In Q2 2013, WACKER achieved earnings before interest, taxes, depreciation and amortization (EBITDA) of €188.2 million – down some 22 percent from a year ago (€242.1 million), but over 14 percent above Q1 2013 (€164.5 million). The EBITDA margin for the second quarter was 16.4 percent, after 19.8 percent in Q2 2012 and 15.3 percent in Q1 2013. The Group’s earnings before interest and taxes (EBIT) from April to June 2013 totaled €52.5 million (Q2 2012: €111.9 million). The corresponding EBIT margin was 4.6 percent, after 9.2 percent a year ago. Net income for the quarter under review was €15.1 million (Q2 2012: €61.1 million) and earnings per share amounted to €0.27 (Q2 2012: €1.19).
WACKER’s earnings trend from April through June was once again marked by the low price levels for polysilicon. Solar-silicon prices in the second quarter were down about one-third from their prior-year levels. For semiconductor wafers, prices were roughly 10 percent lower than in Q2 2012. On the other hand, total EBITDA at the three chemical divisions climbed to €116.6 million, almost 4 percent above Q2 2012 (€112.3 million) and 21 percent up on Q1 2013 (€96.3 million). The increase was chiefly prompted by volume growth, which, in some cases, was due to seasonal effects. Second-quarter EBITDA included €23.8 million (Q2 2012: €19.4 million) in retained advance payments and damages stemming from terminated contracts with polysilicon customers.
WACKER has specified its sales forecast for full-year 2013, with Group sales now expected to reach €4.5 billion, after €4.63 billion last year. EBITDA for fiscal 2013 is still projected to fall short of the previous year’s figure (€787 million).
“In the face of a persistently difficult market and competitive environment, WACKER closed the first half of 2013 with satisfactory results,” said CEO Rudolf Staudigl on Tuesday in Munich. “Our chemical divisions performed well during the April-through-June period. In polysilicon, low price levels and trade-policy risks remain a challenge. A compromise has now been found in the solar dispute between the European Union and China. If this settlement is implemented, it could mark the start of another global photovoltaics upturn.”
Asia was once again by far the most important market for WACKER products in the quarter under review. The Group achieved sales of €448.3 million in the region between April and June 2013, down about 8 percent from a year ago (€489.3 million). Demand for WACKER’s chemical products, in particular, continued to rise in the second quarter. However, higher sales in chemicals could not compensate for polysilicon and semiconductor-wafer price declines. Compared with Q1 2013 (€434.7 million), WACKER increased its Asian sales by 3 percent.
In Europe, WACKER posted April-through-June sales of €289.2 million, thus almost matching the level of a year ago (€292.2 million). The chemical divisions improved their sales, but semiconductor wafers and polysilicon fell well short of their prior-year figures, largely due to lower prices. The generally weak economic situation dampened business in Europe year on year. Compared with the preceding quarter (€256.7 million), the Group’s sales in this region rose by almost 13 percent.
In Germany, the main factor slowing sales was the solar sector’s ongoing shift to Asia. WACKER generated second-quarter sales of €164.7 million in Germany, down almost 5 percent from the year-earlier period (€173.0 million), but up 3 percent on the preceding quarter (€159.9 million).
In the Americas, sales of €201.9 million were down 10 percent from a year ago (€224.4 million). Most of this decline stemmed from substantially weaker semiconductor-wafer sales. However, WACKER surpassed its Q1 2013 sales of €183.7 million by approximately 10 percent.
In the markets combined under “Other Regions,” second-quarter sales totaled €46.2 million – rising 6 percent on last year (€43.6 million) and 12 percent on Q1 2013 (€41.3 million). Overall, WACKER generated some 86 percent of its second-quarter sales with customers outside Germany (Q2 2012: 86 percent).
Investments and Net Cash Flow
In Q2 2013, WACKER invested €131.3 million to expand production capacity – a good 46 percent less than a year ago (€244.9 million), due to project-related factors.
