Osram Records Good Second Quarter

Osram recorded a significant year-on-year earnings increase in the second quarter of its fiscal year 2014. While revenue on a comparable basis – meaning excluding portfolio and currency effects – rose 1% to almost €1.3 billion despite a continued decline of the traditional business, EBITA excluding special items increased by 17% to €116 million. This translates into an adjusted margin of 9.1%.

The development was mainly supported by the opto semiconductor and specialty lighting businesses. Including special items, EBITA was €81 million, or 6.4% of revenue. Net income reached €69 million following a loss in the same period last year when the figure was burdened by high transformation costs. The business with LED-based products (Solid State Lighting, or SSL) continued to rise strongly in the second quarter and achieved a revenue share of 34%.

“In the recent quarter, we did well in a challenging environment. In light of the decline of the traditional general illumination business, our revenue target has become more challenging. We are very confident regarding our earnings target”, said Wolfgang Dehen, CEO of OSRAM Licht AG. “To reflect the accelerated transition towards LED technology even more, we will separate the SSL business and the business with traditional products from one another within the reporting segment Lamps & Components. The intention is to sharpen the focus for the different strategies of both businesses and to increase entrepreneurial responsibilities as well as external transparency.”

The cumulated gross savings planned in the context of OSRAM Push are still expected to total €1.2 billion by the end of fiscal 2015. At the end of the second quarter, they totaled about €640 million, including a contribution of more than €100 million from the recent quarter. Additionally, Osram is also implementing or planning further measures to improve structures and processes. These include reorganizing the general illumination sales organization as well as setting up a global shared service organization, among other things.

Osram’s opto-semiconductor components reporting segment Opto Semiconductors, or OS, recorded a revenue increase of 14% on a comparable basis in the second quarter, with contributions from all regions and businesses. General illumination and industry sales recorded particularly strong growth. At more than 19%, the EBITA margin was exceptionally high. OS will officially open its new LED assembly plant in the Chinese city of Wuxi at the end of May.

Specialty Lighting (SP), with its Automotive Lighting and Display/Optics units, also continued to benefit from rising demand for LEDs in the automotive industry. On a comparable basis, the segment’s second-quarter revenues rose 11%, with all reporting regions contributing to this development. The automotive business has been growing faster than the global car production for 17 quarters now. Thanks to high capacity utilization, SP again achieved an EBITA margin of about 16%.

In the Lamps & Components (LC) reporting segment, which covers the product business with lamps, light engines and electronic control gears, the clear decline of the traditional business also impacted the second quarter. Total comparable revenue was down 2%, even though revenue with LED-based products rose 40% on that basis. The adjusted EBITA margin fell to slightly above 5%, in part because of the rising revenue share of LED-based products. These are less profitable.

As announced during the Osram capital markets day (CMD) at the beginning of April, the businesses of the reporting segment Lamps & Components will be reorganized as of May 1, 2014: The traditional business will be bundled in the business unit Classic Lamps & Ballasts (CLB), while the LED-based businesses will be pooled in the business unit LED Lamps & Systems (LLS). Both business units will also be part of the company’s financial segment reporting from the third quarter.

The Luminaires & Solutions (LS) reporting segment comprises luminaires for professional customers, products for consumers, as well as the service and solutions business. In the second quarter, LS recorded a significant sales decline of 19% on a comparable basis, mainly due to luminaire portfolio adjustments and the restructuring of the service business in North America. The adjusted EBITA margin was about minus 25%. Osram anticipates that the decline in sales has now bottomed out.