Wacker Chemie AG — Earnings Release 2013

Mar 18, 2014

News Details

Corporate | 18 March 2014 07:14

Wacker Chemie AG: WACKER EXPECTS HIGHER SALES AND EARNINGS IN FISCAL 2014

Wacker Chemie AG / Key word(s): Final Results

18.03.2014 / 07:14

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– SALES OF EUR4.48 BILLION IN 2013 ABOUT 3 PERCENT BELOW PREVIOUS YEAR, WITH EBITDA REACHING EUR679 MILLION

– FULL-YEAR GROUP SALES 2014 EXPECTED TO RISE BY A MID-SINGLE-DIGIT PERCENTAGE

– HIGHER VOLUMES AND SALES FORECAST ACROSS ALL BUSINESS DIVISIONS

– WACKER EXPECTS EBITDA TO INCREASE BY AT LEAST 10 PERCENT YEAR ON YEAR, WITH GROUP NET INCOME FORECAST TO IMPROVE, TOO

– INVESTMENTS TO TOTAL SOME EUR550 MILLION IN 2014 – BALANCED NET CASH FLOW PROJECTED

Munich, March 18, 2014 – As already disclosed, Wacker Chemie AG ended 2013 with lower sales and earnings compared to 2012. As the Munich-based chemical company announced today on presenting its 2013 annual report, Group sales totaled EUR4.48 billion, some 3 percent down on 2012 (EUR4.63 billion). The decline was chiefly due to weaker prices, particularly for solar-grade silicon and semiconductor wafers. All in all, price effects reduced Group sales by EUR366 million or about 8 percent last year. 2013’s EBITDA – earnings before interest, taxes, depreciation and amortization – came in at EUR678.7 million (2012: EUR795.4 million). The corresponding EBITDA margin was 15.2 percent (2012: 17.2 percent). EBITDA dropped almost 15 percent against 2012 mainly because of persistently low solar-silicon prices. Although more or less stable from the start of 2013, annual solar-silicon prices were about a third lower on average than in 2012. Exchange-rate effects resulting from the stronger euro also slowed the earnings trend. WACKER’s chemical divisions, though, increased their EBITDA by over 11 percent compared to the previous year, thanks mainly to higher volumes. Looking at the bottom line, WACKER ended 2013 with Group net income of EUR6.3 million (2012: EUR114.7 million), EUR109 million lower than a year earlier.

During the first two months of 2014, WACKER experienced healthy demand across all business divisions. Over the same period, sales were above the comparable prior-year figures, especially for polysilicon, and also for chemicals and semiconductors. Overall, WACKER anticipates generating Q1 2014 sales of more than EUR1.1 billion (Q1 2013: EUR1.08 billion).

For full-year 2014, WACKER forecasts that both sales and earnings will be above the prior-year figures. Based on company projections, sales will rise by a mid-single-digit percentage. Every division is expected to surpass the volumes and sales achieved in 2013. Earnings before interest, taxes, depreciation and amortization (EBITDA) are forecast to be at least 10 percent above the prior-year figure. Group net income, too, is expected to improve compared with 2013.

“After two challenging years, I am more optimistic about 2014,” said CEO Rudolf Staudigl in Munich on Tuesday. “We anticipate that our polysilicon business will increase its sales. This trend will not only be supported by higher volumes – we also see chances for a slight recovery in prices. Price pressure in semiconductors is very likely to continue this year. Nevertheless, our assumption for the full year is that Siltronic will post an increase in both sales and EBITDA. At our chemical divisions, we also see good chances for further growth.”

Investments

Group investments in 2013 more than halved year on year, dropping 54 percent to EUR503.7 million (2012: EUR1.1 billion). This decline shows that WACKER has largely completed, or extended the timeline for, its capital-intensive large-scale investments in new upstream product facilities.

Last year, WACKER’s investing activities remained centered on the construction of the new polysilicon site at Charleston, Tennessee (USA). At some EUR250 million, this project accounted for approximately half of all investments in 2013. The construction work continued on schedule last year. The start of production is planned for during the second half of 2015.

