Coronavirus updates: Osram will miss financial targets, Signify raises prices

March 19, 2020
COVID-19 hits the lighting industry’s two biggest players. Signify calls it a force majeure.

Financial ramifications of the coronavirus COVID-19 are taking hold at the world’s largest lighting companies, as number two Osram said it will not hit its 2020 targets, and industry leader Signify notified OEM customers that the “force majeure” is prompting price increases.

“Due to the COVID-19 pandemic, Osram does not expect to achieve its corporate targets for the current 2020 financial year,” Osram’s investor relations department said in a statement released after European stock markets closed on Wednesday.

Going back to November, Munich-based Osram had been forecasting 2020 revenue growth between plus-to-minus 3% for the fiscal year ending Sept. 30, and had been expecting an adjusted EBITDA margin between 9% and 11%. It stuck with that outlook in early February when it reported a small €1 million ($1.08M) profit in its first quarter that ended Dec. 31, but noted at the time that the COVID-19 situation was posing uncertainty.

Since then, the virus has spread globally, the World Health Organization has declared it a pandemic, and businesses around the world have struggled with closures and supply chain disruptions. Osram is now giving no firm financial guidance.

“Given the unprecedented operational and financial challenges posed by the spread of COVID-19 and the uncertain developments in the coming weeks, the economic impact of the pandemic on Osram, however, can neither be adequately determined nor reliably quantified at this time,” Osram said in the statement, signed by head of investor relations Juliana Baron.

“The COVID-19 pandemic and the global response measures taken in this context, in particular the increasing number of production shutdowns by customers of and the disruption of global supply chains, are expected to have a significant impact on the world economy and in particular on the global automotive industry,” Osram said. “This will also affect demand in business units Opto Semiconductors and Automotive, whose activities in automotive business accounted for more than 50% of group’s sales in the 2019 financial year.

“In general, ensuring the health and safety of employees is the highest priority for Osram. Furthermore, Osram is preparing an additional comprehensive package of measures. Amongst others, Osram is considering short-time working at locations which are particularly affected, and the temporary closure of some of its own production facilities.”

The announcement comes as Osram and Austrian sensor company ams spin their wheels trying to find synergies between the two firms following ams’ acquisition of Osram in early December. The transaction still faces regulatory approval.

Meanwhile, Signify has begun to take measures that in the US have included a temporary 3% price increase on products including LED electronics and ballasts. Damian Gardley, head of OEM sales, wrote to customers from his Somerset, NJ base that the increase will help offset increased delivery charges and will start on Apr. 1.

“Our immediate thoughts are with those who are immediately impacted while we are taking all precautions to safeguard the health, safety, and wellbeing of our employees, customers, and business partners,” Gardley says to open the letter.

“The virus outbreak, and the corresponding closures, slowdown, and travel bans are beyond our control,” he wrote. “We therefore have no option but to treat it as a force majeure event. The effects of COVID-19 (coronavirus) on our supply chain are increasingly intensifying and in addition to restrictions in the supply situation, are leading to considerable additional costs in our logistics chain.”

The letter, dated Mar. 13, was published earlier this week on the EdisonReport website, and can be read in its entirety via the website in a PDF.

Signify, headquartered in Eindhoven, the Netherlands, is believed to be taking similar measures in other territories.

“As the impact of the coronavirus is global, we have indeed reached out to customers from different market segments in different regions,” a spokesperson told LEDs Magazine, who declined to share details. “The coronavirus continues to spread and our thoughts are with those who are impacted. We take the situation very seriously. At Signify, our priority is to protect the health, safety, and wellbeing of our employees, customers, partners, and the people around us. In addition, a dedicated project team is in place to monitor, assess, and prepare plans in order to minimize the impact on our business.”

In late January, Signify warned that the coronavirus could disrupt financial results, but so far it has not published a statement backing off of projections, which in its January year-end report called for an improvement in adjusted EBITA margin for 2020 and for a free cash flow of at least 6% of sales. Signify operates on a calendar year.

MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).

About the Author

Mark Halper | Contributing Editor, LEDs Magazine, and Business/Energy/Technology Journalist

Mark Halper is a freelance business, technology, and science journalist who covers everything from media moguls to subatomic particles. Halper has written from locations around the world for TIME Magazine, Fortune, Forbes, the New York Times, the Financial Times, the Guardian, CBS, Wired, and many others. A US citizen living in Britain, he cut his journalism teeth cutting and pasting copy for an English-language daily newspaper in Mexico City. Halper has a BA in history from Cornell University.