22 Explanatory Notes on Segment Reporting

The Group’s segment reporting is geared toward the internal organizational and reporting structure. WACKER reports on five operating segments (Siltronic, Silicones, Polymers, Polysilicon and Biosolutions), which are organized and managed autonomously on the basis of the type of products they offer and their different risk and income structures. Any activities not assigned to an operating segment are shown under “Other.” Currency translation results that cannot be assigned to a segment are likewise shown in this item. In 2013, the Biosolutions segment for the first time passed the thresholds set down in IFRS 8, thus officially becoming subject to reporting requirements. As WACKER had previously opted to report on the Biosolutions segment in view of its specific product and customer structure, segment reporting did not change compared with the previous year.

Items in the statement of financial position and statement of income are assigned to the operating segments in accordance with the commercial power of disposition. Assets used jointly by several segments are generally shown under “Other” if they cannot be assigned clearly to a particular segment. A similar approach is adopted for borrowed funds. For the geographical regions, the assets and liabilities are assigned in accordance with where the respective Group company’s site is located. Sales are classified in accordance with both the customer’s location and the respective Group company’s site.

WACKER measures the segments’ success using the segment profitability variable EBITDA. EBITDA is calculated by adjusting EBIT for depreciation and amortization, impairments, and write-ups. EBIT consists of the gross result from sales, selling and general administrative expenses, research and development expenses, and other operating income and expenses less income from investments in joint ventures and associates and other income from investments.

Asset additions, depreciation, amortization and write-ups refer to intangible assets, to property, plant and equipment, to investment property and to financial assets. Internal sales show the sales that are generated between the segments. They are settled mainly on the basis of market prices or planned cost of sales. Segment information is based on the same presentation and accounting methods used for the consolidated financial statements. Receivables and liabilities, provisions, income, expenses, and results between the segments are eliminated in the course of consolidation.

As a rule, the assets reported for the segments encompass all of their assets. Loans, cash and cash equivalents, and deferred tax assets, however, are allocated to the “Other” segment.

The liabilities shown for the segments represent all of their liabilities – except deferred tax liabilities, which are shown under “Other.” The Group’s financial liabilities are allocated to individual segments in proportion to the segment assets.

Several non-core organizational units were reorganized within the segments effective January 1, 2013. WACKER’s salt business, the sales and profit for which were previously reported under WACKER POLYSILICON, is now treated as part of the “Other” segment. In 2013, sales from this business to be recognized in the “Other” segment reached a euro amount in the double-digit millions, making a positive contribution to earnings. There were effects of a similar magnitude in the previous year and no adjustment was made. In addition, internal cost allocation between the segments was harmonized, causing the volume of internal sales reported for the segments to decrease. The decrease caused the internal sales figures for 2012 to drop by around € 100 million.

Important valuation changes not recognized through profit or loss include changes in the market value of derivative financial instruments (cash flow hedging) and changes in value from the remeasurement of defined benefit pension plans.

Of the changes in the market value of derivative financial instruments from cash flow hedging, € 5.9 million (2012: € 6.6 million) is attributable to the Siltronic segment and € 2.1 million (2012: € –0.1 million) to “Other.” The changes in value from the remeasurement of defined benefit pension plans are distributed among the segments as follows: € 28.4 million (2012: €–52.1 million) for the Silicones segment; € 11.1 million (2012: € – 21.4 million) for the Polymers segment; € 2.6 million (2012: € – 4.9 million) for the Biosolutions segment; € 18.7 million (2012: € –44.4 million) for the Polysilicon segment; € 40.6 million (2012: € –55.9 million) for the Siltronic segment; and € 51.4 million (2012: € – 100.0 million) for the Other segment.

In addition to Germany, the USA and China are the only countries in which WACKER generates significant sales from a Group viewpoint. Measured in relation to the location of the selling unit in the USA, sales amounted to € 609.8 million (2012: € 672.5 million). Measured by the respective customer location in the USA and China, the sales generated were € 604.4 million (2012: € 681.2 million) and € 754.0 million (2012: € 717.3 million), respectively. There are no major customers that account for large proportions of our sales.

The reconciliation of the segments’ aggregate results with the net income for the year is shown in the following list:

 Download XLS

 

 

 

 

 

€ million

 

2013

 

2012

 

 

 

 

 

Operating result of reporting segments

 

112.3

 

266.7

Consolidation

 

2.0

 

-0.1

Group EBIT

 

114.3

 

266.6

Financial result

 

-83.3

 

-62.7

Income before taxes

 

31.0

 

203.9

Income taxes

 

-24.7

 

-89.2

Net income for the year

 

6.3

 

114.7