Earnings Call: Q1 2019

Feb 7, 2019

Ladies and gentlemen, thank you for standing by. I'm Stuart, your Chorus Call operator. Welcome and thank you for joining the OSRAM Leased AG Conference Call on the Q1 2019. 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. I would now like to turn the conference over to Andreas Spitzauer. Please go ahead. Thank you, operator. Good afternoon as well as good morning, ladies and gentlemen. My name is Andreas Spitzauer, Head of Investor Relations of Osram, and I want to welcome you to Osram's conference call for our Q1 2019 results. As a reminder, the conference call will be recorded and is available on our homepage, www.osram group/investorrelations.com. You can find today's presentation as well as later transcript there as well. It is now my pleasure to turn over the call to Doctor. Olaf Wahlin, the CEO and Ingo Bank, the CFO of Osram. Please go ahead, Olaf. Yes. Thank you very much, Andreas. Ladies and gentlemen, warm welcome from my side as well. Let me start with an overview of our Q1. My colleague, Ingo, will then provide you with a more detailed explanation of the financial figures and of course, followed by the Q and A session from you. Looking at Slide number 3, you can see that we had a quite challenging start to fiscal year 2019. The negative market dynamics that we already saw in the second half of the fiscal year twenty eighteen further increased between October December. All of our business segments were impacted by a considerable slowdown end of 2018. Main drivers were the weak growth in China, the WLTP issue in Europe and the ongoing trade conflicts. Turning to Slide 4. Revenue from the continuing operations amounted to €828,000,000 in the Q1. This is a decline of around 15% on a comparable basis. Adjusted EBITDA was at €93,000,000 The margin reached 11.3%. Free cash flow was impacted by the revenue development on end CapEx, but finished slightly better than last year. The comparison with the Q1 a year ago is particularly striking, but we have to consider that we come from a really strong Q1 2018. And as you know, this refers to October till December 2017. The economy was booming at that time. We were unable to meet the high demand for automotive LED lamp. Whereas Q1 2019, the weak growth in China clearly impacted us, especially the automotive industry. China reported the weakest quarter in car sales growth since 2,005. I will come to that later on. The European Automotive Industry posted a weak demand, too. Here, the effects from the WLTP are still there. Last but not least, destocking and general lighting by our customers and the weak demand in smartphones affected our financials in Q1. The figures no longer include the activities of our service business in the United States, we call it SLS, for which we signed a sales contract in January nor the European Lumineers business, which is currently in a divestment process. So this takes me to Slide number 5, and I would like to talk more about markets. The German Economic Research Institute, IFO, reported the weakest number since 2012. Its World Economic Climate Index, you see it on the left side, dropped to minus 2 points in Q4. The same trend was mirrored by the global PMI index on the right side. Global manufacturing expectations slowed down significantly, as you can see on the right side. We clearly saw the same trend in our revenue development in our Q1 2019. The decline that we saw in October November was in line with our expectations. However, the numbers in December, minus 24%, fell dramatically and without any prior indication. If we look at the global car production on Slide number 6, we see this decline in this in the last quarter in all regions. We had it in NAFTA, where the growth rates have dropped since November. You can see it on the left side. And we saw it in Europe, where the market suffered from the post WLTP ramifications. But the biggest impact was clearly in China, where growth rates came down rapidly. As you can see from the right chart, Chinese auto sales have declined sharply, with Q4 of the calendar year 2018 down 15% year over year. And amongst any road, it is the 1st quarter since 2,005. Again, this was mainly due to the steep decline in December, and this hit us. We are the market leader in automotive lighting. China is our most important market. And accordingly, our China revenue year over year dropped by 18% in the last quarter. Ladies and gentlemen, the uncertainties in the markets continue in 2019. Market research has remained cautious. As a result of the ongoing market and political uncertainties, visibility for the quarters ahead remain rather low. If we have a look at what our customers expect to order, we see an optimistic order volume for 2019. And Page 7 shows you on the left side again the deviation in calendar year 2018 between agreed upon contract value and actual billings. The right hand chart illustrates the volume agreements for calendar year 2019, showing that the majority of our automotive customers have indicated higher auto volumes in 2019 compared to calendar year 2018. This is an important data point regarding our more positive expectations for the second half of our fiscal year. Taking into account the deviations from last year, you may ask why should we believe in the 2019 order volumes to come? The answer is because the 2019 figures already reflect the cautious forecast of our customers, whereas the 2018 assumptions were made in the times of a booming economy. So there are reasons to believe in a more optimistic order volumes for the second half of twenty nineteen. But for us, it is for the time being, we remain cautious. So the management board has initiated a number of countermeasures. Main focus is on cost savings and, of course, top line growth. On Slide number 8, you see our operational program, which we showed you at our Capital Market Day in November and which we promised to report on a regular basis. Overall, execution is on track. We delivered what we have promised, but let me just highlight some achievements. In January, we signed the contract to sell our service business in the United States that we had announced last year. And we are making good progress in the sale of our SITECO Luminaire business. We are currently in concrete talks with