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Osram’s 3Q14 Financial Results Show Positive Effects from LED Transformation
Published:2015-03-20 10:52:06  
Summary:Osram has achieved its recently updated outlook for the fiscal year that ended in September 2014. Revenue rose one percent year over year on a comparable basis – meaning excluding portfolio and currency effects – and was more than €5.1 billion. The revenue ... ...
Osram has achieved its recently updated outlook for the fiscal year that ended in September 2014. Revenue rose one percent year over year on a comparable basis – meaning excluding portfolio and currency effects – and was more than €5.1 billion. The revenue share of LED-based products and solutions increased to 36 percent from 29 percent in fiscal 2013. In the fourth quarter, it reached already 39 percent. EBITA [1] excluding special items increased almost ten percent to EUR 449 million (US $) in fiscal 2014, translating into an EBITA margin of 8.7 percent, in particular due to positive effects from the OSRAM Push transformation program.
 
Reported EBITA more than tripled from the same period last year, when the figure was burdened by comparatively high transformation costs, to EUR 310 million or 6.0 percent of revenue. This development was also one of the reasons that net income rose to EUR193 million. It is planned to propose to pay out around 50 percent of this amount, translating into a dividend of EUR 0.90 per share. For fiscal 2015, it is intended to pay a stable dividend. In the fourth quarter of fiscal 2014, the first phase of OSRAM Push was successfully completed. For fiscal 2015, which started in October, the company expects comparable revenue to be on the level of fiscal 2014. The adjusted EBITA margin is also expected to be at the prior-year level. Reported earnings are expected to sharply decrease due to the accelerated implementation of the transformation program in fiscal 2015.
 
“We have managed the challenges of fiscal 2014 very well. The majority of our businesses are growing. We were able to further strengthen our technology leadership in many areas thanks to a strong focus on innovation. In the traditional Lamps & Components segment, we reacted promptly to a strong market decline and generated considerable cash. This shows that OSRAM Push is keeping its promise and has paved the way for an overall, comprehensive and continuous improvement in fiscal 2014,” said Wolfgang Dehen, Chief Executive Officer of OSRAM Licht AG. “We want our shareholders to benefit from this and plan to distribute a dividend for the first time for fiscal 2014. The planned dividend continuity for fiscal 2015 underlines our confidence in the positive development of Osram.”
 
Osram Group in the fourth quarter and current status of OSRAM Push
In the fourth quarter, Osram recorded a one percent comparable revenue increase from a year earlier. Growth was again driven by the reporting segments Opto Semiconductors, Specialty Lighting and LED Lamps & Systems. The adjusted EBITA margin remained stable at 8.0 percent. Compared with a year earlier, the revenue share of LED-based products and solutions rose from 31 to 39 percent in the fourth quarter.
 
The first phase of the OSRAM Push program has been successfully completed by the end of September. Among other things, the measures included the sale or the closure of eleven plants. At the end of the fourth quarter, the cumulated gross savings for the years 2013 and 2014 totaled EUR 871 million, including EUR 110 million from the recent quarter.
 
Osram reporting segments and regional developments in the fourth quarter
Osram’s opto-semiconductor components reporting segment (Opto Semiconductors, or OS) posted a comparable revenue increase of eleven percent in the fourth quarter compared with the year-earlier period. Growth was driven by business with automotive and industrial customers as well as demand for LED in general lighting. With almost 17 percent, the EBITA margin remained at a very good level. Profitability at OS benefited from an advantageous product mix, among other things.
 
Specialty Lighting (SP), with its Automotive Lighting and Display/Optics units, continued to benefit from healthy automotive demand and posted comparable revenue growth of ten percent in the quarter. Growth was supported by traditional as well as LED-based products. The segment’s EBITA margin was almost 15 percent. In fiscal 2015, SP will benefit from the consolidation of Clay Paky, a maker of luminaires for the entertainment industry. Since October 1, the OLED activities are also assigned to the reporting segment.
 
The reporting segment LED Lamps & Systems (LLS) covers Osram’s business with LED lamps, light engines as well as LED drivers. In the fourth quarter, LLS posted revenue growth of 72 percent on a comparable basis thanks to continued demand for LED products. The adjusted EBITA margin improved sharply to minus 16 percent.
 
The continuing rising market acceptance of LED-based products continued to have an impact on the Classic Lamps & Ballasts (CLB) reporting segment. Comparable fourth-quarter revenue fell 13 percent year over year, while the adjusted EBITA margin reached almost seven percent.
 
The Luminaires & Solutions (LS) reporting segment comprises luminaires for professional customers, products for consumers as well as service and solutions business. In the fourth quarter, LS recorded a revenue decline of 20 percent on a comparable basis, mainly due to the reorganization of the service business in North America and luminaire portfolio adjustments. Despite this development the segment’s adjusted EBITA margin remained stable at about minus seven percent.
 
From a regional perspective [2], Osram’s APAC reporting region recorded a comparable year-on-year increase in fourth-quarter revenues of five percent, while revenues in EMEA rose two percent on this basis. Comparable revenues in the Americas region declined three percent due to the exit of the traditional maintenance business in North America.
 
Outlook for fiscal 2015 and the ongoing company transformation
For fiscal 2015, the Managing Board expects revenues to be on the level of fiscal 2014 on a comparable basis. The adjusted EBITA margin is also expected to be at the prior-year level. In addition, the Managing Board expects both net income and return on capital employed (ROCE) to decrease sharply in the current fiscal year due to a sharp increase in transformation costs. Free cash flow should reach a positive triple-digit million-euro figure in fiscal 2015 but stay below the prior-year level. Based on the outlook for fiscal 2015 and Osram’s midterm prospects, the Managing Board intends dividend continuity with EUR 0.90 per share also for fiscal 2015.
 
The ongoing company transformation should result in cumulative gross savings of around EUR 1.3 billion in the fiscal years 2015 to 2017. Thereof, approximately EUR 400 million are expected to become effective in the current fiscal year. In addition, the biggest share of costs associated with the ongoing transformation is also planned to be booked in fiscal 2015.
 
Business highlights of fiscal 2014 – technology leadership strengthened further
Osram continued to strengthen its technology leadership in fiscal 2014. To be prepared for expected market growth, Opto Semiconductors started to switch the production of red- and yellow-emitting LED chips from four-inch to six-inch wafers, making Osram the first manufacturer worldwide that expands production of all LED in the visible-light range to those larger wafers. And LED technology is becoming more and more popular, for example in the Ford F-150, which is one of the best-selling pickup trucks in the U.S. and came into the market in 2014 with a full LED front lighting from Osram. Still, the company’s technology leadership goes beyond LED chips: With the Audi R8 LMX and the BMW i8, there are now two vehicles available that are equipped with a unique laser module from Osram. Compared with previously used light sources, the module lights up the road significantly further and therefore increases safety on the road. But light can boost enjoyment as well. An impressive example is the new lighting solution in the Sistine Chapel, which was installed in the second half of the year under the supervision of Osram and with financial support of the European Union. About 500 years after they were created, Michelangelo’s masterpieces can now be seen in a so far unparalleled quality thanks to a total of 7,000 light-emitting diodes – which are not only energy-efficient but also particularly suited to preserve the artworks. But customers can also count on smart lighting by Osram at home or in the office. Thanks to Lightify, the lighting system Osram introduced in spring, users can control their lamps and luminaires via a smartphone and have the possibility to choose their favorites from millions of potential colors. The system can also be used to link and jointly control several different light sources. Lightify is another proof that new lighting technologies are opening up completely new dimensions for fascinating applications. At the same time, they consume substantially less energy than traditional lighting sources. As a logical consequence, Osram was included in the internationally renowned Dow Jones Sustainability Index World at the end of September. Sustainability is a key aspect of Osram’s business philosophy. This also became evident in March, when the first of five new solar-powered energy stations went into operation on the banks of Lake Victoria as part of an extension of the Kenya off-grid project initiated by Osram. Thanks to these energy stations, the area’s inhabitants get a cost-effective access to battery-powered lanterns.
OSRAM Licht AG’s annual report will be posted on the company’s Investor Relations homepage at www.osram.com/iron December 4, 2014.
 
