Group Equity Increased
Equity rose 7 percent to €2.63 billion as per December 31, 2011 (2010: €2.45 billion). However, because total equity and liabilities were so much higher, the equity ratio has actually fallen slightly year over year, to 42.2 percent (2010: 44.5 percent). Group net income added €356.1 million to equity (2010: €497.0 million). This was offset by dividend payouts and distribution of dividends totaling €160.1 million. Other equity items included uncapitalized currency-conversion effects from non-German subsidiaries’ net assets and from changes in the market value of derivative financial instruments. These effects had a negative impact of €12.3 million on equity.
WACKER also posted an increase in liabilities, climbing 18 percent to €3.61 billion (2010: €3.05 billion). At 58 percent, their share of total equity and liabilities edged up compared with 2010 (55 percent).
Noncurrent Liabilities Rise Due to Higher Financial Liabilities
and Advance Payments from Customers
Noncurrent liabilities rose 21 percent to €2.49 billion (2010: €2.06 billion). Their share of total assets is 40 percent (2010: 37 percent). Noncurrent provisions climbed 5 percent to €782.3 million (2010: €745.8 million). The increase was marked by higher pension provisions, in particular, which grew €51.7 million to €527.1. Because we upwardly revised our life-expectancy assumptions relating to the Group’s pension-fund beneficiaries in 2011, there was a substantial rise in pension provisions. Revised life expectancy accounted for €29.9 million of the €51.7 million increase in these provisions. When the Hikari site is closed in 2012, we will be paying out all pension claims to the employees there. Accordingly, these benefit obligations have been reclassified as current liabilities. Other noncurrent provisions were reduced mainly by reversals of the provisions for phased early retirement.
Noncurrent financial liabilities were up, rising to €662.1 million (2010: €407.1 million). Beside exchange-rate effects, two other items had an influence. In December 2011, we accessed the second €200 million installment of a long-term investment loan from the European Investment Bank. We renegotiated and extended one investment loan in the first quarter, thereby reclassifying it from a current liability to a noncurrent one. Furthermore, additions from finance-lease obligations increased noncurrent financial liabilities.
There also were changes in other noncurrent liabilities, which rose to €1.04 billion (2010: €909.0 million). The increase was primarily due to the signing of long-term polysilicon-supply agreements with customers. In 2011, the value of long-term advance payments received rose €131.0 million to €1.0 billion (2010: €869.9 million), representing 16 percent of total assets.
Current Liabilities Rise amid High Trade Payables
WACKER posted an increase in current liabilities of 13 percent to €1.12 billion (2010: €992.5 million). Their share of total assets was unchanged at 18 percent. Current financial liabilities declined slightly to €115.8 million (2010: €126.3 million).
Trade payables were 20 percent higher than in the previous year, up €67.4 million to €402.6 million (2010: €335.2 million). Their share of total assets was 6 percent. This significant year-over-year increase was the result of increased investment activity for the new polysilicon plant in Tennessee, which increased trade payables by €74.0 million as of the reporting date.
The other current provisions and liabilities rose to €602.9 million (2010: €531.0 million), up €71.9 million on a year earlier. Here, the major components were current provisions for contingent losses from purchase obligations in China relating to long-term contracts between WACKER and the associated company Dow Corning (ZJG) Co., Ltd., and for current advance payments received for polysilicon deliveries. These advance payments climbed €39.4 million to €201.7 million (2010: €162.3 million). Additional items included liabilities from profit-sharing compensation and liabilities relating to the closure of the Hikari site.
Unrecognized Assets and Off-Balance-Sheet Financial Instruments
An important asset that does not appear on our statement of financial position is the value of the WACKER brand and other Group trademarks. We consider the high profile and reputation of our trademarks to be a key factor influencing customer acceptance of our products and solutions. However, there are other intangible assets that are vital for success and positively impact our business – for example, long-standing customer relationships and customer trust in our product and solution-related expertise. Just as important are our employees’ in-depth skills and experience, and our many years of expertise not only in R&D and project management, but also in designing production and business-process structures. In particular, our integrated production system gives us a competitive edge over our rivals.
Another key success factor is WACKER’s sales network, which has evolved over many years and enables the Group to market and sell its range of products and services locally to customers.
WACKER does not use any off-balance-sheet financing instruments.