Financial-Position Trends: Equity and Liabilities
Group Equity up Slightly
Group equity increased slightly relative to December 31, 2012, rising by € 75.8 million to € 2.20 billion (Dec. 31, 2012: € 2.12 billion). As a result, the equity ratio was 34.7 percent (Dec. 31, 2012: 32.7 percent). Group equity was influenced by a number of different factors. Net income for the year increased retained earnings by € 2.6 million. At the same time, the dividend distributed diminished retained earnings by € 29.8 million. Other equity items led to an increase in equity. These were mainly impacted by a pension-provision adjustment that was not recognized in the income statement. At the start of 2013, WACKER switched to the new IAS 19 (revised) accounting and valuation methods for pension provisions. The remeasurement of defined benefit plans carried out at the end of the year led to lower actuarial losses. Changes from the remeasurement of defined benefit plans led to an increase in equity of € 152.8 million in 2013. Increases in the fair value of derivative financial instruments also raised equity by a further € 8.0 million, while negative foreign currency translation effects lowered equity by € 54.7 million.
WACKER’s liabilities declined by € 236.2 million year on year, totaling € 4.14 billion at the end of 2013 (Dec. 31, 2012: € 4.37 billion). They accounted for 65 percent of total equity and liabilities (Dec. 31, 2012: 67 percent).
Noncurrent liabilities totaled € 3.08 billion as of December 31, 2013, a year-on-year decline of 4 percent (Dec. 31, 2012: € 3.21 billion). They continued to account for 49 percent of total equity and liabilities (Dec. 31, 2012: 49 percent). The provisions for pensions declined by € 156.2 million, mainly because a higher discount rate (3.8 percent instead of 3.5 percent) was applied for remeasurement than at the end of fiscal 2012. Provisions for pensions amounted to € 1.08 billion as of December 31, 2013 (Dec. 31, 2012: € 1.24 billion), equivalent to 17 percent of total equity and liabilities. Other noncurrent provisions fell slightly as provisions for phased early retirement were reduced.
Noncurrent financial liabilities grew by € 288.9 million to € 1.25 billion (Dec. 31, 2012: € 958.5 billion), an increase of 30 percent. Noncurrent financial liabilities now account for 20 percent of total equity and liabilities (Dec. 31, 2012: 15 percent). On April 23, 2013, WACKER issued US$ 400 million in senior unsecured notes in a private placement in the USA. The notes were offered with three maturities, namely five, seven and ten years. The transaction was based on standard market credit terms.
Other noncurrent liabilities fell by € 252.1 million to € 567.3 million (Dec. 31, 2012: € 819.4 million) and mainly comprise advance payments received for polysilicon deliveries in the amount of € 564.4 million. Reclassifications to current liabilities and the retention of advance payments from terminated contracts are the reasons for the € 239.0 million drop in noncurrent advance payments received.
Current liabilities decreased year on year, totaling € 1.06 billion at the end of 2013 (Dec. 31, 2012: € 1.16 billion), down 9 percent from a year earlier. They accounted for 17 percent of total equity and liabilities (Dec. 31, 2012: 18 percent). Trade payables dropped 19 percent, amounting to € 309.4 million as of the balance sheet date (Dec. 31, 2012: € 379.8 million). This decrease was mainly due to a drop in trade payables in connection with investments. Other current provisions and liabilities rose by 7 percent to € 579.9 million (Dec. 31, 2012: € 542.8 million). The main factor behind this is reclassification of advance payments received as current assets.
WACKER Posts Higher Net Financial Debt
Compared with 2012, current financial liabilities fell from € 238.7 million to € 169.3 million. This decrease was due to redeemed loans and to credit lines no longer required for financing working capital. Overall, financial liabilities increased to around € 1.42 billion (Dec. 31, 2012: € 1.20 billion), accounting for 22 percent of total equity and liabilities (Dec. 31, 2012: 18 percent). Current liquidity (current securities, cash and cash equivalents) also rose compared with the prior year. It amounted to € 503.7 million (Dec. 31, 2012: € 435.6 million) – an increase of 16 percent. Noncurrent securities rose from € 61.1 million to € 120.8 million. As of December 31, 2013, WACKER had net financial debt (the balance of gross financial debt and noncurrent and current liquidity) totaling € 792.2 million (Dec. 31, 2012: € 700.5 million), a rise of 13 percent year on year.
Unrecognized Assets and Off-Balance-Sheet Financial Instruments
An important asset that does not appear in our statement of financial position is the value of the WACKER brand and other Group trademarks. We consider the high profile and reputation of our trademarks to be a key factor influencing customer acceptance of our products and solutions. Moreover, there are other intangible assets that are vital for success and have a positive impact on our business – for example, long-standing customer relationships and customer trust in our product- and solution-related expertise. Just as important are our employees’ in-depth skills and experience, and our many years of expertise not only in R&D and project management, but also in designing products and production- and business-process structures. In particular, our integrated production system gives us an edge over our rivals. Another key success factor is WACKER’s sales network, which has evolved over many years and enables the Group to market and sell its range of products and services locally to customers. Various German legal forms of rented and leased goods reported on in Note 17 are also not included in the statement of financial position, nor are other self-constructed assets. WACKER does not use any off-balance-sheet financing instruments.