interested parties. Due to the weak Q1, we have initiated additional measures to improve our performance. This includes strong OpEx measures within Opto. To remain competitive, we announced the reduction of about 300 jobs in Regensburg as well as 200 additional temporary staff. So let me finish with some latest developments in Q1 and in the last weeks. A few weeks ago, at the Consumer Electronics Show in Las Vegas, we presented a wide range of fascinating new technologies, technologies that extend far beyond visible illumination, such as LIDAR and sensor application for driver assistance and autonomous driving, facial recognition for smartphones, digital solution for smart farming and as well as our digital ceiling. The CES demonstrated our strategy of becoming a leading high-tech photonic company is making good progress, and we are focusing on the right trends, be it the digital ceiling, autonomous driving or increased content per car. The feedback from our customers and visitors was overwhelming. We're generating 3,600 new customer leads on these few days and 5,000,000 social media engagements in this short period of time, making a CES as a big success for us. The interest in our new technologies is also paying off. Just recently, we achieved our first two VCSEL designs wins with Asian mobile phone makers. VCSEL technologies are being used for facial recognition. Taking that we just bought VIXA last year in the U. S, I think that's a good success. So ladies and gentlemen, let me summarize. While market turbulences and political uncertainties continue, we have taken measures to safeguard revenue and margins. Despite all short term challenges, our medium- and long term prospects are intact. We continue to evolve into a high-tech photonics company. We focus on the right trends and attractive markets, and we have a clear strategy for the digital future. So therefore, we are very positive about the long term future despite strong headwinds from short term. So first of all, thank you very much. And now I will hand over to Ingo. Thank you, Olaf, and thank you for joining the earnings call today. Before I get into the numbers, I would like to point out 2 important aspects related to the presentation of the Alstom Financials for the Q1 of fiscal 2019. First, the financial presentation now reflects the new segment reporting structure we first outlined back on November 7, 2018, during our Capital Markets Day. The changes are related to automotive, or AM, and digital, abbreviated with DI. Opto Semiconductors OS is unchanged. An overview of the new segment structure can also be found on Slide 10 of the earnings release. We also provided historical financial information for 2018 for this new segment reporting structure on a pro form a basis earlier this year. It can be found on our Investor Relations website. The presentation of the financials for Q1 fiscal year 2019 will focus on what now constitutes continued operations. These exclude our U. S. Service business, Sylvania Lighting Solutions USA, following the agreement to sell this business to Wesco International. Furthermore, the financials of our European Luminaires business, also sometimes referred to as Zteco, are also excluded as we are in the divestment process. Consequently, both activities are treated as discontinued operation as of the 1st October 2018. Let me also point out that in conjunction with the decision to classify our European Luminess activity as discontinued operation, we took an impairment charge to the tune of €61,000,000 The following presentation of the financials for Osram for the Q1 of fiscal 2019 are focusing on what now constitutes continued operations. Moving now to Slide 11. As Olaf pointed out, we had a difficult start into the new fiscal year. Comparable growth for the company was negative with minus 15%. All segments recorded double digit declines in the quarter. Adjusted EBITDA came in at €93,000,000 or 11.3 percent of revenue compared to 18.5% in the prior year quarter. Free cash flow was negative with €101,000,000 CapEx was €105,000,000 Operational cash flow was slightly positive in the Q1, and special items amounted to €24,000,000 in the quarter. Moving now to revenue in Q1 fiscal 2019 on Slide number 12. Revenue growth was impacted by weakening automotive demand for both our Opto and Automotive businesses. We saw a further softening in general lighting markets, which not only affected Opto's revenues, but also revenues in our Electronic Ballast and Controls business within the DI Reporting segment. Particularly in the United States, demand slowed further down towards the end of the quarter. Geographically speaking, all regions recorded revenue levels below last year's quarter. For the company, revenue in China was lower by close to 18% year over year, with China being approximately 20% of overall OSRAM revenue, this had a meaningful impact on the total company. The impact of IFRS 15 in the quarter was approximately 1%, lower than originally anticipated due to an unexpected swift slowdown in business activity in December. Shipment volumes were therefore much lower in the last working days of the Q1 fiscal 2019 than originally planned. At this point in time, we expect the total impact of IFRS 15 for fiscal year 2019 to be approximately €20,000,000 to €30,000,000 revenues with the corresponding impact in adjusted EBITDA. This estimate includes the impact for the Q1 mentioned above. Moving on to profitability on Slide 13. In Q1 of fiscal year 2019, absolute adjusted EBITDA was €93,000,000 translating into a margin of 11.3%. The drop in revenue and overall volumes took a toll on our profitability, largely a reflection of the operating leverage effect in our Opto Semiconductor and traditional automotive business. Lower volumes also affected factory utilization rates of the industrial facilities in our electronic ballast and controls business, both in Europe and NAFTA. The pricing environment in the quarter overall was largely as expected. The impact of foreign exchange was minor, with a more favorable exchange rate in comparison to prior year being offset through hedges. Please note that approximately €50,000,000 of the year over year decline in adjusted EBITDA for DI was due to a one off gain recorded in Q1 of last year relating to a divestment