Stable dividend: Osram surprises and rebuilds

economy

Tuesday, November 06, 2018

With a solid last quarter, Osram is preparing the balance sheet for a difficult year with two projected cuts. Shareholders should not suffer. Hope the company is counting on a conversion.

The Osram lighting group surprises with good quarterly results and a small welfare program for shareholders. Sales were higher than expected and net income was lower than expected. In addition, the company announces a major share buyback and promises a stable dividend. On the other hand, growth prospects are rather sober. Above all, the margin remains under pressure. "The trend is expected to be more successful in the second half of the year than at the beginning of the semester," the group said.

In the last quarter of July at the end of September, sales amounted to 1.06 billion euros, an increase of 3% over the previous year. Analysts were expecting a drop in revenue. Although adjusted operating income (EBITDA) decreased by 8% to 147 million euros, badysts expected much less with 128 million euros. After taxes, a loss of five million euros, after a profit of 40 million a year ago. But experts had estimated the loss five times higher.

Income from continuing operations was € 4.1 billion at the end of the year, slightly lower than the previous year. At the same time, Ebitda fell by nearly a quarter to 477 million euros. The margin was also lower. The surplus has melted by almost half to reach 142 million euros. Osram had already lowered its forecasts at the end of June due to limited demand from the automotive industry, weak activities in the lighting sector and project delays in the smartphone sector. It was the second time of exercise. In total, the former Siemens division employed 27,400 people.

Osram realigns

Osram announced that it would buy back its own shares of up to 400 million euros and withdraw the shares already acquired. In addition, an unchanged dividend of € 1.11 for the past year should be paid, which is significantly more than expected.

In the future, the Group intends to focus even more on photonics and optical technologies beyond lighting. In business terms, this means refining the alignment. The Management Committee has therefore decided to reorganize its areas of activity, which are now focused on optical semiconductors, automotive and digital applications. Osram wants to get closer to its markets and better balance its portfolio.

The group adopts a new structure: the automotive sector must provide the automotive industry with original equipment and aftermarket market, the digital division should include intelligent digital light management systems, as well as as cloud and IoT solutions. The sales processes for the lighting business (Siteco) and services in the United States are progressing well. The Opto Semiconductors segment remains the technological hub of Osram.

For 2019, Osram announced stable sales growth to moderately growing (0 to 3%) on a comparable basis. Adjusted for non-recurring effects, the Ebitda margin is expected to be between 12 and 14%, after 14.7% last year. In addition, positive free cash flow in the range of two to three digits is expected. These forecasts relate to the previous consolidated statement in the three reporting areas of the previous year, with no portfolio effects, such as the targeted sale of lighting and services activities in the United States. United and the effects of the reorganization.