Osram to Speed Up Reorganization and Continue Growth Despite Difficult Market Environment

Osram has reported its financial result of the third quarter of its 2018 fiscal year* and announced the company’s plan to divest its luminaires business and to save cost for the coming years.

The revenue revealed by Osram in the third quarter of its 2018 fiscal year* was EUR 1.02 billion (US$ 1.19 billion) which remained consistent with the prior year’s level. But its EBITDA adjusted for special items, at EUR 133 million (US$ 155.37 million), was significantly lower compared to the number last year. The reasons for the reduced adjusted EBITDA were foreign exchange effects, higher R&D expenses and ramp-up cost. Furthermore, according to the company, “the worldwide changes in ordering behavior of our customers and distributors in part due to existing and imminent trade restrictions have weighed on the company’s revenue.”

(Image: Osram)

Osram expects that these effects will continue to impact its performance in the coming months and has adjusted its annual outlook at the end of June. The company’s next step is to further sharpen its portfolio by cutting off its luminaires business. Moreover, the company will streamline its global administration and expects to reduce cost by 20 percent with the measure. It will also implement structural and operational programs including improving the efficiency in R&D, supply chain, and the German factory alliance. Through these measures, Osram hopes to save up to EUR 130 million to EUR 140 million ( US$ 151.87 million – 163.55 million) by 2020.

In the third quarter of the fiscal year, the general economic slowdown and weak demand in the automotive industry was primarily reflected in Osram Opto Semiconductors (OS) and in the Specialty Lighting (SP) segment. The trade tariffs in the U.S., more stringent emission tests in Europe and lower production expectations from premium manufacturers have also caused uncertainty. In addition, there were project delays in business with mobile devices and horticulture applications and a continued slowdown of the general lighting market.

“Despite a difficult market environment, we continue to generate good returns in our most important business areas. We are actively addressing the temporary weakness in demand of our customers in the automotive industry and improving our cost base," said Olaf Berlien, the CEO of OSRAM, "Nothing has changed in terms of long-term growth opportunities."

Osram has adjusted its outlook for the current fiscal year at the end of June. It now expects to post a revenue increase of 1.0 to 3.0 percent (previously: 3.0 to 5.0 percent) and an adjusted EBITDA of EUR 570 to 600 million (previously: approximately EUR 640 million) for fiscal year 2018*. The Managing Board of Osram has been revising the strategic development and will announce the result at a capital market conference on November 7.

Osram's long-term growth prospects remain good. LED and laser based technologies are oriented to global megatrends and continue to serve growing high-tech markets. The group is actively shaping the ongoing technological shift and has also recently expanded its portfolio with innovative future technologies, including the acquisition of US provider Vixar, which specializes in compact 3D identification technology, and the acquisition of the horticulture company Fluence. The Osram Continental joint venture, which will shape the future of intelligent car lighting, went into operation at the beginning of July.

(Image: Osram)

(*Note: the fiscal year of the Osram Group is from October 1 to September 30 in the next year; the third quarter refers to April to June.)

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