Dear Shareholders,

In 2017, WACKER continued on its growth trajectory. Sales climbed by more than 6 percent to €4.92 billion. EBITDA (earnings before interest, taxes, depreciation and amortization) also rose by over 6 percent despite substantially higher raw-material prices. It reached €1.01 billion, outperforming our forecast. This lifted Group net income from continuing operations, which was 40 percent higher than the year before.

Other key financial indicators also reflected how good the business year was. We reduced net financial debt to below €500 million. Net cash flow was again high at around €360 million.

Our good figures are the result of our employees’ strong team performance. On behalf of the entire Executive Board, I wish to thank all our employees worldwide for their hard work and their outstanding commitment and dedication.

Fiscal 2017 was a special year for WACKER. We completed a key strategic step on March 15 last year, when we gave up our majority ownership of Siltronic AG. In the future, Siltronic will appear in our figures as a significant shareholding, but no longer as a business division in its own right.

We are now intensifying our focus on chemicals and our polysilicon business. We are certain that we chose a good time to sell our majority stake to other investors. Siltronic is in very good economic shape. The semiconductor market continues to perform robustly and, with our remaining stake of some 30 percent in Siltronic, we are benefiting from this favorable trend.

Last year’s many positive results were overshadowed by an incident that affected us deeply. In early September, a technical malfunction caused a hydrogen explosion at our new polysilicon site in Charleston, Tennessee (USA), damaging a plant section there. The most important thing for us was that no one came to any harm. That was a great relief.

Working with an independent team of experts, we investigated the root cause of the incident with the utmost care and diligence. We will only start up the plant again after it has passed all the necessary tests. Given our present state of knowledge, we can begin ramping up production there during Q2 2018.

At our three chemical divisions, last year was marked by substantial volume growth. It was so strong that we readily absorbed the higher raw-material costs and lower prices for some of our products. We benefited especially from the continued high demand for our silicone products – a trend that meant we did not fully meet our customers’ needs. Once again, our chemical divisions increased their EBITDA, which totaled around €690 million.

WACKER POLYSILICON achieved strong market growth amid persistently decreasing average prices. As a result, the division lifted its sales slightly. Even higher growth, though, was held back by the loss of production at Charleston. It reduced the polysilicon volumes available for sale by about 6,000 metric tons. EBITDA was slightly higher year over year. This was a very good result, since operating costs were still incurred after Charleston’s shutdown and no significant insurance compensation has been received as yet.

We established the basis for WACKER’s future success in 2016 when we introduced our five-point strategy. It outlines our clear targets and visions for developing WACKER. These have not changed. We remain firmly on course, always trying to seize every opportunity that arises.

The goal of our dividend policy is to ensure that our shareholders benefit even more from our profitability. Given our good net income for 2017, our successful placement of Siltronic shares on the capital market and our low debt-to-equity ratio, the Supervisory and Executive Boards will propose to the Annual Shareholders’ Meeting in May 2018 that an extra €2 per share should be distributed on top of a dividend of €2.50 per share. The total payout for 2017 thus amounts to €4.50 per share.

We are optimistic that 2018 will be a good year for WACKER. Sales growth will not be as robust as last year. Momentum will be dampened by strong currency headwinds and by amendments to accounting standards. But we are confident of lifting EBITDA by a mid-single-digit percentage. We expect Group net income from continuing operations to rise markedly.

In the current year, WACKER will also increase its investments. Our focus will clearly be on our silicones business. As in the past, we see strong demand for our silicone products. We want to use this positive market trend to reinforce our position as the world’s second-largest supplier. That is why over half of the roughly €470 million budgeted for capital expenditures will go into silicones. We are investing from a position of financial strength and have excellent prospects for expanding our share of this growth market.

One topic that is high on every company’s agenda at the moment is digitalization. WACKER is no exception. The key question is what approach to take. We see three action areas for the future:

• We must develop new sales and communications systems and deploy them to intensify our customer relationships.
• We will use digital technologies and data to enhance security, efficiency and productivity throughout the supply chain and, by doing so, create value.
• The basis for digital transformation is a high-performance, forward-looking IT infrastructure, coupled with a mindset that anchors digital business processes even more firmly into our daily work.

Digitalization will not happen overnight. It will be our constant companion in the years ahead as we make our way into the digital era. Our approach is to take the initiative – not in a rush, but with all due care. Clearly, the wealth of expertise and experience gained in the pre-digital age is still valuable.

This valuable asset must be adapted to the needs of the future. We have already identified a broad variety of topics and have entered them on a digital map. Over half of them affect core business processes at our production facilities.

Digitalization underscores a basic fact: the world is changing. And we must rise to this challenge. We have proven again and again that we can. Throughout the 104 years of our company’s history, adaptability and the will to change have stood out as characteristic strengths. And, above all, we think and act for the long term. That is what pays off over time.

On behalf of the entire Executive Board, I wish to thank our customers and suppliers for all their support and cooperation, and our shareholders for their trust. We see multiple opportunities for WACKER in the future and look ahead with optimism, and hope that you will stay with us on this path.

Munich, March 2018

Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG