Financial-Position Trends: Equity and Liabilities
Equity Reduced by 11 Percent
Group equity declined by € 250.6 million relative to the previous year. It amounted to € 1.95 billion as of December 31, 2014 (Dec. 31, 2013: € 2.20 billion). As a result, the equity ratio was 28 percent (Dec. 31, 2013: 34.7 percent). Retained earnings increased by € 203.8 million as a result of the Group’s net income for the year. At the same time, the dividend payment diminished retained earnings by € 24.8 million. Other equity items reduced equity, essentially as a result of the adjustment to provisions for pensions that was not recognized in the income statement. The remeasurement of defined benefit plans at year-end caused actuarial losses to rise. These losses lowered equity by € 520.2 million. Currency translation effects, on the other hand, increased equity by € 121.4 million. The disposal of the previous stake in Siltronic Silicon Wafer Pte. Ltd. – which had been accounted for using the equity method – resulted in a decrease in equity of € 14.9 million.
Compared with the previous year, WACKER’s liabilities climbed by € 865.4 million, or 21 percent, and amounted to € 5.00 billion (Dec. 31, 2013: € 4.14 billion). They represented 72 percent of total equity and liabilities (Dec. 31, 2013: 65 percent).
As of the balance sheet date, noncurrent liabilities were € 3.84 billion (Dec. 31, 2013: € 3.08 billion), a year-on-year increase of 25 percent. They accounted for 55 percent of total equity and liabilities (Dec. 31, 2013: 49 percent). Provisions for pensions grew by € 678.9 million to € 1.76 billion, up 63 percent. This increase is attributable to the discount rates being applied for the defined benefit plans, which were substantially lower than at year-end 2013. As of the balance sheet date, the discount rate was 2.3 percent in Germany and 3.8 percent in the USA (Dec. 31, 2013: 3.8 percent in Germany and 4.75 percent in the USA). As a result, actuarial losses due to the remeasurement of provisions for pensions increased. Provisions for pensions accounted for 25 percent of total equity and liabilities (Dec. 31, 2013: 17 percent). Other noncurrent provisions also rose, reaching € 181.8 million (Dec. 31, 2013: € 148.2 million). Here, too, the lower discount rate made an impact, especially on provisions for anniversary payments and for environmental protection.
Noncurrent financial liabilities increased by € 70.8 million to € 1.32 billion (Dec. 31, 2013: € 1.25 billion). In Q3 2014, WACKER drew down a new long-term loan of € 80.0 million. At the same time, noncurrent financial liabilities were reclassified as current liabilities in accordance with their maturities. Other noncurrent liabilities fell slightly overall, to € 533.9 million (Dec. 31, 2013: € 567.3 million). This was due to the change in noncurrent advance payments received. At year-end, they amounted to € 523.0 million (Dec. 31, 2013: € 564.4 million). Additions due to the first-time inclusion of Siltronic Silicon Wafer Pte. Ltd. in the consolidated financial statements increased the advance payments received. On the other hand, the retention of advance payments under restructured or terminated contracts with polysilicon customers led to a substantial decline.
Current liabilities grew 10 percent, from € 1.06 billion at year-end 2013 to € 1.16 billion. In 2014, as in the previous year, they accounted for 17 percent of total equity and liabilities. Trade payables rose 21 percent relative to year-end 2013 and amounted to € 374.5 million at the balance sheet date (Dec. 31, 2013: € 309.4 million). Due to the high level of investing activities, especially at the future production site in Charleston, Tennessee (USA), trade payables for investment spending were substantially higher. Other current provisions and liabilities fell 13 percent to € 507.1 million (Dec. 31, 2013: € 579.9 million). Current advance payments received amounted to € 166.1 million as of the balance sheet date (Dec. 31, 2013: € 282.8 million). The ongoing elimination of advance payments received and of those retained under terminated or restructured contracts in the polysilicon business are responsible for this. Current income tax provisions and personnel liabilities, including those related to vacation, flextime and performance-related compensation, were higher as of the balance sheet date. Liabilities from currency-hedging derivatives were also higher as a result of US dollar and Japanese yen exchange-rate differences.
WACKER Posts Net Financial Debt of € 1.08 Billion
Current financial liabilities were 67 percent higher and amounted to € 283.3 million as of December 31, 2014 (Dec. 31, 2013: € 169.3 million). The primary reason for the increase was the reclassification of noncurrent items. Overall, financial liabilities grew 13 percent to € 1.60 billion (Dec. 31, 2013: € 1.42 billion) and accounted for 23 percent of total equity and liabilities. The depreciation of the euro against the US dollar and other currencies in the second half of 2014 caused financial liabilities to increase by some € 70 million. Current liquidity (current securities, cash and cash equivalents) fell slightly, to € 483.3 million (Dec. 31, 2013: € 503.7 million). Noncurrent securities decreased from € 120.8 million to € 37.6 million. As of the balance sheet date of December 31, 2014, WACKER had net financial debt (the balance of gross financial debt and noncurrent and current liquidity) totaling € 1,080.6 million (Dec. 31, 2013: € 792.2 million). That is a rise of 36 percent compared with December 31, 2013.
Unrecognized Assets and Off-Balance-Sheet Financial Instruments
An important asset that does not appear in 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. Moreover, there are other intangible assets that are vital for success and have a positive impact on 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 products and production- and business-process structures. In particular, our integrated production system gives us an 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. Various German legal forms of rented and leased goods (operating leases) reported on in Note 17 are also not included in the statement of financial position, nor are other self-constructed assets. WACKER does not use any off-balance-sheet financing instruments.