Osram records solid start into fiscal year

2014/01/29

Comparable sales growth combined with increased profitability in first quarter
LED-based business (SSL) with revenue share of one third for the first time
Osram confirms outlook for full fiscal year

In a still challenging environment, Osram recorded a solid start into the fiscal year 2014 which started last October. While revenue in the first quarter fell slightly year over year due to currency movements, it rose two percent on a comparable basis – meaning excluding portfolio and currency effects – to more than €1.3 billion. The revenue share of LED-based products and solutions (Solid State Lighting, or SSL) increased by about seven percentage points to now 33 percent. EBITA1 rose12 percent to €112 million, translating into a margin of 8.5 percent. Excluding special items, EBITA was €123 million, or 9.3 percent of revenue. Income before taxes rose 26 percent to €97 million. Osram’s net income remained stable at €68 million as the year-earlier figure was supported by an extraordinary low tax rate. In view of the development in the first three months, Osram confirms the outlook for the current fiscal year.

"We are satisfied with the start into fiscal 2014. The positive effects of our comprehensive improvement program OSRAM Push are becoming increasingly visible and broad based. We have continued our focus on profitable growth. For the first time since two years, we have reached a reported EBITA margin of more than eight percent again. At the same time, our LED business continues to develop dynamically and already accounts for one third of our revenue worldwide. This shows that we drive the transformation towards the digital era of light”, said Wolfgang Dehen, Chief Executive Officer of OSRAM Licht AG.

The cumulated gross savings realized in the context of OSRAM Push are expected to total €1.2 billion by the end of fiscal 2015. At the end of the first quarter, they totaled almost €540 million. The increase of the adjusted EBITA margin in the first quarter was not only a result of improvements and savings associated with OSRAM Push but also of higher capacity utilization primarily at Opto Semiconductors. (OS)

Osram reporting segments and regional developments2

Osram’s opto-semiconductor components reporting segment Opto Semiconductors recorded an extraordinary revenue increase of 20 percent year over year on a comparable basis, again supported by all regions. The OS segments for general lighting and for infrared components recorded particularly strong gains. The EBITA margin was more than 13 percent despite expenses related to ending a legal dispute that could only be compensated in part by gains from a license agreement. OS installed the first equipment in its new LED assembly plant in the Chinese city of Wuxi during the first quarter and is therefore well on track to put the factory into operation in the third quarter of the current fiscal year. OS will also start to switch production of red- and yellow-emitting LED chips from 4-inch- to 6-inch wafers to meet continuously growing demand. The same move was already made regarding blue LED chips in 2011.

Specialty Lighting (SP), with its Automotive Lighting and Display/Optics units, also continued its positive development thanks to continuing growth from LED-based light sources and recorded a clear gain in revenues of nine percent on a comparable basis. Automotive Lighting posted a double-digit increase, once again growing faster than the global car production. Overall, SP achieved a high EBITA margin of 16 percent.

The largest reporting segment, Lamps & Components (LC), which covers the product business with lamps, light engines and electronic control gears, posted a comparable revenue decrease of two percent due to declines in the traditional lamps business. Those can in part be attributed to a relatively strong fiscal fourth quarter 2013. At the same time, sales of LED lamps rose significantly because of the successful expansion of the company’s LED lamp portfolio. The adjusted EBITA margin rose more than two percentage points to almost seven percent, also due to improvements resulting from OSRAM Push.

The Luminaires & Solutions (LS) reporting segment comprises luminaires for professional customers, products for consumers, as well as the service and solutions business. On a comparable basis, LS recorded a revenue decline of six percent in the first quarter. As expected, the ongoing reorganization of the North American service business as well as adjustments in the luminaires product portfolio impacted revenues. The adjusted EBITA margin improved to minus eight percent. The realignment is making progress especially in the luminaires business, where already above 40 percent of revenues are generated with LED-based products and solutions.

From a regional perspective, the Osram reporting region APAC recorded a sales increase of four percent on a comparable basis, while revenues in EMEA rose three percent. Growth in both regions was primarily driven by OS and SP. In the Americas region revenues remained stable despite the reorganization of the North American service business.

Outlook for fiscal 2014

The company confirms the outlook for fiscal 2014. The Managing Board still 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.

Highlights in the first quarter

Just in time for the lighting season, Osram launched its largest portfolio of LED lamps to date. Customer feedback was very positive, and general lighting is not the only field in which new technologies are on the rise: With the so-called “Phaser” technology, Osram’s business unit Specialty Lighting has introduced a projector module that enables maximum image quality for a pure laser-based projection through a combination of laser and phosphor material. But regardless of technological progress, one also has to bear in mind that there are regions in the world where people have no access to the power grid and electrical lighting. The Kenya located off-grid lighting project “Umeme Kwa Wote“, (“Energy for all”) is a good example of an environmentally friendly way to help change this situation. The project was initiated by Osram in 2008. Since then, three solar energy stations have been set up around Lake Victoria, enabling residents to rent and also recharge efficient battery-powered luminaires and lanterns at a modest fee. Those luminaires and lanterns are replacing kerosene lamps and therefore reduce fire and health risks for users. At the beginning of December Osram has been awarded the German Innovation Prize for Climate and the Environment for the project by German Federal Ministry for the Environment and the Federation of German Industries (BDI). The timing was perfect: In March 2014, Osram is set to open the first of five further such stations in Kenya.

The company will hold a conference call on the preliminary results for the first quarter with OSRAM Licht AG’s Managing Board today at 9:00 a.m. CET. The conference will also be broadcast via the Internet:
Conference call
After the event, a recording of the conference will also be provided at that link.

Starting at 2:00 p.m. CET you can follow the conference call for analysts and investors with the Management Board:
Conference call for analysts and investors

The full report of OSRAM Licht AG’s first quarter will be posted on the company’s Investor Relations homepage at www.osram-group.com/en/investors on February 12. 

Key financial data of OSRAM Licht Group in the first quarter

1st quarter 2014 1st quarter 2013 Change
Nominal
Revenue 1,326 1,357 (2%)
EBITA 112 100 12%
...Margin 8.5% 7.4% 110 bps
EBITA, adjusted 123 108 14%
...Margin 9.3% 7.9% 140 bps
Income before taxes 97 77 26%
Net income profit 68 68 --
Free cash flow 72 90 (20%)
Employees (000) 34.1 38.0 (3.9%)

(Preliminary, unaudited figures. In millions of euros, Margins in percent, Employees as of
December 31. Negative values in brackets.)

Reporting segment performance in the first quarter

1st quarter 2014 1st quarter 2013 Change
nominal in %
Opto Semiconductors
...Total revenue 270 230 17
...EBITA 36 22
...EBITA, adjusted 36 23
Specialty Lighting
...Total revenue 376 359 5
...EBITA 60 69
...EBITA, adjusted 62 72
Lamps & Components
...Total revenue 643 695 (7)
...EBITA 40 2
...EBITA, adjusted 43 31
Luminaires & Solutions
...Total revenue 135 148 (9)
...EBITA (15) (17)
...EBITA, adjusted (11) (13)

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

1Earnings before interest, taxes, amortization.

2Osram 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).

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 “Report on Opportunities and Risks” in the Annual Report of OSRAM Licht Group for fiscal 2013. 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.