Trends: Equity and Liabilities

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Liquidity Up 22 Percent

Securities and cash and cash equivalents are a major component of other current assets. Current securities reached €126.2 million at the end of 2016 (Dec. 31, 2015: €67.2 million), with WACKER investing liquid funds in fixed-term deposits and short-term bonds. There was a modest decline in cash, which amounted to €283.5 million as of the balance sheet date (Dec. 31, 2015: €310.5 million). Thus, total liquid assets (current and noncurrent securities, cash and cash equivalents) increased by 22 percent year over year.

Other current assets included income tax receivables of €18.5 million (Dec. 31, 2015: €19.0 million) and other tax receivables of €45.4 million (Dec. 31, 2015: €41.5 million).

Equity Ratio at 34.8 Percent

Group equity fell by €201.9 million compared with a year earlier. It amounted to €2.59 billion as of December 31, 2016 (Dec. 31, 2015: €2.79 billion). The resulting equity ratio was 34.8 percent (Dec. 31, 2015: 38.5 percent). Retained earnings rose, due to the Group’s net income for the year, and declined, on the other hand, by €99.4 million due to the dividend paid by Wacker Chemie AG. Other equity items lowered equity, basically as a result of the adjustment to pension provisions that was recognized in other comprehensive income. The remeasurement of defined benefit plans at the end of the year resulted in higher actuarial losses, which reduced equity by €356.2 million. Currency translation effects lifted equity by €43.4 million.

Liabilities Increase Amid Higher Pension Obligations

Compared with the previous year, WACKER’s liabilities increased by €399.1 million or 9 percent to €4.87 billion. This change was attributable especially to the provisions for pensions, which rose by €496.1 million to €2.11 billion. This 30-percent increase reflects the lower discount rates used for defined benefit plans. These discount rates were 1.94 percent in Germany (Dec. 31, 2015: 2.75 percent) and 3.92 percent in the USA (Dec. 31, 2015: 4.2 percent). As a result, actuarial losses rose substantially. Other noncurrent provisions increased, amounting to €247.4 million (Dec. 31, 2015: €217.0 million). Here, low interest rates had an impact on provisions for jubilee benefits and for environmental protection. Provisions for phased early retirement increased due to the corresponding new contracts concluded during the reporting year. Overall, other noncurrent liabilities were lower at €172.7 million (Dec. 31, 2015: €293.5 million). This was due to the reclassification to current liabilities of formerly noncurrent advance payments received.

At €369.7 million, trade payables were roughly the same as the year before (Dec. 31, 2015: €378.3 million). Other current provisions and liabilities fell 5 percent to €438.9 million (Dec. 31, 2015: €460.6 million). Current advance payments received amounted to €106.6 million at the reporting date (Dec. 31, 2015: €165.8 million). The change in current income tax provisions and liabilities for forward-exchange contracts was insignificant as of the balance sheet date. Personnel liabilities, including those related to vacation, flextime and performance-related compensation, were slightly higher at the closing date.

Financial Liabilities Remain Constant

As of the balance sheet date, noncurrent and current financial liabilities were unchanged at €1.46 billion. In March 2016, WACKER took out new bilateral loans totaling US$ 250 million, taking advantage of prevailing low interest rates for refinancing. Financial liabilities totaling €200 million were repaid on schedule in December 2016. The share of current financial liabilities increased because certain financing arrangements previously reported as noncurrent moved closer to maturity. Exchange-rate effects likewise led to an increase in financial liabilities.

Unrecognized Assets and Off-Balance-Sheet Financing 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’ 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 rented and leased goods (operating leases) reported on in Note 15 are another item that do not appear in the statement of financial position, and the same applies to other self-constructed assets. WACKER does not use any off-balance-sheet financing instruments.