Assets

Financial-Position Trend: Assets

As per December 31, 2009, the WACKER Group’s total assets were only slightly lower than at the end of 2008, dropping 1.8% to €4.54 billion (2008: €4.63 billion). The decline primarily affected current assets, though noncurrent assets decreased slightly, too.

Within noncurrent assets, there was a rise in fixed assets. This item climbed €65.8 million from €2.95 billion to €3.02 billion. On the one hand, WACKER invested €740.1 million (2008: €916.3 million) in 2009, with the focus on expanding WACKER POLYSILICON’S production capacities. On the other, impairments of €182.1 million and depreciation of €397.8 million had the opposite effect, reducing fixed assets.

The carrying amount for investments in associates accounted for using the equity method contracted by 26.9% to €140.2 million at year-end (2008: €191.8 million). This was mainly because the pro rata net income from companies consolidated using the equity method reduced the carrying amounts by €83.7 million. Capital contributions to our siloxane-production joint venture with Dow Corning resulted in additions of €32.1 million. Other noncurrent assets showed a marked decline – down €103.5 million to €177.8 million (2008: €281.3 million). Advance payments received were €70.4 million lower because of our disposal of WACKER SCHOTT Solar Vertriebs GmbH. The value of derivatives within noncurrent assets dropped €15.9 million to €4.2 million, due to lower market values and notional amounts. In contrast, receivables from investments for phased-early-retirement credits rose €7.5 million to €38.2 million.

Current assets fell by 2.9% or €42.4 million compared to December 31, 2008. WACKER’s inventories, in particular, decreased 12.6% or €63.7 million as production quantities were adjusted to demand and raw-material stocks were impaired. Trade receivables remained constant. Other current assets (including tax receivables and securities) were up 4.3% to €513.7 million (2008: €492.4 million) – mainly due to higher liquidity, which rose €58.3 million. In contrast, tax receivables decreased by €36.5 million. Plus, a reduced market valuation for derivative financial instruments resulted in a lower carrying amount of €18.5 million.

In 2009, WACKER sold securities (from current financial investments) of €101.1 million that had been shown under liquidity in 2008.

Financial-Position Trend: Liabilities

Equity amounted to €1.94 billion as per December 31, 2009 (2008: €2.08 billion). This €140.4 million decline mainly stemmed from the net loss of €74.5 million and the 2008 dividend payout of €89.4 million. The equity ratio decreased slightly to 42.8% as per year-end 2009 (2008: 45.0%). Changes due to currency translation of foreign subsidiaries’ financial statements and to currency-hedging measures increased equity on balance by €17.3 million. In particular, lower volumes and market-value fluctuations for hedge-accounting derivative financial instruments reduced income and expenses under equity. Non-controlling interests increased due to funds injected by Dow Corning (the minority shareholder) into our HDK ^® joint venture in China.

Continued Solid Equity Ratio

Noncurrent and current financial liabilities amounted to €439.7 million at year-end 2009 (2008: €272.4 million) – up 61.4% or €167.3 million because WACKER had taken out long-term loans of €180.0 million in mid-2009. Maturing in 2011 and 2013, these loans are largely subject to a floating interest rate. They help secure financing of the Group’s future investments. Financial liabilities to companies consolidated using the equity method were repaid. Plus, liabilities from finance-lease obligations dropped by €11.8 million to €44.5 million due to ongoing leasing payments (2008: €56.3 million). Net financial liabilities (the balance of financial liabilities and liquid assets) rose year over year. On December 31, 2009, financial liabilities exceeded liquidity by €76.1 million. In 2008, there had been a liquidity surplus of €32.9 million.

Altogether, noncurrent liabilities rose 9.4% to €1.86 billion (2008: €1.70 billion). Pension provisions increased 18.3% to €445.1 million (2008: €376.1 million). In 2009, WACKER decided to raise its assumptions about the average life expectancy of pension beneficiaries. We immediately recognized the resultant €47.9 million charge in profit or loss, since the situation is not expected to change in the future.

Long-term advance payments received remained constant at €761.8 million (2008: €761.8 million). Other noncurrent provisions increased slightly to €281.9 million (2008: €261.0 million). Two effects were responsible for the rise: first, WACKER approved additional phased-early-retirement quotas and, second, created a framework for working-life accounts. In 2009, we reclassified noncurrent tax provisions as current provisions, since we expect to use them in 2010.

Current liabilities dropped 12.8% to €732.1 million (2008: €839.4 million). The main factor was trade payables, which fell by €78.8 million to €217.9 million. Other current liabilities diminished by €49.1 million to €297.5 million (2008: €346.6 million). Here, there was a decrease in obligations from both derivative financial instruments and profit-sharing bonuses. In addition, current advance payments received rose by €40.7 million to €138.5 million.

In 2009, WACKER did not sell or acquire any major corporate entities that would have significantly impacted assets.

Unrecognized Assets

An important asset that does not appear on our financial position statement is the value of the WACKER brand and other Group trademarks. We consider the high profile and reputation of our trademarks to be a key factor influencing customer acceptance of our products and solutions. However, there are other intangible assets that are vital for success and positively impact our business – for example, long-standing customer relationships and customer trust in our product and solution-related expertise. Just as important are our employees’ in-depth skills and experience, and our many years of expertise not only in R&D and project management, but also in production- and business-process structures.

Another key success factor is WACKER’s sales network, which has evolved over many years and ensures customer proximity when we supply our range of products and services.