After the crisis of 2009, the entire chemical industry rebounded last year, with virtually unparalleled dynamism. It is no exaggeration to say that 2010 was an excellent year for chemicals, and definitely for WACKER, too. Both the Group’s sales and operating result reached a record peak.
Our employees played a vital role in helping WACKER weather the world’s worst economic crisis for decades so effectively and return to the successful path of previous years. On behalf of the whole Executive Board, I would like to thank all our employees for their outstanding achievements.
Best Year in the Group’s History
At the start of 2010, it was hard to imagine that the world economy would rebound so quickly and, above all, with such momentum. The recovery started from a very low level in 2009, amid persistent production-capacity underutilization. Demand then soared during 2010’s first quarter, and remained high until year-end. Even the usual seasonal slump did not come last summer.
Our results reflected the upswing. Sales rose 28 percent to €4.75 billion and EBITDA almost doubled to €1.19 billion. With net income of some €500 million, WACKER achieved an after-tax return of over 10 percent – the best operating result in the Group’s entire history. Every business division contributed toward this success.
Without doubt, our performance benefited strongly from the world economy’s industry-wide recovery. If global growth rates had not been so high, we would not have surpassed our 2008 record so quickly. Equally decisive, however, were our measures during the slowdown to improve our cost structures and process efficiency.
Despite 2009’s demand slump, we avoided any significant reductions to our workforce and production capacities. When necessary, we introduced short-time work, thereby retaining our highly qualified employees. Our strategy certainly paid off in 2010, when we needed to quickly ramp up production capacities. From today’s vantage point, we obviously did a lot right during the crisis.
WACKER’s Financial Situation Enhanced Further
WACKER has always made financial strength a top priority, focusing on securing a sound equity base, ensuring adequate liquidity and minimizing debt levels. In 2010, the Group most definitely achieved these goals. We financed our ongoing high level of investments entirely from net operating cash flow. Given the robust liquidity inflows from operations, cash and cash equivalents exceeded liabilities by about €260 million, and the equity ratio rose to 44.5 percent.
WACKER’s operational successes and financial strength allow for a substantial dividend increase compared to 2009. At the Annual Shareholders’ Meeting in May 2011, the Supervisory and Executive Boards will propose a dividend of €3.20 for 2010. The resulting distribution ratio is 32.4 percent, based on the net income allocable to Wacker Chemie AG’s shareholders – clearly above the minimum distribution ratio of 25 percent.
Successful Backward Integration of Silicon-Metal Production
To promote the Group’s medium to long-term development, we have completed several projects that will greatly spur WACKER’s progress. One project was the backward integration into silicon metal, our most important raw material. For about €65 million, we purchased a silicon-metal plant at Holla in Norway. A sound investment, the acquisition makes us more independent of raw-material price fluctuations and increases our supply security. At Holla, we can produce around 50,000 metric tons of silicon metal – covering a third of the Group’s annual requirements.
In China, WACKER and its partner Dow Corning jointly launched siloxane production at the world’s largest integrated silicone site in Zhangjiagang. This milestone marks the completion of our key investment project in the highly promising Chinese market. Although the investment and start-up costs were higher than originally planned, we now have a local presence for supplying silicone products in China and expanding our business there.
New Plant in Tennessee – the Largest Single Investment in WACKER’s History
In December, we decided to build a new production facility in the US State of Tennessee. Totaling about €1.1 billion, the project is WACKER’s single largest investment ever and will open up new opportunities for us. Our first polysilicon plant outside Germany will enable us to meet ongoing photovoltaic-sector growth and to strengthen our position as a leading supplier of polysilicon. Additionally, the new facility will help us compensate more efficiently for currency fluctuations between the dollar and euro.
WACKER Aims to Expand Further
Our strategy focuses on continued and self-financed growth, as seen in our capital spending. In 2011, we will invest over 20 percent of sales in WACKER’s future. We will be able to seize growth opportunities thanks to the investment projects already concluded and initiated. Despite high capital spending, WACKER is in excellent financial shape – a fact that underscores how strongly we are positioned.
We have entered 2011 confidently optimistic. The first few weeks have seen the economic rebound continuing – a good sign for business throughout the year. On the downside, the robust recovery is pushing up raw-material and energy costs. Although it won’t be easy to compensate for these accelerating costs, we are confident that we can increase sales and achieve a very good operating result in 2011.
Looking further ahead, WACKER POLYSILICON has contractually secured most of its planned polysilicon output until 2014, a particularly positive signal. Importantly, these contracts already include the output from the plant under construction in Tennessee, which is expected to come on stream in late 2013.
Continued growth is the goal for WACKER’s other divisions, too. At WACKER SILICONES, we aim to expand strongly in emerging markets, especially in Brazil, China and India. WACKER POLYMERS, too, is targeting these markets, reinforcing its market leadership through intelligent products for the construction industry. In the dispersions market, we plan to launch new, environmentally-compatible products. At WACKER BIOSOLUTIONS, we are focusing on further profitable expansion in the food and life-science sectors. Siltronic’s priorities are to rigorously continue the efficiency and productivity measures already underway, to make its cost structures more flexible, and to strengthen its presence among customers in the 300 mm wafer sector.
A key groupwide goal is to continuously improve each corporate sector’s productivity through our “Wacker Operating System” productivity-enhancement program. Another goal is to vigorously push ahead with application-specific product developments, since they are the basis of tomorrow’s sales. True to WACKER’s success formula of customer proximity, we intend to expand our presence in dynamic growth regions. The closer we are to customers, the better we understand them and the more precisely we know what they want. We adhere to this principle in everything we do, always striving to create added value for our customers.
On behalf of the whole Executive Board, I sincerely thank our suppliers and customers around the globe for maintaining a trusting and reliable relationship with WACKER. I extend my gratitude to you, our shareholders, for your confidence in WACKER and for your open dialog with us.
We look forward to your continued support on the path ahead.
Munich, Germany, March 2011
Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG