Overall Statement by the Executive Board on Underlying Conditions

Despite continued conflicts and political uncertainties, the world economy grew in 2018. Global economic activity was especially strong in the first quarter of 2018. As the year progressed, the underlying dynamics gradually weakened and growth slowed amid mounting trade tensions between the United States, on the one hand, and China and Europe, on the other. Global growth was also impeded by problems associated with the United Kingdom’s withdrawal from the European Union. In 2018, China posted its lowest growth rate since 1990. This was due to trade tensions with the United States and lower capital spending by Chinese companies.

WACKER’s chemical business developed well in 2018 amid these underlying economic conditions. Sales growth at our silicones business was especially strong at 14 percent. Our other two chemical divisions, WACKER POLYMERS and WACKER BIOSOLUTIONS, also expanded, posting higher volumes. Further, earnings at the chemical divisions rose, even though higher raw-material costs had a dampening effect, especially at WACKER POLYMERS. The trend with our polysilicon business, on the other hand, was clearly weaker. The main reasons were lower average prices and slowing customer demand. Additionally, the market was dampened by China’s decision to curb its solar feed-in tariffs and limit the installation of new photovoltaic capacity. All these factors meant that sales and earnings were substantially lower than planned.

It was due to the declines in our polysilicon business that our sales decreased in Asia, particularly in China. As regards our other two main regions, Europe and the Americas, WACKER lifted its sales by a mid-single-digit percentage. Further, we expanded in the other countries of the world, where we grew by a high-single-digit percentage.

In the first weeks of the new business year, prior to publication of the consolidated financial statements on March 5, 2019, business has developed in line with our expectations.