WACKER Stock in 2012

Difficult conditions and adverse sentiment in global capital and financial markets dominated the performance of WACKER’s stock in 2012. Uncertainty among market participants was chiefly fueled by the as-yet unsolved sovereign-debt crisis in eurozone countries. In addition, the effects of consolidation and political uncertainty in the solar industry weighed on WACKER’s stock price.

Consolidation Process in Photovoltaics and Talk of Trade Barriers Strongly Impact WACKER’s Stock Price

The first quarter of 2012 was marked by political efforts to overcome the sovereign-debt crisis in Europe and preserve the European common currency. Accordingly, cautious skepticism was the predominant sentiment on the exchanges in early 2012, even though key corporate data and business indicators were pointing to a gradual improvement in overall economic conditions.

Another major factor impacting the stock’s performance was reduced demand and ongoing consolidation in the photovoltaic industry. Public discussion on feed-in tariff cuts in Germany and Italy, previously the key growth markets, plus solar-company insolvencies, were clearly taking their toll on an initially optimistic market.

Overall, the release of WACKER’s preliminary 2011 figures on January 26, 2012, and the publication of the annual report on March 14, 2012, did not affect the price of WACKER’s stock.

The stock essentially moved sideways in Q1 2012, registering an increase of 6 percent. It started out the year at a price of €62.15 and closed the first quarter at €66.11. Experiencing a temporary upturn in early February, WACKER’s stock reached its high for the year at €91.00 on February 9. Then, demand slowed in some of the key markets for solar installations, especially in Germany and Italy, which returned the stock to a lower price level. In March, it traded within a range from approximately €65 to €70.

In Q2 2012, developments in global capital and financial markets were predominantly shaped by Europe’s sovereign-debt crisis, which also dampened the world economy. Stock-market sentiment was rather skeptical during Q2 2012.

During that quarter, WACKER’s stock fell from €64.71 (April 2, 2012) to €54.20 (June 29, 2012). The stock moved in line with the trends registered by the DAX and MDAX benchmark indices during Q2 2012, though with more volatility.

The release of WACKER’s Q1 2012 report on May 4 and the Annual Shareholders’ Meeting of May 16 had no directly identifiable impact on the price of the stock.

In the third quarter of 2012, both the situation and mood in capital and financial markets worldwide eased a little, but did not show any fundamental improvement. The European Central Bank’s decision to buy crisis-hit countries sovereign bonds, in unlimited amounts if necessary, helped calm financial markets somewhat.

During this period, WACKER’s stock was appreciably undermined by price and consolidation pressures, and by policy-driven uncertainty in the solar industry. In early September, the European Union launched anti-dumping investigations against Chinese solar companies. Earlier, in mid-May, the US Department of Commerce had decided to impose provisional duties – ranging from 31 to 250 percent, in some cases – on Chinese-made solar modules imported into the US. Chinese authorities, in turn, started to investigate the pricing of polysilicon imported into China. Initially limited to US and South Korean products, the investigation was subsequently expanded to include European polysilicon as well. Fears of a potential trade war between not only China and the USA, but also the European Union and China, reduced market confidence further. As reported in its second-quarter publications, WACKER adjusted its polysilicon production capacity to match reduced customer demand.

Entering the third quarter of 2012 at €55.80, the stock subsequently fell, closing the quarter at €49.96. Amid the prevailing situation, the stock was neither lifted by publication of the Q2 Interim Report on July 25, which contained a cautious outlook and a slight correction to the full-year 2012 forecast, nor by WACKER’s Capital Markets Day on September 11, 2012. After WACKER announced (on October 24) a target of €750 million for full-year EBITDA, the range of analyst estimates narrowed. But this did not result in any buy signals for the stock. While the chemical divisions delivered stable earnings and Siltronic met its own targets, the business outlook for polysilicon impeded WACKER’s stock. Although WACKER held its own in an intensely competitive polysilicon environment, prices and earnings declined markedly as demand remained weak.

As a result, in the third quarter, short-time work was introduced at WACKER POLYSILICON, and the schedule for constructing and commissioning the new Charleston polysilicon site was extended by 18 months. Production start-up at Charleston is now planned for mid-2015.

The release of WACKER’s Q3 2012 report had no directly identifiable impact on the price of the stock.

WACKER stock entered the fourth quarter at €49.96 (closing price on September 28, 2012). The Group’s Q4 business performance was shaped by the weak global economy, by the solar sector’s specific difficulties and by the usual seasonal effects facing the chemical divisions, such as slower demand for construction materials during the winter months. The relentless consolidation process in the solar industry continued unabated and business results were impacted accordingly. WACKER’s stock price fell to its year-low of €40.87 on November 16, 2012, amid a subdued solar-market outlook, a series of profit warnings from semiconductor companies, and continued financial-market uncertainty over the European debt crisis. In the closing weeks of 2012, the stock was driven up by, among other things, reports that China intends to expand solar energy more intensively than previously planned. It traded at €49.65 at year-end (closing price on December 28, 2012).

Performance of WACKER Stock Compared with DAX and MDAX

Germany’s DAX and MDAX equity indices gained 14 percent and 17 percent, respectively, in the three months from January through March 2012. WACKER’s stock moved sideways in Q1 2012. It started out 2012 at a price of €62.15 (opening price on January 2, 2012) and closed the first quarter at €66.11. Both the DAX and MDAX fell in Q2, down 9 percent and 5 percent, respectively, between April and June. In the same period, WACKER’s share price lost considerably more ground. It decreased by about 18 percent from €66.11 (closing price on March 30, 2012) to €54.20 (closing price on June 29, 2012). Germany’s DAX and MDAX developed positively through the end of Q3. The DAX climbed about 11 percent during the July-through-September period to stand at over 7,200 points at the end of September 2012. The MDAX was up 5 percent during the period and moved within a corridor between approximately 10,400 and 11,500 points. WACKER’s share price did not mirror this trend. The stock started out in July at a price of €55.80 and then fell during Q3 – apart from short-lived rebounds that took it past the €55 mark on several occasions – to €49.96 (closing price on September 28, 2012). During the fourth quarter, the DAX and MDAX performed positively overall, after a temporary weak phase in the first two weeks of November. On December 6, the DAX crossed the 7,500-point threshold for the first time that year. The MDAX topped the 11,800-point mark on the same day, also for the first time in 2012. The DAX and MDAX closed Q4 2012 with gains of nearly 9 percent and roughly 8 percent, respectively. For full-year 2012, the DAX rose 27 percent and the MDAX 31 percent. WACKER’s stock closed at €49.65 on December 28, leaving it virtually unchanged from where it was at the start of Q4. The stock lost 20 percent of its value in 2012 overall.

WACKER Share Performance (indexed to 100)¹