Comparing Actual with Forecast Performance

WACKER did not change the 2018 targets it had set early in the year for EBITDA, EBITDA margin, ROCE and net cash flow. In the case of net financial debt and capital expenditures, WACKER issued more specific guidance during the year. At the start of 2018, WACKER projected that its sales would increase by a low-single-digit percentage. The EBITDA margin would be slightly higher than the previous year, EBITDA would increase by a mid-single-digit percentage and ROCE would be substantially above the prior-year level. Net cash flow would be clearly positive, but substantially below the prior-year level.

Forecast Unchanged during Year, with Guidance Specified on Net Financial Debt and Capital Expenditures

In its Q1 Interim Report of April 2018, WACKER left its projections unchanged.

On publishing its Q2 Interim Report, WACKER adjusted its guidance only for net financial debt and capital expenditures. Net financial debt was forecast to total around €500 million at the end of 2018. Until then, WACKER had expected net financial debt to be on par with the prior-year level of €454.4 million. Capital expenditures were predicted at around €450 million for full-year 2018. That was about €20 million less than projected at the start of the year (€470 million).

In its Q3 Interim Report, WACKER confirmed its projections for the full year.

WACKER Reaches Sales Target – EBITDA Down Over Prior Year Due to Outstanding Insurance Compensation

WACKER increased its sales by 1.1 percent to €4.98 billion (2017: €4.92 billion), primarily due to volume growth. Sales climbed further at the chemical divisions, with WACKER SILICONES posting especially strong sales gains. Sales contracted markedly at WACKER POLYSILICON, dampened by lower average prices and reduced volumes.

EBITDA, diverging from our guidance, came in at €930.0 million, 8.3 percent below the year before (2017: €1,014.1 million). That is why the EBITDA margin was lower than a year earlier. The reason for the EBITDA decline was that our 2018 earnings guidance included insurance compensation (for the incident at Charleston, Tennessee) that is still outstanding. As polysilicon production at Charleston did not reach full capacity until early December 2018, there was not enough time to conclude talks with the insurer before year-end. We now expect to do so in 2019.

Net cash flow of €124.7 million was clearly positive, but substantially below the year-earlier figure, as forecast. ROCE, diverging from our guidance, was 5.9 percent lower versus the year before due to the still outstanding insurance compensation. Raw-material and energy costs increased more than we expected. The average rate of the euro against the US dollar over the year was somewhat lower than we had originally anticipated.

In 2018, capital expenditures were markedly above the year-earlier level. They amounted to €460.9 million.

Year-end net financial debt of €609.7 million was not on par with the previous year as initially projected, but substantially higher. Here, too, the outstanding insurance compensation had an impact.

Employee numbers increased as anticipated at the start of the year. At the reporting date, WACKER had 14,542 employees. That was 731 more than the year before.

Deviations from Projected Expenses

Personnel costs edged up, both in absolute terms and as a percentage of sales. In the medium-term, we expect personnel costs to decline markedly in relation to sales, given our extensive program to increase productivity.

Raw-material costs were markedly higher than the year before, both in absolute terms and as a percentage of sales. That was because prices of key raw materials, especially VAM and ethylene, continued to rise throughout the year. Our medium-term projection is that the ratio of raw-material costs to sales will decrease slightly, given our measures to lower the quantities of raw materials used in our products.

Energy costs declined slightly year over year due to our ongoing program to cut production costs and to the shutdown of polysilicon production at Charleston in the first half of 2018.

As expected, depreciation declined markedly year over year, both in absolute terms and as a percentage of sales. This was due to lower levels of investment spending in 2016 and 2017 and to the expiry of depreciation periods. In 2019, we expect depreciation to fall further, amounting to about €500 million in the medium term.