AMS Osram is undertaking a vast restructuring of its micro-Led business, following the cancellation of a project from a major client. The operation, which concerns 500 employees, will cost 700 million euros. Quarterly results turned bright red.
The sum of 700 million includes a depreciation of 513 million euros and one-off costs of 119 million, both recognized in the 1st quarter, according to the press release published Friday by the Austro-German group of semiconductors and optical sensors. At the end of February, AMS Osram estimated the amount of depreciation between 600 and 900 million francs.
Additional costs could arise during the year, of the order of 70 million euros, however, warns management.
The restructuring will affect the micro-Led activity in Germany but especially in Malaysia, where the group had invested 1.3 billion euros in a new factory in Kulim. This site will be abandoned and dedicated to rental. AMS is also seeking to exit the sale-leaseback contract for the Kulim factory. Long-term debt should thus be reduced by 400 million euros.
Nevertheless, the company expects an improvement in liquidity of 100 million euros and adjusted operating profit Ebit by 100 million by 2025 as well, compared to the situation that would have prevailed if the micro-Led project had continued.
Refocusing on the core business
According to analysts, the client in question is the technology giant Apple. The collaboration between the two companies focused on the development of pixel-sized LEDs, which could have been used for the screens of smartwatches, respectively the Apple Watch. The day after the announcement, AMS Osram shares lost nearly 40% of their value in one day, with micro-Led having until then been seen as an important growth engine for the group.
AMS also publishes its figures for the first quarter. Revenue fell 9% to 847 million euros. The adjusted gross margin stood at 28%. Adjusted Ebit contracted by 13% to 44 million euros, for a linked margin of 5.2%, down 20 basis points. The restructuring of the micro-Led activity widened the net loss, which reached 710 million euros, compared to an outlay of 134 million in the first quarter of 2023.
These figures are in line – some slightly higher – with the forecasts of the financial community. The analysts contacted by AWP expected on average a turnover of 846 million euros, a gross margin of 27.2%, an adjusted EBIT of 42.5 million for a related margin of 5%.
For the second quarter, management expects a turnover of between 770 and 870 million euros. The gross operating margin (Ebitda) is expected between 14 and 17% (1st quarter: 16.3%).
For the year as a whole, AMS is banking on the effectiveness of its new strategic plan called “Re-establish-the-Base”, which aims to refocus on its core business. Activities covering 300 to 400 million euros in revenue will be abandoned. Adjusted Ebit is expected to improve by 75 million by the end of the year. Investment spending (Capes) will be reduced to 450 million, compared to 700 million previously.
ats, awp