back then. Adjusted EBITDA in corporate items for OSRAM was negative with €14,000,000 in line with our previous quarter. Moving now to Slide 14. Before I go into the financial details of our reporting segments, let me provide you with an update of our performance programs. This overview is now also based on continued operations. In other words, existing performance programs for our European Luminaire business and U. S. Service business are no longer included in this overview but are, of course, ongoing. The targeted saving areas have not changed. It's overheads in our industrial footprint. Including the new structural cost measure, Opto Fit for the Future that Olaf explained earlier, we're now targeting overall gross savings of between €160,000,000 to €180,000,000 in the period of between fiscal year 'eighteen fiscal year 'twenty, which is up from the earlier communicated savings by approximately €50,000,000 to €60,000,000 on the basis of OSRAM continued operations. Savings in fiscal year 'eighteen were realized in line with plans. For fiscal year 'nineteen, we are now targeting gross savings of between €65,000,000 to €85,000,000 We now expect to incur transformation related charges of between €80,000,000 to €90,000,000 in fiscal year 2019. This is up from prior guidance and now reflects the addition of the Opto program. Total special items for 2019, not just related to the performance of programs just outlined only, are now expected to be in the range of between €100,000,000 to €120,000,000 Summarizing our Q1 performance for the business segments on Slide 15. Let me now start with Opto. Opto's comparable revenue growth was minus 16.9% in the Q1. Lower volume and pricing were the major reasons for the reduction, both sectors carrying approximately an equal share, with pricing being the expected range. In Opto's Automotive business, revenue was lower by approximately 14%. Next to pricing impact in the high single digit range, we saw a decline in volume, reflecting an overall lower market. Our market share remained stable. General Lighting accounted for approximately onethree of the absolute decline in revenue year over year as we had a number of bigger horticulture projects last year that were absent in this quarter, making the comps tough for this business line. We also saw elevated inventory levels in the industry for outdoor and indoor lighting applications, impacted by, amongst others, the introduction of trade tariffs between the United States and China. As a result, end markets continue to be softer. Top line reduction within Industry and Mobile was approximately 14%, largely due to distributors taking destocking measures, impacting mainly the very diverse multimarket portfolio of Opto, which includes, for instance, end markets such as video halls, LED projection, traffic lights, etcetera. Business for advanced smartphone applications was soft in the quarter. Despite the strong top line decline, Opto managed to keep its adjusted EBITDA profitability at around 20%, also supported by efficiency measures taken by management. The reduction in adjusted EBITDA profitability when compared to prior year's 25 percent was, by and large, driven by the operating leverage effect of lower volumes, combined with a higher overall available capacity at Opto when compared to a year ago. As mentioned, we put additional structural measures for opto semiconductors in place to proactively manage in an environment of limited forward visibility. These measures are expected to result into a restructuring charge in fiscal year 2019 of approximately €40,000,000 to €50,000,000 Expected savings for these measures just this year are targeted to be up to €30,000,000 Moving now to our segment Automotive. Comparable growth was minus 11% in the quarter, driven by lower volumes in our traditional OEM business, particularly in Europe and China. The aftermarket business was stable compared to the same period a year ago with low single digit growth in North America. The business development of Osram Continental was in line with our expectations. Automotive adjusted EBITDA profitability was 10 point 8% in the quarter. The margin difference when compared to the same period a year ago was largely a reflection of the operating leverage impact from lower volumes. Price erosion and inflation were compensated by productivity measures. The inclusion of the Ostrom Continental into the financials of AM had a dilutive effect of approximately 170 basis points. DI had a difficult start into the new fiscal year. Comparable revenue growth was minus 16.7%. Particularly, our Electronic Ballast and Controls business, also referred to as Digital Systems, was affected by a further slowdown in the general lighting market in the U. S, where customers unexpectedly extended factory furloughs in December. We believe this to be a reflection of elevated inventory levels put in place in anticipation of the introduction of tariffs between China and the U. S. Early on in calendar year 2019, also explaining the higher growth for Digital Systems in the Q4 of fiscal year 2018. The European DS business continued to be affected by shortages in electronic components and a generally soft general lighting market. On the positive side, our DS business in APAC continued to fare well, delivering double digit growth in the quarter. When looking at the other business activities within DI, we saw good performance within our Industrial business, driven by our recent acquisition Fluence. The entertainment business of the Eye had a slower start into the year as we changed market channels in the United States. DI's dynamic lighting business continued to perform well but had tough growth comps, given that the revenue in the Q1 fiscal year 2018 included 3 large projects that were absent in the Q1 of this fiscal year. And finally, digital lumens performed in line with plans and showed growth. The ICE profitability was negative in the Q1 of 2019, largely due to the lower revenues in digital systems and the corresponding volume regression impact. In addition, the bottom line was impacted by cost inflation for certain electronic components. Please also note that for comparison purposes, the Q1 financials of 2018 included an extraordinary gain to the tune of EUR 15,000,000 related to the divestment