Osram Shows Growth, Clear Profitability Improvements in 4Q 2013

Osram has fully achieved and partially even exceeded its targets for the fiscal year that ended in September 2013. Revenue rose 2% 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% in fiscal 2012 to 29% in the past year. EBITA almost doubled compared with the previous year to €99 million. Excluding special items, EBITA increased 31% to €410 million, which equals 7.7% 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 8% 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, CEO of OSRAM Licht AG, on the occasion of the company’s annual press conference in Munich.

Osram recorded a 4% 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% from 7.4% in the third quarter and 1% 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% year over year, further demonstrating the rising acceptance of LEDs in the lighting market and Osram’s strength regarding this technology.

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% 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%.

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 8%. The EBITA margin was above 13%, or almost 16% 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 2% means that the LED business was able to offset declines in the traditional business. LC’s business with LED-based products rose by 38%. EBITA was impacted by higher transformation costs than in the previous year. The adjusted EBITA margin amounted to almost 3% 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 4% 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 7%.

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 3% (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 8%. 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.

Osram employed more than 35,000 people globally at the end of fiscal 2013. This represents a drop of around10% 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% 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.