Press information

Results of fiscal 2004 (October 1, 2003 – September 30, 2004)

Osram grows sales and profits

Osram, one of the world´s two leading light manufacturers, reported on the fiscal year 2004 at the Annual Report Press Conference held today in Munich. "Innovative products were the growth drivers this year again.

Despite negative currency effects of 6 percent attributable primarily to the U.S. dollar, we posted nominal growth in sales for the first time in two years," explained Dr. Wolf-Dieter Bopst, President and CEO of Osram. Sales were increased by 2 percent, or even 8 percent after adjustment for currency effects. In absolute figures, the light manufacturer generated sales of EUR4.240 billion (previous year: EUR4.172 billion). Group profit came to EUR445 million (previous year: EUR410 million). "The Group profit margin rose from last year´s already high level of 9.8 percent to hit a new record of 10.5 percent in fiscal year 2004," added Bopst.
 
He emphasized as highlights of the fiscal year just ended the take-over of the Russian fluorescent lamp manufacturer Svet and the minority holding in Felco - which is China´s largest local lamp manufacturer, according to Osram´s estimates (the investment is contingent upon the approval of the Chinese authorities). The commencement of job production of organic light-emitting diodes (OLED) at the plant in Malaysia was an additional success. Bopst stressed that Osram not only maintained its workforce in Germany, but even expanded it slightly.
 
Sales: Volume growth with innovative products
Osram´s good sales figures were partly due to the slight improvement in the global economy. This success mainly was driven by innovative products, which made a major contribution to volume growth of 12 percent. In view of this volume growth, Bopst believes that Osram effectively defended its strong position as one of the world´s two leading lighting manufacturers. In the NAFTA countries Osram was able to increase its share of the market. In Germany, the largest lighting market in Europe, the company generated sales of EUR522 million or, as in the previous year, 12 percent of its worldwide business.
 
Profit: Great advances in productivity
Osram was able to improve its Group profit despite tougher competition and persistently high development input expenses and start-up costs for new products, especially organic light-emitting diodes (OLED) and high-pressure discharge lamps with ceramic burner. As in the past, the result of fiscal year 2004 was burdened by restructuring expenses in Germany and the United States. "Our profitability was mainly due to significant productivity gains amounting to over 8 percent worldwide, which resulted from targeted cost-cutting programs and economies of scale," stressed Bopst. Other contributing factors included strict cost-consciousness in all areas and the company´s expanding manufacturing presence in low-wage countries.
 
Effective management of the patent portfolio also had a positive effect on Group profit. The main contributors were licensing income from white LEDs, and two strategic collaborations with Samsung Corning and Coretronic. During the period under review, both of these companies were granted licenses for the manufacture and sale of mercury-free Planon flat lamp. Consistent asset management led to another significant reduction in average business property assets in comparison with the previous year. A cautious investment strategy helped Osram to achieve net cash from operating and investing activities of EUR453 million, which was higher than Group profit and further evidence of the company´s good operating performance in fiscal year 2004.
 
Capital expenditures: Innovations lead the way
A total of EUR211 million (previous year: EUR206 million), or some 5 percent of sales, was spent on Research and Development. Capital expenditures on plant and equipment in the past fiscal year came to EUR226 million (previous year: EUR248 million). The construction of the Midwest Distribution Centers in Versailles, Kentucky, was concluded in the United States. Osram´s worldwide investments also focused on measures to expand production capacity at locations including Hillsboro (U.S.A.), Exeter (U.S.A.), Foshan (China), Penang (Malaysia) as well as Berlin, Herbrechtingen and Regensburg (Germany). EUR121 million - a good half of the total sum invested worldwide in plant and equipment - were spent in Germany. The greatest portion went to enlarging the opto-chip factory in Regensburg, the most advanced of its kind in the world, and expanding its production capacity.
 
Workforce now exceeds 36,000
Osram´s corporate strategy of steadily expanding its global presence also is reflected in the current number of employees. As of September 30, 2004, the company employed a worldwide staff of 36,644, or roughly 1,000 more than in the previous year (35,563). The rise is a result of Osram´s strong volume growth and its expansion, particularly at its production locations in China and Eastern Europe. The workforce in the Asia-Pacific region has now reached 11,021. In the NAFTA countries, the workforce fell at Osram Sylvania to 10,911. In Europe, the number of employees rose slightly to 13,895 and to 8,972 in Germany (previous year: 8,851).
 
Outlook: Success through long-term strategies
In view of the uncertain economic forecasts for the coming year, it would not be prudent to make definite predictions for fiscal year 2005. "What is certain, however, is that we intend to adhere to our long-term strategy in the future: to consistently globalize business, to resolutely promote innovation and venture into new growth sectors, and to continuously strive for cost leadership," Bopst emphasized. At the same time, it was still crucial for Osram to be able to react quickly and flexibly to changes in the market. Osram´s President is generally confident that the company will not only grow sales adjusted for currency effects again in fiscal year 2005, but that Osram will also further consolidate its earning situation and leading position in the world market.
 
This document contains forward-looking statements and information - that is, statements related to future, not past, events. These statements may be identified by words as "expects", "anticipates", "intends", "plans", "believes", "seeks" "estimates", "will" or words of similar meaning. Such statements are based on our current expectations and certain assumptions, and are, therefore, subject to certain risks and uncertainties. A variety of factors, many of which are beyond Osrams´ control, affect its operations, performance, business strategy and results and could cause the actual results, performance or achievements of Osram worldwide to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. For us, particular uncertainties arise, among others, from changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products or technologies by other companies, lack of acceptance of new products or services by customers targeted by Osram worldwide, changes in business strategy and various other factors. More detailed information about certain of these factors is contained in Siemens´ filings with the SEC, which are available on the Siemens website, www.siemens.com and on the SEC´s website, www.sec.gov. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in the relevant forward-looking statement as anticipated, believed, estimated, expected, intended, planned or projected. Osram does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.

Press contact:

OSRAM

Reglindis Pfeiffer
Tel: +49-89-6213-2305
Fax: +49-89-6213-3457
Email: reglindis.pfeiffer@osram.de