OSRAM pushes on company transformation Q3 FY14 Management - - PowerPoint PPT Presentation

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www.osram-licht.ag OSRAM pushes on company transformation Q3 FY14 Management Presentation (preliminary figures) OSRAM Licht AG July 29, 2014 Safe Harbor Statement This presentation may contain forward-looking statements that are subject to

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www.osram-licht.ag

OSRAM pushes on company transformation

Q3 FY14 Management Presentation (preliminary figures)

OSRAM Licht AG July 29, 2014

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 2

Safe Harbor Statement

2

This presentation may contain forward-looking statements that are subject to risks and uncertainties, including those pertaining to the anticipated benefits to be realized from the proposals described

  • herein. Forward-looking statements may include, in particular, statements about future events, future

financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and supply and demand. OSRAM Licht AG has based these forward-looking statements

  • n its views and assumptions with respect to future events and financial performance. Actual

financial performance could differ materially from that projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and financial performance may be better or worse than anticipated. Given these uncertainties, readers should not put undue reliance on any forward-looking statements. The information contained in this presentation is subject to change without notice and OSRAM Licht AG does not undertake any duty to update the forward- looking statements, and the estimates and assumptions associated with them, except to the extent required by applicable laws and regulations. Due to rounding, numbers presented throughout this and other documents may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 3

Group highlights Q3 FY14

Modest topline decline – LLS, SP and OS stay growth engines Business Units CLB and LLS implemented, management fully in control OSRAM Push Wave 1 on track; targets for Wave 2 defined Outlook FY14 confirmed

  • Revenue expected on the last year's level, at best a modest revenue increase, on a comparable basis
  • We expect an adjusted1) EBITA margin of more than 8% in FY14
  • Profitability: EBITA margin of >8% as average over the cycle from FY153)
  • €1,203m revenue (-1% comp.)
  • 8.6% Adj. EBITA margin1) (+120bps y-o-y)
  • €118m Wave 1 benefits in Q3
  • 8th plant closed, remaining 3 plants in Americas for closure in Q4 FY14 announced, in

implementation and on track

  • Additional €260m cum. gross savings2) from Wave 2 until FY17
  • Q3 FY14: profit & loss reporting
  • Q4 FY14: full segment reporting

1) Adjusted for “Special items” - "Special items” in this context include certain items, e.g. (personnel) restructuring costs, that will also occur in future periods 2) Expected cum. gross savings based on Wave 2 restructuring part 3) Depending on the implementation speed of the measures and the restructuring costs’ effect on earnings, the reported EBITA margin could be below this average value in FY15

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 4

Specialty Lighting (SP) Opto Semiconductors (OS) Classic Lamps & Ballasts (CLB) Luminaires & Solutions (LS)

Segment highlights Q3 FY14

  • Market shares in EMEA and Americas kept stable
  • Pricing strategy with good results in selected markets
  • Repositioning LS shows first effects – trough in topline in Q2 passed
  • LS in line with plan to break-even in FY15
  • Majority of Services lay-offs completed
  • Strong growth in Automotive; Display/Optics growth trend continues
  • OSRAM headlamp laser technology introduced with BMW / Audi
  • 9 quarters of growth (yoy) in a row, 5% growth in Q3 FY14 despite tough comps
  • High operational performance – driven by product mix and OSRAM Push
  • Successful ramp-up of back-end facility Wuxi, start of first deliveries to customers

LED Lamps & Systems (LLS)

  • Sharp growth rate of 68% (comparable)
  • Break-even target LEDr lamps in Q1 FY15 on track
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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 5

Our focus / products CLB - Classic Lamps & Ballasts LLS - LED Lamps & Systems Our focus / products Our Goals Key measures

Split of LC to address the need of different business models

Our Goals Key measures Market (mid-term outlook)

  • Keep EBITA positive, pay its restructuring and

return cash

  • Continue double digit growth
  • Reach break even (LEDr lamps in Q1 FY15 on track)

