Economic and Legislative Factors

WACKER sells its products and services to virtually every industry. Consequently, the Group is subject – in its business divisions – to natural cyclical fluctuations, the impact and onset of which may vary greatly. We are able, however, to mitigate the severity of these fluctuations thanks to our extensive product range and our very broad, cross-industry portfolio of customers.

Early Operational Indicators as Measures for Future Developments

By using specific, early operational indicators, we try to anticipate potential developments in our business plans and to allocate capacities accordingly. Since we are at home in diverse businesses and markets, we consult a number of early indicators to gain insights into potential developments at each of our business divisions.

Economic Factors Impacting Our Business

Although 2010 saw the world economy recovering strongly from 2009’s crisis, our business has remained subject to the same, key economic factors:

• Exchange-rate fluctuations
  Our business is influenced by currency fluctuations against the euro. We have used currency hedging (derivatives) to secure at least half of our dollar exposures for the next year. The hedging ratio is currently around 50 percent. Without hedging, a one US cent increase in the euro-dollar exchange rate lowers EBITDA by some €5 million.
  
  
• Energy and raw-material costs
  As a chemical company, we belong to an energy-intensive industry and require diverse raw materials to manufacture our products. Consequently, higher energy and raw-material costs impact our cost structure. At our Burghausen and Nünchritz sites, we reduce our energy-procurement needs and costs by generating our own energy. Backward integration at WACKER SILICONES has enabled us to secure part of our long-term silicon-metal needs, to gain more independence from price fluctuations and to enhance supply reliability during demand peaks. We generally conclude long-term agreements to ensure energy and raw-material supplies.
  
  
• State-regulated incentives and compensation systems for
  renewable energy sources
  As one of the world’s leading suppliers of hyperpure polycrystalline silicon, we are affected by regulatory changes to incentives and compensation systems for renewable energy sources. Through continuous productivity improvements, however, we are in a position to maintain our competitiveness amid the altered landscape. Our product quality and international orientation, our customer structure, and our medium to long-term supplier contracts all offer us competitive advantages over other producers.

Legal Factors Impacting Our Business

Overall, there were no significant changes to Wacker Chemie AG’s legal environment in 2010. Our operations were not subject to any additional requirements.

85 Registration Dossiers Submitted as Part of REACH

Since June 2007, we have been obligated to register all substances on the European market – and classify them by property – if annual quantities exceed one metric ton or more. Registration is governed by the EU-wide REACH regulation (Registration, Evaluation, Authorization and Restriction of Chemical Substances). We began registering products in accordance with REACH in 2008 and 2009. In 2010, WACKER submitted 85 registration dossiers to the European Chemicals Agency (ECHA). The new legal stipulations involve considerable input from the chemical industry. REACH does not define a transition period for preparing the extended material safety data sheets required. Nonetheless, the time and effort involved means that chemical companies need a reasonable period of time to adapt their data sheets. On an interim basis, we continue to send out our existing data sheets, which already afford a very high safety level.

The EU Commission introduced the GHS (Globally Harmonized System of Classification and Labeling of Chemicals) in 2009 when adopting Europe’s CLP (regulation on Classification, Labeling and Packaging of Substances and Mixtures). At WACKER, the GHS involves checking, reclassifying and relabeling all our products. By late 2010, we had reclassified each substance. By mid-2015, every mixture will have to be reclassified. Additionally, we registered all substances with the EU’s classification and labeling inventory by January 2011. In 2010, we also reclassified and relabeled every substance as per GHS in Japan, Singapore and South Korea.