Presse Press Munich, July 29, 2014 Osram pushes on company transformation SSL gains almost offset high revenue declines in traditional business Outlook for fiscal year 2014 confirmed Osram intends additional transformation measures until fiscal year 2017 In the third quarter of the fiscal year 2014, Osram almost offset the high declines in its traditional general illumination business through substantial gains with LEDbased products (Solid State Lighting SSL) on a comparable basis. On this basis meaning excluding portfolio and currency effects revenue dropped slightly by one percent year-on-year and was around 1.2 billion. By contrast, EBITA 1 excluding special items rose 9.5 percent to 104 million, translating into a margin of 8.6 percent. The EBITA improvement was supported by the Opto Semiconductor and Specialty Lighting segments as well as OSRAM Push measures. Reported EBITA more than tripled from the same period last year, when the figure was burdened by comparatively high transformation costs, to 81 million, or 6.7 percent of revenue. The business with LED-based products recorded a comparable revenue increase of 21 percent in the third quarter and had a share of 38 percent of consolidated group revenue. Osram confirms the recently updated outlook for the current fiscal year. Furthermore, the Managing Board confirms the target to reach an average reported EBITA margin of more than eight percent over the cycle from the fiscal year 2015 onwards. The company intends to implement various additional measures to further improve the competitiveness of its operating units. The associated capacity adjustments of about 7,800 positions worldwide over the next three fiscal years are planned to be implemented in a socially responsible way as far as possible. Depending on the implementation speed of the measures and the restructuring costs effect on earnings, the reported EBITA margin could be below the targeted average value in the fiscal year 2015. 1 Earnings before interest, taxes, amortization
While earnings continue to develop nicely, the growing market acceptance of LED technology is, as already announced, causing a significantly faster decline of the traditional business, said Wolfgang Dehen, Chief Executive Officer of. We will successfully complete the first stage of OSRAM Push shortly. However, we have always stressed that the transformation of the lighting market will also continue after 2014 and that it will require additional capacity adjustments. Against the backdrop of the latest developments, additional measures are now necessary to safeguard our position as a leading lighting manufacturer in the long term. We need to be even closer to the customer, further strengthen the entrepreneurship of our segments and at the same time create cost structures that are appropriate to the size of the company, but also to that of its individual businesses. Current OSRAM Push status and progress on company s further transformation The first stage of OSRAM Push started in 2012, and all measures are in implementation or have been completed. At the end of the third quarter, the cumulated gross savings totaled about 760 million, including 118 million from the recent quarter. As part of the already announced second step of OSRAM Push, the company now intends to initiate further process improvements and conduct structural adjustments after completing consultations with the employee representatives. The second step of the program will run until 2017 and occurs against the backdrop of the rapidly changing market conditions. The measures will impact production capacities for traditional general lighting products and, on a company-wide scale, the sales and administration divisions as well as other indirect functions. Over a period of three years, around 1,700 domestic positions and around 6,100 international positions would be affected. In total, the measures are intended to lead to a permanent cost reduction of about 260 million until the end of the fiscal year 2017. The gross costs are expected to amount to about 450 million in the same period. 2/7
Osram s reporting segments 2 and regional developments in the third quarter 3 Osram s opto-semiconductor components reporting segment (Opto Semiconductors, or OS) recorded a comparable revenue increase of five percent compared with the year-earlier period, which had already been very good. At almost 20 percent, the segment s EBITA margin was exceptionally high. Besides a favorable product mix and good capacity utilization, OS also benefitted from a 5 million gain from a license agreement. Specialty Lighting (SP), with its Automotive Lighting and Display/Optics units, continued to benefit from rising demand in the automotive segment and achieved a comparable revenue increase of ten percent. The reporting regions APAC and Americas recorded double-digit growth rates. The EBITA margin of SP came to more than 14 percent in the third quarter. The share of LED-based revenue reached 33 percent of total revenue. The LED Lamps & Systems (LLS) reporting segment covers the business with LED lamps, light engines as well as LED drivers. It recorded comparable revenue growth of 68 percent in the third quarter due to the fast-growing LED demand. The segment s EBITA margin also improved in a year-on-year comparison but was still significantly negative at around minus 20 percent. The advancing market penetration of LED lighting also had a significant negative impact on the performance of the Classic Lamps & Ballasts (CLB) reporting segment in the third quarter. The segment s revenue was down 14 percent on a comparable basis, while the EBITA margin excluding special items fell to slightly above six percent. The Luminaires & Solutions (LS) reporting segment comprises luminaires for professional customers, products for consumers, as well as the service and solutions business. LS recorded a sales decline of 13 percent on a comparable basis in the third quarter due to the reorganization of the service business in North America. Thanks to strong growth from LED-based luminaires, the luminaires business posted a comparable revenue increase. The reporting segment s adjusted EBITA margin was around minus 15 percent. 