OSRAM Push

  • OSRAM Operations Project
  • OSRAM SG&A Project
  • GI Sales Streamlining
  • Global Shared Services & Process Excellence
  • Lean Headquarters (incl. logistics)
  • Benefitting from OSRAM SG&A project
  • Innovation through efficient R&D, roadmapping

and platform concept

  • 4-Pillar strategy for manufacturing, purchasing,

Quality & Supply Chain

Market (mid-term outlook)

  • LED Lamps, Spots and Tubes (ex LP)
  • Light Management Systems
  • Outdoor Systems /

Indoor SSL-ECG

  • Thermal, CFLi, LPD, HPD
  • Traditional ECGs (ex LE)
  • Continuous strong decline
  • Ongoing double-digit growth prospects
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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 6

  • Cum. Q4 FY13

OSRAM Push: Overall, comprehensive, continuous performance improvement program

OSRAM Push Wave 1 continues to deliver on plan

OSRAM Push Wave 1 targets:

  • Cum. gross savings of €1.2bn by FY15 unchanged
  • Headcount reduction of 8,700 by FY14 unchanged
  • Reduction of manufacturing sites unchanged
  • OPEX targets unchanged:
  • SG&A1): Reduce by ~8-10% by FY14 vs. FY12
  • R&D: Keep absolute terms flat until FY14 vs. FY12

1) w/o logistics costs 2) Including impact of Tangerang (closure of production) Q1 FY14 Q2 FY14

OSRAM Push: Wave 2 initiated

EBITA Margin: >8% as average

  • ver the cycle

OSRAM Push Wave 1 execution track record

As of FY 13 Q1-Q3 cum. Progress Target Transformation costs (€m) (FY12 – 14) 498 64 ~ 600 Plant reductions (FY12 – 14) 7 1 11 Headcount reduction (‘000) (FY12 – 14) 6.6 2) 1.4 c.8.7 OSRAM Push gross savings, cum. (€m) (FY13 – 15) 433 328 c.1,200

94% 73% 92% 63%

Q3 FY14

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 7

Key targets Wave 2

OSRAM Push Wave 2: restructuring part adapted to accelerated traditional GI market decline

Make the whole company leaner and more responsive Get closer to the customer (Delayer) Clear profit & loss and strengthen entrepreneurship of segments (Dematrix) Get affordable cost & right-sized “back-pack”

Key data Wave 2 (restructuring part only)

  • Cum. expected gross savings of ~ €0.260bn, FY15 - FY17

Headcount3) reduction of ~ 7.800, FY15 - FY17

  • Thereof ~ 1.700 within Germany
  • Thereof ~ 1.900 non-manufacturing
  • Exp. transformation costs of ~ €0.450bn, FY15 - FY17

2nd wave

Organic growth Operational performance

1) Gross expense 2) Gross savings 3) Full-time equivalent

1st wave

Transformation:

  • Operations

Operational performance Organic growth

Transformation: SG&A

New product platforms / Sales share of new products Manufacturing footprint / Adapt to market situation GI Sales Streamlining / Global Shared Services & process excellence / Lean HQs Purchasing optimization / Productivity improvements

continued continued continued

~€1.2bn2) ~€0.2bn2) ~€1.0bn2)

Details to come in Q4

~€0.26bn2) ~€0.6bn1) €0.45bn1)

FY 2012 - 2015 FY 2015 - 2017

Details to come in Q4 Details to come in Q4

Transformation: Operations

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 8

Modest revenue decline, Ongoing strong growth in SSL

Comments Q3 y-o-y Revenue development1)

Quarterly revenue

Comp. growth (%) Revenue (in €m)

Group (€m)

1) nom. (nominal growth) / comp. (comparable growth), adjusted for FX and portfolio effects 2) based on sum of Segments´ revenue, w/o considering corp. items & consolidation

Nom. Growth (%) (6) (2) (2) (3) (3)

1,203 Q2 FY14 1,278 Q1 FY14 1,326 Q4 FY13 Q3 FY14 1,332 Q3 FY13 1,278

Revenue by Region Q3 Revenue by Segment2) Q3

APAC

25%

EMEA Americas

32% 43%

  • nom. 0%
  • comp. 2%
  • nom. (11)%
  • comp. (4)%
  • nom. (8)%
  • comp. (2)%

