Wacker remains on growth course after a record year in 2010

Wacker Chemie AG expects further sales-revenue and sales-volume gains for 2011. As the Munich chemical company announced, the upward trend at Wacker’s business segments continued in Q1 2011. Thanks to strong customer demand across all sectors and regions, the company ended 2010 with new sales and earnings records. Consolidated sales rose 28 percent to €4.75 billion (2009: €3.72 billion). Earnings before interest, taxes, depreciation and amortization (EBITDA) nearly doubled to €1.19 billion (2009: €607 million). Net income increased to €497 million last year. In 2009, Wacker had posted a loss of €74.5 million, due to a number factors, including provisions and fixed-asset impairments.

In the first two months of 2011, every division reported high and sustained sales volumes. Consolidated sales in January and February 2011 were clearly up year on year. Should this trend continue throughout the year, Wacker anticipates that 2011’s consolidated sales will cross the €5 billion mark. According to current plans, EBITDA is expected to reach the high level of 2010 despite significantly rising raw-material costs and ramp costs for polysilicon capacity expansion.“We have entered 2011 with confidence and from a position of strength,” said CEO Rudolf Staudigl on Wednesday in Munich. “The Group is in excellent financial shape and our long-term investment strategy has established a solid basis in the world’s growth regions over the last few years – above all in Asia. Customer demand for our products remains strong at all divisions. This means 2011 is going to be another very successful year for Wacker.”

Capital Expenditures

The Group’s investments stayed at a high level in 2010. Asset additions reached €695 million (2009: €740 million). Funds were primarily earmarked for hyperpure polysilicon capacity expansion and for additional plants to manufacture silicones in China.

At Burghausen, Wacker started up its polysilicon “Expansion Stage 8,” reaching the planned nominal capacity of 10,000 metric tons per year in Q2 2010. Construction of polysilicon facilities at Nünchritz – also with a capacity of 10,000 metric tons per year – progressed very well in 2010. Currently, the buildings are being fitted with production equipment. Commissioning is scheduled to commence before the end of this year.

In November 2010, Wacker and its partner Dow Corning officially launched siloxane production in Zhangjiagang, China. This production complex rounds out the world’s largest integrated site for silicones. The launch not only marks the completion of Wacker’s key investment project in the dynamic Chinese market, but it also prepares the ground for continued silicone business expansion there.

Wacker took an important step toward securing its raw-material base by purchasing a silicon-metal plant in Holla, Norway, last year. The Munich-based chemical company acquired this site from the FESIL Group for €66.5 million in mid-2010. Holla’s production capacity totals around 50,000 metric tons of silicon metal per year. As a result, WACKER now covers almost a third of its annual silicon-metal needs through captive production.

Employees

As per year-end 2010, Wacker had 16,314 employees worldwide (2009: 15,618) – up 696 year over year. The rise is due to strong customer demand and high capacity-utilization rates. Another factor enlarging the workforce was its acquisition of the Holla silicon-metal plant and of a silicone site at Jincheon, South Korea. At year-end, Wacker’s German sites had 12,235 employees (2009: 11,925) and its international sites 4,079 (2009: 3,693).

Net Cash Flow, Net Financial Liabilities and Equity Ratio

In 2010, net cash flow grew to €422 million (2009: €-33 million). This increase is the result of strong operational business and high prepayments from customers for future polysilicon deliveries. In terms of net financial liabilities (the balance of liquidity and financial liabilities), Wacker posted a surplus of €264 million as per December 31, 2010. A year earlier, the Group had net financial liabilities of €76 million. As per year-end 2010, Wacker’s total assets were significantly higher at €5.5 billion (2009: €4.54 billion) than a year ago. This 21-percent rise was caused by asset additions, by higher inventories and trade receivables stemming from stronger business volumes, and by exchange-rate effects. On the balance-sheet date, equity amounted to €2.45 billion (2009: €1.94 billion), resulting in an equity ratio of 44.5 percent (2009: 42.8 percent).

Outlook

According to economic experts, the global upturn will continue during the current year. Growth rates are, however, expected to be lower than in 2010. Momentum will be strongest in Asia. The large economies of China and India will grow particularly strongly. Moreover, GDP in every other region is expected to be above prior-year levels.

The robust recovery is leading to rising raw-material costs. In January and February 2011, the prices for Wacker’s key raw materials – silicon, ethylene and methanol – significantly exceeded the prior-year average. The company anticipates further raw-material price increases in the coming months. Compensating for these price rises will be one of the main challenges this year.

Wacker will bring new production capacity on stream and make additional investments to meet rising customer demand. In total, the company plans to invest around €950 million during the current year – with its polysilicon business as the main focus here.

In the second half of the year, WACKER POLYSILICON will start up production at its “Expansion Stage 9” facility in Nünchritz. The facility has a nominal capacity of 10,000 metric tons per year. Also this year, construction will start on polysilicon production facilities at the new Cleveland site in the US State of Tennessee. The production complex will have an annual capacity of 15,000 metric tons and is to be completed by the end of 2013. The investment volume for this large-scale project will total some €1.1 billion. Furthermore, Wacker is expanding its polysilicon production in Burghausen and Nünchritz by implementing debottlenecking measures within its integrated production network. As a result, annual volumes will increase at each site by 5,000 metric tons, with the first additional quantities becoming available in 2012. This expansion, which involves investments totaling some €130 million, will increase Wacker’s total hyperpure-polysilicon capacity from over 30,000 metric tons annually now to 67,000 by 2014.

Wacker also expects further growth at its chemical divisions during 2011. Its silicone and polymer businesses will benefit strongly from accelerating demand in emerging economies, thereby generating higher sales this year. Greater prosperity in countries like Brazil, China and India, coupled with increasing urbanization and infrastructure developments are fueling sales volumes for silicones, dispersible polymer powders and dispersions. WACKER BIOSOLUTIONS is also anticipating higher sales this year. Key growth drivers here include its gumbase business.

For its semiconductor business, the Group expects silicon-wafer demand to rise during 2011 – especially in the 300 millimeter segment. New devices, such as tablet PCs and smartphones, and the growth of image and video applications are fueling demand for memory chips and high-performance processors. At Siltronic, this trend should raise plant-utilization levels and, possibly, push up silicon-wafer prices, too. For 2011, Wacker expects that Siltronic will be able to post higher sales and earnings. To meet market growth in Asia, further expansion of 300 mm wafer capacity at the Siltronic Samsung Wafer joint venture in Singapore is planned.Overall, Wacker anticipates that sales will cross the €5 billion mark in 2011 for the first time ever, with every business division contri¬buting to this success. Higher raw-material prices and polysilicon-production start-up costs at Nünchritz will have an effect the earnings trend. Nevertheless, Wacker expects that EBITDA will reach 2010’s high level once again.