OSRAM Licht AG

Olaf Berlien - Chief Executive Officer Klaus Patzak - Chief Financial Officer

Schupp - Deutsche Bank Michael Hartman - HSBC Sebastian Growe - Commerzbank Andreas Willi - JP Morgan David Vos - Barclays Margaret Paxton - Nomura Phil Wilson - Redburn

Thank you. Ladies and gentlemen, welcome to our management call on the preliminary Q3 figures of Osram.

Regarding forward-looking statements I would like to draw your attention to the safe harbor statement on page two of the management presentation, which is available for download on our website. After the statement of Olaf Berlien, CEO of OSRAM Licht; Klaus Patzak, CFO, will give you an overview about the Q3 financials.

After that Olaf and Klaus will be available for questions. I now hand over to Olaf.

Thank you [both]. Ladies and gentlemen, good afternoon.

A warm welcome also from my side. Let me start with a short overview of our third quarter.

Later Klaus will give you a deep dive into our financials. As you have seen all in all we performed well in this quarter.

Supported by positive currency effects as well as the acquisition of Clay Paky, we recorded sales of 1.4 billion, what equals a nominal increase of 12% compared to the prior year. The margin development remained strong.

The adjusted EBITA increased 24% to 129 million, resulting in a margin of 9.5%. Based on the good margin development of the first three quarters, I feel pretty comfortable to reach our margin target of about 9% to 10% for the full fiscal year.

Slide number two gives you a detailed overview of the future setup of Osram after the carve-out of lamps. Specialty Lighting and Opto Semiconductors remain unchanged and we are well positioned in these segments.

SP is the global number one in automotive, and Opto is the global number two in semiconductors. The third leg will be Lighting Solutions and Systems bundling our technology driven downstream business with luminaries, solutions and lighting components.

In this regard, let me elaborate on the luminaries business. The segment performance concerns me.

It operates in a growing market where competitors are profitable. Despite visible improvements the performances is still not an acceptable level for us.

It will be now my priority over the next months to deep dive into this business and to work with my management team on consequent measures to turn this segment around and to prepare it to keep pace with our competitors. However, reaching breakeven will take longer than initially expected.

It is my clear goal to get this business back on track and I will give you an update as soon as possible. The next slide gives you an update on lamps.

The carve-out is in line with my expectations. The supervisory board and the [Indiscernible] gave us green light.

The underlying work streams are up and coming. The top management team for lamps is assigned and in place.

The market response on the carve-out is good. This step is one of our biggest strategic moves in the history of Osram.

It comprised the business with 2 billion Euro revenue in 135 countries and have around 12,000 employees. We are talking about 40% of our today’s revenue and one-third of our workforce.

The carve-out gives lamps the ability to even better adapt the fast changing in the lighting market. As a separate company, lamps will be able to act more flexible and open for strategic options.

Moreover, the carve-out strengthens Osram’s focus on growth and innovation, as well on technology leadership. The areas of Opto, Specialty Lighting as well of Lighting Solutions and Systems will form the new core of Osram.

And with that I would like to hand over to Klaus.

Thanks Olaf and hello to all of you. If you look at page six, you will see the revenue, which came in at [1.352 million], an increase of 5.4% and heavily benefiting from currency.

You see that on the right hand side, 11.9% coming out of currency, and of course this future impacts on volume are difficult to predict and also is exposed to a multitude of currencies, not only the US dollar but also of course some Asian – and also Asian currencies. In a hypothetical scenario, this exchange rate staying more or less as they are today we would assume today’s currency tailwind to continue in the fourth quarter, however, to a somewhat smaller extent.

Now if you look on the regions, we had comparable growth in America that was mainly driven by LLS, where we have great progress with our LED systems business that means the optotronics product lines and similar products. And also we had lower decline there in CLB thanks to our fast-growing halogen classic business.

APAC had growth in all segments except for CLB where we had a continued strong decline. On a positive note if you look at the LED share the growth is now is 44%.

We had continued good growth on the LED side, roughly 15%. Of course the growth in the LED products that means in a more forward integration products like modules, [Indiscernible] the growth was higher, but of course also from a lower base.

If you turn the page, the profitability was an EBITDA of 100 million and an improvement both in reported and adjusted EBITDA margin. We had again like in the prior quarter a significant positive currency effect on EBITDA of roughly 50 million on group level without material impact on margins.

So no impact on margins out of FX in that quarter. Profitability benefited strong from Osram Push with 143 million in savings.

I will come back to that later. With regard to the restructuring cost I can tell you that the net restructuring costs are still expected to be around 250 million for the full fiscal year, and with regard to carve-out cost, you will remember that we have spoken of a range of 100 million to 120 million, with the biggest share to occur in 2016.

We had in the last quarter a small amount of roughly 4 million. We expect a higher amount than in Q4, but for the full fiscal year that should be not more than roughly 30 million.

So the bigger share of this we will then come in the next fiscal year. So on the next page, you see Specialty Lighting, which came in with 467 million in revenue and on a nominal basis growth was very high with 23.5%.

On a comparable basis growth was 4% without automotive delivering 4% growth driven by the Americas and also APAC, and of course growth in LED. Display optics also contributed to growth, but at a somewhat lower rate.

The LED share at SP increased to 37% from 33%. This faster growth in LED products compared to the LED [Indiscernible], which I explained to you also in the past.

We had at SP a substantial positive currency effect and here at SP there is also out FX a margin, a positive margin effect. And despite this FX tailwinds, adjusted EBITDA is slightly down year-over-year and that is due to ramp up costs for new technologies in car lighting that is both laser and OLED.

But also we had a portfolio mix impacting the margin with rising LED retail eating into our HID business. I expect these factors to become more visible in the next quarters and if the tailwinds from FX are easing.

Nonetheless the automotive lighting continues to be a major differentiator and design factor and Osram is very well placed to lead the innovation in this attractive market. Now on Opto on the next page you see that we delivered 333 million in revenue with the comparable growth rate of 4%.

This limited comparable growth was due to a strong prior year and only to a somewhat lower demand for our general illumination components. But on the other hand thanks to Opto’s well balanced business mix, including growth in industry and automotive applications, profitability remains high.

Actually we had the best quarterly EBITDA in Opto’s history that is a number of 61 million in absolute EBITDA. There were some positive impacts on EBITDA out of currency, but of course lower than what we had in SP because at Opto we have a kind of a natural hedge.

The major part of production is abroad. That means outside of Germany and the EBITDA margin of Opto is not influenced by currency.

Please keep in mind that the prior year quarter was positively influenced by an extraordinary high income from license agreement and while Opto constantly received proceeds from license agreements, the earnings tend to fluctuate and came in substantially lower compared to last year that reflects a number of roughly 5 million if I recall that correctly. As announced in the last quarters, we still expect for the second half of the fiscal year higher absolute revenues, though there is no change, and this business obviously is developing quite good.

On LED lamps on the next page, you see that we had again sharp top line growth with a comparable growth rate of 36.4%. We had substantial revenue growth driven out of the Americas, I think [Indiscernible] to this strong growth there and by our LED systems business, Americas now accounts for almost 50% of LLS business.

The lighting components as in the last quarter’s outpaced growth of LED lamps. You will remember that lighting components stand for roughly 40% of LLS revenue and the LED lamps for roughly 60%.

We had a sharp increase of EBITDA of the EBITDA margin year-over-year. This is due to scale and productivity, yet held back by negative currency impact in that division and also product sell offs, but these product sell offs impact is not as severe as in last year’s quarter, which also demonstrates to you that we’re making progress in our phase-out capabilities in LED lamps.

On Luminaires & Solutions, we had 102 million in revenue and that comparable – and the comparable revenue decline, which you had in that business of 14% is largely due to the exit of the business in NAFTA, which we decided end of last fiscal year, but also in EMEA Luminaires business was behind our expectation. Like for like that means before focus measures before the exiting of certain portfolios, we saw a revenue reduction of roughly 5%, and this like for like decline is – the reason for that is mainly a decline in our traditional business, especially in indoor, which we could not fully offset through growth with LED, and moreover the outdoor Luminaires business also performed below expectation, and that is mainly due to grant for street lighting in Germany, which expired last year.

On the positive side, we have now in that business a LED share of 62% of revenue and it still is the case that we have a higher gross margin in the LED products compared to the traditional products. The adjusted EBITDA improved year-over-year due to Osram Push measures and that over-compensated cost progression and negative currency impact in that business and also price change.

On classic lamps and ballast, we had a comparable decline of 13% in line, which is what we guided for because you might remember that we said we have to look at the first and second quarter separately, but more basically the average one and that is also the expectation for the third quarter and that is what you have here. And we had a continued decrease in – also, in -- which was as expected if we look at the market at all.

So I think we are in line here. Halogen classic I mentioned earlier with a sharp growth.

Margin was up year-over-year mainly due to lower SG&A costs and ongoing stable prices. I think it also demonstrates that we are making good progress with regard to cost discipline and also with regard to our value initiative, which is focusing on pricing in the market.

And I think that the most important news for such as business is that we had an excellent cash conversion with free cash flow in the quarter of [60 million] and sharply above prior year’s level and that was on the successful asset management program. Starting in the fourth quarter, we will report the revised company structure, including the new reporting segment lamps and Lighting Solutions and Systems.

Therefore we are planning for your convenience to provide historical figures for those units in September. And now, let me come to the Osram Push page, where quickly I think the transformation costs are in line with what we guided for.

We had transformation costs of 23 million in the quarter. The Push measures delivered 143 million to the bottom line that means year-to-date we are at 324 and that means also that we are well on track to achieve the goal of roughly 400 million in savings for the full fiscal year.

The third quarter was a rather strong quarter that has also something to do with seasonality. There was seasonally strong purchasing savings, which contributed to that and also the impact of the ramp up of our SG&A cost reduction program.

For the full fiscal year, I feel that we will comfortably reach our guidance of 400 million. And on the next page you see that CapEx is more or less 74 million.

I now expect for the full year investments to be at the lower end of our guided range from 270 million to 300 million, and on working capital you can see that we were able to reduce inventories year-over-year despite increasing revenues. And this is in my view a good accomplishment, especially in light of unfavorable currency trends.

The working capital turn rate is on prior year level, when adjusted for currency effects and our target remains unchanged on working capital. And free cash flow, you see that we had an increase of 88 million.

Before special items, the increase is even slightly above 100 million because we had roughly 50 million in special items. In the free cash flow there of round about 30 million from transformation and 25 million from a legal and regulatory matter, which has been settled in prior quarters.

Now to my last page, I wanted to make just two comments. The one thing is they show a gross margin decline but also the increase in SG&A are actually a bit lower when adjusted for special items.

And the second one is on corporate items. They came in at minus 24 million, including minus 30 million in special items, mainly transformation costs for the global [health service] program as well as first charges related to the lamps carve-out that mentioned earlier was 4 million.

The resulting EBITDA in corporate items, before special items, was 11 million. It includes board and supervisory board related expenses, pensions and miscellaneous [costs].

And for the coming quarter that means for the fourth quarter we expect a value of below 10 million. And with that we come to the guidance page, and you see immediately and also in the headline that outlook remains unchanged, and however on sales growth obviously we need a strong finish.

On the other hand the free cash flow might come in above our expectations, possibly even above last year. So, we will have to look at that over the next couple of weeks how that finally develops.

Okay. Thank you Klaus.

I will now open the Q&A session. Operator, please open the Q&A session.

Yes, good afternoon gentlemen. Three questions, please.

Firstly, on Opto, Klaus, you just mentioned the cash flow for the company in the quarter obviously mainly driven by Opto sale. And I remember you indicated last quarter that CapEx would be up this year.

And the question I should have asked obviously last quarter was and which I will put to you now. When you say CapEx will increase, is this really on a relative basis also or is that also purely on an absolute basis.

And I mean, you now said you probably have given part of the answer because you now expect the CapEx a lower end of the previous guidance which directly brings me to my second question. Which is, can you just give us an indication where you think the – or where the utilization at Opto is right now.

Some of your peers have indicated they are now in the 85% to 90% area. And I was wondering whether similar is true for Opto.

And if you are at in that kind of area ballpark, is there room to go to 100% without much further CapEx or is this kind of 100% utilization really only something that is possible on a PowerPoint slide. Last question on SP.

The margin was slightly down on the year-over-year basis as you indicated burdened by ramp-up cost. I was just wondering whether, I mean, as where that could end in terms of the margin for SP.

It should be 11% to 12% margin EBITA, now then you normal from here? Thank you.

Yes. Thank you, Uwe Schupp, for your questions.

The first one was on the CapEx of Opto. If you look at last six year and CapEx was 100 million.

And obviously for the current fiscal year we look at the higher amount, might be into somewhere in the range of 140 million. So, as guided this year, a significant increase in CapEx in Opto, which is also clear if you look at the topline and development and was affected in pricing.

But also as the percentage of sales in 2014, we were at I would say below a 10% to 9% maybe and if you look at the current fiscal year, we will see about 10%, perhaps more in the range of 11%. And also expect an increase in CapEx in going forward at Opto, also absolute but it also percentage wise to enable Opto growth.

Then to your second question, utilization; the 85% to 90% that is not where we currently are. We are more in a utilization range of 75%, if you talk about front end because again we have a lot of capacity on the effect of filling in machine in our Wuxi plant.

But it is also the case that we given our Niche business and we mentioned it at several times which we have not only one or two products but 100's of products. 100's of different products.

It is not possible in reality to significantly increase beyond 80%. That is on the hand due to the diversity of our product portfolio and has also something to do with our strong and very important automotive business that we have to make sure that you do not cause a chance to let your customers -- protection.

And then there was the question on the SP. I would think that here is the best to come back to what I said earlier and that was we see back to the first quarter.

And here my expectations would be that came in from FX would be somewhat smaller. And therefore what I would guess, in the first quarter, somewhat higher expenses for new technologies, OLED and Laser become more visible.

If in the moment I would not look further in the future because we're currently in the budgeting process and I think we can give you an update and then we talk next time in November based on what we then have also agreed with our management team and have all presented in the supervisor report.

Okay. Thank you.

Uwe Schupp, thank you.

Next question please.

Thank you, very much. I do appreciate that you will only be able to share details on the new structure with us or the numbers on the new structure with us in September.

But I was actually hoping that you could give us maybe a rough outline if you were to look at it on the new structure, as of now what you have seen in underlying growth and in terms of underlying EBITA for those two new divisions and how you see that progressing possibly in Q4. And then I would like to follow-up on one more questions on SP.

I certainly appreciate that you have to go through budgeting process but if you could give us a bit of an indication on how much the investment could possibly be in those new products and what you would expect in future revenue from those new products. So, basically asking how significant will that be.

Thank you very much.

Yes, Michael. Let me come to first question.

I can try to give you a rough feeling for the numbers, but keep in mind that what I mention now and what we will show then to you in September and then also in the first quarter, that will not be kind of the historical financials, right? Because there is a huge difference, we are still talking about lamps as an integral part of Osram.

And there are still allocations and of course, if you look at some point in time into the carved out figures, they will look different. Having said that if we look at this year quarter, I would say that we have for mid-single digit fixed line on a comparable basis.

But that means also that on a nominal basis there was an increase in revenue. I am talking about lamps here.

I am talking about lamps. Sorry.

And on the profitability, we had a mid-single digit margin on an adjusted basis, also on reported basis. That was a profitable business in the last quarter.

Looking forward, I would expect that we see sequential growth coming both from the LED lamps, but also if we perform as planned to a smaller extent out of the classical lamps. On the latter one, this sequential topic has something to do with the usual seasonality of cost.

And profitability wise, we have to see and I would also assume that this is in this mid-single digit range area. And on the lighting solutions and systems piece, which then combines digital systems and luminescence solutions, we had roughly a mid-single digit comparable decline on a nominal basis we had some growth.

Margin was mid-single digit negative figure both the first special items but also reported and going forward. I would expect that specifically on the digital systems we see an increase in revenue and also actually also on the luminescence solution we expect that the first quarter topline lies for that segment will be sequentially up.

And now on SP, you are making me a hard time Michael. So, obviously, if you invest in a technology like OLED and if you are investing in a OLED technology like laser which is really the leading edge, that is not a topic of one or two quarter.

And it is also not something totally new for us. So, it was before my time but then if I look back -- when I look back into HID development, it was a business which was making for quite some time.

And then it became one of our greatest business in the end, not only from a market position point-of-view but also margin wise. So, it is an investment where both in laser and in OLED we are preparing now and in the coming quarters a way for being one of the very small number of companies who can offer that to our customers.

And therefore, of course, the business case for both technologies is a positive one. I am not able to now give you more details as said earlier with regard to the next fiscal year because we, Olaf and myself, we agreed that we will guide on the next fiscal year, as we always did in the past when we presented our full fiscal year numbers.

Okay. Thank you.

Thank you.

Michael.

The next question please.

Yes, good afternoon gentlemen. Sebastian Growe, here.

Two or three questions from my side. So, starting with luminescence solutions business.

You stated that that remain behind expectations and so could you please quantify the dearth, the budget that you had on mind for the third quarter? Then related to this one also can you elaborate on the drivers beyond the performance because you said obviously that the market as much as in tact.

So the question that I’ve is, is it more really a lack of the right product from your end and you could fix it by buying in third-party – or is it really an issue with the channels and obviously are you intending to work on the channels, be it by restructuring or be it by making acquisitions? Then second thought on working capital, you said and obviously the numbers so much right that pretty – working capital was about “100 million”, can you just say with us, which segments were affected the most to the positive here and where do you see the room for further working capital improvement in the coming quarters and if I may come back to – finally [indiscernible] when you say that obviously that there was basically on about the same level as in the third quarter of 2014 then obviously that means that there is no operating leverage at all which normally should been at about 5 million plus on the organic sales growth so if this basically – roughly the deal magnitude that we should quantify here when it comes to the related investments and [indiscernible] ramp up costs?

Thank you.

The last one was the tough one, you’re asking. Okay, let’s start first with Luminaires & Solutions, obviously I mentioned the topic.

The one is restructuring impact of decisions we made earlier and that is brining you down to this 5% decline, minus 5% decline that is what we – what you said is the like for like gross. Then obviously, if you look at the LED penetration rate, you say wow, that is quite impressive now it’s LED penetration of 62% that is out in the industry and despite if you go down despite that that means also that we’ve fustic line traditional products – also traditional products that we’re losing share.

We look into further taking cost out into traditional products that is something what we’re targeting at that might also mean that we have to move more production in low cost euro. We also have sort of plant here in Slovakia.

It is however, in general in my point of view, but that remains to be seen all of, if we look together in that business further, at the moment I do not see further restructuring it’s more that we have to increase the – of our products as we look at specifically also indoor. And of course, we’ll do that in the combination of working on our own pipeline and also looking at co-operations with other companies.

I’m convinced that this business unit will come back into gross and that we’ll see further improvement in the margins. The second question was on working capital, one of the main drivers is of course CLB.

I hinted already on the asset management program what they have, what basically means that all the segments are incentivized based on free cash flow. And in general, that is one of the engines behind what we said that we target that is working capital churn rate increase to 4.5 and one of the engines is that we drove to incentive system for free – down into – business and segment but also legal entities.

Also on a very positive note, we have also profits already in the last quarters in LS, obviously from a very poor performance starting from a very poor performance in the first quarter of last fiscal year, but that is developing nicely. And also Opto made excellent progress on their turn by improving the speed of production in this kind of thing.

So that has been the major contributors. So on specially lighting to cut that answer short basically you asked about why don’t we have more leverage this an increasing top line and that is a combination of the factors which I mentioned before, the first one that is diluted impact from the LED component we say business, the LED components from Opto – from SP to the market that is not – and the one that you follow us longer time know that this is something which – it’s no need to worry about.

The second one is the investment in OLED and in Blazer and I mentioned that earlier. And that on the other hand leads to gross already now and I mentioned although that LED product growth which is faster than the LED component growth.

The third one is that we have a – we have a decline in parts of the traditional business specifically in HID that has also something to do with the current situation in China. And this was and is HID is a very good business for us and therefore we also had a negative mix impact of that topic.

Okay, thank you. Next question please.

Good afternoon. My first question is on kind of what you’re currently seeing in order trends and lead indicators for some of your business, if you look at the Opto your industrial business within that maybe you could just tell us what some of the key markets are and what trends you’re seeing there given that all of the industrial companies are reducing their top line gross outlook and in the automotive business you’ve just mentioned China, what are you seeing in terms of demands from the automotive side particularly for some of the high ends cars that you have some exposure to in terms of what’s going to happen in the coming quarters?

And second question on the cars, we had a Chinese company expressing their interest in your agreement with the supervisory board and the workers representative was there anything agreed or discussed in terms of who can you potentially sell this business to, particularly should that be let’s say a Chinese company with no international track record? Thank you.

Hello Willi, Olaf Berlien here. Coming to your first question was the lead indicator.

So, if you, especially to off you said, if you see that we’ve a strong quarter in Opto and we expect another good quarter for Opto as well. So, today we don’t have any indication that we had a decline in sales for Opto so we expect a good one.

If you really look for the global GDP and you see that the industry is still growing we still have full order book, and our book to bill rate is still above 1. So, in this case as I said I have no indication for weaker one.

Nevertheless, you are absolutely right, we see China in automotive one and I had the discussion with [Switakon] and with [Audi] two weeks ago what happened in China. And that's clearly an impact in decrease of their China business.

Nevertheless, you have to put in your mind that China itself is growing. It moved from the front plant to the Chinese producers.

So the Chinese company like Cherry, they had an increase in sales by up to 30%. So, that means there is mix for us for Chinese OEMs and European OEMs in China.

And then in this case we expect a decline but today we don't have or have any impact on that. Coming to your second question with the carve-out.

And as I try to explain, it's a very complex carve-out. So, it's not that you create one company and then Opto running, we have business in 130 countries.

We will start with about 40 new companies in 40 countries. We have reverse carve-outs, we have carve-outs, we have tax issues.

We have to split 30 SAP systems and we have to talk to 400 clients. So, first of all, we have to create this new company and the data room.

And if you would like to talk to somebody who is willing to buy it he will ask immediately for some financial data. And in this case it takes simply time to create these historical financial data and these data must be proven by the auditors.

And if you have these data room, then these -- and when April sets will start. But we are not ready for that.

We are still in the process to create all these data and I have no discussion with anybody. It is not the Chinese one and it's not private equity one.

And as you asked do I have an agreement with the supervisory board, the simply agreement is first of all you need your data and then you can start with M&A process. So it doesn't make any sense to start earlier.

Okay. Thank you, Andreas, for the question.

Due to the high number of questioners I have to limit just -– please limit yourself to two question. Next question please.

Good afternoon gentlemen. Then just two questions from my side.

When we look at the progress at LED head lamps are making, shed some light of just how much that represents of the SP share of sales at this moment. I am really talking about the forward headlamps such as on the new Mercedes E-Class.

And then the second question is just following on the earlier question on OS industrial end markets. Could you shed some light on what kind of applications your OS components making are going into.

I just want to understand whether that's more tied into general IP demand or whether there is a content improvement angle there as well by say your clients are increasingly switching from traditional UV solutions to LED based UV solutions. Thank you very much.

Hi, David. So, first on the headlamps question.

Obviously, that is a very important business for us because also only a couple of companies are able to provide high quality solutions there and for us. It's about 70% of our automotive revenue which is roughly 80% of SP overall revenue.

And the second one is on the industrial business of Opto, which is roughly 30% of Opto's revenue. This is an extremely broad-based business with visible LEDs but also with infrared and also to but to a small extent UV.

It is going from into light goods, it's going into head-up displays. Head-up displays would be more on the automotive side, it's going into security application; to name just two examples.

And while we are seeing a lot of innovations, obviously, also in that area it's more linked to the overall GDP as since it's a very broad-based business and it follows therefore the GDP growth.

Okay. That's very clear on the OS side.

Can I just clarify on the automotive side, 70% of the 80% of SP is headlamps and just how much of that 70% is then already LED and how much is still traditional please?

First of all, the numbers you said are correct. In general, in the market the LED penetration headlamps is still very low; it's about by 5%.

In our business it's higher but then we have not disclosed until now what specific percentage it is, but it's obviously a higher than [indiscernible].

Okay. Thank you very much.

Thanks, David. Next question please.

Good afternoon, gentlemen. Thanks for taking the call.

Just two questions please. Firstly, on SP again.

I believe roughly speaking your geographic stage in SP is more focused on North America and Europe, maybe about 50/50 but would you comment around the Asian weakness? Could you give us an idea of what your indirect measure to Asia is or why this SP product actually end up?

And then secondly on LS. And it wasn't that long ago where I think you said that you weren't willing to keep the business and agreed that wasn't making money.

And as far as I am aware, LS has been a restructuring issue's pretty much since you bought the [tuck-in trucks] back in 2011. How do we see that previous comment in the context of what you were saying about the deep dive again into LS and also what you are saying in the press release about being more focused on connected and smart lighting?

Realistically, can you be controlled or intelligent lighting provider without doing the luminance piece, given the entire -- is moving more into software. Yes.

So, do you think that deep dive is -- is that deep dive definitely going to come out with more work on LS or is there another sort of strategic option present here?

Thank you. Here is Olaf here.

I'm coming to your second question with LS. We had a written event for this year to achieve breakeven and after nine months we have -38 million EBITA.

So, in this case, as -- the first six months took a deep dive in Opto and in SP and about COB. And we -- as we made these decision to make this carve-out.

So, I didn't concentrate on that and that is what I will do now. That means, I make now a deep dive in the luminescence business and to understand it and as you know maybe know from my track record I made a lot of restructuring my business life.

So, that means give me the time to take these deep dives and then I give you all these answers to your question what should be the next step for luminescence.

Yes. Hi, Maggy.

And to your first question so we always said that SP actually is one of our most recently kind of glorified business. And therefore it's also not surprise, as that our Asian revenues are roughly 30% of SP total revenue.

And obviously that is a significant part within the 30% coming out of China, but that would be less than half of that.

Okay. Thank you, very much.

Thank you, Maggy. Next question, please.

Thanks, good afternoon. Thanks for taking the questions.

So just two then please. Back to just coming back on to Chinese outage, about a shift in demand few towards the local OEMs all have a mix impact on your margins.

And if it does, can you perhaps scale that? And secondly, just on the way, he talked about lower tremble in Asian growth.

Is this the start of a trend, because obviously we do see that that lowest share of GI going forward and will have a positive impact on your mix in the OS business? Thanks.

Well, maybe just to recall your question. The question…

Second one.

The second one was on the GI business for Opto, wasn't it?

Yes.

And how that develops, was.

Yes, how it develop.

Okay. So, the first one, I think to the comment of with regard to Chinese automotive.

I gave you already an indication in general what kind of revenue share that is the Chinese automotive business, so that is not too big for us. It's important in general we are doing business with both transplants rends plans but also for local players there.

And therefore, what we see is more that it's some -- if you look in the quarter in the months, there was a negative trend in the third quarter. Indeed, as Olaf said, we see that more in the transplants.

