On May 8, 2008, I became President and CEO of Wacker Chemie AG’s Executive Board. So, this is the first time I am writing to you in this capacity. Although 2008 posed additional challenges, we forged ahead seamlessly, after a successful 2007. WACKER was able to post new sales and earnings records. As a result, we met the goals we set at the start of 2008. This would not have been possible without WACKER’s employees and customers. So, I would like to extend my sincere thanks to all of them.
Compared with the previous year, sales rose to €4.3 billion, up 14%. EBITDA climbed to €1.06 billion, though earnings were impacted by high energy and raw material costs, not to mention exchange rate fluctuations. A key aspect of our growth strategy is production capacity expansion. In particular, we profit from the solar sector’s rising polysilicon demand. Our “Expansion Stage 7” polysilicon production facility went on stream six months earlier than planned, which meant it could supply its first large quantities to customers early. The project spotlights our excellent engineering expertise – which we have built up over several decades. Despite the complex nature of WACKER plants, our expertise has repeatedly allowed us to meet or even outperform our ambitious schedules. We are also making good progress with our projects to establish Chinese facilities in Nanjing and Zhangjiagang. Pyrogenic silica production has been on stream in Zhangjiagang since November 2008.
2008 saw us concluding integration of the dispersion business previously operated by Air Products – our former long-time partner. When our Nanjing production site comes on stream in 2009, we will be the only company on the market to offer a complete supply chain for dispersions and polymer powders in Asia, Europe, and the Americas.
Due to our expansion program and the dispersion acquisition, our investment volume rose strongly once more compared with the previous year. For the first time in WACKER’s history, investments passed the €1 billion mark. We funded these investments entirely out of our own cash flow. In spite of high investment levels in 2008, the Group is soundly financed and has an excellent equity base. Cash and cash equivalents exceed current and noncurrent finan cial liabilities. WACKER is, thus, almost free of debt – an increasingly important factor in light of the financial crisis.
Of course, we will certainly have our shareholders participate appropriately in last year’s success. In times of financial crisis, however, it is equally important to bolster WACKER’s internal financial strength and take account of 2009’s general economic challenges. This is why we are proposing a dividend of €1.80 per share at the Annual Shareholders’ Meeting in May 2009. Relative to net income, 2008’s payout ratio is 20.4%.
Turning to our goals for 2008, we can be satisfied with our overall performance. Nonetheless, 2008 had two sides to it. In the first half, the growth pattern of previous years continued. The trend in the second half, though, was exactly the opposite. Q4, in particular, saw almost every industry worldwide being affected by plummeting demand and sales. WACKER was not immune to the consequences.
The severity of the downturn took everyone by surprise. Given the scope of the current trend, I would like to answer a few questions that have been raised not only by WACKER shareholders such as yourselves, but also by our employees, customers, suppliers, and the Executive Board itself. What impact will the global economic crisis have on WACKER’s business? Will we stick to our growth strategy?
WACKER may not be immune to the global slump. However, we are in a position to influence its impact on us. This is why we took action back in 2008 and approved crisis-alleviating measures, such as short-time work, temporary plant shutdowns, budget cuts, investment plan modifications, and especially sound operational financing. Other positive effects are likely from raw material and energy costs, which we expect to be lower than in 2008.
Based on current economic developments, we expect to see sales and operating result decline in 2009, although it is still hard to say by how much. Bearing this in mind, a reliable forecast is not yet possible. We will discuss 2009 more specifically as part of our quarterly reporting. Despite the difficult economic situation, there is still growth potential in our WACKER POLYSILICON and WACKER FINE CHEMICALS divisions.
Once the global economy has come out of recession, WACKER will vigorously resume its growth path. After all, WACKER does not have a general structural problem. What we are facing is primarily a severe, cyclical drop in demand.
Although 2009 will not be an easy year, we will continue our long-term growth strategy. We will maintain our high level of investments so that we can tap into growth potential, especially in the solar sector. Our approach is underscored not only by the decision to build another polysilicon plant in Nünchritz (Germany), but also by our announcement in late February 2009 to set up a new integrated polysilicon production site in the USA.
As you can see, we are optimistic about WACKER’s future. The major megatrends from which we profit remain unchanged. We have a unique product portfolio for energy conservation and sustainable energy generation. The same goes for WACKER’s myriad of cutting-edge products that help to both raise the standard of living in emerging economies and keep it high in industrialized countries. Thus, we make a key contribution to global progress and sustainable development. For years, sustainability has been an integral part of our production and business processes. In 2008, for example, we received the Federation of German Industry’s Environmental Award for our biotech-engineered production of cysteine (an amino acid).
We have an excellent global position and outstanding production and plant expertise. Our customer relations are first-rate and go back many years. These are all strengths that will continue to play a vital role in maintaining WACKER’s long-term success. My Executive Board colleagues and I will be doing everything we can to achieve this goal.
Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG