WACKER SILICONES

Strategy

In 2009, WACKER SILICONES had advanced its strategy, focusing on profitable growth, cost savings and greater flexibility toward customers and markets.

In 2010, progress continued. We closed a strategic gap in our supply chain with the backward integration of silicon metal. In China, expansion of WACKER’s integrated production system surged ahead. We started up a siloxane joint-venture plant with Dow Corning at Zhangjiagang, officially launching production on November 18, 2010. As a result, we are well positioned to meet and stimulate growth in this vital region. The division’s strategic marketing focuses on China, Brazil and India. In these regions, we anticipate the greatest growth opportunities, thanks to our wide range of products and applications.

WACKER SILICONES Sets New Sales Record

WACKER SILICONES posted a new sales record in 2010. Climbing 28 percent, sales came in at €1.58 billion (2009: €1.24 billion) amid surging demand for our products across every industry. Demand even remained vigorous during the summer when business usually slackens off. In every region, WACKER SILICONES reported higher sales.

EBITDA outperformed sales, soaring 46 percent to €229.9 million (2009: €157.9 million). EBITDA was spurred mainly by production-volume growth, lower specific production costs and currency-exchange effects. On the downside, higher prices for methanol, platinum and other raw materials dampened the earnings trend. Additionally, 2010’s EBITDA was held back by fourth-quarter provisions of €51.8 million for contingent losses, due to purchase obligations involving high long-term transfer prices between WACKER and the siloxane-production joint venture with Dow Corning. The EBITDA margin came in at 14.5 percent (2009: 12.7 percent).

Investments Far Higher than Prior Year

WACKER SILICONES’ investments amounted to €174.1 million, considerably higher than in 2009 (€102.2 million). This total includes €66.5 million for purchasing the Holla silicon-metal plant from Norway’s FESIL Group and the total purchase price of €14.7 million for the Lucky-Silicone brand (and the associated business) in South Korea. At Zhangjiagang, WACKER and Dow Corning officially opened an integrated siloxane production complex in November 2010, after four years of construction. It ranks among the largest and most modern silicone sites worldwide. Shortly before, in October, WACKER had started up a silicone-polymer plant at Zhangjiagang. The new facility there produces diverse intermediates and downstream silicone products, such as fluids. As a result, WACKER has completed its supply chain in China. The total investment in this facility was about €30 million.

Acquisition in Dynamic Asian Market

To strengthen its presence and supply chain in the growth markets of Asia, WACKER acquired the South Korean Lucky-Silicone brand from Henkel Technologies (Korea) Ltd. for €7.1 million in October 2010. As part of the acquisition, WACKER took over the production facilities in Jincheon, including the associated real estate. Additionally, it assumed all this business’s inventories and receivables, the value of which comes to €7.6 million. The Jincheon site’s workforce of some 40 employees was kept on. The Lucky-Silicone brand mainly comprises silicone sealants, manufactured and marketed for use in construction and other sectors.

WACKER SILICONES had 3,892 employees on December 31, 2010 (December 31, 2009: 3,873).