Executive Board Statement on Business Development and on the Group’s Economic Position

In 2018, WACKER’s operations were characterized by robust volume growth at its three chemical divisions, by a marked volume decline amid lower average prices at WACKER POLYSILICON, and by raw-material costs that, on balance, climbed significantly. WACKER met its sales projection. We were below guidance for EBITDA, EBITDA margin and ROCE because part of the insurance compensation for the loss event at Charleston, Tennessee, was still outstanding at year-end.

In chemicals, sales continued rising, spurred mainly by volume gains along with high capacity utilization. Sales growth was also supported by the fact that prices were higher on balance. Earnings were dampened by higher raw-material costs and negative exchange-rate effects. At WACKER POLYSILICON, declining volumes and lower average prices weighed on business. In addition, reductions in solar feed-in tariffs and a cap on the construction of new solar installations in China had a negative impact. Earnings were also slowed by the costs of the production shutdown and restart at Charleston.

Personnel expenses rose slightly, both in absolute terms and as a percentage of sales. Raw-material costs were markedly higher year over year, both in absolute terms and in relation to sales. Energy costs declined slightly year over year. As projected, depreciation edged down – in absolute figures and as a percentage of sales.

At €3.15 billion, Group equity was down €23.8 million year over year, mainly due to actuarial losses from provisions for pensions. The equity ratio came in at 44.2 percent. The Group’s net financial debt increased, amounting to €609.7 million on December 31, 2018. Capital expenditures rose versus a year earlier, as planned. But, at €460.9 million, they were below depreciation. Net cash flow of €124.7 million was clearly positive, but substantially lower year over year.

EBITDA

Earnings before interest, taxes, depreciation and amortization.

Return on Capital Employed (ROCE)

Return on capital employed is the profitability ratio relating to the capital employed. It is defined as earnings before interest and taxes (EBIT) divided by capital employed. Investment income from Siltronic AG and the corresponding carrying amount in equity are not included when calculating ROCE. ROCE is a clear indicator of how profitably the capital required for business operations is being employed. It is influenced not only by profitability, but also by capital intensity with regard to noncurrent assets required for business operations and to working capital. ROCE is reviewed annually as part of our planning process and is a key criterion for managing our capital expenditure budget.

Equity Ratio

The equity ratio is equity as a percentage of a company’s total assets. It is a measure of a company’s economic and financial stability.

Cash Flow

Cash flow represents the movement of cash and cash equivalents into or out of a business activity during a finite period. Net cash flow is the sum of cash flow from operating activities (excluding changes in advance payments received) and cash flow from long-term investing activities (before securities), including additions due to finance leases.