Opportunities Report

Opportunity Management System

WACKER’s opportunity management system remained unchanged from the previous year. It is a divisional and Group-level instrument. We identify operational opportunities and leverage them in our business divisions, which possess the detailed product and market expertise required. We continuously use market observation and analysis tools to obtain a well-structured evaluation of market, industry and competitor data, for instance. In addition, we conduct customer interviews to evaluate future opportunities. The monitoring process – how WACKER seizes opportunities – is based on key indicators (such as rolling forecasts and current-status reporting).

Opportunity Management System

Strategic opportunities of vital importance – such as strategy adjustments, potential acquisitions, collaborations and partnerships – are handled at the Executive Board level. Such opportunities are incorporated into WACKER’s annual strategy-development and planning process, with current issues being discussed at regular Executive Board meetings. We generally elaborate different scenarios and risk-opportunity profiles before making decisions on such issues.

WACKER has identified a whole range of opportunities for advancing the Group’s success over the next few years.

Overall Economic Opportunities

In addition to expectations of global economic growth in 2018, WACKER sees good opportunities to again expand faster than global chemical production, especially in emerging markets and sales regions. The strongest momentum, in our view, will continue to come from China, India and Southeast Asia. To seize such opportunities, we are steadily expanding our presence in these markets. Our technical competence centers and the WACKER ACADEMY are pivotal in achieving WACKER’s high standard of service and customer proximity.

Sector-Specific Opportunities

Sector-specific opportunities primarily result from our broad product portfolio, which places us in an excellent position to meet global megatrends. These include advancing urbanization, the trend toward conserving natural resources and energy, increasing global demand for mobility, and the growing need for products that enhance the quality of life. These trends remain as important as ever to our business.

Rising affluence in emerging countries, particularly in Asia, coupled with ever more stringent market and customer requirements, is fueling demand for products incorporating high-value silicones. WACKER wants to benefit from this development and bolster the proportion of highly profitable specialty silicones in its portfolio compared with standard products. Our main focus is on automotive applications, cosmetics, personal care, health, medicine, electronics and clothing. We intend to support growth in these areas by launching innovative products and technologies for wound dressings, cosmetics, textile care, plastics processing, the electronics sector and 3D printing.

We see good growth prospects for WACKER SILICONES in electrical and electronics markets, especially in automotive electronics. Growth drivers are digitalization, connectivity and electromobility. Electronic automotive assistance systems, for example, are becoming increasingly important and are indispensable for autonomous driving. According to Semicast Research, the market for driver-assistance systems in vehicles will expand by almost 13 percent annually until 2022. The sensors and electronic components in these systems are reliably protected by silicone gels and silicone encapsulants. Electric vehicles also require high-performance batteries. That is why we are developing new, thermally conductive silicones. They enable effective thermal management so that batteries operate without maintenance and have a long service life.

At WACKER POLYMERS, growth potential is fueled by rising affluence in emerging economies, by increasing urbanization, and by the trend toward conserving natural resources and reducing carbon dioxide emissions. The shift away from conventional building materials and construction methods to value-added systems will continue. A key aspect here is the use of dispersible polymer powders for modifying cement. Through the addition of these polymer powders, mortar mixtures are easier to process, can be applied more thinly and their properties can be substantially improved. But, so far, some 80 percent of dry-mix mortars used in the building sector are not modified. In many regions, construction experts have only just started to appreciate the benefits of polymer-modified dry-mix mortars. WACKER POLYMERS also sees further potential in environmentally friendly, water-based paints and coatings, and in its material-substitution business.

At WACKER BIOSOLUTIONS, the main growth opportunities are expected to come from bioengineered products. In cyclodextrins, we are developing new applications (e. g. for egg-free baked goods and low-fat desserts) that create additional demand for our products. We also expect to see growth in cysteine and other fermentation-generated food products, such as vegetarian-grade meat flavors. Our current investments in our large-scale fermentation plant in León, Spain, will enable us to meet this rising demand over the long term.

Energy remains a key megatrend, with the photovoltaic industry at the forefront. The competitiveness of the solar industry versus other energy sources continues to spur demand for solar installations. Across the globe, the use of renewable energy is increasing. We expect growth to be driven mainly by China, India and the USA, and by the growing global trend toward highly efficient monocrystalline solar cells. As a hyperpure-polysilicon producer and cost and quality leader, WACKER POLYSILICON will benefit from this megatrend.

Strategic Opportunities

WACKER’s expansion of upstream-product capacities in recent years provides opportunities for further growth at its business divisions. Until at least 2020, our priorities will be to meet rising customer demand, mainly through cost-effective expansions at existing plants, and to strengthen our capacities for downstream products in the world’s growth regions. The capital expenditure for these projects will be below the level of depreciation. At Ulsan in South Korea, for example, we are currently building new facilities for dispersions and polymer powders, primarily for use in the construction industry. In China, we are expanding capacities for silicones and polymer products. Our Shanghai technical center is also being enlarged. We are equipping it with several new research labs for silicones and biotech products. By doing so, we are strengthening our development expertise in our largest single market. At our Charleston site in the USA, we are building a production plant for pyrogenic silica. It is the next logical step in making Charleston a fully integrated silicon site in the world’s second-largest chemical market.

Performance-Related Opportunities

WACKER has a number of opportunities for improving its cost structures, processes and productivity. At WACKER POLYSILICON, we are continuing to implement our cost roadmap. In the chemical divisions, we are tapping further cost-cutting potential with our productivity and efficiency program – the Wacker Operating System. Our various cost-cutting levers include the specific costs for auxiliaries, productivity advances on the manufacturing side, and a broader choice of suppliers in order to secure more attractive purchasing terms.