Zurich (awp) – The Austrian-German semiconductor and photonics giant AMS Osram managed to increase its profitability in the third quarter. But faced with the deterioration of the automobile sector, he announced new savings, which will affect more than 500 additional employees.
“Visibility” is once again “worse”, lamented general manager Aldo Kamper, on the sidelines of the publication of quarterly results. The group expects a recovery in the automotive market, one of its key end markets, only in the second half of 2025.
Until then, the manufacturer anticipates revenues of 810 million to 910 million euros as well as an adjusted Ebitda margin of 15% to 18% at the end of 2024. Management anticipates stagnation in demand for its semiconductors in the automotive sector, explaining it by “uncertainties in the global supply chain of the automotive sector”. In recent days, news of social plans has multiplied, whether from the Japanese Nissan, the German Volkswagen or the French tire manufacturer Michelin.
Demand in the industrial and medical markets is also limited, while activity for its consumer wearable products as well as in horticulture will experience a seasonal slowdown.
The company then expects a “weak” first quarter of 2025 with a decline in sales, due to the difficulties in the automotive industry, but sees “growth in its core semiconductor portfolio for the full year “.
This is why new cost savings are required, given “the persistence of cyclical weakness in key markets”, according to the boss, who intends to continue investments for target semiconductor markets.
The group managed to save 85 million euros, exceeding its target of 75 million euros by the end of 2024. It is targeting 150 million savings by the end of 2025 and now 225 million by the end of 2026, i.e. 75 million more, to “preserve profitability improvements in an uncertain environment”. More than 500 additional employees, who do not work in production, will be “affected”. The positions concerned are in services, administration and research, said the boss.
Aldo Kamper also had to speak on the fate of the factory in Malaysia, scrutinized by analysts. Interest in the site still exists, the general manager assured, adding that talks are ongoing, but “we need more time to find a buyer.” The group announced last spring that it was abandoning the MicroLED site, which had required an investment of more than a billion euros, following the abandonment of a project undoubtedly emanating from its major client Apple.
Better profitability
From July to the end of September, AMS Osram’s turnover decreased by 3% to 881 million euros, but within the range that the Zurich-listed company had set, a press release indicated on Thursday. The decline is “entirely attributable to the Lamps & Systems segment”, which represents a quarter of revenues, while the semiconductor business stagnated at 647 million revenues. Compared to the previous quarter, total revenue increased by 8%.
Adjusted gross operating income (Ebitda) gained 3% to 166 million, for a related margin of 18.8%, improved by 108 basis points.
Adjusted operating profit (Ebit) climbed 15% to 82 million, for a related margin of 9.3% after 7.9% a year earlier. Adjusted net profit came to 37 million euros, an increase of more than a quarter. These results exceed AWP consensus forecasts.
During the period, free cash flow totaled 188 million, compared to an outlay of 70 million a year earlier, “thanks to good operational performance, lower capital expenditure and pre-payment from customers.”
In the medium term (2024-2027), the core semiconductor business is expected to grow by 6% to 10% and the group’s adjusted Ebitda margin is expected to be 20% to 24% by 2027.
For Zurich Cantonal Bank, the group’s caution is not surprising given the difficulties in the automotive sector. With forecasts for the final part of 2024 being lower than expected, the market will revise its estimates slightly, he predicts. The expert welcomes the larger-than-expected savings and considers the new medium-term ambitions reasonable.
UBS, for its part, believes that the clouded outlook should already be factored into recent share price declines. The stock should perform below average given the balance sheet. The market should, however, appreciate the new budget cuts.
Investors were visibly cooled. Before 1 p.m., the stock fell 10.6% to 7.12 Swiss francs, in an SPI up 1.1%.
ck/ib
