WACKER’s Q2 earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to €329.0 million (Q2 2014: €229.5 million), up by a good 43 percent. Compared with the preceding quarter (€267.1 million), EBITDA grew by around 23 percent. There was a corresponding improvement in the EBITDA margin, which rose to 24.0 percent from 18.5 percent in Q2 2014 and 20.0 percent in Q1 2015.
Advance payments retained and damages received were a significant factor in the strong rise in EBITDA. In the reporting quarter, WACKER terminated contractual and delivery relationships with customers from the solar sector, resulting in special income of €86.7 million. Adjusted for this amount, WACKER’s EBITDA grew by almost 6 percent year over year. There were no non-recurring effects in Q2 2014.
WACKER’s Q2 earnings before interest and taxes (EBIT) amounted to €187.9 million (Q2 2014: €82.1 million). That was more than twice as much as a year ago, yielding an EBIT margin of 13.7 percent (Q2 2014: 6.6 percent). Here, too, special income at WACKER POLYSILICON had a positive impact on EBIT. Adjusted for non-recurring effects, EBIT at WACKER increased by a good 23 percent year over year. Net income for the reporting quarter was €108.2 million (Q2 2014: €29.4 million) and earnings per share came to €2.21 (Q2 2014: €0.64).
WACKER confirmed its full-year forecast for 2015. The company is expecting Group sales, which totaled €4.83 billion in 2014, to rise by around 10 percent, putting the company over the €5-billion mark for the first time in its history. EBITDA on a comparable basis, i.e. adjusted for special income, is expected to rise slightly. Group net income is projected to be lower than a year ago because special income will probably not be as high as in 2014.
“At the midway point in the year, we are well on track to achieve the targets we set for 2015,” said CEO Rudolf Staudigl in Munich on Monday. “Amid higher volumes and currency tailwinds, Group sales grew markedly in the second quarter. We further enhanced our profitability, even without considering non-recurring effects. Although challenges in the economy are increasing, we are optimistic that our operating activities will continue to develop positively in the second half of the year.”
In the reporting quarter, Asia remained by far the largest market for WACKER products, accounting for 42 percent of the the company’s sales in the period April through June (Q2 2014: 42 percent). At €577.4 million (Q2 2014: €525.5 million), sales were up 10 percent year over year. Apart from WACKER POLYSILICON, where sales declined, every division posted double-digit growth in this region. Silicones and polymer products performed particularly well. Compared with Q1 2015 (€569.3 million), the WACKER Group increased its sales by over 1 percent in Asia.
In Europe, WACKER achieved second-quarter sales of €314.1 million (Q2 2014: €300.8 million), up a good 4 percent year over year and almost 6 percent quarter over quarter (€297.0 million). All of the business divisions exceeded their respective prior-year figures, except for WACKER POLYMERS, whose sales in Europe held steady. Relative to Q1 2015, every division grew its sales in Europe.
WACKER’s sales in Germany came in at €172.1 million in the reporting quarter (Q2 2014: €161.6 million), up almost 7 percent over a year ago, but a good 2 percent less than in Q1 2015 (€176.0 million). Sales of polysilicon and silicones, in particular, grew year over year.
In the Americas, the Q2 sales trend remained strongly influenced by the favorable effects of the weak euro. At the same time, the good economic conditions in the reporting quarter helped fuel brisk customer demand for WACKER’s products. Silicones performed particularly strongly in this region. Overall, WACKER sales in the Americas totaled €249.8 million for the quarter through June 2015 (Q2 2014: €207.2 million), up almost 21 percent on a year ago and a good 2 percent more than in Q1 2015 (€243.8 million).
Group sales in the markets combined under “Other regions” totaled €57.1 million in Q2 2015, after €47.5 million in Q2 2014 and €48.8 million in Q1 2015. In total, WACKER generated over 87 percent of its second-quarter sales with customers outside Germany (Q2 2014: 87 percent).
Investments and Net Cash Flow
The WACKER Group invested €214.2 million in the second quarter of 2015 (Q2 2014: €101.0 million). That was more than twice as much as a year ago, and was the result of project-related factors and changes in currency effects. The Group’s net cash flow came to €21.0 million in Q2 2015 (Q2 2014: €49.6 million). The main reason for this substantial year-over-year decline was higher capital expenditure than in Q2 2014. On the other hand, good operating performance as well as special income at WACKER POLYSILICON had a positive impact on cash flow.
The demand-driven expansion of polysilicon production capacities remained the focus of investment activities at the WACKER Group in the second quarter, with projects of this kind accounting for almost 80 percent of the Group’s total investment spending during the quarter. Construction of the new polysilicon site in Charleston, Tennessee (USA) continued on schedule in the current reporting period. Before the end of this year, WACKER will begin ramping up the facilities at this site, the biggest single investment project in the company’s history. In parallel, the production output of the existing hyperpure polysilicon facilities at the Burghausen and Nünchritz sites in Germany is to be expanded by optimizing the processes already in place. WACKER intends to increase its overall annual production capacity for polysilicon to about 80,000 metric tons by 2017.
