Financial-Management Principles and Goals

Our key financial-management goal is to maintain WACKER’s financial strength. The central task is to sufficiently cover the financial needs of our operations and investment projects. Financial management at WACKER comprises capital structure management, cash and liquidity management, and the management of market-price risk (currencies, interest rates). Financial management at the Group is centrally organized. A groupwide financial regulation sets out the corresponding tasks and responsibilities.

Capital-structure management involves shaping the capital structure of the Group and its subsidiaries. The latter are capitalized and financed in accordance with the principles of cost and risk optimization, which entails taking account of restrictions on the movement of capital as well as other capital and foreign-currency transfer constraints.

As part of liquidity management, we continuously monitor payment flows from operations and financial business. WACKER covers its resultant liquidity needs via suitable instruments, such as intra-Group financing through borrowings, or through external loans from local banks. We receive the necessary outside funding from contractually agreed lines of credit nominated in various currencies and with differing maturities. We invest liquidity surpluses on the money and capital markets at an optimum risk/return rate. Cash management centralizes procedures designed to calculate cash requirements and surpluses.

WACKER pursues a careful financing policy that targets a balanced financing portfolio, a diversified maturity portfolio and a comfortable liquidity buffer. In addition to the financing instruments already mentioned, WACKER expects to be able to tap the bond markets and other instruments, if necessary. Our aim is to maintain our corporate financial structures so that the Group’s credit rating remains – at a minimum – in the investment-grade range.

WACKER’s key liquidity source is the operations of its Group companies and the resultant incoming payments. As part of our cash-management systems, liquidity surpluses at individual Group companies are used to cover the financing needs of other Group companies. This centralized system of internal transfers reduces external borrowing requirements and interest expenses.

The purpose of managing market-price risks is to limit the effects of fluctuations in exchange rates and interest rates on the Group’s bottom line. That involves first determining the Group’s overall exposure to currency risks. On the basis of the information obtained, we can then make decisions as regards hedging – namely the volume to be hedged, the respective term of the hedge and the choice of hedging instrument.

Financial Analysis

The Group’s cash flow is a key instrument of liquidity management. Net cash flow serves as the internal indicator for liquidity measurement.