Group Sales Climb 2 Percent Year over Year to €5.40 Billion

In 2016, the WACKER Group again increased its sales, which came in at €5.40 billion (2015: €5.30 billion). This almost 2-percent increase was driven by robust customer demand and the associated volume growth, as well as by positive exchange-rate effects. Compared with the previous year, each business division sold more in terms of volume and generated higher sales. The chemical divisions, in particular, contributed strongly to the rise in sales by delivering substantial volume growth. In an intensely competitive environment marked by lower prices, WACKER POLYSILICON increased its sales by 3 percent. Siltronic slightly outperformed prior-year sales despite lower prices.

WACKER generated the majority of its sales outside Germany. International sales came in at €4.69 billion – after €4.61 billion a year earlier – representing 87 percent of total sales.

Group EBITDA at €1.10 Billion – EBITDA Margin at 20.4 Percent

Group EBITDA rose 5 percent year over year and amounted to €1,101.4 million (2015: €1,048.8 million). In spite of a reduction in income from advance payments retained and damages received, WACKER posted substantially higher EBITDA in 2016. In 2015, WACKER had recognized €137.6 million in special income from advance payments retained and damages received, which had a positive effect on EBITDA. In 2016, special income received in connection with terminated contracts amounted to €20.3 million. Adjusted for this effect, EBITDA actually climbed 18.6 percent year over year to €1,081.1 million (2015: €911.2 million).

Reconciliation of EBITDA to EBIT

Higher Depreciation Reduces EBIT and Net Income for the Year

Group earnings before interest and taxes (EBIT) totaled €366.2 million in 2016 (2015: €473.4 million). That represented a decrease of 23 percent from a year earlier and corresponded to an EBIT margin of 6.8 percent (2015: 8.9 percent). This drop was due to higher depreciation, which rose 28 percent in 2016 to €735.2 million (2015: €575.4 million), as expected.

Cost of Goods Sold Rises 6 Percent Year over Year

At €990.7 million, gross profit from sales was 12 percent lower than a year earlier (2015: €1.13 billion). The gross margin was 18.3 percent (2015: 21.3 percent). Alongside the effect of higher depreciation, this decline reflected the start-up costs at the new Charleston production site, which increased the Group’s cost-of-sales ratio from 79 percent to 82 percent.

Functional Costs Climb

Other functional costs (selling, R&D and general administrative expenses) were 5 percent higher year over year, rising to €652.3 million (2015: €623.5 million). General administrative expenses, in particular, were higher due to commissioning of the Charleston site.

Other Operating Income and Expenses

In 2016, the balance of other operating income and expenses was €26.7 million (2015: € –35.3 million). Income of €20.3 million (2015: €137.6 million) from advance payments retained had a positive effect on the net result. A substantially reduced net foreign-currency loss of € –17.5 million (2015: € –69.1 million) and the elimination of costs arising from the commissioning of the Charleston site led to markedly lower other operating expenses.

Reconciliation of EBIT to Net Income for the Period

Financial and Net Interest Result

As expected, WACKER’s financial result was weaker than the year before. It amounted to € –101.4 million (2015: € –66.7 million). Interest income was €6.0 million (2015: €7.3 million), while interest expenses were €42.4 million (2015: €31.8 million). The net interest result amounted to € –36.4 million (2015: € –24.5 million). Due to commissioning of the Charleston production site, capitalization of construction-related borrowing costs was significantly lower in the reporting year. As a result, interest expenses increased year over year to €17.4 million.

The other financial result amounted to € –65.0 million (2015: € –42.2 million). It primarily comprised interest-bearing components of pension provisions and other noncurrent provisions. In addition, it contained gains and losses on price fluctuations in financial assets and associated hedging instruments. The prior-year figure had included the positive effects on financial assets of changes in exchange rates.

Income Taxes

For 2016, the Group reported tax expenses of €75.5 million (2015: €164.9 million). The Group’s effective tax rate was 28.5 percent (2015: 40.5 percent). This positive change stemmed from the elimination of start-up costs for the Charleston production site that are not recognized in the tax accounts and from a reduction in the losses incurred at some subsidiaries.

Consolidated Net Income

As a result of the effects mentioned, consolidated net income fell to €189.3 million (2015: €241.8 million).

ROCE

The return on capital employed (ROCE) sets earnings before interest and taxes (EBIT) in relation to the capital employed for business activities.

In the reporting year, ROCE came in at 6.1 percent (2015: 8.1 percent). This decrease was essentially due to the high amount of capital employed coupled with lower EBIT. The high level of capital employed stemmed from our substantial capital spending on new production facilities last year. At €6,018.0 million, capital employed climbed slightly in the reporting period.