Further capital expenditures during the reporting quarter focused on increasing capacities for polymer products. WACKER is expanding its production plants for vinyl acetate-ethylene copolymer dispersions at Calvert City, Kentucky (USA), where it is building a new reactor with an annual capacity of 85,000 metric tons. Capital expenditures for the new facilities and for infrastructure expansion amount to some €50 million. The new reactor is due to come on stream in the next few weeks.
At Burghausen (Germany), WACKER officially started up a new dispersible-polymer-powder plant with an annual capacity of 50,000 metric tons in mid-April. In early June, a new plant for specialty monomers also came on stream at Burghausen, with an annual capacity of 3,800 metric tons. The specialty monomers in question – vinyl neodecanoate and vinyl laurate – are important raw materials for producing high-value specialty grades of dispersible polymer powders. The new facilities reinforce WACKER’s position as the world’s biggest manufacturer of dispersible polymer powders in a growth market shaped by such global trends as urbanization, renovation and energy efficiency.
Relative to Q1 2015, the number of WACKER employees worldwide changed only marginally during the second quarter of 2015. The Group had 16,928 employees as of June 30, 2015 (March 31, 2015: 16,844). At the end of the reporting quarter, WACKER had 12,378 employees in Germany (March 31, 2015: 12,400) and 4,550 at its international sites (March 31, 2015: 4,444).
WACKER SILICONES increased its sales and earnings in Q2 2015. Between April and June 2015, the division generated total sales of €506.3 million (Q2 2014: €441.2 million). It was the first time that it exceeded the half-a-billion-euro threshold in a single quarter. Relative to a year ago, sales were up almost 15 percent. Compared with Q1 2015 (€474.8 million), WACKER SILICONES achieved close to 7 percent growth. Favorable exchange rates and higher volumes were the main factors driving sales. Somewhat improved prices in certain product segments also lifted sales year over year. Higher sales were the main reason that WACKER SILICONES posted a substantial increase in EBITDA in Q2 2015. Second-quarter EBITDA reached €77.3 million (Q2 2014: €57.4 million), almost 35 percent more than a year ago. Compared with Q1 2015 (€67.7 million), EBITDA rose by around 14 percent. The EBITDA margin for the second quarter of 2015 was 15.3 percent, after 13.0 percent in the prior-year period and 14.3 percent in Q1 2015.
In Q2 2015, WACKER POLYMERS achieved total sales of €314.6 million (Q2 2014: €285.5 million), up by over 10 percent. Compared with the first quarter (€284.6 million), sales grew by almost 11 percent. Favorable exchange rates, higher overall volumes and better prices year over year contributed to this sales growth. Compared with a year ago, EBITDA at WACKER POLYMERS improved substantially in Q2 2015, climbing almost 31 percent to €56.8 million (Q2 2014: €43.5 million). The main reasons for this growth were higher sales due to favorable exchange rates and to higher quantities of dispersible polymer powders sold. At the same time, the division almost matched its first-quarter EBITDA (€59.9 million). The EBITDA margin for the second quarter was 18.1 percent, after 15.2 percent a year ago and 21.0 percent in the first quarter.
In the second quarter of 2015, WACKER BIOSOLUTIONS generated total sales of €52.7 million (Q2 2014: €46.6 million), 13 percent more than a year ago. Favorable exchange rates and higher prices were the main drivers of this growth. Relative to Q1 2015 (€49.4 million), sales rose by close to 7 percent. Acetylacetone and cysteine performed especially well year over year. WACKER BIOSOLUTIONS also further enhanced its EBITDA in Q2 2015, which at €9.5 million was up by about 16 percent over Q2 2014 (€8.2 million). Higher sales were the main factor driving this growth. Compared with the first quarter (€8.8 million), EBITDA at WACKER BIOSOLUTIONS rose by 8 percent. The EBITDA margin for the reporting quarter amounted to 18.0 percent, after 17.6 percent in Q2 2014 and 17.8 percent in Q1 2015.
In Q2 2015, WACKER POLYSILICON achieved total sales of €261.3 million (Q2 2014: €273.2 million), a good 4 percent less than a year ago. This decrease stemmed mainly from the fact that euro prices for solar silicon were somewhat lower compared with the same quarter last year. Relative to Q1 2015 (€289.4 million), sales were down by almost 10 percent due to lower volumes. After robust demand in the first quarter of the year, many customers reduced their inventory levels in the second quarter and ordered less polysilicon. Euro prices for polysilicon declined slightly compared with Q1. WACKER POLYSILICON’s second-quarter EBITDA amounted to €161.4 million (Q2 2014: €87.9 million). This year-over-year increase of almost 84 percent yielded an EBITDA margin of 61.8 percent (Q2 2014: 32.2 percent). Relative to Q1 2015 (€78.7 million), WACKER POLYSILICON more than doubled its EBITDA. This strong growth was attributable to advance payments retained and damages received. In the reporting quarter, the division terminated contractual and delivery relationships with customers from the solar sector, resulting in special income of €86.7 million. Earnings in Q2 2014 had not been influenced by any non-recurring effects of this type. Adjusted for advance payments retained and damages received, second-quarter EBITDA at WACKER POLYSILICON was 15 percent below the prior-year level. The main reasons for the decline were lower polysilicon prices relative to a year ago and higher start-up costs for the site in Charleston, Tennessee (USA). Ongoing measures to enhance efficiency and productivity could not fully compensate for this decrease. In line with the forecast, the adjusted EBITDA margin in Q2 2015 was 28.6 percent.
At Siltronic, markedly higher volumes, especially for 300 mm wafers, led to higher sales and earnings year over year. Siltronic generated total sales of €246.7 million in the second quarter of 2015 (Q2 2014: €210.4 million), a good 17 percent more than a year ago. Sales rose by over 3 percent relative to Q1 2015 (€238.7 million). In addition to higher volumes, the weak euro had a favorable impact on sales in the reporting quarter. Although prices for silicon wafers, which are mostly invoiced in US dollars, were noticeably lower than a year ago, the favorable exchange rate meant that average euro prices were higher. Quarter over quarter, wafer prices were virtually unchanged. Siltronic achieved EBITDA of €31.4 million in Q2 2015 (Q2 2014: €28.1 million). That was a rise of close to 12 percent and yielded an EBITDA margin of 12.7 percent (Q2 2014: 13.4 percent). Sales growth and higher volumes, especially for 300 mm wafers, were the main reasons for the EBITDA increase. Good coverage of fixed costs thanks to high plant utilization was another factor influencing earnings. In addition, the efforts made by Siltronic to cut costs and enhance productivity are having a lasting, positive effect on earnings. Compared with the preceding quarter (€40.0 million), Siltronic’s EBITDA decreased by almost 22 percent, mainly due to €17.6 million in currency hedging losses and currency translation effects with respect to receivables.
Consensus estimates by economic experts indicate that the global economy is set to continue growing moderately through the rest of 2015. This, however, presupposes that there will be no further escalation of financial risks and geopolitical conflicts, and that Chinese stock-market turbulence will be only temporary.
Sales at WACKER SILICONES are expected to increase substantially in 2015. Particular areas of growth are products and applications for personal care and medical technology, as well as for the electrical and electronics sectors. EBITDA is expected to be markedly above the prior-year figure. However, higher prices for silicon-metal will dampen that increase somewhat.
WACKER POLYMERS is anticipating a significant increase in sales for the year as a whole, with both dispersions and dispersible polymer powders expected to help drive this growth. The division foresees a substantial year-over-year increase in EBITDA.
WACKER BIOSOLUTIONS, too, is expected to post substantial growth in 2015. Now that Scil Proteins Production GmbH in Halle (Germany) has been integrated, the division sees further growth potential for its biologics business. Thanks to new product developments, substantial growth is anticipated in the nutrition segment as well. EBITDA at WACKER BIOSOLUTIONS should also show a clear year-over-year increase.
In WACKER’s polysilicon business, both volumes and sales are projected to rise slightly in 2015. The company expects the photovoltaic market to continue on its growth trajectory. Nevertheless, overcapacity persists along the entire supply chain. That being the case, a further reduction in polysilicon production costs remains the key objective. EBITDA is forecast to decline significantly year-over-year, since less special income – in the form of advance payments retained and damages received – is expected in 2015 than was posted in 2014. EBITDA will also be reduced by start-up costs at the new polysilicon production site in Charleston, Tennessee (USA).
Siltronic, too, expects to achieve higher full-year sales in 2015 amid somewhat higher volumes and more favorable exchange rates than last year. Siltronic expects the market for 300 mm silicon wafers to continue growing, while demand for 200 mm wafer diameters is likely to remain stable. Demand for smaller-diameter wafers is expected to decline slightly. EBITDA is projected to increase substantially year on year.
Overall, WACKER expects its full-year 2015 sales to rise by about 10 percent. The company anticipates a moderate year-over-year rise in EBITDA on a comparable basis, i.e. adjusted to exclude special income. The return on capital employed (ROCE) is expected to be slightly lower than last year’s figure of 8.4 percent. At about €775 million, capital expenditures will be higher than last year. Depreciation will amount to around €625 million, slightly higher than last year’s figure. Net cash flow will be slightly positive. Net financial debt at year-end is expected to remain roughly at the prior-year level. Group net income is projected to be lower than last year.
Information for editorial offices: The Q2 2015 report is available for download on the WACKER website (www.wacker.com) under Investor Relations.