WACKER POLYMERS

At WACKER POLYMERS, total 2008 sales rose appreciably. This is mainly attributable to the full consolidation – effective February 1, 2008 – of the dispersion business acquired from our former partner Air Products. Divisional sales climbed 37.2% to €867.9 million (2007: €632.8 million). The sales trend was hit by the construction-sector downturn. Demand for dispersible polymer powders and construction dispersions fell in the USA, Europe and China. So, sales volumes for these products were somewhat lower than in the previous year. The price increases WACKER achieved did not fully offset the downturn in demand.

Acquisition of Air Products’ Dispersion Business Boosts Sales

However, the acquisition of Air Products’ dispersion business led to additional, consolidated sales. As a result, US and German sales made significant gains, and Asia, too, saw divisional sales increase. Integration of the dispersion business into the WACKER Group was successfully completed in 2008.

As in the prior year, WACKER POLYMERS’ profitability was hampered by high raw material and energy prices, as well as by the unfavorable euro/dollar exchange rate. Although oil prices fell in the second half of 2008, ethylene costs were above the prior-year level. The division generated EBITDA of €108.9 million (2007: €107.0 million). Given the much higher sales gains, the EBITDA margin dropped from 16.9% to 12.5%.

Year-on-year asset additions rose by €33.4 million to €74.4 million (2007: €41 million). Aside from this, €171.2 million was spent on acquiring Air Products Polymers and Wacker Polymer Systems – our former joint ventures. Further funding went to the ongoing expansion of our Nanjing (China) site and into optimizing existing production facilities.

To counter rising raw material and energy costs, the division raised prices and introduced a productivity-boosting program, focusing on cost-cutting and capacity-utilization measures. Amid weaker demand, production was channeled to the most efficient facilities. As a further measure, WACKER POLYMERS restructured its portfolio, disposing of PIOLOFORM® polymer binders. This business was taken over by the Japanese Kuraray Group on October 1, 2008. The purchase price paid (in euros) for the specifications was a single-digit million sum.

The acquisition of Air Products’ dispersion business raised employee numbers to 1,579 on December 31, 2008 (December 31, 2007: 1,128).