Earnings

WACKER Sets New Sales and Earnings Records

WACKER finished fiscal 2010 with new sales and earnings records. Thus, we shook off the effects of the world economic crisis faster than anticipated and even surpassed the records set in 2008. The Group’s net income for the year rose to €497.0 million (2009: €-74.5 million). WACKER’s earnings were supported by continuing high demand and low specific production costs. In 2009, several non-recurring effects totaling €342.0 million dampened earnings before taxes, due to precautionary measures for countering the economic crisis and to impairments on fixed assets.

Sales Climb 28 percent to €4.75 billion

Sales amounted to €4.75 billion, up 28 percent from the previous year (2009: €3.72 billion), resulting from stronger customer demand for our products in all key target industries. This sales record was mainly fueled by Siltronic’s robust sales gains and WACKER SILICONES’ and WACKER POLYSILICON’s strong business performance. The entire additional polysilicon volumes from Burghausen’s new Poly 8 facility were sold on the market. Sales were boosted €1.13 billion by volume growth and €114.1 million by exchange-rate effects. A key contributor here was the US dollar-euro exchange rate, which averaged $1.33 per euro in 2010 (2009: $1.39 per euro). In contrast, declining prices – particularly at WACKER POLYSILICON – reduced consolidated sales by €215.6 million.

Detailed information on domestic and international sales is contained in the Regions section.

EBITDA almost Doubles

Earnings before interest, taxes, depreciation and amortization (EBITDA) reached €1.19 billion (2009: €606.7 million) – nearly doubling. The EBITDA margin rose to 25.2 percent (2009: 16.3 percent), matching 2008’s level. Earnings growth was largely the result of higher sales volumes and revenues, as well as increased plant utilization, which benefited specific production costs. In 2009, non-recurring effects reduced EBITDA by €159.9 million.

Cost of Sales and Gross Profit from Sales

Gross profit from sales rose €502.8 million to €1.35 billion (2009:
€843.5 million) – 60 percent higher than a year earlier. At the same time, the gross margin climbed from 23 percent in 2009 to 28 percent in 2010. Cost of goods sold amounted to €3.40 billion (2009: €2.88 billion), resulting in a cost-of-sales ratio of 72 percent (2009: 77 percent). Averaging well over 80 percent, the Group’s capacity-utilization rates were very good in 2010, which had positive scale effects on the distribution of fixed costs. Cost of goods sold included expenses of €51.8 million for an addition to provisions for expected losses from WACKER’s silicone business in China. The reason for the addition was purchase obligations involving higher transfer prices from long-term agreements between WACKER’s Chinese subsidiaries and its siloxane-production joint venture with Dow Corning. Back in 2009, high additions to pension- and personnel-related provisions had negatively impacted the cost of goods sold.

Rising Functional Costs

Other functional costs rose 8 percent to €548.0 million compared to the previous year (2009: €505.9 million). This increase essentially stemmed from selling and administrative costs, which were up 12 percent year over year to €382.9 million. The rise was mainly due to business-volume growth and to higher profit-sharing compensation in 2010 than a year earlier.

Stable R&D Costs

At €165.1 million, the Group’s R&D costs remained nearly constant in 2010 (2009: €164.0 million).

Other Operating Income and Expenses

In 2010, the balance of other operating income and expenses was €4.3 million (2009: €-183.5 million). In 2009, impairments on property, plant and equipment of €182.1 million impacted other operating income. The balance of exchange-rate gains and losses totaled €-6.2 million for the year (2009: €-27.0 million). Other operating income of €18.5 million was generated by the sale of WACKER’s 50-percent share in US-based Planar Solutions LLC Other operating expenses contain disposal losses for plant-related items and other impairment losses to assets totaling €21.0 million, as well as expenses from the establishment of provisions amounting to €35.7 million.

These effects led to higher operating income of €802.6 million (2009: €154.1 million).

Result from Investments in Joint Ventures and Associates

The investment result – the total income from investments in joint ventures and associates and other income from participations – was negative at €-38.0 million (2009: €-127.4 million). This was due to losses in Asia as a result of high depreciation (as planned) at joint ventures with Samsung and Dow Corning. Additionally, start-up costs were incurred at the siloxane joint venture with Dow Corning. A year earlier, the Group’s share in the WACKER SCHOTT Solar joint venture was transferred to SCHOTT Solar AG – causing an investment loss of €74.8 million.

Financial and Interest Result

At €-32.3 million (2009: €-23.5 million), the financial result edged down compared to the prior year. At €-2.0 million, the interest result was nearly balanced. Here, capitalized construction-related borrowing costs of €13.5 million (2009: €12.9 million) had a positive effect in 2010. The other financial result was
€-30.3 million (2009: €-27.8 million). The main factor here was accrued interest on pension-related and other provisions.

Income Taxes

Tax expenses for 2010 amounted to €235.3 million (2009: €77.8 million). As a result, the Group’s tax rate was 32.1 percent. The tax rate a year earlier, adjusted for non-recurring effects, was also around 30 percent. The Group’s tax expenses mainly consist of current income taxes.

Net Income

In total, net income for 2010 was €497.0 million (2009: €-74.5 million).