Munich: Osram, the world's second-biggest lighting company, will cut an additional 7,800 jobs to safeguard earnings amid a faster-than-expected decline in sales of traditional bulbs.
The lay-offs will help Osram save 260 million euros ($349 million) in annual costs through 2017, the Munich-based company said in a statement. The new cuts add to an older plan to scrap 8,700 positions by the end of this fiscal year. The company had 35,108 employees as of September 30.
Osram was spun off last year from Siemens as Europe's largest engineering company divests units with profitability or growth potential it deems inadequate. Amid a shift in the lighting industry toward light-emitting diodes, which are smaller, more energy-efficient and have longer lifespans than traditional bulbs, Osram cut its full-year earnings target May 28, saying revenue would remain flat or at best increase moderately.
"We have always stressed that the transformation of the lighting market will also continue after 2014 and that it will require additional capacity adjustments," Chief Executive Officer Wolfgang Dehen said in the statement. The company needs a cost structure that is appropriate to the size of the company, he said.
Adjusted earnings before interest, taxes and amortisation increased 9.5 per cent to 104 million euros in the third fiscal quarter, Osram said in a separate e-mailed statement. The average estimate of five analysts surveyed by Bloomberg was 100 million euros. Revenue tumbled 5.9 per cent to 1.2 billion euros, with sales in the classic lamps division falling 14 per cent.
"This will raise the question of the ongoing restructuring level needed at Osram in the future," Morgan Stanley analysts including Lucie Carrier and Ben Uglow said in a note to clients. "This is also symptomatic of the significant challenges faced by the company."
The stock gained as much as 2.9 per cent in Frankfurt trading on Wednesday and was up 1.5 per cent as of 9:04am, valuing the company at 3.6 billion euros. Before Wednesday, the stock has dropped 17 per cent this year.
Dutch rival Royal Philips in June said it will merge some lighting units into a 1.4 billion-euro standalone company to share research and development costs with outside investors, echoing the move by Siemens to spin off Osram.
As replacement rates decline because of the longer lifespan of LEDs, Osram and Amsterdam-based Philips are seeking to stabilise revenue with multi-year contracts to install complex lighting systems for whole cities from Washington DC to Amsterdam and equip buildings such as Paris' Notre Dame cathedral with luminaires.