Investing activity in 2013 additionally focused on production-capacity expansion for dispersions in Asia and the USA. At Ulsan (South Korea), WACKER officially opened a new production facility for vinyl acetate-ethylene copolymer dispersions with an annual capacity of 40,000 metric tons. At WACKER’s polymer site in Nanjing, China, the existing production plants for dispersions were enlarged by a new reactor with an annual output of 60,000 metric tons. Nanjing also saw the completion of a new plant for polyvinyl acetate solid resins. It has an annual capacity of 20,000 metric tons. In the USA, the polymers site at Calvert City also expanded, adding 30,000 metric tons of dispersions capacity per year. In 2013, these projects involved a total of EUR25.1 million in additions to property, plant and equipment.

Employees

WACKER’s workforce decreased slightly in 2013. The Group had 16,009 employees worldwide as of December 31, 2013 (Dec. 31, 2012: 16,292), 1.7 percent down on one year earlier. This decline was mainly due to a cautious hiring policy when filling open positions. At year-end, WACKER’s German sites had 12,322 employees (2012: 12,635) and its international sites 3,687 (2012: 3,657).

Net Cash Flow, Net Financial Debt and Equity Ratio

In fiscal 2013, net cash flow totaled EUR109.7 million (2012: EUR-536.2 million). This improvement of about EUR646 million is mainly due to the considerable year-on-year decline in investments and the reduction in inventories. For the same reason, the rise in net financial debt was much less than a year ago. Net financial debt amounted to EUR792.2 million as of the balance sheet date (Dec. 31, 2012: EUR700.5 million).

WACKER’s total assets decreased by EUR160 million last year. As of December 31, 2013, they amounted to EUR6.33 billion (Dec. 31, 2012: EUR6.49 billion). The year-on-year decline in fixed assets and lower working capital are the main reasons for the decrease. On the reporting date, equity amounted to EUR2.20 billion (Dec. 31, 2012: EUR2.12 billion). As a result, the equity ratio was 34.7 percent (Dec. 31, 2012: 32.7 percent).

Business Divisions

Lagging silicon-wafer demand and lower prices resulted in a sales decline at Siltronic . Sales decreased over 14 percent to EUR743.0 million (2012: EUR867.9 million). While 300 mm silicon-wafer business grew slightly during full-year 2013, 200 mm wafer volumes remained at the prior-year level and small-diameter wafers saw a further slowdown. EBITDA improved against the prior year, rising to EUR26.5 million (2012: EUR0.7 million).

In 2013, WACKER SILICONES increased its sales by almost 2 percent to EUR1.67 billion (2012: EUR1.65 billion). Higher volumes compensated for the lower prices of standard products and for unfavorable exchange-rate effects. EBITDA outpaced sales growth. It came in at EUR230.2 million, up nearly 22 percent on 2012 (EUR189.3 million). Higher utilization of capacity resulted in better fixed-cost coverage in production. In addition, during Q4 2013, the reversal of provisions that had been set up in the past for contingent losses from future purchase obligations from the joint venture with Dow Corning in China had a positive impact of EUR13.7 million on divisional EBITDA.

In 2013, WACKER POLYMERS ‘ sales fell slightly – down over 2 percent to EUR978.7 million (2012: EUR1.0 billion). Weaker dispersions business was the reason for this decrease. The substitution business with VAE dispersions, especially in the packaging industry, did not develop as positively as it had in 2012. In dispersible polymer powders, sales growth from higher volumes was held back by lower average selling prices and negative exchange-rate effects. EBITDA remained constant at EUR147.8 million (2012: EUR147.4 million).

WACKER BIOSOLUTIONS posted slightly higher sales. They rose 0.5 percent to EUR158.4 million (2012: EUR157.6 million), with the increase stemming from higher volumes. Sales growth was impeded by negative exchange-rate effects and lower prices. EBITDA amounted to EUR23.6 million, down almost 4 percent against 2012 (EUR24.5 million). Negative exchange-rate effects were the main reason for the decline.

As expected, WACKER POLYSILICON ‘s sales declined in 2013, down almost 19 percent to EUR924.2 million (2012: EUR1.14 billion). Although WACKER POLYSILICON sold more polysilicon than ever before, with 49,000 metric tons shipped, its 2013 sales were lower than a year ago due to the marked drop in average prices for hyperpure polysilicon. Fiscal 2013 was shaped by continued photovoltaic-market growth, by persistent overcapacity throughout the supply chain and by price pressure. The uncertainties in the anti-dumping dispute on solar modules between the EU and China curbed production, especially in the third quarter. Following an agreement in the anti-dumping dispute, polysilicon volumes picked up in the fourth quarter of 2013. EBITDA dropped 45 percent to EUR233.9 million (2012: EUR427.5 million), dampened primarily by prices that were, on average, markedly lower than in the previous year. Terminations of supply contracts with customers who exited the solar business and payment of damages added a total of EUR77.6 million to EBITDA (2012: EUR113.1 million).

Proposal on Appropriation of Profits

In accordance with German Commercial Code accounting rules, Wacker Chemie AG posted a retained profit of EUR636.1 million in 2013. The Executive and Supervisory Boards will propose a dividend of EUR0.50 (2012: EUR0.60) per share at the Annual Shareholders’ Meeting. Based on the number of dividend-bearing shares as per December 31, 2013, the cash dividend corresponds to a payout of EUR24.8 million. Calculated in relation to WACKER’s average share price in 2013, the dividend yield is 0.8 percent.

Outlook

Key market data suggest stronger growth for the global economy over the next two years. For the first time since 2011, market researchers anticipate a slight rise in Europe’s economic output. The USA should see its economic output rise relative to the past year. China and other emerging countries will continue their economic expansion in 2014, broadly matching the growth rates of 2013. WACKER, in its scenario, assumes that the global economy will expand slightly in 2014.

In WACKER’s polysilicon business, both volumes and sales are projected to rise in 2014. The company’s assumption is that the photovoltaic market will continue on its growth trajectory. Nevertheless, overcapacity is still a feature of the entire supply chain. WACKER expects a slight recovery in polysilicon prices for photovoltaic applications. WACKER and the Chinese Ministry of Commerce have now come to an agreement which enables WACKER to supply its customers in China with polysilicon at competitive prices also in the future. On the EBITDA front, WACKER POLYSILICON expects substantial growth compared with the previous year. EBITDA performance in this division will benefit from the restructuring of the contractual and delivery relationship with a customer from the solar sector. This will result in special income of about EUR115 million from retained advance payments and from damages received.

In its semiconductor business, WACKER expects substantial sales growth in 2014, fueled primarily by the full consolidation of Siltronic Silicon Wafer Pte. Ltd., the joint venture that is now 78 percent owned by Siltronic. Siltronic anticipates that 2014 will see persistent price pressure impeding sales growth. Full consolidation of this joint venture is expected to entail a considerable increase in EBITDA year on year.

The Group’s chemical divisions offer good prospects for further growth in 2014. Sales at WACKER SILICONES are expected to increase, though the price pressure on standard products will remain. Growth will primarily come from Asia. EBITDA is projected to be slightly lower than last year, owing to the fact that the prior-year figure included a non-recurring effect in the amount of EUR13.7 million from the reversal of a provision for purchase contract obligations in China. WACKER POLYMERS aims to increase its sales considerably. The regions with the highest sales gains are likely to be China, India and the Americas. In Europe, projections are for only a slight sales increase. EBITDA in this division is forecast to rise slightly year on year. WACKER BIOSOLUTIONS, too, expects sales to continue to rise. The division aims to step up its biologics business as a result of the takeover of Scil Proteins Production. EBITDA at WACKER BIOSOLUTIONS in 2014 is projected to come in at the prior-year level.

