Osram 2Q14 Earnings Sees Significant Growth in LED Business

Osram recorded a significant year-on-year earnings increase in the second quarter of its fiscal year 2014. 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 percent.

"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, Chief Executive Officer 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.”

Osram is 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 reporting segments and regional developments

Osram’s opto-semiconductor components reporting segment Opto Semiconductors, or OS, recorded a revenue increase of 14 percent 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 percent, the EBITA margin was exceptionally high and included among other things a gain of more than €7 million from an insurance reimbursement. 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 eleven percent, 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 percent.

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 two percent, even though revenue with LED-based products rose 40 percent on that basis. The adjusted EBITA margin fell to slightly above five percent, 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 percent 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 percent. Osram anticipates that the decline in sales has now bottomed out.

From a regional perspective, the Osram reporting region APAC recorded a year-on-year comparable sales increase of three percent, while revenues in EMEA rose two percent. In both regions growth was again driven by OS and SP. In the Americas region, revenues on a comparable basis fell slightly by one percent, in part due to the ongoing reorganization of the North American service business.

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