Financial-Management Principles and Goals

Our key financial-management goal is to secure WACKER’s financial strength over the long term. The central task is to sufficiently cover the financial needs of our operations and investment projects. Financial management at WACKER comprises capital-structure management, cash and liquidity management, and the management of market-price risk (currencies, interest rates). The Group organizes financial management centrally. A groupwide financial regulation sets out the tasks and responsibilities. Capital-structure management involves shaping the capital structure of the Group and its subsidiaries. The latter are capitalized and financed in accordance with the principles of cost and risk optimization. This involves taking account of restrictions on the movement of capital, as well as other capital and foreign-currency transfer constraints.

In liquidity management, WACKER continuously monitors from operations and from financial business. It covers the resulting liquidity needs via suitable instruments, such as intra-Group financing through borrowings, or through external loans from local banks. We receive the necessary outside funding from contractually agreed lines of credit denominated in various currencies and with differing maturities. We invest surplus liquidity in the money and capital markets at an optimum risk/return rate. In cash management, WACKER uses centralized procedures to calculate cash requirements and surpluses.

WACKER pursues a careful financing policy that targets a balanced financing portfolio, a diversified maturity portfolio and a comfortable liquidity buffer. In addition to the financing instruments already mentioned, WACKER expects to be able to tap the bond markets and other instruments if necessary. Our aim is to maintain our corporate financial structures so that the Group’s credit rating remains – at a minimum – in the investment-grade range.

WACKER’s key liquidity source is the operations of its Group companies and the resultant incoming payments. As part of our cash-management systems, liquidity surpluses at individual Group companies are utilized to cover the financing requirements of other Group companies. This centralized system of internal transfers reduces our interest expense and the need for debt financing. The purpose of managing market-price risks is to limit the effects of fluctuations in exchange rates and interest rates on the Group’s bottom line. That involves first determining the Group’s overall exposure to currency risks. On the basis of the information obtained, we can then make decisions as regards hedging – namely, the volume to be hedged, the respective term of the hedge and the choice of hedging instrument.

Financing Measures in 2017

In 2017, WACKER repaid a promissory note (German Schuldschein) installment of €150 million. It also repaid a loan installment of €200 million to the European Investment Bank (EIB) and a loan of ¥10 billion to the Development Bank of Japan. At the same time, a financing agreement concluded with the EIB in 2016 amounting to €200 million was drawn in 2017. In December 2017, WACKER issued a new promissory note (German Schuldschein) for a total amount of €300 million, and with terms of five years (€150 million) and seven years (€150 million). The payment for this note occurred in January 2018. In 2017, the syndicated loan of €400 million taken out in 2016 was extended by another year until 2022. This syndicated loan, together with another such loan of €200 million from 2014, serves to secure our financing. Neither of these syndicated loans is currently being utilized.

The Group’s financing agreements contain standard market credit terms. The major loans are subject to financial covenants (net debt-to- ratio and maximum debt level of all Group companies).

Financial Analysis

The Group’s cash flow is a key instrument of liquidity management. Net cash flow serves as the internal indicator for measuring the liquidity of operating activities. Owing to the deconsolidation of Siltronic in 2017, all cash flow figures were adjusted for the sake of comparability.

Cash Flow
Cash flow represents the movement of cash and cash equivalents into or out of a business activity during a finite period. Net cash flow is the sum of cash flow from operating activities (excluding changes in advance payments received) and cash flow from long-term investing activities (before securities), including additions due to finance leases.
Earnings before interest, taxes, depreciation and amortization.