2 The activities of the former reporting segment Lamps & Components were reorganized in the third quarter of 2014 and are now disclosed in the reporting segments LED Lamps & Systems und Classic Lamps & Ballasts. 3 Osram divides its business into the three regions APAC (Asia Pacific), EMEA (Europe, Middle East and Africa) and the Americas (North and South America). 3/7
From a regional perspective, the Osram reporting region EMEA recorded a year-on-year comparable sales increase of two percent, while revenues declined two percent in APAC and four percent in the Americas region on this basis. Outlook for fiscal 2014 The company confirms the outlook for fiscal 2014 that was updated at the end of May. The Managing Board still expects revenues on last year s level, at best a modest revenue increase, on a comparable basis. 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. This decline is driven mainly by 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 of 8.5 percent. Highlights in the third quarter One of the most important trade shows of the lighting industry, Light+Building in Frankfurt, ended in early April, and customers response to Osram s fair appearance is very affirmative. Among the featured highlights was the app-enabled intelligent LED lighting system Lightify, which is slated for release in autumn. It can be used at home as well as in the office and will be compatible with many smart-home systems. Another focus topic was Osram s LED lamp portfolio, which will see a year-on-year increase of 50 percent to more than 90 models for the coming lighting season. The expansion is supported by the new platform production approach in which identical modules are used in different lamps. This is a key advantage because it allows significantly shorter development periods. As a result, products are available on the market faster and at lower cost. Osram is also gaining further momentum regarding laser lighting: With the BMWi8 and Audi R8 LMX, there are now two cars available that contain an Osram laser light module. And the Opto Semiconductors segment developed a multi-chip laser for the first time. This product considerably reduces the complexity of laser projectors while at the same time providing far greater luminosity than conventional models. Osram s acknowledged technology leadership was also underpinned by the signing of a multi-year cooperation framework agreement with the Vatican Museums that paves the way for possible cooperation regarding additional lighting projects. In a project supported by the European Union, Osram is currently already equipping the 4/7
Vatican s Sistine Chapel with an innovative and highly energy efficient LED-based lighting solution. The company will hold a conference call on the preliminary results for the third quarter with s Managing Board on Wednesday at 9:00 a.m. CEST. The conference will also be broadcast via the Internet at www.osram.com/press. After the event, a recording of the conference will also be provided at that link. Starting at 2:00 p.m. CEST you can follow the conference call for analysts and investors with the Management Board at www.osram.com/ir. The full report of s third quarter will be posted on the company s Investor Relations homepage at www.osram.com/ir on August 11. PRESS CONTACTS Stefan Schmidt Tel. +49 89 6213-4680 E-mail: stefan.schmidt@osram.com Philipp Grontzki Tel. +49 89 6213-2129 Email: p.grontzki@osram.com 5/7
Key financial data of OSRAM Licht Group in the third quarter 2014 2013 Change nominal Revenue 1,203 1,278 (6%) EBITA 81 22 59...Margin 6.7% 1.7% 500 bps EBITA, adjusted 104 95 9 Margin 8.6% 7.4% 120 bps Income before taxes 67 42 25 Net income profit 44 14 30 Free cash flow 52 108 (56) Employees (000) 34 35 (1) (Preliminary, unaudited figures. In millions of euros, margins in percent, employees as of June 30. Negative values in brackets.) Reporting segment performance in the third quarter 2014 2013 Change nominal Opto Semiconductors Total revenue 286 279 2% EBITA 57 38 EBITA, adjusted 56 38 Specialty Lighting Total revenue 378 359 5% EBITA 55 44 EBITA, adjusted 58 57 LED Lamps & Systems Total revenue 110 69 60% EBITA (22) (26) EBITA, adjusted (22) (26) Classic Lamps & Ballasts Total revenue 431 535 (19%) EBITA 15 19 EBITA, adjusted 26 55 Luminaires & Solutions Total revenue 110 131 (16%) EBITA (18) (23) EBITA, adjusted (16) (20) (Preliminary, unaudited figures. In millions of euros. Negative values in brackets The activities of the former reporting segment Lamps & Components were reorganized in the third quarter of 2014 and are now disclosed in the reporting segments LED Lamps & Systems and Classic Lamps & Ballasts.) 6/7
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.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. 7/7