[1] Earnings before interest, taxes and amortization.
[2] Osram divides its business into the three regions APAC (Asia-Pacific, Australia), EMEA (Europe, Russia, Middle East, Africa) and the Americas (U.S., Canada, Mexico, South America).
Key financial data of OSRAM Licht Group in the fourth quarter
 
4th quarter 2014
4th quarter 2013
Change nominal
Revenue
1,335
1,332
(0%)
EBITA
36
(24)
60
...Margin
2.7%
(1.8%)
450 bps
EBITA, adjusted
106
108
(2)
…Margin
8.0%
8.1%
(10 bps)
Income before taxes
17
(44)
61
Net income
12
(29)
41
Free cash flow
51
85
(34)
Employees (000)
34
35
(1)
(Preliminary, unaudited figures. In millions of euros, margins in percent, employees as of September 30.
Negative values in brackets.)
 
Reporting segment performance in the fourth quarter
 
4th quarter 2014
4th quarter 2013
Change nominal
Opto Semiconductors
 
 
 
…Total revenue
299
268
11%
…EBITA
50
39
 
…EBITA, adjusted
50
39
 
Specialty Lighting
 
 
 
…Total revenue
404
369
9%
…EBITA
60
48
 
…EBITA, adjusted
63
57
 
LED Lamps & Systems
 
 
 
…Total revenue
144
84
72%
…EBITA
(28)
(24)
 
…EBITA, adjusted
(23)
(24)
 
Classic Lamps & Ballasts
 
 
 
…Total revenue
472
549
(14%)
…EBITA
(8)
(7)
 
…EBITA, adjusted
32
41
 
Luminaires & Solutions
 
 
 
…Total revenue
124
155
(20%)
…EBITA
(11)
(65)
 
…EBITA, adjusted
(8)
(10)
 
(Preliminary, unaudited figures. In millions of euros. Negative values in brackets.)
 
Key financial data of OSRAM Licht Group in fiscal 2014
 
Fiscal 2014
Fiscal 2013
Change nominal
Revenue
5,142
5,289
(3%)
EBITA
310
99
211
...Margin
6.0%
1.9%
410 bps
EBITA, adjusted
449
410
39
…Margin
8.7%
7.7%
100 bps
Income before taxes
279
50
229
Net income
193
34
159
Free cash flow
216
284
(68)
Employees (000)
34
35
(1)
(Preliminary, unaudited figures. In millions of euros, margins in percent, employees as of September 30.
Negative values in brackets.)
 
Reporting segment performance in fiscal 2014
 
Fiscal 2014
Fiscal 2013
Change nominal
Opto Semiconductors
 
 
 
…Total revenue
1,125
1,018
10%
…EBITA
194
124
 
…EBITA, adjusted
194
125
 
Specialty Lighting
 
 
 
…Total revenue
1,551
1,456
7%
…EBITA
237
219
 
…EBITA, adjusted
246
246
 
LED Lamps & Systems
 
 
 
…Total revenue
454
298
53%
…EBITA
(89)
(95)
 
…EBITA, adjusted
(84)
(95)
 
Classic Lamps & Ballasts
 
 
 
…Total revenue
1,963
2,302
(15%)
…EBITA
90
42
 
…EBITA, adjusted
172
222
 
Luminaires & Solutions
 
 
 
…Total revenue
469
561
(16%)
…EBITA
(70)
(128)
 
…EBITA, adjusted
(60)
(65)
 
(Preliminary, unaudited figures. In millions of euros. Negative values in brackets.)
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