of a business out of the industrial portfolio of the eye, which I already mentioned early on. Moving to cash flow on Slide 16. Free cash flow was negative with €101,000,000 including CapEx spend of €105,000,000 more than 80% of that spend related to Opto. We do expect that Q1 of 2019 to have represented the peak spend of CapEx for us in fiscal year 2019. The free cash flow effect from inventories was approximately EUR 81,000,000 in the quarter, also being a reflection of the unexpected sharp slowdown of the business environment towards the end of the Q1 fiscal year 2019. Our performance regarding the collection of receivables was good, helping to compensate such increase. Net debt increased to EUR 172,000,000 as per end of December. Moving to Slide 17. Clearly, our outlook for fiscal year 2019 has become more challenging on the back of a weaker than expected Q1. Also, visibility remains low. The substantial decline in revenue, in particular, has resulted into the initiation of a number of countermeasures that Olaf also mentioned. Those include, amongst others, structural measures such as for the Opto Semiconductors Business Unit as outlined earlier. The various measures are intended to secure the guidance for the fiscal year. However, the achievement of the guidance is also subject to a revival in our order intake in the month ahead. Andreas, back to you. Okay. Thank you, Ingmar. Coming to the Q and A. Ladies and gentlemen, at this time, we will begin The first question is from the line of Uwe Schrupp from Deutsche Bank. Please go ahead. Yes, good afternoon, gentlemen. I will limit myself to one question then. Basically coming back to the very interesting slide on Slide deck number 7, where you basically show the expectation of the pre agreed volumes and also pricing contracts with your biggest customers. Would be interested really in how did those numbers on the right hand side, I. E, the expectations of your customers change during the last few weeks, if at all? And when do you expect to see the low point really in year over year terms for your volumes? Some companies obviously called the volume bottom in automotive already for December. Others seem to be a bit more cautious and even point to later in Q1. So really would be interested in where you stand really and whether you can see light, so to speak, at the end of the WATP tunnel. Thank you. Yes. Thanks, Uwe, for your question. I showed this chart last year, and we agreed that we are coming up regular on a follow-up with this chart. I think in these uncertain times, you have to collect a lot of data points and to get a better view what could happen. And what we would like to show you amongst the negative indication and data points, as I showed on IHS on the Mung Stanley study, the positive point is that my customers still stay with these FAO PAs. That means we agreed on these FAO PAs, and no customer did not change them until today or renegotiate. That means the signal is they all stay with the proposal. Again, it's one data point. And I think in these uncertain times, it is important to collect a lot of data points to get a better view. But here from the top customer, we have clear signals that 2017, and that's what we said in the beginning, Uwe, that we see that the second half will be better than the first half. And that's what happened in the Q1, much harder than we expected, especially for the December. But again, they all stay in these 4 PAs. And would those BPAs look or indicate a trough already in January and seeing a gradual recovery already in February? Or is it really your fiscal year H2 loaded really? Hi, Ru. This is Ingo. Maybe just one other interesting data point as well. So what we saw in Q1 was, proportionally speaking, a much sharper slowdown in the interior part of Automotive than the exterior part. I think that's probably also important to understand. Whether we've been looking at the trough or not, I think that's probably too early to tell. Even if you look at January, we haven't seen any changes really in trends neither negative nor meaningfully positive. And I just think it's too early to tell. That's very clear. Thank you. Next question is from Sven Weier from UBS. Please go ahead. Thanks. Hi, guys. First question is on Conti. You said that the portfolio effect on automotive was 0.4% in the quarter. So very minor actually given the size of Conti. So the first part of the question would be why was it such a very small revenue impact? And you mentioned there was 100 basis points dilution to the margin because of that. So how do I square those two factors? That would be the first question. Sven, I'm not sure how you would refer to the 40 basis points you saw on Automotive. I don't think in my prepared remarks that I made that comment. You have it on Page 12, where you show the revenue growth bridge. And on Automotive, you say 0 point 4% portfolio effect, so I suspect that's Conti. But given that it should have a quarterly revenue of to the tune of $40,000,000 I would guess, I would have expected a much bigger portfolio effect. Oh, I see what you mean. Yes, the portfolio effect of Conti at this point in time is still relatively so. That's more due to some technical administrative issues of transferring customer contracts into the joint venture. So the joint venture is running well. We're getting good orders from our customers. There's just some technical issues that are outstanding on that. The 170 basis points then on the Automotive business is simply that, of course, we do get a compensation for the margin for the revenues not yet in the joint venture, and that is contrasted by the ramp up costs that we have in Conti, the initial investments we have made on revenue sorry, on R and D and all the integration costs, that's how you can have to you have to square this. And does it go to the normal revenue contribution then from Q2? Or what would be your final answer? Yes, that's the plan. Right now, there's a few technical things outstanding, but we expect those to be resolved in the Q2 so that we should see a more a bigger portfolio impact certainly in the second, but then certainly also in the second half of the year. Okay. The follow-up would be also on coming back to Uwe's question on Slide 7. I mean, I understand it's probably a