Comparing Actual with Forecast Performance

WACKER did not change the 2018 targets it had set early in the year for , EBITDA margin, and net . In the case of net financial debt and capital expenditures, WACKER issued more specific guidance during the year. At the start of 2018, WACKER projected that its sales would increase by a low-single-digit percentage. The EBITDA margin would be slightly higher than the previous year, would increase by a mid-single-digit percentage and ROCE would be substantially above the prior-year level. Net cash flow would be clearly positive, but substantially below the prior-year level.

Forecast Unchanged during Year, with Guidance Specified on Net Financial Debt and Capital Expenditures

In its Q1 Interim Report of April 2018, WACKER left its projections unchanged.

On publishing its Q2 Interim Report, WACKER adjusted its guidance only for net financial debt and capital expenditures. Net financial debt was forecast to total around €500 million at the end of 2018. Until then, WACKER had expected net financial debt to be on par with the prior-year level of €454.4 million. Capital expenditures were predicted at around €450 million for full-year 2018. That was about €20 million less than projected at the start of the year (€470 million).

In its Q3 Interim Report, WACKER confirmed its projections for the full year.

WACKER Reaches Sales Target – EBITDA Down Over Prior Year Due to Outstanding Insurance Compensation

WACKER increased its sales by 1.1 percent to €4.98 billion (2017: €4.92 billion), primarily due to volume growth. Sales climbed further at the chemical divisions, with WACKER SILICONES posting especially strong sales gains. Sales contracted markedly at WACKER POLYSILICON, dampened by lower average prices and reduced volumes.

EBITDA, diverging from our guidance, came in at €930.0 million, 8.3 percent below the year before (2017: €1,014.1 million). That is why the EBITDA margin was lower than a year earlier. The reason for the EBITDA decline was that our 2018 earnings guidance included insurance compensation (for the incident at Charleston, Tennessee) that is still outstanding. As production at Charleston did not reach full capacity until early December 2018, there was not enough time to conclude talks with the insurer before year-end. We now expect to do so in 2019.

Net cash flow of €124.7 million was clearly positive, but substantially below the year-earlier figure, as forecast. ROCE, diverging from our guidance, was 5.9 percent lower versus the year before due to the still outstanding insurance compensation. Raw-material and energy costs increased more than we expected. The average rate of the euro against the US dollar over the year was somewhat lower than we had originally anticipated.

In 2018, capital expenditures were markedly above the year-earlier level. They amounted to €460.9 million.

Year-end net financial debt of €609.7 million was not on par with the previous year as initially projected, but substantially higher. Here, too, the outstanding insurance compensation had an impact.

Employee numbers increased as anticipated at the start of the year. At the reporting date, WACKER had 14,542 employees. That was 731 more than the year before.

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Comparing Actual with Forecast Performance

 

 

 

 

 

Results in 2017, adjusted

 

Forecast
March 2018

 

Forecast
April 2018

 

Forecast
July 2018

 

Forecast
Oct. 2018

 

Results in
2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Key Financial Performance Indicators

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA margin (%)

 

20.6

 

Slightly higher than last year

 

Slightly higher than last year

 

Slightly higher than last year

 

Slightly higher than last year

 

18.7

EBITDA (€ million)

 

1,014.1

 

Mid-single-digit percentage increase

 

Mid-single-digit percentage increase

 

Mid-single-digit percentage increase

 

Mid-single-digit percentage increase

 

930.0

ROCE (%)

 

7.5

 

Substantially higher than last year

 

Substantially higher than last year

 

Substantially higher than last year

 

Substantially higher than last year

 

5.9

Net cash flow (€ million)

 

358.1

 

Clearly positive, substantially below last year

 

Clearly positive, substantially below last year

 

Clearly positive, substantially below last year

 

Clearly positive, substantially below last year

 

124.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplementary Financial Performance Indicators

 

 

 

 

 

 

 

 

 

 

 

 

Sales (€ million)

 

4,924.2

 

Low-single-digit percentage increase

 

Low-single-digit percentage increase

 

Low-single-digit percentage increase

 

Low-single-digit percentage increase

 

4,978.8

Capital expenditures (€ million)

 

326.8

 

Around 470

 

Around 470

 

Around 450

 

Around 450

 

460.9

Net financial debt (€ million)

 

454.4

 

At last year’s level

 

At last year’s level

 

Around 500

 

Around 500

 

609.7

Depreciation (€ million)

 

590.4

 

Around 550

 

Around 550

 

Around 550

 

Around 550

 

540.4

Deviations from Projected Expenses

Personnel costs edged up, both in absolute terms and as a percentage of sales. In the medium-term, we expect personnel costs to decline markedly in relation to sales, given our extensive program to increase productivity.

Raw-material costs were markedly higher than the year before, both in absolute terms and as a percentage of sales. That was because prices of key raw materials, especially VAM and , continued to rise throughout the year. Our medium-term projection is that the ratio of raw-material costs to sales will decrease slightly, given our measures to lower the quantities of raw materials used in our products.

Energy costs declined slightly year over year due to our ongoing program to cut production costs and to the shutdown of polysilicon production at Charleston in the first half of 2018.

As expected, depreciation declined markedly year over year, both in absolute terms and as a percentage of sales. This was due to lower levels of investment spending in 2016 and 2017 and to the expiry of depreciation periods. In 2019, we expect depreciation to fall further, amounting to about €500 million in the medium term.

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Expenses by Cost Type

 

% of sales

 

2018

 

2017

 

 

 

 

 

Personnel costs

 

24.7

 

24.5

Raw-material costs

 

29.6

 

28.6

Energy costs

 

6.6

 

6.9

Depreciation

 

10.8

 

12.0

EBITDA
Earnings before interest, taxes, depreciation and amortization.
Return on Capital Employed (ROCE)
Return on capital employed is the profitability ratio relating to the capital employed. It is defined as earnings before interest and taxes (EBIT) divided by capital employed. Investment income from Siltronic AG and the corresponding carrying amount in equity are not included when calculating ROCE. ROCE is a clear indicator of how profitably the capital required for business operations is being employed. It is influenced not only by profitability, but also by capital intensity with regard to noncurrent assets required for business operations and to working capital. ROCE is reviewed annually as part of our planning process and is a key criterion for managing our capital expenditure budget.
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.
EBITDA
Earnings before interest, taxes, depreciation and amortization.
Polysilicon
Hyperpure polycrystalline silicon from WACKER POLYSILICON is used for manufacturing wafers for the electronics and solar industries. To produce it, metallurgical-grade silicon is converted into liquid trichlorosilane, highly distilled and deposited in hyperpure form at 1,000 ° C.
Ethylene
A colorless, slightly sweet-smelling gas that, under normal conditions, is lighter than air. It is needed as a chemical starting product for a great many synthetic materials, including polyethylene and polystyrene. It is used to make products for the household, agricultural and automotive sectors, among others.

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