Once again, WACKER’s main earnings drivers were polysilicon and semiconductors. WACKER POLYSILICON’s EBITDA grew by €70.0 million, thus more than tripling prior-year’s figure. At €112.0 million, Siltronic AG nearly matched last year’s EBITDA (Q2 2007: €122.8m) and accounted for over a third of the Group’s earnings before interest, taxes, depreciation and amortization in Q2 2008. In contrast, the chemical divisions saw their earnings impacted by higher raw-material and energy costs. This meant they did not quite achieve their prior-year EBITDA levels.
The Group’s Q2 earnings before interest and taxes (EBIT) rose 26 percent to €224.9 million (Q2 2007: €178.2m). Net income climbed 18 percent year on year to €152.8 million (€130.0m). As a result, earnings per share amounted to €3.08 (Q2 2007: €2.62), up 18 percent. For the full first-half of 2008, WACKER generated an EBIT of €423.6 million (€366.1m). During the same period, consolidated net income rose to €283.4 million (€244.5m) and earnings per share reached €5.70 (€4.92).
The Munich-based chemical company confirmed its full-year 2008 forecast for higher sales and earnings. Consolidated sales should exceed the prior-year figure by clearly over 10 percent. EBITDA is expected to climb, too. All in all, WACKER is investing roughly €1 billion in pursuing its growth and expansion strategy during the current year.
“We’ve again managed to boost both sales and earnings despite the increasingly difficult economic environment,” said Group CEO Rudolf Staudigl in Munich on Thursday. “Our success in the first six months was mainly driven by strategic investments in capacity expansion and, above all, vibrant solar-industry demand. With additional volumes and our market and cost leadership in many business fields, we consider ourselves well prepared to progress on our growth course even in a more difficult economic climate.
Regions
In Q2 2008, the WACKER Group posted further sales gains in Asia’s dynamic markets, where sales reached €367.5 million (Q2 2007: €328.7m). Asia accounted for 33 percent of the Group’s total second-quarter sales. Europe (excluding Germany) took second place with €266.5 million (Q2 2007: €271.5m). As for Germany, WACKER posted April-June sales of €248.4 million, up 48 percent from the prior-year period (€168.4m). This means Germany had the greatest regional sales gain in the period under review. Sharp German growth was primarily due to two factors. First, the substantial rise in polysilicon deliveries to Germany’s solar sector. Second, the full consolidation of the former partnership company APP – a measure that also greatly influenced sales in the Americas, where WACKER reported April-June sales of €205.5 million (€160.9m). In the remaining regions, WACKER posted second-quarter sales of €35.1 million (Q2 2007: €29.5m).
Net Cash Flow and Investments
In the second quarter 2008, WACKER generated a net cash flow of €104.8 million (Q2 2007: €122.1m) even though its investments in current expansion projects again surpassed the comparable prior-year figure. The fact that net cash flow continued to remain strong was mainly due to upbeat business performance. Additionally, customer prepayments for future polysilicon shipments had a positive net cash flow effect of €30.8 million in the second quarter.
During Q2 2008, WACKER spent €181.4 million (Q2 2007: €180.7m) on strategic growth projects and on additional investments in property, plant and equipment, intangible assets and financial assets. The largest share of this sum – €84.1 million – went to WACKER POLYSILICON, which continued to expand capacity for hyperpure polycrystalline silicon at Burghausen as scheduled.
In Q2 2008, WACKER Group started up three new production facilities, as part of its drive to expand capacity for key strategic products in promising sectors and growth regions. Early April saw the official start-up of WACKER SCHOTT Solar GmbH’s site in Jena, Germany. Completed after only a six-month construction phase, this new facility produces solar-grade multicrystalline silicon wafers. Its nominal capacity is scheduled to reach 50 MW per year by fall 2008. In late April, WACKER DYMATIC – a joint venture between Wacker Chemie AG and DYMATIC Inc. – opened its new silicone emulsion plant at Zhangjiagang in China. The new facility will produce 30,000 metric tons per year of silicone emulsions and processing auxiliaries for China’s textile, leather and fiber industries. In Singapore, Siltronic Samsung Wafer Pte. Ltd. started production of 300 mm silicon wafers for the electronics industry in mid-June. Currently, these wafers are undergoing final qualification by several customers, including the main customer, Samsung Electronics.
Employees
In Q2 2008, WACKER’s employee numbers remained almost constant. On June 30, 2008, the Group had 15,769 employees (March 31, 2008: 15,660). German sites accounted for 12,023 of the total (March 31, 2008: 11,935). Outside Germany, WACKER employed 3,746 people at the end of Q2 2008 (March 31, 2008: 3,725).