Specialty Lighting 29% Opto Semiconductors

22%

LED Lamps & Systems

8%

Classic Lamps & Ballasts

33% 8%

Luminaires & Solutions

  • comp. 5% nom. 2%
  • comp. (14)% nom. (19)%
  • comp. 10% nom. 5%
  • comp. 68% nom. 60%
  • 1

2 4 1 2

  • SSL share now 38%, up from 31% in the past

year

  • LLS sales with 68% comparable growth
  • SP again with double digit comp. growth; OS

shows moderate comp. growth on strong prior year quarter

  • As communicated, decline of CLB business

accelerated (-14% comp. y-o-y)

  • Moderate revenue decline in Americas due to

restructuring of Services

  • comp. (13)% nom. (16)%
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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 9

Bottom line on track

EBITA development

2013 2014 Q3 Q4 FY Q1 Q2 Q3 EBITA reported 22 (24) 99 112 81 81 therein: OSRAM Push transformation costs

  • incl. personnel restructuring

(64) (110) (300) (10) (34) (20) Total Special items (72) (133) (310) (11) (35) (23)

EBITA Margin (%)

Special items2)

EBITA (€m)

1) Adjusted for “Special items” 2) "Special items” in this context include certain items, e.g. (personnel) restructuring costs, that will also occur in future periods

Comments Q3 y-o-y Group (€m)

  • Adj. EBITA

Margin1) (%)

81 81 112

  • 24

22 Q2 FY14 Q1 FY14 Q4 FY13 Q3 FY13 Q3 FY14

  • EBITA well above prior year level; strongly

supported by SP and OS and €118m of OSRAM Push benefits

  • OS including a license income of €5m; other

segments benefiting from pension settlement gain totaling €8m

  • Currency headwinds more than offset pension

settlement gain and license income

  • Adjusted EBITA margin 8.6%, up 120bps
  • Strong increase of net income including lower

transformation costs

6.4 (1.8) 8.5 6.7 1.7 8.6 9.3 9.1 7.4 8.1

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 10

Revenue and EBITA margin development Special items2) Comments Q3 y-o-y

1) Adjusted for “Special Items” 2) "Special items” in this context include certain items, e.g. (personnel) restructuring costs, that will also occur in future periods Q3 FY13 Q3 FY14 EBITA reported 19 15 therein: Total Special items (37) (11)

Classic Lamps & Ballasts (CLB): Accelerated volume decline burdens profitability

Revenue (€m) EBITA Margin (%)

  • Adj. EBITA

Margin1) (%)

431 511 548 549 535 590 627

Comp. growth (%) 3.5 11.9 4.0 0.9 3.6 11.9

Nom. Growth (%) (11) (13) (10) (6) (19)

10.4

Q3 FY14 Q2 FY14 Q1 FY14 Q4 FY13 Q3 FY13 Q2 FY13 Q1 FY13

(14) (4) (2) (8) 8.7 6.1 9.0 (5) (4) (8)

(10) (13)

3.5 (1.2) 7.6 12.3

  • Accelerated revenue decline; professional and

consumer channels affected by LED transition

  • Volumes of halogen business substantially

growing in Americas, profitability burdened by ramp-up costs

  • Prices remain stable
  • Margin pressure from cost progression, partly

compensated by OSRAM Push benefits

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 11

Revenue and EBITA margin development Comments Q3 y-o-y

  • Strong growth based on LED lamps, light engines

and LED drivers in all regions with EMEA leading the way

  • Price declines were more than compensated by

productivity improvements and higher volume

  • Continued EBITA margin improvement y-o-y

despite ramp-up costs for new portfolio and major customer win

  • Improvement y-o-y in sub-segment LED lamps on

gross margin and EBITA margin level

LED Lamps & Systems (LLS): SSL transition boosts revenue growth

Revenue (€m) EBITA Margin (%)

110 105 95 84 69 78 67

Comp. growth (%)

Nom. Growth (%) 21 42 24 5 60

Q3 FY14 Q2 FY14 Q1 FY14 Q4 FY13 Q3 FY13 Q2 FY13 Q1 FY13

68 14 38 48 36 31 40

28 35

LLS Gross Margin LTM1) (adj.)

1) Last twelve months ~+400bps ~+300bps

Q3 FY14

~+500bps

Q1 FY14 Q2 FY14 Q2 FY13 Q4 FY13 Q3 FY13 Q1 FY13

(20.3) (25.7) (34.6) (27.7) (13.5) (38.5) (28.4)

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 12

Luminaires & Solutions (LS): Sequential growth after trough in prior quarter

Revenue and EBITA margin development

Revenue (€m) EBITA Margin (%)

Comments Q3 y-o-y Special items2)

1) Adjusted for “Special Items” 2) "Special items” in this context include certain items, e.g. (personnel) restructuring costs, that will also occur in future periods

  • Adj. EBITA

Margin1) (%)

Q3 FY13 Q3 FY14 EBITA reported (23) (18) therein: Total Special items (4) (1)

110 101 135 155 131

Comp. growth (%) (16.1) (11.2) (18.0) (41.7) (25.9) (6.7)

Nom. Growth (%) (9) (21) 1 (7) (16)

(8.0)

Q2 FY14 Q1 FY14 Q4 FY13 Q3 FY13 Q3 FY14

(13) (6) 4 (6) (19) (15.1) (14.9) (24.7)

  • Y-o-y top line decline due to exit of Service

maintenance business and product portfolio adjustments at Luminaires

  • Sharp growth of SSL business; SSL share at

48%

  • Profitability improved q-o-q mainly due to

improved product mix

  • Restructuring well progressed
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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 13

Specialty Lighting (SP): Again double-digit top line growth

Revenue and EBITA margin development

Nom. Growth (%) 5 3 5 7 2

Q3 FY13 Q3 FY14 EBITA reported 44 55 therein: Total Special items (12) (3)

Special items2) Comments Q3 y-o-y

1) Adjusted for “Special items” 2) "Special items” in this context include certain items, e.g. (personnel) restructuring costs, that will also occur in future periods

EBITA Margin (%)

  • Adj. EBITA

Margin1) (%) 12.4

378 393 376 369 359 Q4 FY13 Q3 FY13 Q2 FY14 Q1 FY14 Q3 FY14

Revenue (€m) 15.5 Comp. growth (%) 15.8 14.5 13.0 16.4 16.0 15.8 15.2 16.3

  • Revenue growth with 10% (comp.), driven by

automotive business

  • Substantial growth in SSL and continuous

growth in traditional businesses

  • Adjusted EBITA margin at 15.2% despite

growing LED components business sourced from OS; slightly down q-o-q due to seasonality

5 9 11 8 10

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 14

Opto Semiconductors (OS): New revenue high and outstanding profitability level

Revenue and EBITA margin development

EBITA Margin (%) Revenue (€m)

Nom. Growth (%) 2 17 17 12 10

Comments Q3 y-o-y

286 270 270 268 279 Q2 FY14 Q1 FY14 Q4 FY13 Q3 FY13 Q3 FY14

Comp. growth (%) 19.2 14.6 19.8 13.5

  • Highest quarterly revenue with €286m; high

prior year basis slows down y-o-y Q3 growth

  • Positive influence of €5m from a license

agreement

  • On a like for like basis margin expansion due

to favorable product mix, improved capacity utilization and strong operational performance

  • Price declines were more than compensated

by OSRAM Push benefits

13.2 5 18 20 14 13

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 15 Capex as % of revenue 6.4 Group WC Turns1)

Net Debt bridge Operating Working Capital Capital Expenditure

Reduced FCF due to higher CAPEX

1) Defined as revenue (last twelve months) divided by working capital

Group (€m)

52 108 Q3 FY14 Q3 FY13 25 21 34 Q3 FY14 77 3 2 +37 12 Q3 FY13 40 2 9 7 Other LS LC OS SP

  • 611
  • 707

765 844

  • 83

Trade payables Trade receivables Inventories Q3 FY14 1,160 1,102 Q3 FY13 1,243 1,010

Free Cash Flow

3.1

Net Debt bridge

2 4 6 137

Δ NWC

Net Liquidity Q3 FY14 420

Other Invest./ Fin. activities CAPEX

  • 77

Other income / expense Mainly taxes paid Δ non- current assets and liabilities

  • 11
  • 7

EBITDA

Net Liquidity Q2 FY14 366 FCF 52‘

4.3 4.4

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 16

Key financial metrics

Group (€m)

Q3 FY13 Q3 FY14 Change (y-o-y) Revenue 1,278 1,203 Nom: (6)% Comp: (1)% Gross Margin 27.7% 32.6 % 490bps R&D (82) (85) (3) SG&A (262) (236) 26 EBITDA 112 137 25 EBITA 22 81 59 EBITA Margin 1.7% 6.7% 500bps

  • Adj. EBITA

95 104 9

  • Adj. EBITA Margin

7.4% 8.6% 120bps Financial result (incl. at-equity results) 25 (8) (33) Income before Taxes 42 67 25 Taxes (28) (23) 5 Net Income 14 44 30 Basic EPS (in €) 0.11 0.41 0.30 Free Cash Flow 108 52 (56) CAPEX (40) (77) (37) Employees (in thousands) 35 34 (1) Net Debt (Liquidity) (108) (420) (312)

  • Adj. Net Debt (Liquidity) / EBITDA

0.7 (0.1) Equity Ratio 45% 53% 800bps

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 17

Revenue expected on the last year's level, at best a modest revenue increase, on a comparable basis We expect an adjusted1) EBITA margin of more than 8% in FY14 Cumulated gross cost savings of ~€1.2bn until FY15

OPEX targets remain unchanged Transformation costs for FY14 expected to approach €100m

Net income for FY14 expected to rise sharply ROCE for FY14 expected to exceed cost of capital of 8.5% Free Cash Flow for FY14 expected to come in with a positive triple-digit €m amount, however below the high FY13 level

Higher cash-out for transformation costs and CAPEX

3 2 1

Outlook FY14 confirmed

4 5

1) Excl. special items, e.g. from transformation costs, spin-off- / stand-alone-related costs and substantial legal and regulatory matters

6

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 18

OSRAM’s transformation path

2011 2014 2015

Structure / People / Processes

>8% EBITA as Ø over the cycle

Focus / Prioritize Deliver

2012

  • Apr: New board members
  • Jul: Start of restructuring
  • Jul: Restructuring progress, further consolidation of manufacturing

footprint and “OPEX” program started

2013

  • Q1: Top-line and bottom-line on plan
  • Q2: Top-line bottomed out
  • Q3: Back to profitable growth
  • Q4: Majority of restructuring done

Transform / Execute Transform / Execute

P

  • Q1: Equipment roll in at Wuxi plant (OS backend facility)
  • Q2: New SSL products driving top-line growth
  • Q3: Repositioning of LS shows first effects
  • Q4: Transformation becomes part of operational business (“all in”)
  • Q1: SSL forward lamps break even
  • Q2: First dividend to shareholders to be proposed
  • Q3: Sales streamlining / new structure in full swing
  • Q4: Continuous improvement process is part
  • f OSRAM’s DNA

P P P P P P

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Management presentation Q3 FY14 (preliminary figures) | July 29, 2014 19

Financial Calendar and Investor contacts

Upcoming events

  • July 31, 2014

Q3 Roadshow London

  • August 1, 2014

Q3 Roadshow Paris

  • August 11, 2014

Jefferies Industrials Conference, New York

Investor Relations contact

  • Mr. Boris Tramm

+ 49 89 6213 4686 Munich Office + 49 89 6213 4875 Internet http://www.osram.com/ir Email: ir@osram.com

  • August 11, 2014

Q3 interim report

  • August 12, 2014

Q3 Roadshow Toronto

  • November 7, 2014

Q4 preliminary figures