Investments remained focused on constructing the new polysilicon site at Charleston (Tennessee, USA). This project accounted for around two-thirds of the Group’s capital expenditures in the quarter under review. At the Nanjing site in China, WACKER officially commissioned a new production plant for vinyl acetate-ethylene copolymer (VAE) dispersions in mid-April. With this second reactor line’s additional 60,000 metric tons, WACKER has doubled its production capacity in China for VAE dispersions to a total of 120,000 metric tons per year. Also at Nanjing, WACKER is currently building a new plant to produce polyvinyl acetate solid resins. With an annual capacity of 20,000 metric tons, the plant is expected to come on stream toward the end of this year. Capital expenditures for both projects will total some €40 million.
From April through June 2013, WACKER generated a clearly positive net cash flow of €65.1 million (Q2 2012: €-156.9 million). Due primarily to a significant increase in cash from operating activities and to lower capital expenditures, net cash flow improved by over €220 million on the prior-year level.
The Group’s workforce remained practically unchanged compared with the end of the first quarter. On June 30, 2013, there were 16,203 employees worldwide at WACKER (March 31, 2013: 16,248). As of June 30, 2013, the Group had 12,501 employees in Germany (March 31, 2013: 12,587) and 3,702 at its international sites (March 31, 2013: 3,661).
WACKER SILICONES posted total sales of €437.2 million in Q2 2013, up more than 3 percent against the prior-year period (€422.9 million) and almost 9 percent more than in Q1 2013 (€402.1 million). The division expanded its second-quarter volumes for all major product groups. WACKER SILICONES’ EBITDA amounted to €66.3 million in the quarter under review, almost 11 percent higher than in Q2 2012 (€59.9 million) and a good 23 percent higher than in the preceding quarter (€53.7 million). The EBITDA margin for 2013’s second quarter was 15.2 percent, after 14.2 percent last year and 13.4 percent in the first quarter of 2013. Volume growth and good fixed-cost coverage from high plant utilization were among the factors that positively impacted the division’s earnings.
WACKER POLYMERS generated total sales of €273.4 million from April through June 2013 (Q2 2012: €276.1 million). This 1-percent decline was primarily due to somewhat lower year-on-year prices, which were not fully offset by the division’s higher volumes. Compared with the preceding quarter (€226.7 million), sales were up by almost 21 percent. Here, WACKER POLYMERS benefited from a significant rise in demand from construction-industry customers after the long winter in Europe. Second-quarter EBITDA at the division amounted to €44.4 million, just under 2 percent lower than in Q2 2012 (€45.3 million), but 24 percent above Q1 2013 (€35.7 million). The significant increase in quarter-on-quarter earnings was mainly due to higher volumes. The EBITDA margin for April through June 2013 reached 16.2 percent (Q2 2012: 16.4 percent). In the first quarter of 2013, the EBITDA margin was 15.7 percent.
WACKER BIOSOLUTIONS reported total sales of €40.5 million for April through June 2013, after €40.1 million a year ago. Sales were thus roughly at last year’s level and on a par with the preceding quarter (€40.5 million). Products used in agricultural and medical applications saw year-on-year growth. EBITDA at WACKER BIOSOLUTIONS decreased by €1.2 million to €5.9 million in Q2 2013, after €7.1 million a year earlier. Compared with Q1 2013 (€6.9 million), EBITDA declined by €1.0 million in the second quarter. The EBITDA margin for Q2 2013 was 14.6 percent, after 17.7 percent last year and 17.0 percent in the preceding quarter.
In a market environment shaped by the ongoing challenges of consolidation across the solar industry and by trade-policy risks, WACKER POLYSILICON generated total sales of €203.3 million between April and June 2013 (Q2 2012: €286.8 million) – 29 percent less than a year earlier. This decline was mainly caused by solar-silicon prices, which were about one-third lower than in the same period last year. Compared with Q1 2013 (€235.4 million), sales decreased by almost 14 percent. The main factor here was that the second quarter did not reach the first quarter’s very high volumes, since there were fewer orders on the books. Fears that China might retroactively introduce punitive tariffs on polysilicon imports had resulted in customers taking delivery of lower quantities in Q2 relative to Q1. Prices for polysilicon remained stable, yet low, quarter on quarter. Amid lower prices for solar silicon, second-quarter EBITDA at WACKER POLYSILICON declined by almost 47 percent to €64.0 million (Q2 2012: €120.3 million). EBITDA included €23.8 million from retained advance payments and damages for terminated polysilicon contracts (Q2 2012: €19.4 million). In Q1 2013, this item had amounted to €32.2 million. Compared with the first three months of 2013 (€52.5 million), WACKER POLYSILICON increased its EBITDA by over 22 percent. This was partly the result of higher plant utilization compared with the preceding quarter. The EBITDA margin for the second quarter was 31.5 percent, after 41.9 percent in Q2 2012 and 22.3 percent in Q1 2013.
Siltronic posted total sales of €200.1 million in Q2 2013, after €247.4 million last year – down 19 percent. This decline was mainly due to lower year-on-year prices for silicon wafers. Compared with Q1 2013 (€171.2 million), sales climbed by 17 percent, driven primarily by appreciably stronger customer demand. Volumes grew substantially relative to the preceding quarter. Although silicon-wafer prices were much lower than a year ago, Siltronic reported positive EBITDA for the second quarter. Earnings were supported by Siltronic’s improvements to production costs, compared with a year ago. Conversely, exchange-rate effects stemming from both a weaker yen and US dollar slowed the earnings trend. Overall, the division achieved EBITDA of €9.1 million in Q2 2013, €3.9 million less than a year ago (€13.0 million), but €8.4 million more than in the preceding quarter (€0.7 million). The EBITDA margin for the second quarter of 2013 came in at 4.5 percent, compared with 5.3 percent last year and 0.4 percent in Q1 2013.
The world economy is expected to gain some momentum during the second half of 2013, though the pace of regional expansion will remain very varied. The risks to world trade and growth due to the sovereign-debt and financial crisis in the USA and Europe are still as strong as ever.
In 2013 and the following years, three factors will shape WACKER’s business strategy: expansion into emerging markets and regions, innovations, and the substitution of existing market offerings with WACKER products.
WACKER has made resource management a key priority for this year. With an ambitious cost-cutting initiative in every business field, WACKER intends to save €200 million this year. Alongside specific measures at Siltronic and WACKER POLYSILICON, another key tool here is the Wacker Operating System (WOS) – a continuous productivity improvement program in chemicals, spanning the entire supply chain.
In 2013, WACKER intends to invest some €550 million. At about the same level as annual depreciation, this amount is unlikely to be completely covered by the cash flow expected from operating activities. Net financial liabilities will continue to grow during the year. The target here is to stay below the one-billion-euro mark by year-end. Although 2013’s net cash flow will remain negative, the gap will be much smaller than a year ago.
WACKER’s medium-term targets through to 2017 – which were presented by the Executive Board at Capital Markets Day in London in early July – anticipate average sales growth of about 6 percent annually for the coming years. By 2017, sales are expected to climb to between €6 billion and €6.5 billion, with Group EBITDA increasing by some 9 percent per year during this period to reach around €1.2 billion in 2017. This corresponds to an EBITDA margin of about 20 percent. The return on capital employed (ROCE) is projected to reach over 11 percent by that time.
In mid-2013, the Executive Board specified its estimates for full-year sales. Based on assumptions made in the Q1 2013 report about energy and raw-material costs, personnel expenses and exchange-rate effects, the Group expects sales for full-year 2013 to come in at around €4.5 billion (2012: €4.63 billion). For this to be achieved, however, it is important that there is no escalation in the trade dispute about Chinese solar products. This forecast is based on prices that are weaker than last year, especially for polysilicon and semiconductor wafers. In chemicals, WACKER expects higher full-year sales, thanks to volume growth amid lower prices. Overall, the price declines are likely to reduce Group sales by some €350 million.
Group EBITDA for 2013 is expected to remain below last year’s figure, as already forecast in the 2012 Annual Report, primarily due to lower year-on-year prices for solar silicon and semiconductor wafers. At the chemical divisions, EBITDA is projected to edge above the prior-year figures. WACKER POLYSILICON is planning to make a substantial contribution to EBITDA in 2013, but its earnings will not reach the prior-year level, based on the polysilicon prices in the division’s estimates. At Siltronic, there are currently no signs of a major EBITDA improvement on the prior-year period.
Group net income, according to WACKER’s projections, will be slightly positive, amid a year-on-year rise in depreciation and a higher negative financial result.
Information for editorial offices: The Q2 2013 report is available for download on the WACKER website (www.wacker.com) under Investor Relations.