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

Statement of Income

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Wacker Chemie AG’s earnings performance was very good in 2014, exhibiting a higher operating result due to the positive impact of non-recurring effects. As a result, net income improved, rising from € 11.6 million to € 349.2 million.

The operating result tripled, climbing from € 157.0 million to € 552.0 million year on year. WACKER POLYSILICON, in particular, benefited from higher prices and volumes. That led to an improved operating result. The business division also terminated or restructured contractual relationships with a number of solar-industry customers, retaining advance payments and receiving damages in the process. That generated income in the amount of € 206.3 million (2013: € 77.6 million). The profit-and-loss transfer agreement with Wacker-Chemie Dritte Venture GmbH had a positive impact on the result from investments in joint ventures and associates, which amounted to € 56.8 million. In 2013, the result from investments in joint ventures and associates had been negative (€ -46.2 million) due to the transfer of losses generated by subsidiaries. Net interest income was impacted in particular by interest expenses from provisions for pensions. The increase in the tax expense was mainly due to the improved operating result and the positive effects generated by the transfer of profits under corresponding agreements.

Overall, pre-tax income grew to € 540.8 million (2013: € 64.2 million), while net income climbed to € 349.2 million (2013: € 11.6 million).

Wacker Chemie AG’s sales rose by 6 percent to € 3.34 billion (2013: € 3.14 billion), once again reaching the level last posted in 2012. All of the business divisions contributed toward this growth. WACKER POLYSILICON benefited from higher prices and higher volumes. The division’s sales rose to € 1.05 billion (2013: € 896.1 million), an increase of 17 percent. The other business divisions put in a good performance as well. WACKER SILICONES increased its sales by 2 percent to € 1.33 billion (2013: € 1.31 billion). WACKER POLYMERS’ sales grew to € 673.5 million (2013: € 625.0 million) – a rise of 8 percent year over year. Sales at WACKER BIOSOLUTIONS grew 5 percent to € 124.8 million (2013: € 118.6 million). Operating performance increased by € 271.9 million to € 3.39 billion.

The cost of materials declined slightly in fiscal 2014 and amounted to € 1.47 billion (2013: € 1.49 billion). This drop reflected lower energy expenses. The prices of strategic raw materials such as ethylene, methanol and silicon metal were, on average, somewhat lower than in 2013. However, this positive effect was in part canceled out by an increase in the price of vinyl acetate monomer.

Personnel expenses rose to € 768.3 million (2013: € 720.5 million), an increase of almost 7 percent. The reasons for this were the collective bargaining agreements reached for 2014, the bonuses paid in connection with Wacker Chemie AG’s centennial, and a higher amount of variable compensation than in 2013. Wacker Chemie AG had 9,435 employees as of December 31, 2014 (Dec. 31, 2013: 9,370).

Depreciation and amortization decreased by € 12.1 million to € 319.6 million (2013: € 331.7 million).

The other operating result, consisting of other operating income less other operating expenses, improved markedly, reaching € -282.4 million (2013: € -419.5 million). This was due for the most part to advance payments retained and damages received in relation to terminated or restructured contracts with polysilicon customers. In 2014, these payments amounted to € 206.3 million (2013: € 77.6 million).

The company posted a net exchange-rate gain of € 6.7 million (2013: € -2.0 million). Income from the reversal of provisions led to an increase of € 8.4 million in the other operating result (2013: € 14.2 million). In addition to currency-exchange effects, other operating expenses comprised selling expenses, repairs, maintenance, other contractor work and the assumption of costs of subsidiaries.

The company’s R&D expenses grew marginally to € 111.1 million (2013: € 102.4 million).

The operating result came in at € 552.0 million and was thus substantially higher than in 2013 (€ 157.0 million). This increase was attributable to a profit from operations in combination with advance payments retained and damages received. The improvement in operating performance caused the material-to-sales ratio to decline to 43.4 percent (2013: 47.8 percent). In addition to higher revenues, better coverage of fixed costs played a part in this trend. The employee-expense ratio declined as well, falling to 22.6 percent (2013: 23.1 percent).

The result from investments in joint ventures and associates comprises income from profit-and-loss transfer agreements and dividend payments together totaling € 61.2 million (2013: € 67.1 million). This amount includes the profit/loss of Wacker-Chemie Dritte Venture GmbH, which holds the stake in Siltronic AG, under its profit-and-loss-transfer agreement. The former’s income included Siltronic AG’s dividend payment in the amount of € 242.6 million and a resulting impairment of € 200.0 million. Losses of only a minor amount were transferred under agreements of this kind in fiscal 2014. In 2013, transfer of the loss generated by Wacker-Chemie Dritte Venture GmbH had led to negative investment income. Losses under profit-and-loss transfer agreements amounted to € -105.3 million that year.

The net interest result was lower, amounting to € -71.2 million (2013: € -41.8 million). This was mainly due to the lower discount rate used for pension obligations, which led to higher interest expenses in the amount of € 56.1 million (2013: € 39.6 million). Interest expenses for financial liabilities were lower year on year, as was interest income from securities and fixed-term deposits.

Income tax expenses amounted to € 191.6 million (2013: € 52.6 million) and included current taxes paid by Wacker Chemie AG and taxes paid on behalf of its domestic subsidiaries.

Net income came to € 549.2 million. Retained profit for 2014 – calculated as the profit carried forward from 2012 less € 24.8 million in dividends paid – amounted to € 960.5 million (2013: € 636.1 million).