WACKER enacted measures as early as the second half of 2008 to cut costs and temporarily adjust production capacity to slowing demand. The first quarter of 2009 showed benefits of these measures on profitability. Whereas WACKER’s first-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) fell 46 percent year on year to €157.8 million (Q1 2008: €291.1m), the figure nevertheless reflected the advantages of lower material costs and personnel expenses, as well as more favorable raw-material and energy prices. The EBITDA margin equaled 18.1 percent (Q1 2008: 28.6 percent). The Group’s Q1 2009 earnings before interest and taxes (EBIT) reached €58.2 million (Q1 2008: €198.7m), with a quarterly result of €5.5 million (Q1 2008: €130.6m). Earnings per share were €0.17 (Q1 2008: €2.63).

The Group’s polysilicon business made the largest contribution to Q1 2009 sales and earnings. The WACKER POLYSILICON division’s sales crossed the €300 million mark in a single quarter for the first time ever and EBITDA rose 136 percent. Nevertheless, the sales and earnings trend declined significantly at all other divisions. The drop was most pronounced for Siltronic’s semiconductor business, where sales were down 64 percent year on year – with EBITDA declining to €-60.0 million.

For full-year 2009, WACKER is expecting markedly lower sales and operational earnings compared with the prior-year figures. How strong this decline will be primarily depends on further demand and price developments at WACKER’s key customer groups. The Group is focusing its investments on its strategic growth projects, particularly the ongoing expansion of polysilicon production capacity. From today’s viewpoint, WACKER’s investment volume will reach a magnitude of €800 million in fiscal 2009.

“After several years of successful growth, we are facing a period of widespread economic uncertainty and thus a great entrepreneurial challenge in light of the global recession,” said Group CEO Rudolf Staudigl in Munich on Thursday. “Our measures to limit the impact of the economic crisis on our company are proving effective. The key megatrends that we profit from remain intact. This is why I stay optimistic about WACKER’s future in the long term, even though 2009 will not be an easy year for us.”

Benefiting from the strength of its polysilicon business, the WACKER Group saw first-quarter sales in Germany climb some 3 percent year on year to €220.8 million (Q1 2008: €215.3m). In the rest of Europe, however, sales fell 23 percent to €202.0 million (Q1 2008: €260.8m). Asia remains WACKER’s largest market, though January-March 2009 sales there dropped by 23 percent to €267.0 million (Q1 2008: €345.6m). China accounts for over half of WACKER’s Asian sales. In the Americas, WACKER generated sales of €162.3 million in the period under review, nearly matching the prior-year level (Q1 2008: €169.2m). In this region, WACKER profited from the consolidation of Air Products Polymers, a former partner company, and from the favorable euro/dollar exchange rate. In “Other Regions”, Q1 2009 sales totaled €20.4 million (Q1 2008: €28.6m).

WACKER generated a positive net cash flow of €70.9 million (Q1 2008: €-3.2m) from January-March 2009. Here, a €67.9 million increase of customer prepayments and reductions in current assets together with our investment focus on strategic growth projects were the key contributors. Additionally, in Q1 2008, a €173.4 million payment for acquiring the shares in Air Products Polymers and Wacker Polymer Systems (former partner companies) had affected cash flow in that quarter.

In Q1 2009, WACKER invested €176.8 million (Q1 2008: €145.5m). The focus was on polysilicon expansion projects at Burghausen and Nünchritz (Germany), as well as on extension of the silicones site in Zhangjiagang (China). Some €100 million was spent on the ongoing polysilicon capacity expansion alone in the period under review. In the medium term, WACKER intends to build a new production plant for hyperpure polycrystalline silicon in the USA to satisfy the increase in demand expected from the solar and semiconductor industries in the years to come. In February, WACKER purchased a plot of land (550 acres or 220 hectares) in the State of Tennessee for this purpose at a cost of close to $20 million.

On March 31, 2009, WACKER had 15,851 employees worldwide (Dec. 31, 2008: 15,922), of whom 12,103 worked at German sites (Dec. 31, 2008: 12,110) and 3,748 at international sites as per the end of Q1 2009 (Dec. 31, 2008: 3,812). To gain the flexibility needed for reacting to the current demand decline, the Group applied for short-time work schedules at Siltronic AG from January 2009 and at Wacker Chemie AG from February, in each case for six months. In addition, the Group is taking every opportunity to reduce personnel costs by not extending limited employment contracts and by terminating contracts with temporary workers. WACKER is also transferring employees from its semiconductor subsidiary Siltronic to other corporate entities.

In Q1 2009, WACKER SILICONES generated total sales of €264.9 million (Q1 2008: €360.3m). The sales trend was marked by a substantial decline in sales volumes, particularly in the construction and automotive market segments, as well as in the textile industry. In contrast, sales in the medical technology and power generation and distribution segments developed comparatively better. WACKER SILICONES generated an EBITDA of €27.7 million from January-March 2009 (Q1 2008: €64.8m), thus achieving an EBITDA margin of 10.5 percent (Q1 2008: 18.0 percent). The year on year earnings drop resulted almost entirely from lower volumes. Favorable exchange rates and lower personnel costs, however, had a positive effect on earnings.

