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

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Statement of Financial Position






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The amount of total assets held by Wacker Chemie AG, at €5.17 billion, dropped by 1 percent compared to year-end 2011 (€5.23 billion). The individual asset items were affected by several contrary effects.

Fixed assets increased in 2012 by 6 percent, from €3.10 billion to €3.28 billion. Property, plant and equipment grew by €244.9 million due to investment in strategic projects, primarily technical plants and machinery. Depreciation reduced property, plant and equipment by €337.6 million (2011: €325.8 million), while financial assets grew from €1.17 billion to €1.45 billion. On the one hand, €285.7 million was added to the equity base of Wacker Polysilicon North America, LLC, an intermediate holding company for production purposes. The purpose of this measure was to finance construction work at the Tennessee production site. On the other hand, impairments totaling €175.0 million were recognized on the carrying amounts of the two joint ventures Dow Corning (ZJG) Holding Co. Private Ltd., Singapore, and Wacker Chemicals Fumed Silica (ZJG) Holding Co. Ltd., Singapore, as well as for Wacker Chemicals (China) Company Ltd. (Holding), Shanghai, China. The reason for these impairments was adjustments made to the intercompany transfer price policy between the Chinese WACKER Group companies and the two joint ventures.

The closed investment fund recognized as a financial asset was increased from €100.0 million to €140.0 million. Liquidity not required in the short term is invested in this fund and held for future investment projects. Furthermore, a long-term loan in the amount of €87.9 million was extended to WACKER Finance B.V. Kommenie in Amsterdam in the Netherlands. The ratio of fixed assets to total assets at Wacker Chemie AG was 63 percent, up from 59 percent in 2011.

Inventories remained constant year on year, at €447.5 million (2011: €454.6 million). Trade receivables rose by 9 percent, from €303.1 million in 2011 to €330.1 million. In addition, other receivables and other assets in creased 24 percent year on year to €805.7 million. Receivables from affiliated companies rose from €467.7 million to €676.7 million in 2012. This increase was due to the ongoing financing provided by the production company Wacker Polysilicon North America, LLC for construction work taking place at the new production site in Charleston, Tennessee. Other assets decreased 32 percent to €118.8 million (2011: €175.7 million). Other assets mainly comprise tax receivables and other receivables.

In 2012, as in the previous year, Wacker Chemie AG invested excess liquidity in securities. The bonds in question have maturities of more than three months. As of December 31, 2012, Wacker Chemie AG held more than €175.4 million in securities, €198.8 million less than in 2011 because liquidity was required for ongoing investments.

Wacker Chemie AG’s cash on hand and demand deposits amounted to €125.2 million as of December 31, 2012 (December 31, 2011: €350.7 million). The decline was attributable to substantial capital expenditure in 2012.

Equity on the reporting date amounted to €2.06 billion (2011: €2.15 billion), corresponding to an equity ratio of 39.8 percent (2011: 41.2 percent). Pursuant to a shareholders’ meeting resolution, €230 million in retained profit from 2011 was allocated to other retained earnings. The remaining retained profit of €654.3 million primarily comprised current net income in 2012 of €14.9 million and the profit carried forward from 2011 that was not distributed as dividends. The company paid €109.3 million in dividends to its shareholders in 2011.

As expected, provisions for pensions and similar obligations rose compared with the previous year, by €37.1 million to €535.7 million (2011: €498.6 million). However, other provisions decreased 15 percent to €297.6 million (2011: €350.5 million). This balance sheet item consisted primarily of provisions for taxes and provisions for personnel and environmental protection. In particular, provisions for personnel were reduced by €69.3 million, the reason being a decrease in profit-based compensation elements and lower provisions for phased early retirement. All in all, provisions constituted 16 percent of total equity and liabilities.

Financial liabilities amounted to €1.06 billion at the reporting date (2011: €818.6 million), up 29 percent. Bank loans amounted to €857.1 million (2011: €469.0 million). Wacker Chemie AG took advantage of low interest rates to secure long-term financing on the capital market. On February 23, 2012, WACKER issued four promissory notes (German Schuldscheine) totaling €300 million, with maturities of three and five years at standard market credit terms. In addition, long-term loans each totaling 5 billion Japanese yen were raised in the third and fourth quarters of 2012. Financial liabilities from cash pooling and intercompany loans decreased by €154.3 million. Liabilities due to affiliated companies amounted to €190.0 million (2011: €344.3 million). Financial liabilities accounted for 20 percent of total equity and liabilities (2011: 16 percent).

Trade payables decreased from €202.7 million in 2011 to €154.4 million in 2012. One reason for this decline was lower production volumes, especially at the WACKER POLYSILICON divisions, in the fourth quarter of 2012. Other liabilities also decreased, from €1.21 billion in 2011 to €1.07 billion at the reporting date. This was primarily due to the drop in advance payments received under polysilicon contracts, which decreased €155.0 million during 2012 to €1.02 billion (2011: €1.18 billion). Advance payments received for polysilicon deliveries represented 20 percent of total equity and liabilities.

Wacker Chemie AG’s financial position was impacted in 2012 both by high capital expenditure and by markedly reduced cash flow from operating activities. Cash flows from operating activities amounted to €399.0 million, €450.3 million less than the previous year (2011: €849.2 million). This was primarily due to the lower net income, at €14.9 million, and to high offsets in connection with advance payments received for deliveries of polysilicon to customers. The change in advance payments received amounted to €155.0 million. Non-cash accounting transactions such as depreciation of property, plant and equipment and impairments of financial assets had a positive effect on operating cash flow. Declining trade receivables and other receivables led to cash outflows during the reporting period.

At €-482.2 million, cash outflows for Wacker Chemie AG investment activities in 2012 were substantially below the previous year’s level of €-908.0 million. This amount includes the purchase and sale of securities totaling €129.1 million. Investment in securities in the previous year amounted to €151.6 million. At €251.9 million, investments in property, plant and equipment were down year on year (2011: €390.4 million). The greater part of these funds was invested in further expansion of the polysilicon production facilities in Nünchritz and Burghausen. Financial investments primarily comprised capital increases for Wacker Polysilicon North America, LLC, for the purpose of financing construction of the Tennessee production site. Financing was via an intermediate holding company. Adjusted for the effect of securities, the cash outflow from noncurrent investment activities amounted to €611.2 million (2011: €756.4 million).

Net cash flow from investment activities and operating activities, less securities and advance payments received, amounted to €-57.3 million in 2012 (2011: €-70.6 million). WACKER redefined the meaning of net cash flows for Wacker Chemie AG, as well. From now on, advance payments received under polysilicon agreements will no longer be recognized in net cash flow. According to the previous definition, Wacker Chemie AG would have reported net cash flow for 2012 of €-212.3 million (2011: €92.9 million).

Cash flow from financing activities amounted to €-207.2 million (2011: €3.7 million), reflecting financing measures taken in 2012. Wacker Chemie AG took out loans of €398.7 million to finance investment projects. In addition, the company transacted intra-Group financing, which increased by a total of €496.6 million. The dividend payout of €109.3 million for 2011 also impacted cash flow.

Liquidity – defined as the balance of securities in current assets, of fund shares, and of cash on hand and demand deposits – dropped from €824.9 million at year-end 2011 to €440.6 million at year-end 2012. In 2011, Wacker Chemie AG reported net financial receivables in the amount of €355.9 million, after offsetting liquidity against liabilities toward financial institutions. At the end of 2012, net financial liabilities amounted to €416.5 million.