Despite the difficult global economic situation, WACKER produced a stable performance in the 2009 fiscal year. We too, however, did not emerge entirely unscathed from the world’s most significant economic downturn for decades. Our sales, for example, did not grow for the first time in five years. They decreased by 13.5% to €3.72 billion. EBITDA decreased by 42.5% to €606.7 million. In the result for the year, we even recorded a loss of €74.5 million.
These figures, however, fail to fully reflect the robust operating performance that we produced in 2009. Apart from Siltronic’s totally unsatisfying result, we generated operationally positive EBITDA in all of the other divisions. WACKER POLYSILICON generated sales of over €1 billion for the first time and, despite persistent pressure on prices, achieved an operating EBITDA margin of 51.1%. The two largest chemical divisions at WACKER achieved higher EBITDA margins than in the record year of 2008.
The operating result is overlaid by non-recurring effects which have negatively influenced the development of earnings. These include, among others, the withdrawal from the joint venture WACKER SCHOTT Solar and provisions for personnel measures and pension provisions at Siltronic and provisions for phased early retirement as well as extraordinary pension provisions at WACKER SILICONES. All in all, these measures have reduced EBITDA by €160 million. Under earnings before interest and taxes (EBIT), we have additionally recognized impairments on fixed assets at Siltronic and WACKER SILICONES amounting to around €176 million.
The areas of investments, finance, and products show how well we have coped with the crisis. Our investments remained at a high level in 2009. The investment ratio is about 20% of sales. We have invested €740 million, primarily in the expansion of our polysilicon production and the development of our Chinese sites in Nanjing and Zhangjiagang. Even more remarkable is the fact that we have financed these substantial investments almost entirely out of our gross operating cash flow. Thanks to rigorous liquidity management, WACKER’s financial liabilities are low. This means that, conversely, the company’s financial condition remains excellent.
The 2009 fiscal year has shown that we have a sophisticated and diverse product portfolio which enables us to absorb weaknesses in individual divisions. This, of course, has helped us.
A second success factor can be found in the operational and structural measures that we initiated at an early stage across a broad front. Thanks to our prompt action, we have been able to reduce our costs considerably. As for the necessary structural measures in some of our divisions, we have achieved the first positive results and made some important decisions. The withdrawal from the joint venture WACKER SCHOTT Solar has been completed, as has the restructuring in the WACKER SILICONES business division. The decision has been made to shut down the silicone plant in Duncan (USA) and the pyrogenic silica site in Kempten (Germany) within the next 18 months.
A third success factor is that we secured our financing at an early stage and for the medium term, thereby giving ourselves sufficient leeway to pursue our further growth plans. WACKER has at its disposal utilized and unutilized credit lines amounting to €1.3 billion.
As a company, WACKER has always been characterized by the great importance that it attaches to a prudent and forward-looking financial policy. Consequently, in 2009, we made an extraordinary addition to pension provisions of €47.9 million, and formed provisions for phased-early-retirement plans as well as the introduction of working-life accounts. This way, we are taking precautions for likely developments which might constitute a burden for us over the next few years.
Our employees have made a significant contribution to coping with the difficult economic situation. Their great flexibility and unreserved readiness to take on the particular challenges that we faced has helped us enormously. I would like to give our explicit thanks to our employees on behalf of the entire Executive Board.
When we take a look at the situation at the beginning of the year and compare it with the result at the end, we can state that WACKER has done well. The Executive Board and the Supervisory Board will, therefore, propose at the Annual Shareholders’ Meeting in May 2010 that a dividend of €1.20 should be distributed for the 2009 fiscal year. We are interested in pursuing a dividend policy which is characterized by continuity and gives appropriate consideration to the company’s economic condition.
Even though the recession has already bottomed out and the global economy is slowly growing again, we have another demanding year ahead of us. The crucial question is still whether this will be a self-supporting upturn or sustained recovery in demand. In the first few weeks of the new fiscal year, we can at least see that the upward trend from the second half of 2009 persists, and we are generating increases in volume.
Despite this development, we will still keep a close eye on costs in all of our divisions. We shall continue as before with the structural measures at Siltronic in 2010 as we are dissatisfied with its income position. We are planning to cut its costs by €50 million per year up to 2011. We are going to pursue this objective systematically.
Further growth will be achieved by the “BRIC” countries, particularly India and China. This represents a continuation of what we have been observing for some time: the main momentum for growth is coming from Asia. This means that the economic power relations among the most important economic regions are going to shift further. WACKER is well prepared for that. This year, in conjunction with our partner Dow Corning, we are going to put the world’s largest siloxane plant into operation in Zhangjiagang. This strong presence is going to open up new business potential for us in the future. WACKER is now an acknowledged local business partner which is aware of the local customers’ needs. In the future, we will intensify our development of products and solutions which are tailored to the requirements of these customers.
All in all, WACKER is entering the 2010 fiscal year from a position of strength and is confident about the future. The megatrends from which we benefit remain unchanged. Our financial condition is extremely good. WACKER has low financial liabilities, possesses a sufficient credit scope to finance its further growth, and displays a healthy equity base. Our comprehensive production and plant management expertise, our quality and cost leadership with many products, and our long-term customer relationships are further trump cards for success.
We are confident that we will again increase our sales in 2010, thereby generating substantially positive net income for the year.
The foundation upon which commercial success grows is trusting and reliable cooperation within and outside of the company. My Executive Board colleagues and I would like to sincerely thank our shareholders, customers and suppliers for the trust that they have placed in us. This is our incentive to do everything we can to keep WACKER successful as a company in the long term.
Munich, Germany, March 2010
Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG