Trends: Equity and Liabilities

Equity Ratio at 46.4 Percent

Group equity rose substantially year over year, amounting to €3.17 billion as of December 31, 2017 (Dec. 31, 2016: €2.59 billion). The resulting equity ratio was thus 46.4 percent (Dec. 31, 2016: 34.8 percent). This rise mainly reflects the higher net income for the period, which was strongly impacted by the gain generated by the deconsolidation of Siltronic. That income increased retained earnings by €884.8 million. Equity also grew by €87.6 million through the sale of the 6-percent stake in Siltronic AG. The dividend payment of Wacker Chemie AG reduced retained earnings by €99.4 million. The change in provisions for pensions, which was recognized in other comprehensive income, lifted other equity items by €97.3 million. Currency translation effects decreased equity by €186.2 million. The share of non-controlling interests in equity was reduced by €214.7 million as a result of the deconsolidation of the Siltronic Group.

Liabilities Lower Due to Decline in Financial Liabilities and in Provisions for Pensions

Compared with the previous year, WACKER’s liabilities fell by €1.20 billion or 24.7 percent, to €3.67 billion. Provisions for pensions were €489.5 million lower year over year and totaled €1.62 billion. The deconsolidation of Siltronic was a key factor in this decrease, accounting for €371.3 million of the reduction in these provisions. The fact that the applicable discount rates rose on balance was the main reason for a €127.2 million decline in provisions for pensions. The discount rates were 2.09 percent in Germany (Dec. 31, 2016: 1.94 percent) and 3.50 percent in the USA (Dec. 31, 2016: 3.92 percent). Overall, other noncurrent liabilities were lower at €117.3 million (Dec. 31, 2016: €172.7 million) due to the reclassification of noncurrent advance payments as current.

There was a substantial decline in trade payables, which fell to €268.5 million (Dec. 31, 2016: €369.7 million). Siltronic AG accounted for €82.3 million of this amount. Other current provisions and liabilities fell 13 percent to €382.4 million (Dec. 31, 2016: €438.9 million), with the deconsolidation of Siltronic accounting for €70.0 million. Current advance payments received amounted to €61.8 million at the reporting date (Dec. 31, 2016: €106.6 million). Current provisions for income taxes rose year over year due to the need to provide for additional risks. Personnel liabilities, including those relating to vacation, flextime and performance-related compensation, were slightly higher at the reporting date.

Financial Liabilities Down 31 Percent

At the end of the reporting period, current and noncurrent financial liabilities were €456.6 million lower at €1.0 billion (Dec. 31, 2016: €1.46 billion). In March 2017, WACKER refinanced due financial liabilities totaling €200 million with a new long-term loan in the same amount, taking advantage of the prevailing low interest rates. Later in 2017, WACKER additionally made a scheduled repayment of €300 million in financial liabilities, with €41.9 million of that amount accounted for by the deconsolidation of Siltronic. Exchange-rate effects likewise led to an decrease in financial liabilities. The majority of WACKER’s financial liabilities are recognized in euros or US dollars. To a minor extent the company has assumed financial liabilities in Chinese renminbi. Fixed interest is payable on most of the financial liabilities.

For further information on our financial liabilities, please refer to Note 13 in the Notes to the Consolidated Financial Statements.
For further information on the principles and goals of financial management, please refer to Note 10 in the Notes to the Consolidated Financial Statements.

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. 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 in 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 17 are also items that do not appear in the statement of financial position. The same applies to other self-constructed assets. WACKER does not use any off-balance-sheet financing instruments.