value chart. So if I look at volumes, they are probably even more positive than what you show there because it includes the pricing pressure, I would guess. So why would that be a cautious planning, right, if you have some clients really being even up over 30%, I guess. I don't understand that. And the other question would be what's the penalty for the clients if they walk away from that. So what's their incentive to really give you a fair conservative view on that? Yes. To cover with the first the second question, there is no penalty. But usually, that you are sitting together once a year and have, on a regular base, some updates that they reserve some capacity. And this capacity was and is based on their preorders and proposal from their customer. So in the end, there is no penalty. This has not happened in the automotive industry. So if Daimler is canceling something, they don't pay any penalty to their supplier. But it's over the last years, it was usually in a good range. And what I would like to show you here, and that was the reason that I came back with the chart because I showed it last year as well, is that it seems to be that not only Osram had this view that we see the second half is getting better. Our customer has this view as well. And if you listen what you see in the newspaper in the last days, what Infineon is thinking about the second half, they see a stronger second half in 2019. So overall, we do not take these data points as this is truth. It's one data point in overall, and we have some negative ones, and we have some neutral ones and some positive ones. But that's a top 10 customer. And usually, the top ten customer gives you a quite good view about what could happen. Okay. Understood. Thank you, both. Next question is from Peter Reilly from Jefferies. Please go ahead. Good morning. I'd like to ask about the cost reduction plan, please. You've expanded the scope of the cost reduction plan. The incremental savings are relatively small, about another €20,000,000 or so. But the incremental cost is quite high, another €50,000,000 So can you talk about what you're doing with the extra money? I understand it's mainly for Opso. Is it a timing issue that more of the savings are going to appear in fiscal 2020? Or is it just getting more expensive and difficult to take that because a lot of the cost reduction is happening in high cost countries like Germany? I think Ingo is going for that. Hi, Peter. I think, first of all, when you take these measures, you take the provision or the accrual right upfront. And obviously, then the execution in practice will take longer. That's why you have a bit of a mismatch this year between the accrual relatively to the savings we expect. So I think I said in my prepared remarks that we expect Opto to generate up to EUR 30,000,000 savings out of this program still this year. And mind you, that basically means roughly EUR 30,000,000 within the period of 6 to 7 months. So you can imagine that the run rate of that is much higher. And as you have probably seen in the press, a lot of these measures are here in taken in Germany, which typically from a restructuring perspective is a bit more expensive than elsewhere in the world. Those are the reasons. And if I could just follow-up on mix in Automotive, obviously, you've been talking about what happened in 2018 and what you expect to happen in 2019 in volume terms. But in mix terms, when you go through a period of volumes coming down, do you see an impact where there are it's more of a hit on premium cars where you have higher content and maybe the economy cars where you have lower content are less affected? Or does everything come down for you because there's actually not that much of a mix impact? I'm just trying to work out what we should think in terms of the mix going into 2019? Yes. Well, I think if you look at 2019, Peter, and if you look at our Opto business, because I think that's what you're referring to, the 3 big drivers really are, a, the development of car production. That's a big driver. The second bigger driver is the LED penetration rate, particularly for Frontline. And here we see basically the assumptions we made last year when we said we want to move towards 26%, 27% or so. That's largely reflected so far also in the BPAs and what we've also seen in the last few months or so. And the 3rd variable here in this context pricing. And pricing, of course, is a bit higher or the pricing impact is a bit higher than 2018, but in line with what we had expected so far. We've concluded around 75% or so of our VPAs. There's a few others, typically those with our Asian customers that will be concluded up until March, given that they have a slightly different fiscal year as the rest. And so far, what we've seen there from a pricing is also in line. So in other words, it's not so much, I think, the premium versus other car type of variable that will drive volumes for us this year or not. It's more how car production will grow, where LED penetration will continue because, again, pricing is pretty much in line with what so far, at least what we've seen. Okay. Next question is from the line of Alexander Vugar from Bank of America Merrill Lynch. Please go ahead. Thanks very much. Good afternoon, gents. So I guess a couple of follow ups and primarily on Page 7. I want to just in housekeeping terms, terms, if you could just quantify or give us some indication how much of your sales these cover, just so that we have an understanding? Because I think the obviously, maintaining your revenue guidance implies double digit growth in the second half at least, I think. So I'd appreciate a little bit of color on that, please. So this is I think this is what the top 10 or top 15 of our customer base. And they cover a fairly large part of our automotive business in Opto, more than 50%. Okay. That's helpful. And then follow-up would be, I think the disappointing developments in December and Q4 in particular relative to prior expectations, probably more on general lighting and the non auto business, which although smaller, clearly the declines were much, much greater relative to expectations. So I just wondered, given you don't have as much visibility, I mean, arguably, very little visibility on the auto side as well, but given you don't