Strong Quarterly Figures Give Wacker a Good Start into 2011
Wacker Chemie AG significantly increased sales and earnings in Q1 2011, giving it a good start into fiscal 2011. Sales of the Munich chemical company grew by 21 percent to €1.29 billion from January through March 2011 (Q1 2010: €1.07 billion). This rise was primarily due to higher sales volumes. Wacker’s business continued to grow thanks to a positive market environment and high customer demand. Sales were additionally supported by higher prices in some key product segments, while changes in exchange rates had virtually no effect.
Wacker’s profitability also grew significantly, compared to both the previous year and Q4 2010. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose to €351.0 million in Q1 2011 (Q1 2010: €253.7 million), a year-over-year increase of 38 percent. The EBITDA margin continued to grow in the first three months of 2011 and now stands at 27.2 percent, up from 23.8 percent in Q1 2010. Group earnings before interest and taxes (EBIT) climbed to €245.9 million in the first quarter of 2011 (Q1 2010: €153.7 million). The EBIT margin rose to 19.0 percent (Q1 2010: 14.4 percent). Net income for the period reached €168.0 million (Q1 2010: €105.9 million), yielding earnings per share of €3.39 (Q1 2010: €2.15).
Earnings growth was primarily the result of stronger sales volumes and revenues. This led to high plant utilization at all divisions, which had a positive effect on specific production costs. Compared to Q1 2010, higher polysilicon volumes were available from Burghausen’s Poly 8 expansion stage, which had reached its full nominal capacity in Q2 2010. Wacker’s profitability was additionally supported by the higher prices for some of its products during the first three months of 2011. Higher raw-material costs only had a partial impact on earnings in Q1, since the Group was, in some cases, still using raw materials procured in 2010.
Wacker expects sales and earnings growth for full-year 2011. The Munich chemical company anticipates consolidated sales of over €5 billion. 2011 EBITDA is expected to surpass last year’s figure of €1.19 billion.
“Wacker continues its upward trend past the first three months of 2011,” said Group CEO Rudolf Staudigl in Munich on Wednesday. “Rising prices for raw materials and start-up costs for our new polysilicon production in Nünchritz will slow down our earnings growth. But on the other hand, customer demand remains high at all divisions and our semiconductor business has seen incoming orders rise sharply in the last few weeks. We therefore expect high plant utilization. 2011 will be another very good year for Wacker.”
Regions
The Wacker Group posted robust double-digit growth figures for all regions worldwide during the first quarter of 2011. Asia once again reinforced its position as Wacker’s largest market. Sales there rose by 29 percent to €471.9 million from January through March 2011 (Q1 2010: €364.8 million). Approximately 58 percent of this were generated in China, including Taiwan. Wacker also achieved substantial sales growth in Germany and the rest of Europe. In Germany, sales rose to €247.2 million, up 13 percent on last year (Q1 2010: €219.1 million). In the other European countries, Wacker’s business grew some 19 percent, with sales climbing to €311.9 million (Q1 2010: 261.8 million). In the Americas, Wacker increased its first-quarter sales by 19 percent as well, to €220.5 million (Q1 2010: €185.8 million). Here, too, the expansion was chiefly driven by strong customer demand. Changes in exchange rates had virtually no effect. In the other regions, first-quarter sales grew by 13 percent to €40.2 million (Q1 2010: €35.5 million). Overall, Wacker generated 81 percent of its first-quarter sales with customers outside Germany.
Investments and Net Cash Flow
In Q1 2011, Wacker invested €136.6 million in property, plant and equipment, and in financial assets (Q1 2010: €98.3 million). More than half of the investment total went to WACKER POLYSILICON. Capital expenditures at the division amounted to €78.2 million and focused on the ongoing construction of a polysilicon plant at Nünchritz (Germany). Nünchritz is expected to start producing polysilicon before the end of this year. At its Charleston, Tennessee (USA) location, WACKER POLYSILICON has already started constructing a fully-integrated polysilicon site. To meet increasing customer demand for polysilicon, Wacker is also expanding its existing facilities at Burghausen and Nünchritz. The two sites’ combined capacity will increase by a total of 10,000 metric tons per year. Initial volumes from these expansion measures are expected to be available as early as 2012.
Despite high investments, the Wacker Group’s net cash flow increased more than fivefold to €286.3 million in the first quarter of 2011 (Q1 2010: €54.6 million). The rise was primarily due to two factors. First, Wacker’s operational business remained strong in Q1, resulting in high gross cash flow. Cash inflow from operating activities climbed by €290.5 million to €450.0 million (Q1 2010: €159.5 million). Second, this figure included €229.6 million (Q1 2010: €6.0 million) in cash inflows from customer prepayments for future polysilicon deliveries. Overall, Wacker increased its balance of prepayments received by €187.1 million to around 1.22 billion in the reporting period.
Employees
As of March 31, 2011, Wacker had 16,602 employees worldwide (Dec. 31, 2010: 16,314). The payroll increase primarily stems from higher staffing needs due to the dynamic business trend and high plant-utilization rates. On March 31, 2011, Wacker had 12,414 employees in Germany (Dec. 31, 2010: 12,235) and 4,188 at its international sites (Dec. 31, 2010: 4,079).
Outlook
The upturn in the global economy is continuing in spring 2011. The economies of emerging markets, in particular, are once again very dynamic, following a slight slowdown in growth during last year’s second half. Advanced economies also saw output and trade pick up appreciably in Q1 2011. Given the current economic trends, Wacker expects customer demand and sales to remain strong and stable at all its divisions. Group sales in subsequent quarters of 2011 are estimated to be higher than the corresponding prior-year levels.
As 2011 progresses, two major factors will affect Wacker’s earnings performance: the upward trend in raw-material prices and the start-up costs for the Group’s Nünchritz polysilicon plant. Compared to Q1 2011, both factors are likely to acquire a higher profile in subsequent quarters and diminish Wacker’s profitability. In contrast, Siltronic’s very healthy order levels promise higher plant utilization and correspondingly low specific production costs. Overall, Wacker sees a very good chance of crossing the €5 billion sales mark in full-year 2011. Currently, the company anticipates that EBITDA will surpass 2010’s figure of €1.19 billion.
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