Osram’s quarterly revenue falls 15% year-on-year

Osram of Munich, Germany says that unfavorable developments in the automotive industry, especially in China as well as within the mobile devices sector, impacted its fiscal first-quarter 2019.

Political adversities such as international trade disputes, weakened demand for general lighting and the after-effects of the emission test procedure WLTP (Worldwide Harmonised Light Vehicle Test Procedure) also drove customer uncertainty. In addition, Osram’s customers reduced their inventories towards the end of 2018.

On a comparable basis, quarterly revenue fell by about 15% year-on-year to €828m. Earnings before interest, taxes, depreciation and amortization (EBITDA), before special items, was also down, to €93m. The adjusted EBITDA margin has fallen from 18.5% to 11.3%.

These figures no longer include the business activities of Sylvania Lighting Solutions in North America (for which a sales agreement was signed in January) or the European luminaire business (which is up for sale). Both are accounted for as discontinued operations from fiscal first-quarter 2019 (leading to a value adjustment being made that impacted net income).

“There was an increased headwind from our markets in the past quarter, in particular the automotive cycle has deteriorated significantly,” says OSRAM Licht AG CEO Olaf Berlien. “But demand has also declined in the mobile devices and general lighting sectors,” he adds.

The market weakness is reflected in all three of Osram’s business segments:

The Opto Semiconductors (OS) division saw a drop in revenue of about 17% year-on-year, reflecting not only the economic effects of customers in the automotive industry and general lighting but also a reduction in customer inventories. Automotive segment revenue was down 11%.
The automotive (AM) market declined significantly, especially in China where (according to the market researcher IHS Markit) car production fell by more than 15% on a quarterly basis. Numerous Western manufacturers have also lowered their expectations recently.
In the Digital (DI) segment, revenue fell by about 17%, due mostly to weak market development in the general lighting segment.

Because of the numerous uncertainties, the perspective for the upcoming quarters remains significantly restricted, says the firm. The management board has initiated countermeasures, aiming also to improve revenue and margins. In particular, significant structural measures have been initiated in the Opto Semiconductors division, intended to secure the forecast for the year. However, achievement of the annual targets is subject to a revival in incoming orders in the upcoming months, cautions the firm.

As announced, Osram will in the future hone its focus on photonics and optical technologies beyond lighting, as reflected by the new organizational structures initiated at the start of the new fiscal year. According to Bayerischer Rundfunk, this involves cutting 300 of the 2800 jobs in Regensburg by the end of September through voluntary redundancy (800 Regensburg staff had already been working 35 rather than 40 hours per week since the beginning of this year). The firm also wants to cut up to 240 temporary workers. Previously, over the past three years, Osram Opto Semiconductors’ staffing had been increased from 2000 to 2800, in response to rapid growth rates (of up to 24% annually).

Osram is further sharpening its profile and focusing on high-growth markets, including optical semiconductors, automotive and digital applications. With this, Osram is moving closer to its markets and therefore expects to balance its portfolio more effectively. This long-term growth strategy remains intact, says the firm.

See related items:

Osram’s December-quarter revenue down 15% year on year, with Opto Semiconductors down 16.9%

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