Osram to cut almost 8,000 jobs in switch to LED
BERLIN (Reuters) - German lighting maker Osram Licht AG announced late on Tuesday plans for a new savings program that will include almost 8,000 job cuts, or around 23 percent of its staff, as it seeks to keep up with a shift in technology.
It said the job cuts - of which 1,700 would be in Germany and 6,100 internationally - would allow it to achieve cost savings of around 260 million euros ($348.6 million) a year by the end of the fiscal year 2017.
It said that the extra measures would cost around 450 million euros and could result in it missing its long-term target for a reported operating profit margin of more than 8 percent in the fiscal year to the end of September, 2015.
Osram also announced third quarter results a day earlier than planned, with sales of 1.2 billion euros ($1.61 billion) and better than expected adjusted earnings before tax and interest of 104 million euros.
"While earnings continue to develop nicely, the growing market acceptance of LED technology is, as already announced, causing a significantly faster decline of the traditional business," said Chief Executive Officer Wolfgang Dehen. The new savings drive extends its current "Push" program, which runs out at the end of this year and has involved cutting 8,700 jobs, or 21 percent of its workforce, and closing a quarter of its 43 factories to generate gross savings of 1.2 billion euros.
Osram, spun off from engineering group Siemens last year, has been scrambling to adjust to a shift from traditional light bulbs to newer technologies such as light-emitting diodes (LEDs) and said on Tuesday LED sales made up 38 percent of group revenue in the third quarter.
Top rival Philips announced plans last month to spin off its lighting components businesses as it refocuses its business on healthcare and high-end lighting systems.
Shares in Osram have lost a quarter of their value over the past six months, suggesting there is concern over how much more restructuring may be needed at the company.
Osram Chief Executive Wolfgang Dehen said last month that more cuts in the traditional lighting business would follow, though he did not say at the time how many jobs could go.
Osram trades at 12.6 times its estimated 12-month forward earnings, at a discount to Zumtobel and Philips, which trade at multiples of 13.9 and 14.6, respectively.
Osram confirmed its outlook for the current year for sales to remain flat or increase only moderately and said it still expected to post a sharp rise in annual net profit this year from last year's 34 million euros, which would enable it to pay its first dividend to shareholders.
It had cut its sales outlook in May.