Fiscal 2016 was a good year for WACKER. Sales grew by 2 percent to €5.40 billion. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased by more than 18 percent to reach €1.08 billion, an even better figure than we had forecast. Substantially higher levels of depreciation – a result of our capital expenditures in recent years – did lower our net profit for the year at the Group level, though.

The positive business trend was also evident in other key financial indicators. We reduced our net financial debt to below the one-billion-euro mark and, at around €400 million, our net cash flow grew significantly.

These results would not have been possible without the high levels of commitment and outstanding expertise of our employees. Their strong performance was a key factor in our success. On behalf of the entire Executive Board, I sincerely thank all our employees for their hard work.

Commissioning of our new production site in Charleston, Tennessee (USA) was one the most important events for us in 2016. Ramping up such a technically complex greenfield plant was a formidable task – and everyone involved accomplished it with great success. All of the facilities are now in operation and we are producing polysilicon of exceptional quality at the site.

WACKER’s three chemical divisions again lifted their sales last year amid strong volume growth. WACKER SILICONES even surpassed the two-billion-euro sales mark for the first time and continued to consolidate its position as the world’s second-biggest manufacturer of silicones. This trend underscores the fact that our products offer us plenty of potential for further growth in global markets. EBITDA at our chemical divisions totaled around €660 million, climbing even faster than sales.

Our polysilicon business performed well amid continuing low prices and the remaining commissioning costs incurred for our new production site in Charleston. Our sales volumes continued to rise and our production capacities were fully utilized, enabling us to increase our total sales.

Our semiconductor wafer business benefited from strong customer demand in the second half of the year. Higher sales volumes, further cost reductions and lower currency-hedging expenses all helped Siltronic grow EBITDA significantly, which more than made up for the generally lower silicon wafer prices.

At our Capital Market Day in Burghausen in October 2016, we presented WACKER’s strategic priorities for the period up to 2020.

The key pillars of our strategy are as follows:

• Our capital expenditures will remain below the level of depreciation over the period. We will invest in plants for producing intermediates and downstream products in order to leverage growth potential in specific regions.
• With these new capacities, we intend to grow more strongly than the chemical-industry average. Product innovations and a higher share of specialty products in our portfolio should help secure this growth.
• Sustainability will become an ever more crucial factor in all our business processes – from the optimal use of raw materials and greater process efficiency through to the development of sustainable products that reduce CO₂ emissions.
• Our operating activities will focus on ensuring a high level of profitability. We are targeting an EBITDA margin of over 16 percent for our chemical divisions, while the target margin for our polysilicon business will be in excess of 30 percent.
• Lower capital expenditures, sustained growth, cost improvements and highly profitable operations will all ensure a continuously positive net cash flow.

The fact that analysts, investors and other capital market players all responded very positively to our strategy has reinforced our resolve to implement it consistently.

Over the last 15 years, WACKER has spent a lot on its investment and internationalization initiative. Now, you – our shareholders – should reap the benefits. Previously, WACKER’s policy was to distribute at least 25 percent of net income as a dividend. That figure will now rise to around half of net income. Consequently, at the Annual Shareholders’ Meeting in May 2017, the Supervisory Board and Executive Board will propose a dividend payment of €2.00 per share, corresponding to more than half of our net income for 2016.

After a successful 2016, we are also optimistic about the current year. We expect growth momentum to be similar to last year. As regards sales, we are confident of achieving a slightly higher percentage increase than last year. Headwinds will mainly come from raw-material prices, which are currently rising substantially. This could also impact the EBITDA trend. As a result, we anticipate that EBITDA (adjusted for special income) will come in at a similar level to last year. If current market conditions remain positive during the year, there will be additional opportunities.

A topic that concerns us deeply at the moment is the gradual abandonment of the principle of free trade. We have been witnessing an increase in protectionism, and not just since the Brexit vote in June 2016. Since the global financial crisis in 2008, more and more countries have been trying to protect their national economies.

The number of trade barriers erected has been on the rise for years. They include anti-dumping measures, i.e. import duties on foreign products. According to a survey carried out by the Centre for Economic Policy Research, the number of protective measures introduced has risen from 155 in 2009 to more than 460 today. We know from our own experience what a strong impact such trade barriers can have on business.

As a company, we are doing everything in our power to support free trade. We are convinced that free trade is the only way to create affluence and growth in the future and to ensure that more and more people around the world benefit.

With its broad range of quality products, WACKER makes the everyday lives of people across the world’s regions easier, simpler and more convenient. We aim to continue devoting all our strength to harnessing these opportunities – the potential is huge.

On behalf of the entire Executive Board, I sincerely thank our customers and suppliers for their constructive collaboration and our shareholders for their trust. We look to the future with optimism and hope that you will stay with us on the path ahead.

Munich, March 2017

Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG