this solution will be installed in the Vatican’s Sistine Chapel in 2014. After 500 years, the art-historically outstanding works can then be viewed to a level of precision unique until now, and the especially art-conserving installation enables significantly higher illuminance. In addition, it will use 60 percent less electricity than the current installation. Osram was also involved in another landmark project: The Marmaray Tunnel under the Bosphorus. Several thousand Osram lamps illuminate the link between Europe and Asia in Istanbul. And back in April, the company presented the first LED retrofit lamps designed to replace 40- and 60-watt incandescent bulbs for less than €10. Two Osram LED lamps were also among the winners at the consumer-oriented “Home&Trend Award 2013.”

The annual press conference with OSRAM Licht AG’s Managing Board on the preliminary results for fiscal 2013 will take place today at 8:00 a.m. CET. The conference will also be broadcast via the Internet at www.osram-group.com/media/press-releases. After the event, a recording of the conference will also be provided under that link.

Starting at 1:00 p.m. CET you can follow the conference for analysts and investors with the Managing Board at www.osram-group.com/investors.

OSRAM Licht AG’s full annual report will be published on December 5, 2013, on the Company's Investor Relations homepage at www.osram-group.com/investors.

[1] Earnings before interest, taxes and amortization.

[2] Osram organizes its operating business in four reporting segments. Regionally, the business is split up into the three regions APAC (Asia Pacific), EMEA (Europe, Middle East and Africa) and the Americas (North and South America).

Key financial data of OSRAM Licht Group in the fourth quarter

  4th quarter 2013 4th quarter 2012 Change nominal
Revenue 1,332 1,371 (3%)
EBITA (24) 7 n.a.
...Margin (1.8%) 0.5% n.a.
EBITA, adjusted 108 13 731%
…Margin 8.1% 1.0% 710 bps
Net income (29) (119) 76%
Free Cash Flow 85 93 (9%)
Employees (‘000) 35.1 39.2 (4.1)

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

Reporting segment performance in the fourth quarter

  4th quarter 2013 4th quarter 2012 Change nominal in %
Opto Semiconductors      
…Total revenue 268 244 10
…EBITA 39 20  
...EBITA, adjusted 39 21  
Specialty Lighting      
…Total revenue 369 361 2
…EBITA 48 49  
...EBITA, adjusted 57 50  
Lamps & Components      
…Total revenue 633 686 (8)
…EBITA (30) (41)  
...EBITA, adjusted 18 (30)  
Luminaires & Solutions      
…Total revenue 155 154 1
…EBITA (65) (17)  
...EBITA, adjusted (10) (14)  

(Preliminary, unaudited figures. Figures in millions of euros. Negative values in brackets)

Key financial data for OSRAM Licht Group in fiscal 2013

  Fiscal 2013 Fiscal 2012 Change nominal
Revenue 5,289 5,400 (2%)
EBITA 99 51 94%
...Margin 1.9% 0.9% 100 bps
EBITA, adjusted 410 314 31%
…Margin 7.7% 5.8% 190 bps
Net income 34 (391) n.a.
Free Cash Flow 284 (223) n.a.
Employees (‘000) 35.1 39.2 (4,1)

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

Reporting segment performance in fiscal 2013

  Fiscal 2013 Fiscal 2012 Change nominal in %
Opto Semiconductors      
…Total revenue 1.018 899 13
…EBITA 124 76  
...EBITA, adjusted 125 --  
Specialty Lighting      
…Total revenue 1.456 1.405 4
…EBITA 219 226  
...EBITA, adjusted 246 --  
Lamps & Components      
…Total revenue 2.600 2.786 (7)
…EBITA (53) (76)  
...EBITA, adjusted 127 --  
Luminaires & Solutions      
…Total revenue 561 602 (7)
…EBITA (128) (82)  
...EBITA, adjusted (65) --  

(Preliminary, unaudited figures. Figures in millions of euros. Negative values in brackets)

ABOUT OSRAM

OSRAM of Munich, Germany is one of the two leading light manufacturers in the world. The company's portfolio covers the entire value chain from components – including lamps, electronic control gear and opto semiconductors such as light-emitting diodes (LED) – as well as luminaires, light management systems and lighting solutions. OSRAM has more than 35,000 employees worldwide and generated revenue of almost €5.3 billion in fiscal 2013 (ended September 30). The company's business activities have been focusing on light – and hence on quality of life – for over 100 years. The company was listed on the stock exchanges in Frankfurt and Munich on July 8, 2013 (ISIN: DE000LED4000; WKN: LED 400; Trading symbol: OSR). Additional information can be found at www.osram-group.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 beyond OSRAM’s control, affect OSRAM’s operations, performance, business strategy and results and could cause the actual results, performance or achievements of OSRAM to be material different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements or anticipated on the basis of historic trends. These factors include in particular, but are not limited to, the matters described in the chapter “Risk Factors” in the Prospectus of OSRAM Licht AG. 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.