There are several reasons for this jump in earnings. Last year, WACKER achieved higher prices overall – primarily for polysilicon, but also in several chemical-business segments. Productivity programs, measures to curb specific energy consumption and higher production volumes have reduced Group costs by around €200 million. At Siltronic, the first-time consolidation of Siltronic Silicon Wafer Pte. Ltd. had a positive effect. WACKER POLYSILICON terminated or restructured contractual relationships with a number of solar-industry customers. In this connection, the division retained advance payments and received damages. That resulted in income of €206.3 million (2013: €77.6 million). Adjusted for this effect, Group EBITDA in 2014 was €836.0 million (adjusted 2013: €601.1 million), rising 39 percent and yielding an EBITDA margin of 17.3 percent.
WACKER’s earnings before interest and taxes (EBIT) reached €443.3 million in 2014 (2013: €114.3 million), thus almost quadrupling year on year. Looking at the bottom line, WACKER ended 2014 with Group net income of €195.4 million (2013: €6.3 million). That is about €189 million more than in the previous year.
In the first two months of the current year, WACKER has experienced solid demand. Across all divisions, the sales of these two months beat the comparable prior-year figures. Overall, the chemical company forecasts sales of some €1.3 billion for Q1 2015 (Q1 2014: €1.16 billion).
For full-year 2015, WACKER is expecting higher consolidated sales and higher EBITDA (adjusted for special income) compared with 2014. The company is anticipating a high-single-digit percentage increase in sales, with all divisions expected to achieve higher volumes and sales than in 2014. Relative to a year earlier, EBITDA should rise modestly, adjusted on a comparable basis to exclude special solar-sector income from damages received and from restructured contractual and delivery relationships with customers. Group net income will come in below the 2014 figure, due to lower special income and a tax rate of slightly more than 50 percent.
“I am confident that 2015 will be a good year for WACKER,” said Group CEO Rudolf Staudigl in Munich on Tuesday. “We want to continue 2014’s upward trend and achieve sales of more than five billion euros for the first time in the company’s history. This year will see us starting to produce polysilicon at our new plant in Tennessee. The conclusion of our largest-ever single investment project will mark a major milestone of having integrated production plants in all of our key regions around the world. That will be highly important for our strategy of ongoing expansion.”
During 2014, the Group invested €572.2 million (2013: €503.7 million). That is almost 14 percent more than a year earlier due to project-related factors. WACKER’s investing activities remained centered on the construction of the new polysilicon site at Charleston, Tennessee (USA). About €310 million – somewhat more than half of all 2014 investments – went toward this project. Construction there continued as planned throughout 2014, and production is due to commence in the second half of 2015.
Investing activity in 2014 additionally focused on production-capacity expansion for polymer products and silicones. WACKER built a new dispersible polymer powder production plant at the Burghausen site. It has an annual capacity of 50,000 metric tons and will come on stream in the next few weeks. A plant for modified siloxanes in Burghausen was expanded as well. This intermediate for silicones is used in a variety of end products, such as silicone fluids, emulsions and resins. A new facility for manufacturing polyvinyl acetate solid resins has initiated production at the polymer site in Nanjing (China). Its annual capacity is 20,000 metric tons. The Group is extending its existing production setup at the Calvert City site (USA) by building a new dispersions reactor. Capacity there will increase by 85,000 metric tons per year. The reactor is expected to come on stream mid-year.
WACKER’s workforce increased slightly in 2014 by some 700 employees. WACKER had 16,703 employees worldwide as of December 31, 2014 (Dec. 31, 2013: 16,009), up 4.3 percent on the prior-year period. This increase was mainly the result of the takeover of a majority stake in Singapore-based Siltronic Samsung Wafer and the acquisition of Scil Proteins Production in Halle, Germany. At year-end, WACKER’s German sites had 12,366 employees (2013: 12,322) and its international sites 4,337 (2013: 3,687).
Net Cash Flow, Net Financial Debt and Equity Ratio
Net cash flow almost doubled year on year, totaling €215.7 million in 2014 (2013: €109.7 million). Higher net income is the main reason for this increase. As planned, net financial debt increased against the prior year and amounted to €1,080.6 million at the balance sheet date (Dec. 31, 2013: €792.2 million). The rise of €288.4 million was less than had been expected at the start of 2014.
WACKER’s total assets rose 10 percent last year, totaling €6.95 billion as of December 31, 2014 (Dec. 31, 2013: €6.33 billion), mainly due to currency-translation effects, the increase in property, plant and equipment, and higher trade receivables. On the reporting date, Group equity amounted to €1.95 billion (Dec. 31, 2013: €2.20 billion). Higher provisions for pensions due to lower discount rates were the main reason for this decline. As a result, the equity ratio was 28.0 percent (Dec. 31, 2013: 34.7 percent).
In 2014, WACKER SILICONES increased its sales by almost 4 percent to €1.73 billion (2013: €1.67 billion), primarily due to higher volumes and positive product-mix effects. EBITDA was lower year on year, declining around 9 percent to €209.8 million (2013: €230.2 million). A key reason for the decline was a non-recurring effect from the previous year. In 2013, the division had reversed provisions that had been set aside in the past, to cover contingent losses from the joint venture with Dow Corning in China. This reversal had positively impacted 2013’s EBITDA by some €14 million. In addition, slightly lower prices, particularly at the start of 2014, held back the earnings trend.
WACKER POLYMERS’ sales rose substantially in 2014, climbing almost 9 percent to €1.06 billion (2013: €978.7 million). The increase was fueled by higher volumes for dispersions and dispersible polymer powders and by slightly higher prices. At €149.5 million, EBITDA was marginally higher than in 2013 (€147.8 million). The strong rise in the price of vinyl acetate monomer, a raw material, dampened earnings.
WACKER BIOSOLUTIONS posted a considerable increase in sales, which rose 11 percent to €176.2 million year on year (2013: €158.4 million). This growth was due to the integration of Halle-based Scil Proteins Production GmbH, which was consolidated for the first time in 2014, as well as to higher volumes and prices. At €23.6 million, EBITDA was at the prior-year level (2013: €23.6 million).
WACKER POLYSILICON’s sales rose substantially in 2014, up almost 14 percent to €1.05 billion (2013: €924.2 million). The rise was due to higher volumes and better prices. The division increased its polysilicon sales volumes to 51,000 metric tons (2013: 49,000 metric tons). EBITDA more than doubled, climbing to €537.0 million (2013: €233.9 million). Factors supporting this positive earnings trend were higher polysilicon prices and special income. In total, the business division posted €206.3 million in income from the retention of advance payments and the receipt of damages in connection with the termination or restructuring of customer contracts (2013: €77.6 million).
Siltronic achieved substantially higher sales in 2014 than in the previous year, up 15 percent to €853.4 million (2013: €743.0 million). This growth was mainly due to the first-time consolidation of Siltronic Silicon Wafer Pte. Ltd. since Q1 2014. The sales trend would have been even better had it not been for lower prices and slightly negative exchange-rate effects. Volumes were higher across all wafer diameters, especially 300 mm silicon wafers. EBITDA improved compared with the previous year, climbing to €114.0 million (2013: €26.5 million), chiefly due to the full consolidation of Siltronic silicon wafer.
Proposal on Appropriation of Profits
Wacker Chemie AG posted a retained profit under German Commercial Code accounting rules of €960.5 million in 2014. The Executive and Supervisory Boards will propose a dividend of €1.50 (2013: €0.50) per share at the Annual Shareholders’ Meeting. Based on the number of shares entitled to dividends as of December 31, 2014, the cash dividend corresponds to a payout of €74.5 million. Calculated in relation to WACKER’s average share price in 2014, the dividend yield is 1.7 percent.
Business analysts expect the global economy to continue on its growth trajectory in 2015. Momentum will be strongest in Asia. Continued strong economic growth is projected for the USA. According to market experts, the European economy will continue to recover this year. Ultimately, the rate of global economic expansion depends on the extent to which geopolitical risks can be contained. WACKER’s own scenario assumes that worldwide economic output will increase in 2015.
WACKER’s polysilicon business is expected to generate both volume and sales growth in 2015. The company’s assumption is that the photovoltaic market will continue on its growth trajectory. Nevertheless, overcapacity is still symptomatic of the entire supply chain. As previously, WACKER’s key objective is to again reduce polysilicon production costs. The new production site in Charleston, Tennessee (USA), is scheduled to come on stream during the second half of 2015. WACKER POLYSILICON’s EBITDA is expected to decline considerably, since the special income from the retention of advance payments and the receipt of damages is projected to be lower than in 2014. EBITDA will also be reduced by start-up costs at the new polysilicon production site in Charleston.
In its semiconductor business, WACKER expects sales growth in 2015 amid slightly higher volumes and more favorable exchange rates than a year earlier. The company expects the market for 300 mm silicon wafers to continue growing. In the 200 mm segment, WACKER’s projection is for stable demand. Smaller-diameter wafers are likely to experience a slight slowdown in demand. EBITDA is projected to rise considerably compared with last year.
WACKER’s chemical divisions offer good prospects for further growth in 2015. A substantial sales increase is expected at WACKER SILICONES. Sales growth will be fueled by every WACKER SILICONES business unit. EBITDA should be markedly above the prior-year figure. WACKER POLYMERS is aiming for a substantial increase in sales. Both dispersions and dispersible polymer powders will contribute to sales growth. The division’s EBITDA is likely to increase considerably compared with the previous year. WACKER BIOSOLUTIONS is also forecasting a further substantial rise in sales. Now that the integration of Halle-based Scil Proteins Production GmbH is complete, the division sees further growth potential in its pharmaceutical proteins business. Thanks to new product developments, a considerable sales rise is expected in the nutrition segment as well. Divisional EBITDA in 2015 is projected to show a clear year-on-year increase.
In total, WACKER anticipates that Group sales will rise by a high-single-digit percentage in 2015. Earnings before interest, taxes, depreciation and amortization are expected to grow slightly, adjusted on a comparable basis to exclude special income. The EBITDA margin, on the other hand, will be lower, in large part due to the start-up costs for the new production site in Charleston, Tennessee (USA). Capital expenditures will be higher than last year, climbing to about €700 million. Depreciation will amount to around €625 million, slightly higher than the prior-year level. WACKER expects a slightly positive net cash flow. Net financial debt will climb by about €200 million to €300 million, primarily due to investments in Tennessee. Group net income is projected to be lower than last year.