Bucking a trend of gloomy financial results from traditional lighting companies that are struggling with the transition to LEDs, Osram today reported a surprise jump in earnings for its first quarter ending Dec. 31.
Earnings before interest, taxes and amortization (EBITA) jumped 23 percent from the same period a year ago, to €151 million, the company said in a press release.
The catch? The figure excludes ‘restructuring costs,’ such as the charges associated with laying off thousands of workers.
If you include those costs, Osram reported an EBITA loss of £41 million, compared to an EBITA profit of €112 million in the first quarter of 2014. It also reported an after tax loss of €39 million, compared to a year-earlier profit of €68 million.
The results marked the first quarterly report since new CEO Olaf Berlien joined Osram from outside the industry in late January, taking over from Wolfgang Dehen, who was in charge during the quarter. Berlien, a former construction and engineering industry boss, hinted at a shake-up.
‘We need to be able to bring new ideas to market more quickly,’ Berlien said in a Bloomberg article, which noted: ‘He (added) that the company hadn’t taken full advantage of its own spin-off from Siemens AG, Europe’s largest engineering company, to act with greater agility. “How we were set up in the past is not the best way to be set up in the future,” he said.’
Nevertheless, the company was upbeat, noting that revenue rose 5 percent on a ‘nominal’ basis, to €1.4 billion (or by a less impressive 0.5 percent if you strip out currency effects and portfolio changes).
‘The first quarter marks a successful start into the new fiscal year,’ Berlien said in the press release. ‘But we cannot rest on the already achieved. We will continue with our transformation and will announce in spring what that means in strategic terms.’
The ‘transformation’ has included 8,700 layoffs in a programme that ended last year, and another 7,800 over the next three years, announced last summer, Bloomberg noted.
Like other longtime lighting manufacturers such as Philips and GE, Osram has grappled with the shift to efficient LED lighting while still carrying its legacy business of inefficient conventional lighting such as incandescents. Osram’s conventional lighting business still represents over a third of its revenue.
While the ‘old timers’ have generally made impressive technological strides into the digital lighting era, they have much higher costs than newer LED upstarts such as Neonlite, Acuity, Cree, Opple, TCP, Aurora, LIFX and others.
Rapid prices erosion in LED lamps has compounded the difficulties. Although revenue from LED lamps surged by 70 percent to €162 million from €95 million, Osram continues to lose money on them, albeit the losses are narrowing.
In summarizing its LED lamps and systems unit, which includes bulbs, light engines and LED drivers, the company noted, ‘The segment’s revenue rose 65 percent on a comparable basis in the first quarter,’ the press release stated. ‘The adjusted EBITA margin improved by more than 20 percentage points year on year to minus 4.4 percent due to economies of scale, among other things.’
Revenue grew 9 percent in Osram’s LED chip business, to €295 million from €270 million, and by 15 percent in its specialty lighting group – automotive and displays as well as entertainment lighting – to €433 million from €376 million. Profits rose in both groups.
But the conventional lamps business dragged down overall results, as sales fell by 8 percent to €505 million from €551 million, although not as much as anticipated. ‘The comparable revenue decrease…was not as strong as in the previous quarters,’ the company noted.
The slight improvement in conventional lamps impressed market analysts like Morgan Stanley, which noted that Osram beat Morgan’s forecasts, largely because of ‘better margin resilience than expected in the classic lamps business,’ Bloomberg wrote.
Not a bad first report from brand new CEO Berlien, all things considered. But one that reflected operations that took place under the old guard. Watch for more change under the new.
Photo is a screen shot from the Osram website
Meanwhile at Philips: