On its way of transforming to a high-tech photonic company, Osram has been challenged by the weakening global market. The German company adjusted its annual forecast for fiscal year 2019 which ends by September 30, 2019.

Osram said the revenue of fiscal 2019 is expected to decline between 11 and 14 percent while the previous forecast was a revenue growth between 0 and 3 percent. The company also lowered is the range of its adjusted EBITDA margin to eight and ten percent from 12 to 14 percent. In addition, Osram expects a negative free cash flow between EUR 50 million to 150 million (US$ 56.15 million to 168.45 million) in comparison with the positive mid-double-digit million range as it anticipated previously.

According to Osram, the adjustment of annual forecast is due to “the continued market weakness in the automotive industry, in general lighting and in mobile devices,” which led to significant inventory buildups, particularly in China. Osram also noted that its business development is impacted by general economic slowdown as well as geopolitical uncertainties.

The German company has cut its profit guideline twice for fiscal 2018 and posted a warning in January for its fiscal 1Q19. In the latest announcement, Osram said its revenue of the second quarter of fiscal 2019 is expected to drop by 15 percent YoY with the Opto Semiconductors business unit affected the most due to underutilization.

Despite the forecast adjustment, Osram said it will continue its strategy with the focus on optical semiconductors, automotive and digital applications. Its developments in professional horticulture lighting and sensing technology for facial recognition also receive positive feedbacks.

Meanwhile, the company has been progressing the initiated sales of the European luminaires business and the US service business. In February, Osram confirmed that it has been in discussion with Carlyle and Bain Capital who are eyeing the buyout of Osram. But no further information was revealed in the recent announcement.