But in general, I think if you look at the LED components, that might kind of -- is talking impact. But the LED penetration is extremely low in China and that will support our business going forward.

And with regard to your second question on the LED components for general illumination, that is still small business for us. We always said that it's in the ballpark of 10% to 15% of Opto's revenue.

Obviously, that is in the market the fastest growing piece and therefore also an interesting piece. But as we explained earlier, we followed this strategy of balanced growth that means growing the issues and that to be supported by also some volume business, and the volume business is not only the MTI, the LED components but also this consumer communication devices business.

Okay, thank you. Next question please.

Hi, thanks for taking my questions. Just one from my side really, and the focus is on Opto margins, obviously we’ve seen quite a few quarters where margins have surprised on the upside, and just wanting to ask in the context of the capacity utilization figures that you talked about practical levels of capacity utilization sort of sealing, in that sense what do you think is needed to drive margins to 20% sort of levels because that’s probably something that we did see back in Q2 and Q3 last year.

Is there a possibility of doing – what’s necessary to reach there? Thank you.

First of all, I think if you look at 18.5% and if you look how Opto is performing against competition, then it is also of applause. I think also that in detail, is one company still out which has higher margin and that is kind of our benchmark and therefore of course we always try to catch up this benchmark company.

But, if I look in the future I would say that we’re talking right now already about high margin business and it’s really about kind of keeping margin and growing the business which in the end and also has an impact on the bottom line.

Okay, thank you for the question. The next question please.

Hi, good afternoon gentlemen, and thanks for taking my question. Two short one which I guess would be probably bit more qualitative than quantitative but I was wondering if you could give us an idea of the margin differential in your Opto business versus between the auto related business of Opto and the rest of the business that was question number one.

And then, question number two, I was wondering if you could also kind of qualify how your margin in specialty lighting and specifically in the auto business of specialty lighting had evolved during pretty much the last auto crisis which was between 2008, 2010 what I’m trying to figure out is whether you were able back then to keep the margin stable where they are today or whether there had been some impact from the volume decline then? Thank you.

Let me start with the second question. Actually, I do not see any crisis coming up there to start with such a comment in the automotive industry.

But actually it is clear that such a business has curiosity and in the crisis back in [Leeman] happened the margin came down both in AHP and Opto but the good thing was both as market leaders came after the crisis even stronger than before. And then, on the kind of Opto margin by segment please let me tell you that both the automotive and then the industrial piece operating on similar high levels which above the average and in the other two areas we’ve still potential.

Thank you.

Thank you. We will take last question.

Hi, good after noon it’s Fredrick here from UBS. So, I think now it’s the third quarter that conventional I think has done very well for you, I just wanted to see if you could give us some color on how you see the price to be now the sustainability now and your ability to which – revenue declines we’ve seen now and somewhat higher revenue declines in the coming quarters and years?

Just a bit more color on that will be helpful?

I think, first of all I think we did this – and it was always and therefore we’ve a great management team, we’re close to the customers and we know how to play that game. We’re strong and we keep being strong in our main market with also on our – on the brand strings which we have bolts in the United States but also in Europe with Sylvania and [indiscernible].

We in these regions we’re not losing market share we’re working in an [indiscernible] which I do see reason of behavior. You mentioned already yourself that and I said that over the last quarters that we made progress with pricing, we now have stable prices.

And at the same time we’re progressing on the restructuring and that has to keep the progression effect of costs coming out of the lower volume, to keep that with only small impact. And we focus on cash flow and that is basically what the most important incentive KPI is that for management.

Now they’re working with full speed and a lot of enthusiasm in the direction of being a separate company and all of that is sounding which I really like to see and that this team is really convinced that they will build together with LED lamps which is not only fit to survive but also fit to be a prosperous company going forward.

Much clear, thank you very much.

Thanks Fred. I don’t know if it was a call, and I hope we will see you later here in November at our Q4 conference here in Munich.

Thanks a lot.

Thanks, good bye.