AMS-OSRAM AG Half Year Report 2023
Key figures
Q2 2023 | Q2 2022 | Q1 2023 | 1st Half 2023 | 1st Half 2022 | |||||||
EUR millions | |||||||||||
(except earnings per share) | |||||||||||
Revenues | 851 | 1,183 | 927 | 1,778 | 2,429 | ||||||
Gross margin in % | 28% | 32% | 29% | 29% | 32% | ||||||
(adjusted - see footnote 1) | |||||||||||
Result from operations (EBIT) | 50 | 104 | 50 | 100 | 230 | ||||||
(adjusted - see footnote 1) | |||||||||||
EBIT margin in % | 5.9% | 9% | 5.4% | 6% | 9% | ||||||
(adjusted - see footnote 1) | |||||||||||
Net result | 31 | -54 | 6 | 37 | 48 | ||||||
(adjusted - see footnote 1) | |||||||||||
Basic / diluted earnings per | 0.12 / 0.12 | -0.21 /-0.21 | 0.02 / 0.02 | 0.14 / 0.14 | 0.18 / 0.18 | ||||||
share in CHF 2) | |||||||||||
(adjusted - see footnote 1) | |||||||||||
Basic / diluted earnings per | 0.12 / 0.12 | -0.21 /-0.21 | 0.02 / 0.02 | 0.14 / 0.14 | 0.18 / 0.18 | ||||||
share in EUR | |||||||||||
(adjusted - see footnote 1) | |||||||||||
Operating cash flow | 232 | 100 | 162 | 394 | 247 | ||||||
Net debt | 2,034 | 1,727 | 1,940 | 2,034 | 1,727 | ||||||
- Excluding M&A-related, transformation and share-based compensation costs as well as results from investments in associates and sale of businesses
- Earnings per share in CHF were converted using the average currency exchange rate for the respective periods
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Half Year Report 2023
Second quarter results in line with expectations with revenues at midpoint and profitability at top end of guidance range in challenging environment
Report to shareholders on the second quarter and first half of 2023
- Second quarter revenues of EUR 851 million and adjusted EBIT margin of 5.9% in line with guidance range
- First half 2023 revenues of EUR 1,778 million and adjusted EBIT margin of 5.6%
- Continued meaningful capital expenditures driven by investment into industry-first 8" LED front-end fab, in line with plans
- Strategy update and portfolio realignment announced: Future portfolio will be focused on differentiated, intelligent sensors and emitters with stronger commitment to Automotive, Industrial and Medical markets
- Company continues to pursue differentiated opportunities in Consumer markets, like microLED
- Re-assessmentlong-term business outlook led to non-cash impairment on goodwill of EUR 1,313 million
Ladies and Gentlemen
Our business performed as expected in the second quarter where we delivered results fully in line with our previous guidance, while our profitability came in at the top end of our guidance range.
The demand situation in important product areas remained unfavorable during the quarter and the first half overall, in line with expectations. At the same time, our Semiconductors business stabilized and saw a positive trend in the second quarter compared to the first quarter, benefitting from improvements in some areas of our Consumer business coupled with a strong performance of our Medical business. The Lamps & Systems business segment developed as expected in line with typical seasonal trends in the second quarter.
We also recorded substantial capital expenditures (Capex) during the first half and second quarter, reflecting strategic investments into our long-term manufacturing capabilities. These expenditures were in line with plans and particularly driven by our industry-first 8" LED front-end facility under construction in Malaysia, next to focused investments in the group's European manufacturing footprint in Austria and Germany. We expect to return to our targeted 10% CAPEX over revenues ratio over an investment cycle in 2025.
As planned, we have continued significant development and industrialization activities for our leading microLED technology of smallest structure size. These activities will continue to be a focus of R&D spending and investment for us as we move towards high volume manufacturing of this next- generation display technology in the new 8" LED front-end facility.
With the last closings in March and April, we have completed all communicated disposals of businesses outside of our strategic focus and successfully completed the planned portfolio realignment following the acquisition of OSRAM. For all disposal transactions since 2021, we expect total proceeds amount to close to EUR 600 million. Our other integration efforts and creation of synergies also continue to proceed according to plan.
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Half Year Report 2023
In July 2023 we have presented an update on our group strategy. Further information on the strategy update is available in the section "Subsequent events" on page 24 of this report.
Financial results
Quarterly financial summary
EUR millions | Q2 2023 | Q1 2023 | QoQ | Q2 2022 | YoY |
(except per share data) | |||||
Revenues | 851 | 927 | -8% | 1,183 | -28% |
Gross margin adj.1) | 27.8% | 29.3% | -150 bps | 31.6% | -380 bps |
Result from operations | 50 | 50 | 0% | 104 | -52% |
(EBIT) - adj.1) | |||||
EBIT margin in % 1) | 5.9% | 5.4% | +50 bps | 8.8% | -290 bps |
Net result adj.1) | 31 | 6 | 464% | -54 | N/A |
Diluted EPS adj.1) | 0.12 | 0.02 | -0.21 | ||
Diluted EPS adj. (in CHF)1)2) | 0.12 | 0.02 | -0.21 | ||
Operating Cash Flow | 231 | 162 | 42% | 100 | 132% |
Net debt | 2,034 | 1,940 | 5% | 1,727 | 18% |
- Excluding M&A-related, transformation and share-based compensation costs, results from investments in associates and sale of businesses
- Earnings per share in CHF were converted using the average currency exchange rate for the respective periods
Second quarter group revenues amounted to EUR 851 million, down 8% sequentially compared to the previous quarter and down 28% compared to same quarter 2022, influenced by deconsolidation effects among others. Adjusted1 group gross margin for the second quarter 2023 was 28%, down from 29% in the first quarter and from 32% in the same quarter 2022. Group revenues in the first half of 2023 amounted to EUR 1,778 million, compared to EUR 2,429 million for the same period 2022. Adjusted1 group gross margin in the first half 2023 was 29% compared to 32% in the same period 2022.
The second quarter adjusted1 group result from operations (EBIT) was EUR 50 million or 6% of revenues compared to EUR 50 million or 5% for the first quarter and EUR 104 million or 9% of revenues for the same period 2022 (unadjusted: EUR -11 million or -1% of revenues for the second quarter 2023). The adjusted1 group result from operations (EBIT) for the first half year was EUR 100 million or 6% of revenues compared to EUR 230 million or 9% for the same period 2022.
Second quarter adjusted1 group net result was EUR 31 million compared to EUR 6 million for the first quarter and compared to EUR -54 million for the same quarter 2022 (unadjusted: EUR -1,342 million for the second quarter 2023). Second quarter adjusted1 diluted earnings per share2 were EUR 0.12 or CHF 0.12 (EUR -5.14 or CHF -5.02 unadjusted). First half year adjusted1 group net result was EUR 43
- Excluding M&A-related, transformation and share-based compensation costs as well as results from investments in associates and sale of businesses
- Based on 261,344,259 basic / 261,344,259 diluted shares
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Half Year Report 2023
million compared to EUR 48 million for the same period 2022. First half year adjusted1 diluted earnings per share3 were EUR 0.16 or CHF 0.16 (EUR -5,65 or CHF -5,58 unadjusted).
The second quarter group operating cash flow developed very well with EUR 232 million while group free cash flow was negative with EUR -31 million, reflecting substantial capital expenditures as expected. First half year group operating cash flow was EUR 394 million with a negative free cash flow of EUR 171 million. Group net debt was EUR 2,034 million on June 30, 2023, translating into a group leverage of 2.9x net debt/adjusted EBITDA. Cash and cash equivalents amounted to EUR 841 million on June 30, 2023.
In view of the current macro-economic environment, a careful look at the prospects of each business line including some low-performing consumer businesses, revealed that the outlook required a significant reset. This led to non-cash impairment charges on goodwill of EUR 1,313 million. The outlook for our core business remains positive. Additional information on this impairment is available on page 19 of this report.
Business development
"We were pleased to see some stabilizing trends in the Automotive semiconductor supply chain lately. Despite better sales in certain Industrial and Consumer businesses, the macro-economic sentiment in these markets remains very challenging. We worked hard to improve our operational cash flow and will continue to work on improving our profitability", comments Aldo Kamper, CEO of ams OSRAM.
Our Semiconductors segment again offered the largest contribution to our results providing 71% or EUR 600 million of revenues in the second quarter and 65% or EUR 1,147 million of revenues in the first half year.
The segment showed mixed traction across the various end-markets. The automotive business showed mixed traction across the various end-markets. The automotive business showed normalizing order-patterns after almost two years of erratic behavior and inventory corrections in the wake of the various macro-economic shocks to the automotive supply chain. Industrial and Medical business performed better than in Q1, but still showed the typical mixed behavior during a macro-economic weak period with certain applications running well such as laser welding and others running very soft such as hyper-red LEDs for Horticulture lighting. The Consumer business showed signs of improvement with an 18% quarter-on-quarter increase due to higher sales from existing supply relationships. Overall, the Consumer business remains challenging for the Group compared to previous levels a year ago as the smartphone market has contracted, certain designs reach gradually End-of-Life, price pressure remains high and won designs are not yet launching until 2024,.
Our Lamps & Systems (L&S) segment contributed 29% or EUR 251 million of revenues in the second quarter and 35% or EUR 631 million of revenues in the first half year.
The segment recorded robust revenues in spite of the typical seasonal decline in the Automotive aftermarket lamps business. The specialty lamps for entertainment and industrial application sold as expected. Within that, the specialty lamps for semiconductor manufacturing equipment saw soft traction due to the global slowdown of that sector.
3 Based on 261,349,067 basic / 261,349,067 diluted shares
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Half Year Report 2023
Outlook
Third Quarter 2023 Outlook
With a strengthening demand for our Automotive products, we expect third quarter revenues to improve to a level of EUR 840 - 940 million. The adjusted EBIT is expected to come in at 5% to 8%.
FY2024 comments
Our Group will have a lower revenue base in 2024 after exiting non-core semiconductor businesses. Further information on the strategy update is available in the section "Subsequent events" on page 24 of this report. From this new base, including the Lamps and System segment, we expect revenues to outgrow our target markets, assuming the end-markets stabilize.
We also target a slightly positive Free Cash Flow in 2024 with significantly reduced CAPEX compared to 2023, assuming the end-markets stabilize.
Premstaetten, July 27, 2023 | |
Aldo Kamper, CEO | Rainer Irle, CFO |
Thomas Stockmeier, CTO | Mark Hamersma, Chief Business Development Officer |
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ams OSRAM AG published this content on 27 July 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 July 2023 19:55:01 UTC.
