Assets and Financial Position of Wacker Chemie AG as per German Commercial Code

Wacker Chemie AG’s total assets increased robustly to €4.55 billion (2009: €3.70 billion), a 23-percent rise mainly stemming from higher business-related volumes in current assets and from greater liquidity.

Fixed assets climbed by €110.9 million to €2.53 billion, up 4 percent (2009: €2.42 billion). Growth here was primarily due to strategic investment projects at WACKER POLYSILICON, resulting in additions to property, plant and equipment of €309.9 million. Compared to 2009, financial assets decreased by €14.0 million to €708.2 million. Impending losses from purchase obligations that will impact financial developments at Chinese subsidiaries led Wacker Chemie AG to lower the value of the carrying amount of its investment in Wacker Chemicals (China) Company Ltd. (Holding), Shanghai, from €98.9 million to €20.0 million. For operating reasons, the ratio of fixed assets to total assets decreased from 2009’s 65 percent to 55 percent in 2010.

As a result, inventories expanded at every division, up 12 percent to €304.6 million (2009: €272.4 million). Trade receivables also increased, reaching €319.2 million (2009: €271.1 million). This 18-percent rise was due to the fact that customer demand and sales volumes remained high in the fourth quarter and far exceeded prior-year figures. Other receivables and other assets climbed from €587.8 million in 2009 to €628.6 million. Receivables from affiliated companies edged down in 2010 to €437.6 million (2009: €487.2 million). Other assets jumped to €180.3 million (2009: €92.0 million) on the back of higher VAT receivables and receivables from an investment grant for the polysilicon plant under construction at Nünchritz.

In the fourth quarter of 2010, Wacker Chemie AG invested part of its surplus liquidity in securities (from various bond issuers) with a term of over three months. As a result, current securities soared from €73.6 million in 2009 to €316.7 million.

Cash on hand also rose, reaching €411.6 million (2009: €40.0 million), supported by robust operating cash flow.

The equity ratio was 39.8 percent (2009: 43.1 percent). Equity climbed €214.6 million to €1.81 billion (2009: €1.60 billion). There were several reasons behind our equity performance. Effects arising from the switchover to the German Accounting Law Modernization Act (BilMoG) reduced equity by a total of €124.3 million. Of this,
€-27.3 million was directly recognized in equity. Expenses of €-97.0 million were included in net income. The retained profit of €775.2 million mainly comprised the profit carried forward from 2009 (€533.3 million) and 2010’s net income of €301.5 million. In 2010, the dividend payout for 2009 amounted to €59.6 million.

Provisions for pensions and similar obligations rose – alongside the normal additions arising from the changeover to Germany’s “BilMoG” regulations – by €94.2 million to €445.2 million (2009: €318.8 million). Other provisions declined from €412.1 million in 2009 to €389.4 million because tax provisions were lower, due primarily to payments for a concluded audit. Miscellaneous other provisions remained almost unchanged at €322.5 million (2009: €301.8 million).

Financial liabilities grew by €267.5 million to €615.8 million (2009: €348.3 million). Bank loans amounted to €280.9 million (2009: €242.4 million). Financial liabilities from cash pooling and loans increased the liabilities owed to affiliated companies from €102.5 million in 2009 to €330.9 million.

Trade payables climbed to €207.6 million (2009: €124.6 million) – a rise of 67 percent, stemming primarily from December’s very intensive investment activity and the fourth quarter’s much higher year-on-year business volumes. In total, other liabilities rose by €177.0 million to €1.08 billion (2009: €899.7 million). This increase stemmed from the advance payments which were contained in other liabilities and which rose by €171.7 million to €1.05 billion (2009: €873.9 million). Sundry liabilities were positively impacted by newly concluded supply contracts involving advance payments by customers. As a result, incoming advance payments far exceed those settled when deliveries were effected.

In 2010, Wacker Chemie AG’s healthy financial position reflected vibrant business activities, which generated a strong cash flow from operating activities of €981.1 million (2009: €840.9 million). Net income came in at €301.5 million (2009: €45.8 million). It still has to be adjusted not only for non-cash items from depreciation, but also for the establishment or reversal of provisions and for other non-cash expenses. Higher advance payments received, in particular, resulted in a cash inflow of €171.7 million (2009: €50.7 million). Net working capital increased, which lowered operating cash flow.

The cash flow from investment activities amounted to €-745.3 million (2009:
€-661.4 million). This amount includes investments of €249.6 million in securities. Compared to 2009, investments in property, plant and equipment decreased by €107.0 million. Adjusted for the influence of securities, the cash outflow from noncurrent investment activities amounted to €495.7 million.

Net cash flow (the difference between cash inflow from operating activities and cash outflow from noncurrent investment activities) came in at €485.4 million, rising €305.9 million year on year (2009: €179.5 million). Consequently, Wacker Chemie AG could finance investments entirely from operating cash flow.

In 2010, cash flow from financing activities was in positive territory, at €114.1 million (2009: €-334.7 million). The dividend payout of €59.6 million for 2009 was one item impacting cash. As part of cash management, we use liquidity surpluses at individual Group companies to cover the financing needs at others. Netted via intra-Group financing accounts, these centralized financial settlements reduce the need for external debt. At Wacker Chemie AG, intra-Group financing resulted in a net cash inflow.

Liquidity – defined as the balance of securities in current assets and of cash on hand and demand deposits – rose from €113.6 million at the start of 2010 to €728.3 million at year-end. This item includes €80.8 million from the merger of WACKER POLYSILICON GmbH & Co. KG, Nünchritz. Net financial receivables (balance of liquidity and liabilities to financial institutions) amounted to €112.5 million at year-end.