Dear Shareholders,

The year 2015 was characterized by geopolitical tensions in various regions, slower-than-expected economic growth in China, a steep drop in oil prices and a weakening of the euro against the US dollar. All these factors produced uncertainty and a high level of volatility in the markets.

Nonetheless, we achieved – and in some cases even exceeded – the sales and earnings targets we had set ourselves for fiscal 2015. For the first time in our company’s history, sales passed the five-billion-euro mark. At € 5.30 billion, they were almost 10 percent higher year over year, thanks to positive exchange-rate effects and volume growth across all our business divisions.

Relative to the previous year, earnings before interest, taxes, depreciation and amortization (EBITDA) were substantially higher, when adjusted for special income from advance payments retained and damages received from solar-sector customers. Net income for the year was better than expected. Instead of declining as we had assumed, it rose to over € 240 million.

We want you, our shareholders, to share in this positive performance. The Supervisory and Executive Boards will be proposing a dividend payment of € 2.00 at the Annual Shareholders’ Meeting in May. Compared with the previous year’s dividend, that represents an increase of 33 percent. Overall, we will be distributing 40 percent of the company’s profit for the year to you.

Net financial debt did not rise, contrary to our planning, but remained on a par with the previous year, at € 1.07 billion. Of course, the proceeds from the IPO of Siltronic AG played a part in this. We were able to finance our capital expenditures of € 830 million from ongoing cash inflows.

2015 was an eventful year for WACKER. In June, we floated part of our stake in Siltronic AG – previously a wholly owned subsidiary – on the Frankfurt Stock Exchange. The IPO was a first step toward selling off more shares in Siltronic in the medium term, thus reducing capital intensity at the WACKER Group.

We continued working at full pace to complete our new site in Charleston, Tennessee (USA) and to begin manufacturing polysilicon there. The first quantities of high-grade polysilicon were produced at the plant in early January of this year, and we have been gradually increasing production output since then, as scheduled.

Commissioning such a technically complex greenfield plant has been a big challenge for the company and a formidable task for all concerned. On behalf of the entire Executive Board, I wish to sincerely thank all our employees for their exceptional levels of commitment and for their achievements.

Our chemical business developed particularly well in 2015. Sales totaled over € 3.3 billion and EBITDA was up 38 percent, growing significantly more than sales, to about € 530 million. This trend shows that we have the right products for global markets.

Our polysilicon business performed very respectably, amid lower prices and the start-up costs of some € 90 million for our new site in Charleston. It was important to us that our production capacities were fully utilized, that we increased sales volumes and that we further reduced our production costs.

In our silicon-wafer business, we posted a substantial rise in sales and a slight improvement in earnings, even though volume growth slowed in the second half of the year. Here, too, we were able to compensate for lower prices by achieving a notable reduction in costs.

Completion of the polysilicon production plant in Tennessee marks a turning point. Over the next few years, our capital expenditures will be significantly lower and WACKER’s figures will show a substantial increase in cash flow.

The focus of our capital expenditures will shift to facilities for the manufacture of intermediate and downstream products at our chemical divisions – products we hope will enable us to exploit growth opportunities in all key markets.

In last year’s Letter to Our Shareholders, I wrote that all over the world we were seeing developments with outcomes we cannot predict, let alone reliably plan for. This continues to hold true. In fact, the risks have intensified and no lasting solutions are in sight to any of the various geopolitical conflicts.

Provided that the global economic situation does not deteriorate any further, we remain optimistic about our business trend in 2016, fully aware that the year ahead will be challenging. We want to continue increasing sales and can see prospects for further growth, especially in our chemical business. Demand for polysilicon will continue to rise in 2016 and, as a result, we expect to be able to sell our output on the market amid current manufacturer overcapacity. As yet, regulatory uncertainties remain regarding ongoing anti-dumping proceedings. In silicon wafers, business got off to a slow start in the new year, making us cautious here for the moment, especially about how sales will actually develop in 2016. The digitalization trend – as embodied by Industry 4.0 – is opening up new application areas in which silicon is certain to play a role as a base material.

EBITDA is expected to rise slightly, when adjusted to exclude special income. Higher levels of depreciation due to the capital expenditures of recent years will reduce net income. However, net cash flow will increase markedly in 2016 because capital expenditures will then be lower.

As you know, one of WACKER’s greatest strengths is its broad range of sophisticated products for key industries. But there is something else that sets us apart. We are continuously searching for new solutions. One example is 3D printing. We have developed a new method that makes it possible to use 3D printing to manufacture objects of silicone. This method opens up new application areas – especially in the automotive, medical, optical and household sectors – and we intend to benefit from these opportunities.

Innovation is one of the main drivers of our business, which is why “Creating tomorrow’s solutions” is our motto. I would like to add the word “today” to it. This aspiration places great demands on us, and we want to continue meeting these high standards. Without doubt, WACKER will contribute to countless products that are as yet unknown – that first have to be invented and made marketable.

The second main factor driving our business success is our presence in the world’s most important economic regions. We intend to systematically expand our network of technical competence centers, extend the range of specialized training we offer via WACKER ACADEMY and use our mobile testing labs to intensify our direct contacts with construction-industry customers.

The potential these options offer us has by no means been exhausted. We are convinced that WACKER has good prospects for further successful growth.

The foundation of our business success is to collaborate reliably and closely – both within the company and externally. My Executive Board colleagues and I would like to express our thanks to you, our shareholders, and to our customers and suppliers for the trust placed in us. Together with you, we want to continue driving WACKER forward.

Munich, Germany, March 2016

Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG