Press information
Annual press conference:
Osram defies difficult economic environment
Manufacture of high-tech lamps in Berlin. In the fiscal year just ended, Osram invested in expanding the production capacity for Powerball HCI lamps. These are lamps in which light is produced by gas discharge in a round ceramic vessel. They are particularly good at rendering the natural colours of anything they illuminate. They are therefore used for example for shop window lighting.
- Sales of EUR4.4 billion and an EBIT of EUR365 million remain at a high level
- EBIT margin of 8.4 percent, only slightly lower than the previous year’s result
- Bopst: "We stand by the commitment we made in the Operation 2003 program"
Osram again demonstrated its strong earnings potential despite a difficult economic environment. Sales and EBIT stayed at high levels of EUR4.4 billion (previous year: EUR4.5 billion) and EUR365 million (previous year: EUR462 million, including extraordinary effects), respectively. Dr. Wolf-Dieter Bopst, President of Osram, emphasized at the annual report press conference in Munich that, with its strategic focus on innovation, the lighting company is also heading in the right direction in the long term. Bopst: ""Innovative products generate volume growth and make an above-average contribution to earnings, and this is true even in difficult times."" Necessary cost modifications were implemented rapidly and consistently.
The company defended its strong market position successfully in the fiscal year just ended. Osram is the world’s second largest lamp manufacturer after Philips. If opto-electronic light sources are added to lamps, the two companies are neck-and-neck. Osram has gone from being a classical manufacturer of incandescent lamps to a high-tech company in the lighting industry. Some 40 percent of sales are today generated by products that are less than five years old.
Earnings remain at a high level
In fiscal year 2002 (October 1, 2001 to September 30, 2002), Osram achieved a solid EBIT (earnings before interest and taxes) of EUR365 million and an EBIT margin of 8.4 percent. The EBIT for the previous year was EUR462 million, although this figure also included non-recurrent extraordinary earnings of EUR54 million. The EBIT margin for the previous year was 9.0 percent excluding extraordinary earnings. In the light of the weak economy, particularly in North and South America, the fiercer competition worldwide, high development input expenses and start-up costs for new products, especially in the opto-semiconductor segment, and restructuring costs in the USA and Germany, Bopst was, on the whole, satisfied with the result of the fiscal year just ended.
In asset management, cutting stock levels and improving payment management made it possible to reduce business assets. Good progress was primarily made in this area in North America.
Volume growth for innovative products
Although group sales dropped mathematically by 3.5 percent to EUR4.4 billion (previous year: EUR4.5 billion), three of these percentage points are the result of negative currency effects primarily attributable to the US dollar. In contrast, expanding the scope of consolidation had a positive effect of one percentage point. After adjusting for currency and structural effects, sales were just 2 percent lower than in the previous year. This 2 percent includes a 3 percent fall in prices (previous year: 2 percent), so that there was still a volume growth of 1 percent (previous year: 2 percent) despite the economic influences in the fiscal year just ended. This can be attributed to the positive further development of innovative products, which achieved growth of around 10 percent worldwide.
Investments
Expenditures on research and development totaled EUR219 million, or roughly 5 percent of sales, as in previous years. Capital expenditures on plant and equipment amounted to EUR302 million (previous year: EUR386 million). Regional priorities were set in Germany and the USA. The main focus of investment was on plant and equipment used in the manufacture of innovative products, with the Osram Opto Semiconductors division receiving a major share of some EUR67 million. Osram’s largest single investment (EUR35 million) was in the new chip factory in Regensburg, which will start production in spring 2003. No less than 44 percent of worldwide investments in plant and equipment - or EUR133 million - were transacted in Germany.
Workforce streamlined
As at September 30, 2002, Osram employed a worldwide staff of 35,260 (adjusted figure for the previous year, i.e. including newly consolidated companies: 37,286). Weak market development made it necessary to adjust the number of employees in all parts of the world. Consequently, the worldwide workforce declined by 5 percent. Osram employed a staff of 9,153 in Germany, or 5 percent fewer than in the previous year (9,636). Our American subsidiary Osram Sylvania had 11,350 employees on the closing date (previous year: 12,345).
Outlook
Osram President Bopst: "We are seeing the first signs of improvement, although the tide still has not turned." Bopst said that the plans for 2003 consequently provide for slight sales growth in all divisions, but are not based on a fundamental improvement in global economic conditions. Whatever happens, Osram will be tracking the economic environment very closely over the next few months and will react quickly with additional cost adjustments if necessary. Bopst: "On this basis, we stand by the commitment we made in the Operation 2003 program."
This report contains statements about the future that are based on assumptions and estimates made by the Osram management. Although we assume that the expectations proceeding from these predictions are realistic, we cannot guarantee that they will ultimately prove to be correct. The assumptions may be associated with risks and uncertainties, which can cause the actual results to deviate substantially from the predictions. The factors that can cause such deviations include: changes in the economic and business environment, exchange and interest rate fluctuations, introduction of competitive products, lack of acceptance of new products or services, and changes in the business strategy. Osram has no plans to update the predictions, nor does it assume any obligation to do so.
Press contact:
OSRAM
Juliane Braun
Tel: +49-89-6213-2390
Fax: +49-89-6213-3457
Email: j.braun@osram.de