Overall, WACKER expects Group sales to increase by a mid-single-digit percentage in 2014. Earnings before interest, taxes, depreciation and amortization are projected to grow by at least 10 percent, which will improve the EBITDA margin as well. The EBITDA trend will be influenced, though, by special income as mentioned above, stemming from retained advance payments and from damages received arising from the restructuring of the contractual and delivery relationship with a customer from the solar sector. Amid higher depreciation of some EUR600 million and a tax rate of over 50 percent, Group net income is expected to improve against the prior-year figure. Excluding the acquisition of the majority stake in the joint venture Siltronic Silicon Wafer, investments will be somewhat above the prior-year level at about EUR550 million. WACKER is aiming to achieve a balanced net cash flow. Net financial debt will climb by about EUR300 – 400 million.

WACKER’s Key Figures

	2013	2012*	Change in %
Results/Return
Sales (EUR m)	4,478.9	4,634.9	-3.4
EBITDA 1 (EUR m)	678.7	795.4	-14.7
EBITDA margin 2 (%)	15.2	17.2	n.a.
EBIT 3 (EUR m)	114.3	266.6	-57.1
EBIT margin 2 (%)	2.6	5.8	n.a.
Financial result (EUR m)	-83.3	-62.7	32.9
Income before taxes (EUR m)	31.0	203.9	-84.8
Net income for the year (EUR m)	6.3	114.7	-94.5
Earnings per share (EUR)	0.05	2.43	-97.9
ROCE (%)	2.2	5.2	n.a.
Financial Position/Cash Flows
Total assets (EUR m)	6,332.4	6,492.8	-2.5
Equity (EUR m)	2,197.1	2,121.3	3.6
Equity ratio (%)	34.7	32.7	n.a.
Financial liabilities ( EUR m)	1,416.7	1,197.2	18.3
Net financial debt 4 (EUR m)	792.2	700.5	13.1
Capital expenditures (incl. financial assets) (EUR m)	503.7	1,095.4	-54.0
Depreciation (incl. financial assets) (EUR m)	564.4	528.8	6.7
Net cash flow 5 (EUR m)	109.7	-536.2	n.a.
Research and Development
Research and development expenses (EUR m)	173.8	173.7	0.1
Employees
Personnel expenses (EUR m)	1,133.0	1,196.8	-5.3
Employees (December 31) (Number)	16,009	16,292	-1.7

1 EBITDA is EBIT before depreciation and amortization.

2 Margins are calculated based on sales.

3 EBIT is earnings from continuing operations for the period before interest and other financial results, and income taxes.

4 Sum of cash and cash equivalents, noncurrent and current securities, and noncurrent and current financial liabilities.

5 Sum of cash flow from operating activities (excluding changes in advance payments) and cash flow from long-term investing activities (before securities), including additions due to finance leases.

* Adjusted for the effects of the adoption of IAS 19 (revised); see Changes in Accounting and Valuation Methods in the Notes section of the 2013 Annual Report.

This press release contains forward-looking statements based on assumptions and estimates of WACKER’s Executive Board. Although we assume the expectations in these forward-looking statements are realistic, we cannot guarantee they will prove to be correct. The assumptions may harbor risks and uncertainties that may cause the actual figures to differ considerably from the forward-looking statements. Factors that may cause such discrepancies include, among other things, changes in the economic and business environment, variations in exchange and interest rates, the introduction of competing products, lack of acceptance for new products or services, and changes in corporate strategy. WACKER does not plan to update the forward-looking statements, nor does it assume the obligation to do so.

For further information, please contact:

Wacker Chemie AG

Media Relations & Information

Christof Bachmair

Tel.: +49 89 6279-1830

Fax: +49 89 6279-1239

christof.bachmair@wacker.com

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Language:	English
Company:	Wacker Chemie AG
	Hanns-Seidel-Platz 4
	81737 München
	Germany
Phone:	0049-89-6279-1633
Fax:	0049-89-6279-2933
E-mail:	investor.relations@wacker.com
Internet:	www.wacker.com
ISIN:	DE000WCH8881
WKN:	WCH888
Listed:	Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin, Düsseldorf, Hamburg, Hannover, München, Stuttgart

End of News	DGAP News-Service

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