WACKER looks back on an eventful and difficult year. Although we set new records for polysilicon volumes in 2013, sales and EBITDA (earnings before interest, taxes, depreciation and amortization) came in below the previous year’s level. Low polysilicon prices and persistent price pressure in the semiconductor segment were mainly responsible for this decrease. Overall, price effects reduced Group sales by around € 360 million. Our chemical business was stable, but the economy did not provide the tailwind to enable continued growth. At € 4.48 billion, Group sales were down on the previous year by more than 3 percent. EBITDA was € 679 million, declining by around 15 percent.
In 2013, we placed particular emphasis on resource management and lowered our costs across every corporate sector. This enabled us to limit the negative influence of price effects on Group sales and EBITDA. Cost savings of around € 225 million made a substantial contribution. Higher production output also had a positive effect.
Net cash flow and net financial debt developed better than we had expected at the beginning of the year, due to lower investment spending and rigorous inventory management. At just under € 800 million, net financial debt remained well below the one-billion-euro mark.
Given the exceptionally challenging circumstances, WACKER delivered a respectable performance. At the Annual Shareholders’ Meeting in May, the Supervisory and Executive Boards will propose a dividend of € 0.50 per share.
Our employees deserve considerable credit for WACKER’s performance last year. I would like to express my gratitude, and that of my colleagues on the Executive Board, to all of our employees for their outstanding efforts.
In the photovoltaic market, conditions were very varied. The process of consolidation continued, with excess capacity persisting along the entire supply chain. Despite these problems, positive trends prevailed and the market has continued to grow. The installation of new solar systems increased to 39 gigawatts. In ever more countries, solar energy is gaining acceptance as an environmentally friendly and absolutely competitive source of energy. We profited from this volume growth and, in addition, expanded our market share.
A key, positive signal for the market’s future development was the agreement reached in the solar dispute between the European Union and China regarding imports of Chinese solar modules and cells to Europe. On the other hand, we find it unsatisfactory that there has still been no agreement in the dispute about punitive tariffs for European polysilicon deliveries to China. We are working proactively at all political decision-making levels to enable a permanent and viable solution.
In the silicon-wafer market, trends were disappointing. The volume increase expected for the second half-year did not materialize and price pressures continued unabated amid the exchange-rate advantages of Japanese competitors. Our acquisition in early 2014 of a majority stake in our joint venture with Samsung will strengthen business in 300 mm silicon wafers in the Asian region – in line with our strategy.
On the whole, the chemical business was stable. Higher volumes enabled us to compensate for pressure on prices. Demand was high, especially for silicone products, where we expanded our market share and are now Number 2 globally. The dispersions business, though, developed somewhat more slowly. Overall, sales remained at the prior-year level, while EBITDA climbed noticeably.
The year 2013 was a turning point in WACKER’s investment policy. In the period between 2005 and 2012, we invested substantial capital in expanding our global production capacity. Large facilities for manufacturing upstream products were constructed to ensure continued growth and strengthen our global presence in important markets. These investments are virtually completed, with the exception of the new polysilicon site in Charleston (Tennessee, USA).
By 2017, our capital expenditures will decrease and remain below the level of depreciation. Our investment emphasis will also shift. In the next few years, we will not only complete the Tennessee production site, but also concentrate on constructing facilities for finished products with substantially lower capital intensity. At the same time, we will expand our market share with high-end products in the areas of automotive technology, energy, electronics, medicine, and health and personal care.
The focal point of our growth strategy is to achieve greater profitability in our operating activities and to post consistently positive net cash flow. This strategy will be supported by a stringent cost-monitoring program at each corporate sector.
Our strategic focus, which we initially presented at the Capital Markets Day in July 2013 in London, was received positively by analysts, investors and other capital-market participants alike. This strengthens us in our resolve to continue down the path we have taken.
After two challenging years, we look to the current year with more optimism. Our forecast is for increasing sales and volumes at all of our business divisions. We also expect EBITDA to grow again this year. We will work hard to achieve these goals.
Even if our net financial debt continues to increase, the basic tenets of our financial policy still apply. We will focus on a strong financial profile with a sound capital structure and healthy maturities for our debt.
WACKER will be 100 years old this year. Our company stands for innovation, high quality, good service and financial stability – as well as for three generations of individuals who have identified strongly with the company, promoting its success over the past century with their unswerving commitment.
Amid this steadfast continuity, there is one virtue that has always characterized WACKER: the courage to change, to explore new frontiers – just as we are doing at our new production site in Tennessee.
I, for my part, am optimistic that this combination of continuity and modernity will secure WACKER a positive future in the coming decades. We will do our utmost to take advantage of the opportunities that arise. We are convinced that our businesses are very well positioned and that we will profit from this over the long term. We have excellent products that make people’s daily lives easier, more comfortable and simpler all over the globe.
I would like to thank all of our customers and suppliers for their trust and successful collaboration, and our shareholders for communicating so openly. Together, we want to stride ahead, continuing to shape WACKER’s future.
Munich, Germany, March 2014
Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG