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

Wacker Chemie AG’s total assets grew strongly to €5.23 billion (2010: €4.55 billion). This 15-percent increase was mainly the result of additions to investments and of higher inventories.

Fixed assets rose €570.8 million to €3.10 billion (2010: €2.53 billion), an increase of 23 percent. Growth here was primarily due to strategic investment projects at WACKER POLYSILICON. Together with other projects, these led to additions to property, plant and equipment of €431.8 million. Depreciation reduced property, plant and equipment by €325.8 million. Compared to 2010, financial assets rose €466.2 million to €1.17 billion, an increase that was due to two items. Liquidity of €100.0 million not required over the short term was invested in a closed investment fund recognized as a financial asset under German commercial law. The Group added to the equity base of Wacker Polysilicon North America LLC, an intermediate holding company for production purposes. The funds serve to finance the US subsidiary, which is currently building a new production site in Charleston, Tennessee. The ratio of fixed assets to total assets grew from 2010’s 56 percent to 59 percent in 2011 due to major investments in property, plant, equipment and financial assets. Strong customer demand boosted plant utilization in 2011, too.

As a result of high business volumes, inventories expanded at every division, up 49 percent to €454.6 million (2010: €304.6 million). Higher silicon-metal inventories played a key role here. At €303.1 million, trade receivables remained at the prior-year level (2010: €319.2 million). Other receivables and other assets rose marginally, from €628.6 million in 2010 to €650.8 million. Receivables from affiliated companies remained roughly constant in 2011, amounting to €467.7 million (2010: €437.6 million). Other assets declined slightly to €175.7 million (2010: €180.3 million). These contain tax receivables and receivables from an investment grant for the Group’s investment in the polysilicon plant at Nünchritz.

Wacker Chemie AG invested part of its surplus liquidity in securities of several bond issuers with a term of over three months. Their share of current assets totaled €374.2 million as per the reporting date (2010: €316.7 million).

Cash on hand and demand deposits declined to €350.7 million as per December 31, 2011 (2010: €411.6 million) owing to major investments in the period under review.

Equity amounted to €2.15 billion as per the reporting date (2010: €1.81 billion). This was €343.3 million more than a year earlier and corresponds to an equity ratio of 41.2 percent (2010: 39.8 percent). There were several reasons for this gain. The retained profit of €978.7 million mainly comprised 2011’s non-distributed net income of €502.2 million. In 2011, the company’s dividend payout to shareholders for 2010 amounted to €158.9 million.

Over and above its normal additions, Wacker Chemie AG increased provisions for pensions and similar obligations by an additional amount of €19.3 million. The reason for this allocation was to take account of the higher life expectancy of the Group’s pension-fund beneficiaries. Provisions for pensions and similar obligations amounted to €498.6 million (2010: €445.2 million) as per the reporting date. In contrast, other provisions declined from €389.4 million in 2010 to €350.5 million because tax provisions and provisions for phased early retirement were lower.

Financial liabilities grew to €818.6 million (2010: €615.8 million). Bank loans amounted to €469.0 million (2010: €280.9 million). Financial liabilities from cash pooling and loans increased liabilities due to affiliated companies from €330.9 million in 2010 to €344.3 million.

Trade payables remained virtually constant at €202.7 million (2010: €207.6 million). In total, sundry liabilities rose by €133.1 million to €1.21 billion (2010: €1.08 billion). Advance payments by customers stemming from concluded supply contracts significantly outweighed the reduction in advance payments from deliveries effected. Obligations from advance payments received rose in fiscal 2011 to €1.18 billion (2010: €1.05 billion), a gain of €130.3 million.

In 2011, Wacker Chemie AG’s financial position reflected good business performance, which generated a strong cash flow from operating activities of €849.3 million (2010: €981.1 million). Net income amounted to €502.2 million (2010: €301.5 million). This figure still has to be adjusted for non-cash items from depreciation, for the establishment or reversal of provisions and for other non-cash expenses. High inventories lowered operating cash flow. Higher advance payments received, in particular, resulted in a cash inflow of €163.5 million (2010: €171.7 million).

In 2011, the cash flow from investment activities amounted to €-908.0 million after €-745.3 million in 2010. This amount includes investments of €151.6 million in securities. Compared to 2010, Wacker Chemie AG’s investments in property, plant and equipment decreased by €63.0 million since the Group invested more outside Germany in 2011. As the Group’s parent company, Wacker Chemie AG invested in subsidiaries via capital increases of €367.6 million. The Group particularly focused on funding its US subsidiary Wacker Polysilicon North America LLC, which is building the new polysilicon site in Charleston, Tennessee. Financing is taking place via an intermediate holding company. Adjusted for the effect of acquired securities, the cash outflow from noncurrent investment activities amounted to €756.4 million (2010: €495.7 million).

In fiscal 2011, net cash flow totaled €92.9 million (2010: €485.4 million). It was lower than the prior-year figure due to high investments of €392.4 million. WACKER defines net cash flow as the difference between cash inflow from operating activities and cash outflow due to noncurrent investment activities.

In 2011, cash flow from financing activities was in positive territory, at €3.7 million (2010: €114.1 million). The dividend payout of €158.9 million for fiscal 2010 was one item impacting cash flow. At Wacker Chemie AG, intra-Group financing resulted in a net cash inflow of €26.8 million (2010: cash inflow of €134.6 million). In fiscal 2011, the Group accessed the second installment (€200.0 million) of its investment loan from the European Investment Bank (EIB) to build the polysilicon plant at Nünchritz (Saxony).

Liquidity – defined as the balance of securities in current assets, fund shares, and of cash on hand and demand deposits – rose from €728.3 million at the start of 2011 to €824.9 million at year-end. Net financial receivables (the balance of liquidity and liabilities to financial institutions) equaled €355.9 million at the end of 2011 (2010: €447.4 million in net financial receivables).