Ams Osram could shed some ams lines

With first-quarter profits plunging 95% — much more on an unadjusted basis — and significant travails still ahead, the new CEO of ams Osram today indicated he might shed operations from the ams side now that Osram disposals are complete.

“I will work intensely with the management team on further sharpening our way forward, not to change course dramatically but to see how we can continue to unlock further potential the company, in its combination of capabilities, inherently has,” CEO Aldo Kamper said in opening remarks on a call with analysts to discuss results for the quarter ending March 3, his first results announcement since rejoining the ams Osram fold a month ago after about four years away, and one which covered a period when he was not with the company.

“But please give me some time to develop these thoughts with the team, and come back to you with a clear concise plan on our way forward,” Kamper added.

Analysts gave him about 30 minutes. By later in the call they pelted him with questions about what they assumed would be a culling of the expansive portfolio of ams-branded sensors and optical chips.

Declining sales of such products have been largely responsible for a tumbling financial performance at the company. Ams Osram today reported that the first quarter “adjusted net result” crashed 95% to €6 million from €102 million in the same quarter a year ago. Even worse: The €6 million excludes various factors that otherwise would have shown a €134 million loss. Those factors were “M&A-related, transformation and share-based compensation costs, results from investments in associates and sale of businesses,” the company said in a footnote.

Revenues for the quarter fell by 26% to €927 million from €1.25 billion, as sales into the smartphone and other sectors have struggled.

When asked by one analyst if he is examining the portfolio for a possible pruning, Kamper replied, “Yes, definitely.”

“We have a very large portfolio of technologies and a large portfolio of opportunities associated with that, which is on the one hand a pleasure and a strength,” Kamper elaborated. “At the same time, it also requires you to make choices. And that’s what I want to have as an intense discussion with the management team…But the good part is we have almost too many choices, not too little choices. That’s a very pleasant problem to have in that sense. But still it requires stringency and consequence.”

Back to the future

Kamper took the helm at the Premstaetten, Austria group on April 1, returning to the Osram orbit after around four years as CEO of German automotive wiring and cabling outfit Leoni Group.

Prior to ams’ long and winding acquisition of Osram, Kamper had been CEO of the Opto Semiconductors division of Munich-based Osram, running LED and other optical chip activities.

He had left Osram prior to the ams acquisition. Now that he’s back, he’s reacquainting himself with Osram’s LED and laser chip business, and familiarizing himself with the vast collection of sensors and optical chips that ams produces for smartphones and other devices.

The precipitous drop in ams Osram’s first-quarter numbers would have been worse, if not for the beneficial effect of proceeds from ams Osram’s many disposals of non-chip Osram units, ranging from illumination operations to drivers and digital lighting activities (see partial list below this story).

Ams Osram has been hiving off those Osram units to support a strategic focus on chip-level operations, and to help fund ams’ original acquisition of Osram, a company that had been about four times the size of ams and which required intense and complicated borrowing.

But with all previously announced Osram disposals now complete, and ams Osram having already extracted many of its synergy savings from integrating the two entities, won’t it have to now trim its ams portfolio to continue to cut costs, especially as the company forecasts low second-quarter margins of between 3% and 6%?

That’s what one analyst asked.

“Yes, the team already has done a lot, so it’s not obvious what are the next steps in further cost optimization,” Kamper replied. “I think it will have to go hand-in-hand with making choices in the portfolio — what do you work on, what do you stop working on, or what do you slow down working on? And that’s part of the discussion that we will be having with the management team over the next months…. But it is really about making the right portfolio choices going forward, and then adjust spending towards that.”

Tough market, including horticultural LED

Kamper’s urgent portfolio review is all the more important given that the company issued a gloomy outlook in which it said it expects “continued reduced production volumes in the second quarter, which continue to result in reduced utilization levels in the company’s manufacturing and a negative impact on profitability.”

Part of the decline continues to come from some sectors of the LED market, including horticultural, the company said.

In another upcoming financial maneuver, Kamper said ams Osram will be renegotiating some loans that mature in 2025.

On a positive note, Kamper said that construction of the micro LED facility in Kulim, Malaysia, is on schedule. Kamper, like his predecessor Alexander Everke, is banking on micro LEDs for a strong future. In the waning days of Everke’s leadership, progress at the plant had come under analysts’ scrutiny, as did the state of a prepayment for its eventual output by an unnamed customer. The prepayment did not come up on today’s call.

Prior to the ams acquisition, Osram opened the Kulim plant in 2017 for LED production, with Kamper playing a key role. By hiring Kamper as its new CEO, ams Osram is reaffirming the importance of micro LEDs and the Malaysian factory to the company. Combined with Kamper’s intentions to shed some ams lines, the company is in a sense going through a "re-Osramification."

LEDs Magazine will report more details on today’s financial results in a separate article.

Some former Osram operations that ams Osram has sold

MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).

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