“The figures for last fiscal year are yet more proof of the Group’s operational strength,” said CEO Peter-Alexander Wacker on Tuesday in Munich. “WACKER’s strategic alignment is on the right track. We made huge progress with our expansion projects last year to meet customers’ sustained strong demand. Our production capacity expansion projects and solid presence in Asian growth markets are key prerequisites to continue on our successful course in 2008.”
Total capital expenditures for 2007 grew 33 percent to €699 million (2006: €525m). In addition to WACKER’s ongoing expansion projects to boost production capacities, sizable funds flowed into joint ventures with Samsung Electronics and SCHOTT Solar. As a percentage of annual sales, the investment ratio grew to over 18 percent.
WACKER’s investment activities focused on several major projects. At Burghausen (Germany), WACKER POLYSILICON continued to expand its capacities for hyperpure polycrystalline silicon to meet soaring demand both from chipmakers and the booming photovoltaics industry. A facility with an annual capacity of 3,500 metric tons reached full capacity earlier than planned in Q4 2007. Two additional ongoing expansion stages are on schedule and a new facility for granular silicon is under construction. As a result, the division’s total annual production capacity will rise from a current 10,000 to over 22,000 metric tons by the end of 2010.
To further enhance its photovoltaics supply chain, WACKER set up two joint ventures with SCHOTT Solar GmbH in October 2007 to produce and market silicon wafers to the solar industry. Over the coming years, WACKER and SCHOTT plan to invest some €370 million at their sites in Jena (Thuringia) and Alzenau (Bavaria). Production of wafers with a total capacity of 120 megawatts should already start in mid-2008. Capacity is set to expand in stages, reaching about one gigawatt per year by 2012.
At its Burghausen (Bavaria) site, Siltronic has now doubled its monthly capacity for 300 mm silicon wafers to 135,000. More and more chipmakers are switching their production lines to these wafers, since the larger diameter offers them a cost advantage of about 30 percent. In a joint venture with Samsung Electronics, Siltronic is also building a new 300 mm production line in Singapore. Production of qualification wafers is already up and running, with a rapid mass-production ramp-up planned to start in the first half of 2008. By the end of 2010, the joint venture is scheduled to have a monthly capacity of 300,000 wafers. Siltronic and Samsung are jointly investing about US$1 billion there.
WACKER SILICONES has further expanded its locations at Nünchritz (Saxony) and Zhangjiagang (China). The division is thus responding to huge demand for silicone, a truly general-purpose material. In Nünchritz, capacity for siloxane – a key silicone-production precursor – was expanded once again. Via debottlenecking measures, WACKER SILICONES can now produce 120,000 metric tons of siloxane per year. Previously, total annual capacity was 100,000 metric tons. At Zhangjiagang, production facilities came on stream for silicone elastomers and sealants, and other facilities to manufacture silicone emulsions are under construction. Joint construction of siloxane production in Zhangjiagang with Dow Corning continues to progress according to schedule and production is expected to begin in 2010. A pyrogenic silica production plant – again in partnership with Dow Corning – has meanwhile been completed. In the next step, the facility will be ramped up.
WACKER POLYMERS continues to expand its dispersible polymer powder capacities. At the Burghausen site, a production facility with an annual capacity of 30,000 metric tons came on stream in fall 2007. WACKER POLYMERS is currently building another facility on the same scale in Nanjing (China). Production is set to commence at the beginning of next year. The division intends to secure and further expand on its leading position in China – a key growth market. Moreover, WACKER POLYMERS acquired full ownership of its two joint ventures Air Products Polymers and Wacker Polymer Systems. The acquisition was successfully closed on February 1, 2008. As the world's leading supplier of dispersible polymer powders for construction applications, the division expects the transaction to benefit its global construction-polymers business on several strategic fronts. Advantages include backward integration at U.S. and Asian dispersion plants, as well as from the expansion of its supply chain outside the eurozone.
The sales gain and growth projects had a positive effect on the number of Group employees. At year-end 2007, WACKER had some 15,000 employees worldwide, 2.6 percent more than the prior-year number.
Siltronic boosted its total sales by 15 percent to €1.45 billion in 2007 (2006: €1.26bn). This rise was primarily due to higher production volumes. Exchange-rate and positive price effects virtually cancelled each other out. Siltronic’s EBITDA reached €478 million in the year under review (2006: €356m) – a gain of 34 percent.
WACKER SILICONES’ total sales rose 6 percent to €1.36 billion in 2007 (2006: €1.29bn). Growth was mainly driven by substantial volume gains, although price increases also played a role. Negative exchange-rate effects, however, impacted our sales development. The division’s EBITDA reached €227 million in 2007 (2006: €232m).
WACKER POLYMERS’ total sales rose 13 percent to €633 million last year (2006: €560m). In particular, construction industry demand for dispersible polymer powder showed extremely strong growth. In 2007, WACKER POLYMERS generated EBITDA of €107 million (2006: €107m).
WACKER POLYSILICON’s total sales rose 40 percent to €457 million in 2007 (2006: €326m). This strong growth was fueled by higher prices and volume gains stemming from the expansion of production capacities. Continued strong solar-industry demand had a particularly positive influence on the division’s polysilicon business. In 2007, WACKER POLYSILICON generated EBITDA of €182 million (2006: €118m) – this is a gain of 54 percent.
WACKER FINE CHEMICALS generated total sales of €112 million in 2007 (2006: €113m), thereby matching the prior-year level. The division’s higher sales of biotech products were able to offset its declining business in custom fine chemicals and catalog products, which had been affected by consolidation measures. WACKER FINE CHEMICALS’ EBITDA was €10 million in 2007 (2006: €11m).
Proposal on Appropriation of Profits
The Executive and Supervisory Boards will propose a dividend of €2.25 per dividend-entitled share (2006: €2.00) at the annual shareholder meeting. This basic dividend reflects a designated minimum payout ratio of 25 percent of net income. Additionally, the Group intends for shareholders to benefit from its excellent financial performance with a special bonus of €0.75. Based on shares entitled to dividends as per December 31, 2007, this corresponds to a payout of €112 million. Another €37 million will be distributed via the special bonus. Calculated in relation to WACKER’s average share price in 2007, the yield of both dividend components is 2.0 percent.
WACKER expects its upward sales trend to continue in 2008 – with WACKER POLYSILICON providing the largest internal sales growth. The complete acquisition of shares in the two joint ventures with Air Products will lead to sales growth, too. Overall, the Group sees a good chance of boosting sales in 2008 by well over 10 percent. EBITDA is also expected to continue its upward trend. For 2008, WACKER has earmarked investments of around €1 billion.