Osram Warns of Lighting Slowdown for Second Time This Year

(Bloomberg) -- Osram AG warned investors for a second time this year of a slump in performance at the former Siemens AG lighting division, and said it will begin talks with labor groups to implement cost-saving measures.

The shares fell in extended trading after Osram late Tuesday cut its 2018 forecast, blaming a first-half slowdown and a weaker dollar that added to the strain on revenue. The Munich-based company, which gets more than 20 percent of its sales in the U.S., was already dealing with challenges in automotive-headlamp sales, while its beleaguered light-fixtures unit is under review for a possible sale.

The persistent weakness in two of its three main businesses is forcing Osram to conduct triage while simultaneously investing in the high-tech semiconductor division it’s focused on building for the future. With comparable sales now forecast to rise as little as 3 percent this year, from a previous estimate of up to 7.5 percent, the company said it’s initiating discussions with worker groups to accelerate cost-cutting measures, which will cost an additional 60 million to 70 million euros ($73 million-$86 million).

Osram fell 10 percent on Tradegate. The shares dipped 0.9 percent to 57.92 euros at the close Tuesday in Germany.

Siemens spun off Osram in 2013 and sold its last 17 percent stake in October 2017. The managers didn’t always see eye to eye, especially when Osram decided to ramp up investments in LED chips. The issue famously led to a spat that saw a Siemens representative decline to discharge the Osram board at the annual shareholder meeting in 2016.

Osram said Tuesday that second-quarter cash flow was negative 132 million euros, mainly because of its investment in the opto-semiconductor unit that makes LED chips, iris scanners for smartphones and LIDAR remote-sensing systems for self-driving cars.

While that segment is growing, the company’s traditional auto-lamps business is still its biggest. Demand there is becoming more volatile as manufacturers wrestle with challenges including a slump in diesel sales and a move to electric vehicles.

©2018 Bloomberg L.P.

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