Comparing Actual with Forecast Performance

Following the crisis year of 2009, WACKER looks back on a very successful 2010. We set new sales and EBITDA records, clearly beating even 2008’s figures. We not only reached our goals for 2010, but actually exceeded them.

Forecast Fine-Tuned as Year Progressed

In its annual report published in March 2010, WACKER forecast that sales would exceed the four-billion-euro threshold and that EBITDA would be much higher than in 2009. Investments were expected to total between €600 million and €700 million. The number of employees was predicted to increase by 300 and R&D expenses by 5 percent compared to 2009. Having published the half-year figures at the end of July, the Executive Board then further fine-tuned its forecasts for sales, EBITDA and capital spending. Sales would now reach about €4.5 billion and EBITDA would exceed 2008’s result of €1.06 billion. Capital spending would come in at around €750 million. Once the Q3 2010 figures had been published, sales and EBITDA estimates were raised yet again. Sales would clearly surpass €4.6 billion and EBITDA would amount to over €1.1 billion. In contrast, the forecast for capital spending was cut back to €700 million because the EU Commission authorized a regional grant for the Nünchritz polysilicon facility in mid-September that had not been fully included in 2010’s investment budget.

2010’s sales reached €4.75 billion, significantly higher than expected at the start of year. The figure was 28 percent above 2009. All five of WACKER’s business divisions achieved stronger sales. In particular, WACKER POLYSILICON, WACKER SILICONES and Siltronic posted sales growth of more than 20 percent.

Turning to EBITDA, we began 2010 expecting an increase against 2009 and fine-tuned our forecast as the year progressed. 2010’s EBITDA came in at €1.19 billion, up 97 percent compared to the previous year. Following a loss in 2009, Siltronic again generated a positive EBITDA in 2010. WACKER POLYSILICON and WACKER SILICONES both posted substantial EBITDA growth. WACKER POLYMERS’ EBITDA rose, too, year over year. Higher sales revenues and volumes, plus enhanced plant utilization, positively impacted earnings, helping reduce specific production costs. In contrast, rising raw-material prices and energy costs held back earnings. The prices for our four key raw materials – silicon, ethylene, vinyl acetate monomer and methanol – were 10 percent up on average against the previous year. We established a provision for contingent losses of €51.8 million, due to higher transfer prices for the siloxane covered by future purchase obligations relating to our joint venture with Dow Corning.

Excluding acquisitions, investments of between €600 and €700 million were forecast for 2010. At €613.9 million – without the acquisition of the Holla silicon-metal production facility and Lucky-Silicone in South Korea – investments were within this target corridor. Most funds flowed into the ongoing expansion of our polysilicon production facilities.

As projected at the beginning of 2010, R&D expenses – for developing tomorrow’s products and solutions – climbed slightly to €165.1 million.

The increase in employee numbers was greater than expected. As per the reporting date, WACKER had 16,314 employees, 696 more than in 2009. The rise primarily stemmed from our acquisition of the Holla silicon-metal plant and the South Korean Lucky-Silicone brand, and from hiring due to strong growth at WACKER POLYSILICON.

The Executive and Supervisory Boards’ 2010 dividend proposal to be announced at the Annual Shareholders’ Meeting takes account of that year’s successes and the Group’s strong financial position. The dividend is set to increase substantially to €3.20 per share (2009: €1.20 per share).

Deviations from Projected Expenses

2010’s personnel expenses – which grew 4 percent overall compared to 2009 – declined substantially as a percentage of sales. This was because sales increased by 28 percent. As a result, personnel expenses were below the planned figure for 2010.

Raw-material costs, as a percentage of sales, also remained below our planned figures. The prices for most key raw materials increased, in some cases markedly. Nevertheless, WACKER POLYSILICON and Siltronic – whose ratio of raw-material costs to sales is below the WACKER average – posted high sales growth. Energy costs, at 8.5 percent, were in line with our planned figures.

Compared to 2009, depreciation and amortization decreased significantly as a percentage of sales. There were two reasons for this. First, non-recurring items had increased depreciation and amortization by €182 million in 2009. Second, 2010’s strong sales growth meant that depreciation and amortization dropped to 9.0 percent of sales.