have as much visibility on the non auto business, what gives you the confidence that we don't see those sorts of headwinds pervade into 2019 or the rest of 2019? I think as we try to explain, I think the October, November was in our absolutely line on high single digit decline. The December was really different because in the middle of December, we really had a dramatically slowdown nearly to 0 in ordering. And I think the reason are that the customer are afraid and cautious, and they try to reduce their capital employed. And that means in the supply chain, and if we talk to some of our distributor, for example, they reduced their supply chain dramatically as well. So we had a more or less in this time a little bit onetime impact. And we do not see this impact in January as we had it in December. So that means the December was an unusual year end result different to the regular quarter what we usually have. The next question is from the line of Sandeep Deshpande from JPMorgan. Please go ahead. Yes, hi. I have two short questions. I mean, just to understand, I mean, Olav, you just mentioned that December was particularly bad in terms of orders. But at the same time, you're not directly saying that the order intake has improved in January. But given it was so bad in December, would you say that it is better now than it was in December at this point? And then secondly, regarding pricing, I mean, your output from your new coulomb capacity is clearly not all going to autos as yet. And so a lot of that is going to the general market. And how are you seeing that pricing develop there in the general lighting market? And will that continue impacting you in 2019? Thank you. Okay. So I will repeat it a little bit. As I said, January was better than December. So as I said, we did not see much of a change overall in the trends in January, but we didn't have this, let me say, slowdown in the second half of a month. January, therefore, is one data point and insufficient for the whole year or for the Q2. But nevertheless, again, if we talk to our customer and we do it really now very close on a daily and weekly base, if they have additional data points and they all are cautious for the first half, that means for the next 3 months. But they all are optimistic that the trend will change, and that's the reason they still stay with our with the order volume with Osram through the 4 PAs. So that makes me I don't want to say optimistic, but that makes me more clearer that the second half is getting better because all my customer is telling me this. Do they are wrong? I don't know. But again, we are talking to so many, especially to the big ones. And I think rather the next coming weeks months, we'll also be got some answer to for crucial and Ingo said that. Is the will the automotive demand in China recover? If I have seen what Morgan Stanley wrote this morning in the result, they reported that there was a decline only by 1%. So that shows me another data point that January in China was year over year only minus 1%. That's what Mong Sandeep this morning wrote. So again, so it gives me an optimistic view. The second half is getting better than the first half. And the second point, maybe, Gullen? Sorry, what was the second part? My second part. GL pricing, yes. So in GL pricing, I think it's fair to say that if you look at the mid power segment, particularly in China, because of higher inventory levels, there's certainly somewhat more price pressure. If you look at the reasons for that, again, a lot of that seems to come still from the entire China U. S. Tariff discussion, where people started to produce in anticipation of tariffs going up as of 1st January. And given that, that has been sort of delayed or postponed, if you like, a little bit, That then slowed down the market a bit again. At the same time, for higher power products, which are really relevant for us from a professional perspective, pricing has not been different so much than what we said earlier. So it's in the middle, sometimes high single digit range, but nothing has changed really in that sense that there are different pricing dynamics in that part of the general lighting market right now. The next question is from the line of Leo Carrington from Credit Suisse. Please go ahead. Good afternoon. Thanks for taking my questions. My first and a follow-up. What was the rationale behind the Ring Automotive acquisition, I suppose? Is this an opportunistic move? Or is this something that we can draw out in terms of future strategy and product or distribution? Yes, very good question. Thank you. I know that you may be asking why we are buying something in U. K. Close to the Brexit. But the aftermarket business is for Osram very important. We have a strong position. We make a good margin. And we clearly had a strategy to grow our aftermarket business. And we usually can do it as a market leader only through markets. So U. K, it's an important market with a lot of cars. So the Ring acquisition is a U. K. Company, and it will sell in U. K. So that means that from the U. K. Market for the U. K. And in this case, Ring is helpful to add our market share in the U. K. Market. And second point, what we would like to do is we will bring ring as a brand name to the United States. We are working in U. K. And U. S. With the brand name Sylvania, very well known in U. S. And as a second brand, we will bring ring in the shops, and we already had discussions and agreements with the big shops in U. S. So Ring will help us to add with another brand name as a house of brands, as we call it, in this case. And so in this case, the Brexit will not have an directly impact because, as I said, they are selling in UK for UK. Okay. Let me maybe add to that, Leo. Please. The important here is also that Ring has roughly 50% of its portfolio is automotive lighting products, and 50% is different automotive related products as well. So it helps us to leverage the very strong brand channels we have outside of the U. K. With that portfolio, which is largely sourced from elsewhere. And secondly, within the automotive lighting portfolio, the lighting products there are, at this point in time, not sourced from OSRAM, but from a third party. And obviously, we will change that. So we have revenue synergies, and we have also cost synergies with that acquisition. Okay. That's very clear. And then my follow-up was, I think, on the back of Peter's question on the previous cost out measures. It appears that the cost savings targeted for fiscal 2018 weren't fully realized. I mean, am I right in saying that? And if so, can you indicate why and indicate how confident you are in reaching the higher cost cutting targets that you've set yourselves? Well, the cost saving targets for fiscal 'eighteen were fully realized. I think that's also what I said in my prepared remarks. So there was no slippage there. Also, if I look at the measures that we manage very, very closely and review on a very frequent basis, we see a good fill level of activities to support the savings that we just mentioned, so the EUR 65,000,000 to EUR 85,000,000 this year. So I'm very confident that we will manage that. Why is there such a step up? It's simply because we announced these measures in 2018, where we also took some of the charges. And some of these measures, of course, take time to prepare, etcetera, before they start coming back into my P and L. And therefore, you see a ramp up this year relative to prior year. Next question is from the line of Lucy Carrier from Morgan Stanley. Please go ahead. Hi, good afternoon, gentlemen. Thanks for taking my question. The first one is short one. I was curious to know whether you could give us some indication on the current capacity utilization of your OS factories. Okay. So usually, we do not report on the different factories, but we have clearly in the last quarter with the slowdown in capacity or the slowdown in demand, we have idle capacity. In the past, as you know, we run by 100% in terbast. So I do not have an exact number from Ringsburg, but we have some idle capacity in Ringsburg, and that was one of the reasons that we make these reductions in workforce as well. And regarding the other factories you have, I. E, Gucci, Penang, Kulim, how are they running at the moment? A little bit the same. That means that if you are 18% below in turnover, you have idle capacity available. And but the idle capacity, the biggest point is the fixed cost and salary and benefit to people. So what we do and that what we did react immediately and we reduced workforce in Penang less in Kulim. In Penang, we reduced workforce and we reduced workforce a little bit in Wuxi and the 300, as I said, in Rynsberg. Understood. My second question was around the DI business. And I was hoping you could remind us kind of the share of each segment of DI as part of sales, I. E. DS and the other businesses. And to understand a little bit better what really happened in DS, because when we look at some of your competitors or generally in the industry, I wouldn't say that it has been booming, but we haven't seen the same type of decline here. So is that because you're exposed to some specific customer or specific product segments? Or I mean just trying to understand that double digit, which seems quite extreme versus what we are seeing everywhere else. And related to that, in terms of the profitability, I understand last year you had some exceptional what should we think in terms of profitability for this business this year? Lucie, so clearly, the lion's share of revenue in the DI segment is DS, which I believe is also not a surprise to you. And there, we also saw clearly headwinds, particularly in the United States. I mentioned that a number of our key accounts told us unexpectedly that they would extend their factory furloughs, what typically is a day or so in the Christmas period to a whole week without any pre notice. So that's it does quite hard actually there, and that's one. And in EMEA, you also saw that in some cases, some customers, because of lower volumes, started to use their own facilities or in sourcing, if you like, 1st before they started to ask us, for instance, to provide. So that's basically what we saw. I mean, we continue to see, of course, a decline in the traditional ballast business, the ECGs. That continues at the same type of clip that you are probably aware of also last year, similar also with our competitors. And also what we saw here is in the United States certainly, but also in Europe, is that as you will remember, we had quite a period last year where the availability of certain electronic components was difficult. That still continued, albeit somewhat lower than a year ago this quarter. And quite some customers have built inventory levels because they were experiences supply shortages, etcetera. So it's here, I think it's more of a inventory destocking and cleanup kind of exercise that I don't read too much into for the rest of the year, also in U. S. But clearly, it affected us. And as Olof said, it happened almost largely in December of last year. And maybe to add on that, we are market leader in U. S. And for this reason, we were hit on these effects, as Ingo said, a little bit more than maybe some of my competitors in this area. The next question is from the line of Elok Katre from Societe Generale. Please go ahead. Thanks for taking my question. Just to follow-up here is going back to the VPA, so I am sorry to labor on that. But if I just look, perhaps you could explain or give some color on how the, let's say, the VPA scenario was at the same time last year and how it kind of went through 2018. What I'm trying to sort of understand a little bit more is, we saw a similar, let's say, or maybe I think from a commentary perspective, we did see quite a sharp slowdown despite the VPAs that you had back in April June last year. So what, let's say, gives us confidence that this will not, let's say, happen to any extent in 2019? I mean, just wondering how or what the sanctity of some of those VPAs is given perhaps what we saw last year. So that's a follow-up. And then in terms of the question, I mean, should we on the CapEx side now given the overcapacity, etcetera, should we kind of see a pretty steep cut in the next quarters, coming quarters. I know Ingo, you mentioned €100,000,000 is kind of the peak in Q1, but just wondered if you could help us over there in terms of how you expect the CapEx to trend? And is it still somewhere around that €370,000,000 €380,000,000 sort of range for the full year? Thanks. It's a