Poorly financed—with a mountain of short-term debt on the eve of a rate hike—this combination aimed to create a global benchmark in the healthcare and automotive sectors.
Unfortunately, both sectors have been under a lot of stress for several years now.
Ams-Osram has suffered from a persistent decline in revenue over the past five years. Pressure on its margins also remains very high. This is now forcing it to reduce its R&D budget in an attempt to preserve its solvency ratios.
Q3 results published yesterday show no sign of a reversal in this trend. Despite the decline in activity, cash flows are also under severe pressure. This is naturally causing considerable concern amongst investors given the group's worrying leverage.
The group has net debt of 2 billion Swiss francs—more than two-thirds of its enterprise value—and will face a major refinancing deadline of €760m in 2026; the next two deadlines are in 2029, totaling €1.7bn.
A €500m asset disposal plan has been prepared for this purpose: the group's very survival depends on it succeeding. However, there are fears that it could subsequently compromise its competitiveness, which is already under strain.