Business Divisions
WACKER SILICONES reported total Q2 2008 sales of €380.6 million, beating the prior-year period by 8 percent (Q2 2007: €353.6m). Sales growth stemmed from volume gains and higher prices obtained in the marketplace. The division could only partially offset raw-material cost increases (especially for silicon metal), higher energy costs and the impact of a strong euro on exchange rates. Thus, it did not quite match the prior-year earnings level. WACKER SILICONES posted a second-quarter EBITDA of €60.5 million (Q2 2007: €68.0m), which yielded an EBITDA margin of 15.9 percent (Q2 2007: 19.2 percent).
At WACKER POLYMERS, total sales soared to €244.6 million for April-June 2008 – a strong 46 percent increase over the second quarter of 2007 (€167.7m). This sales gain was primarily due to the fact that APP (the former partnership company acquired from Air Products) was consolidated for a full three months for the first time. Adjusted for this effect, sales rose 3 percent compared to the prior year. At €37.3 million, the division’s second-quarter EBITDA rose 8 percent year on year (Q2 2007: €34.5m). Sharp increases in raw-material, energy and transport costs and the weak US dollar dampened earnings growth. The EBITDA margin was 15.2 percent (Q2 2007: 20.6 percent).
The reorganization of WACKER FINE CHEMICALS as the Group’s biotech competence center is increasingly benefiting the division’s earnings performance. Although its Q2 sales total of €24.3 million was below last year’s second quarter (€27.6m), EBITDA of €3.3 million almost reached the prior-year level (€3.8m). The resultant EBITDA margin was 13.6 percent (13.8 percent). Volume increases led to very high capacity-utilization rates, especially for biotech products, such as cyclodextrins and cysteine. Capacity-utilization rates for fine chemicals are currently strong, too.
In Q2 2008, WACKER POLYSILICON boosted its total sales to a record €194.2 million (Q2 2007: €97.9m) – a year-on-year increase of 98 percent. Thanks to polysilicon capacity expansion at Burghausen, the division continued to benefit from strong, sustained demand. A strong positive impact also came from price effects. WACKER POLYSILICON’s earnings growth outstripped sales. Divisional EBITDA reached €104.8 million in the period under review, growing more than threefold (Q2 2007: €34.8m). At 54.0 percent, the Q2 EBITDA margin crossed the 50-percent threshold (Q2 2007: 35.5 percent).
Siltronic generated total Q2 sales of €351.7 million (Q2 2007: €370.9m). That is 5 percent below last year’s second quarter but 2 percent above the first quarter of 2008. Q2 sales were influenced, on the one hand, by a price drop for all wafer diameters and, on the other, by the strong euro’s impact on exchange rates. Volumes for 300 mm wafers rose again. This did not, however, offset volume decreases for 200 mm wafers and smaller diameters. As in Q1 2008, Siltronic again used free crystal-growing capacity to produce monocrystals for the solar industry. Solar business had a very positive effect on sales, as well as earnings margins. Siltronic posted an April-June EBITDA of €112.0 million (Q2 2007: €122.8m). The corresponding EBITDA margin was 31.8 percent (Q2 2007: 33.1 percent).
Outlook
At mid-2008, WACKER and its five business divisions were firmly on course despite noticeable economic headwinds. Consequently, the Executive Board reaffirms its full-year forecast for 2008, anticipating a year-on-year sales growth of clearly above 10 percent. It also expects earnings before interest, taxes, depreciation and amortization (EBITDA) to climb. The final level of earnings growth will largely depend on how trends will materialize for the global economy, raw-material and energy costs, and exchange rates.
Q2 saw the successful start-up of several new production facilities. For the remainder of the year, WACKER will mainly focus its efforts to drive operational growth on opening production plants for pyrogenic silica (Zhangjiagang, China) and polysilicon (Burghausen, Germany), expanding its WACKER SCHOTT Solar joint venture (Jena, Germany), continuing development of the Group’s new Nanjing polymer site (China), and integrating APP and WPS – WACKER’s former partnership companies – into WACKER POLYMERS.
With these and other measures, WACKER Group intends to reinforce its market positions and competitive strength in tomorrow’s key markets. By doing so, it focuses on creating the right conditions for continued sustainable and profitable growth. Total investments in the current fiscal year are expected to amount to some €1 billion.
Information for editorial offices: the Q2 2008 report can be downloaded from WACKER’s website (www.wacker.com) under Investor Relations.