LED-based business growth keeps driving Osram forward
Revenue rose one percent to almost €1.3 billion despite a continued decline of the company’s traditional lighting business. Margins were about nine percent overall mainly supported by the opto semiconductor and specialty lighting businesses.
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”, explained Wolfgang Dehen, Chief Executive Officer of OSRAM Licht “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’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 strong growth. At more than 19 percent, the margin was high and included among other things a gain of more than €7 million from an insurance reimbursement. Opto Semiconductors will officially open the company’s new LED assembly plant in the Chinese city of Wuxi at the end of May 2014.
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 11 percent. The automotive business has been growing faster than the global car production for 17 quarters now. Thanks to high capacity utilization, the Specialty Lighting group achieved a margin of about 16 percent.
In Osram’s 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 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 margin fell to slightly above five percent, in part because of the rising revenue share of LED-based products.
From May 1, 2014 the company’s Lamps & Components business segment will be reorganized. 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.
Osram’s Managing Board expects revenue growth to exceed the global real GDP growth, which is currently forecast at about three percent. The continued decline of the traditional business makes it more challenging to achieve the revenue expectation but Osram’s Managing Board expects net income to rise sharply this fiscal year and free cash flow should reach a triple-digit million-euro figure.
During the second quarter Osram unveiled a number of innovations which are expected to drive revenue growth. For example an Osram research team claimed it had developed the world’s most efficient LED lamp which achieves an efficiency of 215 lumens per watt and consumes half as much power as a standard fluorescent or LED tube for the same light output.
At the Light+Building 2014 fair that took place in Frankfurt this month, Osram also revealed Lightify, a lighting system that enables professional customers as well as end consumers to exploit a wide range of lighting possibilities using an app on a smartphone or tablet.
The company has also been focsuing on the automotive sector and spotlighted Osram’s latest generation of laser-based headlamps in the pioneering BMW i8.
Laser light is being touted as the next development step in automotive lighting and offers new design options in addition to functional benefits. Innovative headlamp technology provided by Osram also featured on Ford new F-150 pickup truck. The vehicle is one of the best selling pickup trucks in the USA and will now enter the market with a complete LED forward lighting solution.
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