Ams Osram Ag Unsp/Adr

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the conference call on third quarter 2023 results. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Jürgen Kreml, Head of Investor Relations. Please go ahead.

Thank you. Hello, good morning, everyone. This is Juergen speaking. I would like to welcome to our Q&A call for investors and analysts. With me are Alzo, CEO, and Rainer, CFO. Alzo will comment on business update and strategy. Rainer will comment on financials and how to assess the financing plan. After the introductory remarks, we're happy to answer your questions. Aldo and Rainer will refer to the presentation that you'll find on our website. Aldo, please walk us through the Q3 business update now.

Thank you, Juergen, and good morning to everybody from my side as well. The business environment is certainly not easy, but I think we have delivered a solid third quarter. Let us take a look at slide number four. CO3 revenues grew nicely by 6% quarter-on-quarter to €904 million. We landed above the midpoint of our guided range. One year ago, we stood on a like-for-like basis, excluding divestments in the land assistance segment, at €1,093,000,000. As such, we see a nominal decline of 7% year-on-year. However, we need to consider two things. The US dollar weakened as the average exchange rate one year ago to the 101 compared to an average exchange rate of 109 in Q3. At constant currencies, dominated by US dollar-euro, Q3 revenues would have been 43 million euro higher. So, the currency effect accounts for around 4% decline year-on-year. Second, the remaining decline of around 3% is mainly due to the weakness of several end markets, especially industrial and consumer. We'll talk about it in more detail afterwards. Adjusted EBIT improved even more, from €50 million in Q2 to €71 million in Q3, an increase of 42%, driven by strict cost control and higher volumes. Furthermore, some €10 million were due to a positive one-off effect related to a catch-up effect in government trends. This resulted in an adjusted EBIT margin of 8%, better, but still far away from where we want to be. It is our clear ambition to significantly increase profitability and our re-establish the base program we will ensure that we will deliver on this promise. Now let us take a look at our biggest segment semiconductors on slide number 5. Revenues improved by 8% from Q2 and came in at 648 million euro. All end market, automotive, industrial, medical and consumer contributed positively. However, in detail, the picture is very diverse, which I will comment on in a moment. Adjusted EBIT of the semiconductor segment almost tripled sequentially, with 6% adjusted EBIT margin of €36 million in absolute terms, up from 2% or €13 million in Q2. Higher loading contributed to improved results. Furthermore, the steep increase was also supported by this catch-up effect I spoke about related to the overseas funding. Let us switch to slide number six, looking at the dynamics in the end markets. Our automotive ALD products were in high demand, especially in China, with an increasingly short-notice order pattern. We could even grow year-on-year by 2% in automotive. Although we grew revenue from products for industrial medical applications compared to last quarter, the year-on-year comparison reveals the massive macroeconomic pressure in essentially all verticals. We are down by 26%. We're all aware of the problems in the construction sector worldwide, and this is leading to a weak demand for industrial outdoor lighting LED products. Another example is horticulture. Higher energy prices and high borrowing costs hamper developers. Consequently, horticulture project development is weak, and we saw fewer hybrid LEDs, although we did see an uptick in demand from QT to Q3. The weakness in industrial is seen both in mass market and OEMs. Medical business also remains subdued. Coming to consumer, on the positive side, we saw a decent seasonal upswing of 6% driven by our leading position Android smartphones for our products. On the negative side, we still see a significant year-on-year decline due to the phasing out of some big sockets, as we told you before. Also, macronomic pressures weigh on global smartphone sales, especially in the relevant premium segments. Now let me come to one of today's highlights, the fantastic traction that our cutting-edge LED and sensor products find in their target markets. The increase in design wind tally confirms our structural growth model. Let's take a look at slide number seven. First, we continue to add many new designs with our high-pixel forward lighting solution called Evios. Design wind now stands at more than €250 million, but by more than €100 million since Q2, and traction remains strong. It is the mid- to high-end forward lighting solution of choice for many OEMs now, and you will soon see more and more cars on the road using our solution. The first will be on the new Volkswagen Touareg. You might have seen it. I recently drove a car myself with our Envios technology in a Mercedes that really makes a noticeable, impressive difference versus existing solutions. Second, our recently launched and intelligent ambient light for cars, iRGB, already landed more than 100 million euros in design minutes. The interior lighting is increasingly becoming interactive, and with that the number of multi-color LEDs grows from tens to hundreds per car. Third, our new LED on foil technology for automotive, Elios, which creates light out of nothing, and all that allows for entirely new light designs. It's raised incredible interest among our customers when we launched it a couple of weeks ago. It caters not only to the desires of car designers, but also enables more interactive content on the rear of our cars. Many OEMs in Tier 1 are seeking a close cooperation to quickly bring this technology on their vehicles. Please see our website also for a nice video illustrating this exciting new technology, a true world first. Fourth, looking at medical applications, we won more than 50 million euro lifetime value design with one of our specialty sensors for computer thermography. We are a key partner for almost all OEMs in this space and continue to have good traction. Fifth, our family of LED and laser light sources and modules for near-eye projection will be an integral component in many AR-VR devices. We have first designed ones for the LED-based components and see strong interest for a laser-based solution. However, we are all aware of the uncertainty of the AR-VR market and we are cautious in terms of its outlook until it really takes off. Nevertheless, it nicely shows how we can combine our unique blend of LED and IC competence in novel products. With this, let me switch to page number 8. The lamps and systems segment performed as expected. The 2% quarter-on-quarter improvement in revenues to €256 million increased, are on the back of a continued strong automotive aftermarket business, with a clear leader in this market and an important partner to our retailers that rely strongly on our brand and our ability to drive traffic in their stores. In comparison, the sales in industrial and entertainment applications declined in lamps and systems segments by 15% compared to Q2, reflecting the weak environment in industrial in general. Adjusted EBIT came in strong and on a comparable basis to Q2, with 14% or €35 million in Q3. We've also received quite a few questions on what assumptions we have for the relative contribution of the various growth drivers. I'm now on slide 9. First, we reaffirm our growth model with 6-10% CAGR from the new base after exiting the non-core semiconductor businesses. I explained a few examples of the strong design wind base and momentum we see early in the call. With this in mind, we see the largest revenue growth and EBIT contribution from automotive in this trajectory going forward, where we are the clear market leader. This, followed by meaningful design with light sensor products and smartphone applications, and next in line are the growth contributions from our new 8-inch facility in Malaysia. We assumed further many other contributions from growth factors in industrial, medical, and selected consumer applications, but did give you a flavor of the ranking of the growth opportunities for us in next years. We also continue to target around 15% adjusted EBIT in 26, based on this growth model, in conjunction with successful execution of our re-establish the base program. With this, let me hand over to Rainer for more details.