Earnings Performance of Wacker Chemie AG as per the German Commercial Code

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Earnings at Wacker Chemie AG in 2013 were marked by a further reduction in the operating result. Net income of € 11.6 million remained roughly at the prior-year level (2012: € 14.9 million). A decline in sales, in particular at WACKER POLYSILICON, resulted in a lower operating result. Counteracting this were advanced payments retained and damages received related to terminated long-term supply contracts for polysilicon amounting to a total of € 77.6 million, although this was less than the prior-year figure of € 113.1 million. The previous year’s financial result was also impacted by impairment losses on investments in the amount of € 175.0 million. In fiscal 2013, € 8.0 million in impairments on investments was recognized. Pre-tax income came in at € 64.2 million (2012: € 98.5 million). Tax expenses were impacted by non-recurring effects, due in particular to non-tax-deductible expenses, resulting in net income of € 11.6 million. In the previous year, net income of € 14.9 million was reported.

Sales declined from € 3.30 billion to € 3.14 billion. This is a year-on-year drop of 5 percent. Whereas WACKER SILICONES and WACKER BIOSOLUTIONS succeeded in boosting their sales, WACKER POLYMERS and WACKER POLYSILICON recorded declining sales. WACKER SILICONES increased its sales by 3 percent to € 1.30 billion (2012: € 1.27 billion). WACKER BIOSOLUTIONS’ sales grew to € 118.6 million (2012: € 114.4 million). Sales at WACKER POLYMERS were somewhat lower, declining by 3 percent to € 625.0 million (2012: € 642.0 million). Prices for polysilicon were lower year on year, reducing sales at WACKER POLYSILICON by 18.5 percent to € 896.1 million (2012: € 1.10 billion). The agreement in the solar dispute revived the market in the second half of 2013, so that WACKER was able to sell large volumes of polysilicon. Operating performance fell by € 208.1 million to € 3.12 billion. This included inventory reductions of € 49.1 million.

In 2013, the cost of materials declined slightly to € 1.49 billion (2012: € 1.54 billion). This drop reflected lower energy expenses. Prices for strategic raw materials were somewhat lower on average than in 2012.

Personnel expenses remained at the previous year’s level, coming in at € 720.5 million (2012: € 726.1 million). The fact that personnel costs did not drop even further is due to the collective bargaining agreements reached for 2013, which increased personnel expenses. Wacker Chemie AG had 9,370 employees as per December 31, 2013 (Dec. 31, 2012: 9,467).

Research and development costs at Wacker Chemie AG remained at the previous year’s level, coming in at € 102.4 million (2012: € 105.0 million).

Depreciation and amortization decreased slightly to € 331.7 million (2012: € 341.3 million).

The other operating result, consisting of other operating income less other operating expenses, decreased by 24 percent (on balance) to € –419.5 million (2012: € –337.0 million). This decrease is largely due to a reduction in advance payments retained and damages received relating to terminated polysilicon contracts. In 2013, these payments amounted to € 77.6 million (2012: € 113.1 million). Conversely, the improvement in foreign currency gains and losses from operations reduced the net loss to € 2.0 million (2012: € 10.0 million). Reversals of provisions led to an increase in the other operating result, on balance, of € 14.2 million (2012: € 24.4 million). Major effects on other operating expenses beside the foreign currency loss were: outgoing-freight expenses, customs duties, other selling expenses, as well as other contractor work.

The operating result came in at € 157.0 million, around 60 percent below the 2012 level (€ 389.1 million). In particular, lower revenue was the main cause of this drop. Due to decreased operating performance, the material-to-sales ratio rose to 47.8 percent (2012: 46.1 percent). The labor-to-sales ratio also went up, reaching 23.1 percent (2012: 21.8 percent).

The result from investments in joint ventures and associates contains expenses for losses assumed under profit-and-loss transfer agreements. Also included is an € 8 million impairment of the stake in WACKER’s Brazilian subsidiary. The prior-year result from investments in joint ventures and associates was impacted chiefly by impairments of investments in Chinese companies totaling € 175 million. In 2012, the intracompany transfer prices between the Chinese WACKER companies and the associated company Dow Corning (ZJG) Co. Ltd., which produces siloxane at the Zhangjiagang site in China, were adjusted to reflect altered market conditions. This led to a reduction in transfer prices for siloxane and an impairment of the carrying amount of the investment in Singapore-based Dow Corning (ZJG) Holding Co. Private Ltd.

The losses assumed, resulting principally from Siltronic AG and amounting to € –105.3 million (2012: € –112.0 million), were compensated by combined earnings from dividends and profit-and-loss transfers relating to the chemical holdings and Siltronic in the amount of € 67.1 million (2012: € 41.3 million).

The net interest result remained at the previous year’s level, coming in at € –41.8 million (2012: € –40.0 million). This is chiefly due to slightly higher expenses for interest accruing to provisions for pensions. Income from investments in securities and fixed deposits as well as interest expenses for financial liabilities remained nearly constant compared to the prior-year level.

Income tax expenses amounted to € 52.6 million (2012: € 83.6 million). Tax expenses were higher year on year, due in particular to non-tax-deductible expenses.

Net income was € 11.6 million. In the previous year, net income of € 14.9 million was generated. Retained profit for 2013 – calculated as the profit carried forward from 2012 less € 29.8 million in dividends paid – amounted to € 636.1 million (2012: € 654.3 million).