Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ams-OSRAM AG (AUKUD, Financial) reported solid results in the second quarter despite increasing uncertainties, with revenues reaching EUR890 million, landing at the midpoint of their guided range.
- The semiconductor business showed a 3% quarter-over-quarter increase, driven by automotive and industrial applications such as horticulture and professional lighting.
- Adjusted EBITDA improved to 16.5% or EUR135 million, marking a 9% increase from the first quarter, attributed to better factory loading and structural savings.
- The company secured significant new business, with design wins amounting to EUR2.5 billion in lifetime value for the first half of 2024, supporting mid- to long-term growth ambitions.
- The restructuring and efficiency program, 'reestablish the base,' is on track, with EUR60 million of structural cost savings realized, aiming for EUR150 million by the end of 2025.
Negative Points
- Group revenues decreased slightly quarter-over-quarter, with a EUR28 million seasonal decline, primarily due to the Lamps and Systems business.
- The Specialty Lamps business for industrial and entertainment applications remained at a low level, with high inventories at semi equipment customers.
- The semiconductor segment CMOS sensors and ASICs saw a quarter-over-quarter revenue decline of EUR9 million, impacted by the ramp-down of legacy consumer designs.
- The automotive market is experiencing weakening demand, with reduced car unit forecasts impacting revenue expectations.
- The company faces pricing pressure in the automotive segment due to competitive dynamics and margin pressures faced by Tier 1s and OEMs.
Q & A Highlights
Q: Could you comment on the level of inventory in the industrial market and when you expect the inventory correction to be completed? Also, regarding the automotive market, is the current weakness due to inventory build-up or weaker global car production volumes?
A: On the industrial market, particularly sensors, demand remains low as customers slowly work through high inventories. We expect this to take several more quarters. In automotive, the weakness is primarily due to reduced car production rather than inventory build-up, with inventory levels remaining healthy.
Q: Despite the automotive market weakness, you mentioned strong design wins. Are these ramps being delayed, or is the market weakness overshadowing them? How do you see revenues progressing into Q4?
A: The new design wins are ramping as expected, but the overall car production decline is impacting revenues. While we hoped for stable build volumes to boost revenues, the current weakness suggests a more flattish outlook. However, content per vehicle improvements will help mitigate some of the impact.
Q: With significant progress in cost reduction, could there be upside potential beyond the EUR75 million run rate savings target?
A: We are making faster-than-anticipated progress, but the overall goal remains EUR150 million. We continue to push hard to achieve these savings as quickly as possible.
Q: How do you see pricing trends in the automotive sector for next year, given the margin pressures faced by Tier 1s and OEMs?
A: While there is increased pressure from OEMs and Tier 1s due to their margin challenges, we have maintained reasonable pricing strategies over the years. We expect some pricing pressure but believe it will remain within a manageable range, supported by cost improvements and product mix enhancements.
Q: Regarding your facilities in Malaysia, what is the current status of the micro-LED facility, and what are your plans?
A: We are in the process of selling the facility or finding a new lessee. There is good interest due to Malaysia's geopolitical attractiveness, and we are confident in finding a solution that optimizes the value of the assets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