Construction-segment weakness worldwide and seasonal effects of the severe winter in Europe had a noticeable impact on WACKER POLYMERS’ sales. Total sales from January-March 2009 amounted to €172.3 million (Q1 2008: €198.5m), down 13 percent year on year. Adjusted for the addition of Air Products Polymers’ dispersion business, the decline was 22 percent. Q1 2009 EBITDA for the division was €21.5 million (Q1 2008: €38.1m), resulting in an EBITDA margin of 12.5 percent (Q1 2008: 19.2 percent). The earnings drop vis-à-vis Q1 2008 was primarily caused by declining sales volumes and price pressure. In contrast, lower raw material costs and more favorable exchange rates had a positive effect on results. Measures to optimize production efficiency also served to support earnings.

WACKER FINE CHEMICALS had total sales of €21.6 million in Q1 2009 (Q1 2008: €27.7m), down 22 percent year on year. This drop in sales is attributable to the discontinuation of certain catalog products resulting from the fine-chemical business portfolio consolidation. The division’s earnings performance presents a similar picture. The division generated an EBITDA of €1.9 million for January-March 2009 (Q1 2008: €3.2m), thus achieving an EBITDA margin of 8.8 percent (Q1 2008: 11.6 percent). WACKER FINE CHEMICALS’ bioengineered products, such as cyclodextrins and cysteine, performed well. The same was true of pharmaceutical proteins, thanks to rising sales volumes.

WACKER POLYSILICON profited further from continued strong polysilicon demand in Q1 2009. Compared to the prior-year period, the division doubled its total quarterly sales to €315.0 million (Q1 2008: €155.9m). The enormous production capacity expansion at the Burghausen site was primarily responsible for this growth. WACKER POLYSILICON’s EBITDA greatly outpaced sales growth, climbing to €168.1 million (Q1 2008: €71.3m). This represents a 136 percent increase compared with the prior-year quarter. At 53.4 percent (Q1 2008: 45.7 percent), the EBITDA margin remains at the high level achieved in the last few quarters. This growth was driven by higher sales volumes, as well as by positive price and product-mix effects.

At Siltronic, the negative business trend of late fiscal 2008 gained additional momentum in Q1 2009. Sales revenues of €126.0 million (Q1 2008: €346.1m) for the period under review were 64 percent below the comparable prior-year figure. Quarterly demand for silicon wafers of all diameters was very weak in all regions. This led to both significantly lower sales volumes and a drastic deterioration in market prices. Moreover, the silicon-monocrystal business for the solar and equipment industry showed clear signs of the current crisis in terms of both sales volumes and prices achievable on the spot market. Favorable exchange rates were not able to compensate for the extremely difficult global semiconductor-market situation. As a result, Siltronic posted a January-March 2009 EBITDA of €-60.0 million (Q1 2008: €114.0m). The EBITDA margin dropped accordingly from 32.9 percent in Q1 2008 to -47.6 percent in Q1 2009. To counteract the earnings situation, Siltronic implemented an extensive package of measures that will reduce personnel costs. This led to a year on year personnel-cost reduction of 30 percent in Q1 2009.

WACKER is preparing for a global downturn in 2009. From today’s vantage point, it is not clear whether the global economy will return to a growth path in 2010. Given the economic uncertainties, the Group cannot make a reliable and quantifiable forecast for the rest of 2009 at this time. Based on the current situation, the Munich-based chemical company assumes sales and the operating result will decline noticeably from now until year-end.

Despite the generally difficult global environment, WACKER does see growth potential, especially at WACKER POLYSILICON, which is profiting from plant and product-line expansions. At WACKER’s other three large divisions, however, business trends will be more difficult. According to company estimates, the silicon-wafer business will perform particularly weakly, due in part to falling prices for 300 mm wafers. Currently, no reliable forecast is possible for WACKER SILICONES or WACKER POLYMERS.

WACKER enacted a series of measures at an early stage to counter the pressures of the global financial and economic crisis. For example, the Group cut budgets, introduced short-time work and other measures to lower personnel expenses, placed restraints on hiring, modified investment plans and safeguarded operational financing. WACKER intends to reduce personnel costs during the current fiscal year by 15 percent, thus by some €160 million. The Group anticipates positive effects in 2009 from raw-material and energy costs, which will probably be lower than in 2008.

For the long term, WACKER believes that key megatrends will remain strong, enabling the company to sustainably profit from them. For example, the Group has a whole series of products to serve the energy megatrend. As in the past, the largest growth opportunities there arise from the manufacture of polysilicon for the solar industry. As for the digitization megatrend, the Group’s semiconductor-grade silicon wafers will enable it to benefit from further growth. In view of its strong regional presence in Asia’s growth markets and in emerging economies elsewhere, WACKER can offer a whole range of products and solutions that are ideal for increasing living standards in these regions. WACKER is confident about the long-term potential of these megatrends and intends to use them to resume its sustainably-oriented growth path once the global economy has come out of recession.

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.