fair question, and I'll start with the first one, and Ingo is going to the second one. As I said, I tried to show you what kind of data, Barin, do I have. I think it doesn't help you if I give you only the negative parts. And talking about the negative one, I think it doesn't help you if I'm too optimistic and show you only the best optimistic chart. So I would like to and that was the idea or that was the to give you some data points, positive one from my customers, and that's order preorder from my customer, that's the 4 PAs. And of course, and I was talking about the market in China and Europe and U. S. But nevertheless, your question is correct in this time, and I would say the answer is the following. In 2018, in that time where we cannot deliver enough, my customer orders like hell. So they made traditional little bit higher VPAs than they may be needed because they are so happy to get enough LED automotive chips. So this is maybe the difference between the VPAs they ordered, the number they ordered with Osram, and then they really ordered in the end of the day. And what's happened to 2019, I would say, if you are coming from this cautious 2018 that you know the super cycle automotive is maybe to come an end and you have a weak October, November, December, I would say they are optimistic that overall, the number of production of cars is still stable. So if you take a look and if you listen to the OEMs and to the other customer, they expect 94,000,000 cars produced for 2019. So they do not expect a huge decline overall. If you take a look in IHS, you see they expect a decline in the 1st quarter. They expect a decline in the 2nd quarter, our 2nd quarter, and they expect a growth in Europe, in Asia in the 3rd and the 4th quarter. So again, it's another data point. Is IHS always true? No, definitely not. But another data point to customers as well. So overall, I would say maybe they were too optimistic in 2018, and maybe they are coming now from the reality what they really need for 2019. That gives me the a little bit more confidence for the second half. Ingo, would you go to the second question? That was On CapEx, yes. So certainly, we always look at our CapEx spending. And as you will remember, we've always been clear that the spending expected spending levels for fiscal 2019 will be substantially lower than what we spent in fiscal year 2018, and that is still, of course, true. Depending on how volumes, of course, develop, and we pointed to also the importance of the next months ahead in terms of order intake, of course, we will look at CapEx from a free cash flow perspective. We've always tried or what we've always succeeded to do is to create very flexible contracts with our suppliers for capital equipment, which allows us certain flexibility either to pull in because we need it earlier or to also maybe shift because certain projects shift on the customer side, for instance, and things of that nature. So we have quite some flexibility here, and we will certainly use it either way. The next question is from James Moore. Please go ahead. Yes, afternoon, everyone. Ingo, some of the key topics, I think, have been addressed. So I'll try and ask some others if I can. Could you perhaps help a little bit with the savings phasing and the divisional split of the savings as we progress through this year? That's the first question. Then I'll come back with the second if I can. Hi, James. Hi. Yes. So overall, if I look at the savings run rate, there is the savings run rate in the second half of the year is higher than in the first half of the year. I would say it's a ratio of 2:one basically in a way. I don't want to I mean, I mentioned how much we expect from Opto, so that number you have. And Opto so far in the last year's numbers, at least that we announced, was not part of the equation. So you can imagine that the remainder is for the other 2. It is also not it's also known to you that if you look at the split between in terms of overheads and plants that as far as factories is concerned, certainly, the plans that we have are addressing our traditional automotive segment because their volumes are, as expected, in a decline that sort of follows the kind of a sunset type of evolution, and we gradually need to adjust there. So therefore, transformational plans is largely with automotive. And on the overhead side, which is the other bucket, we do have both the automotive and also DI participating in those next 2, obviously, what you know, also some central functions here in our headquarter. Very helpful. And on Optum Opto Auto, can you give us a sense for the difference in organic growth decline between interior and exterior? I'm not trying to be precise, but it's an interesting comment you made earlier. And I just wonder why you think there is that difference. Why there's a difference? I think there's a difference because in the interior, the LED penetration is fairly high. And therefore, the growth that you can create from increases in penetration is less so an impact than it is still in the exterior. If you remember, on the exterior side, we said that still today, roughly 25% to 30% or sorry, 75% to 65% to 70% of all cars are more or less equipped with either Hedelgene or HID. And therefore, the run rate from a growth perspective from the exterior LED side is much larger. That's different than the interior side. Thanks. I assumed it was that. But does it have a margin impact in the sense that I would have thought exterior is favorable from a profitability perspective? So there is some favorable mix story going on underneath the bonus of the cyclical pane. Well, I think, again, if you look at the decline for Opto in the Q1 and them being able to manage 20% adjusted EBITDA, it's still, I think, a good performance after all, I would say. And in general, if you look at our automotive business, exterior, interior, I'm actually quite happy with the margins that we generate there. Okay. Please excuse us. We are out of time right now. There are no further questions, and I would like to hand back to Andreas Spitzauer for closing comments. Please go ahead. Yes. Thank you very much for your participation, and we hope you enjoy the rest of the day. Thank you, and bye bye. Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining