Outlook for 2019
WACKER’s main planning assumptions relate to raw-material and energy costs, personnel expenses and exchange rates. For 2019, we anticipate a euro exchange rate of US$1.20 (2018: 1.18). We expect the average prices of our key raw materials to be slightly lower than last year. Prices of natural gas and electricity, particularly electricity procured in Germany, will be well above prior-year levels. Our raw-material and energy supplies are largely secured for 2019. The markets in which we source our raw materials are sufficiently liquid, making bottlenecks unlikely. To date, the insurance compensation payments expected for the loss event at our Charleston site (USA) are not included in our forecast.
Performance Indicators and Value-Based Management
WACKER’s key financial performance indicators are the same as last year.
WACKER’s 2019 Sales Will Reflect Volume Growth
In 2019, WACKER expects to see volume growth in its chemical divisions and average prices that are higher for some of its product lines and lower for others. On balance, average selling prices will be lower year over year. In our polysilicon business, we anticipate a rise in volumes. Average prices, though, will be substantially below the year-earlier level. Overall, Group sales are projected to climb by a mid-single-digit percentage.
Economic uncertainties may cause the actual performance of the WACKER Group and its divisions to diverge from our assumptions, either positively or negatively. We expect to remain on our growth path in 2019, as long as there are no unforeseen slumps in WACKER’s key regions and industries.
Outlook for Key Performance Indicators at the Group Level
From today’s perspective, the key performance indicators at the Group level will develop as follows.
EBITDA margin and EBITDA: the EBITDA margin is expected to be clearly lower than last year (2018: 18.7 percent). EBITDA will be 10 to 20 percent below last year’s level. The reasons are lower average prices for polysilicon, price reductions in standard products, and rising energy costs. We expect income from equity investments to be lower than last year. With an effective tax rate of under 20 percent, Group net income is projected to be substantially lower than a year earlier.
ROCE: due to a lower operating result, ROCE will be substantially below the prior-year level (2018: 5.9 percent).
Net cash flow: we expect net cash flow to be clearly positive in 2019 and substantially higher than last year, due to less usage of working capital.
Outlook for Supplementary Performance Indicators at the Group Level
Capital expenditures: at roughly €400 million, capital expenditures will be lower than last year and remain below depreciation. At around €525 million, depreciation in 2019 will also be below last year’s level. Investment projects include the construction of new facilities for pyrogenic silica and liquid silicone rubber at Burghausen, the expansion of our capacities for downstream silicone and polymer products, and the construction of a new silicon-metal plant at Holla in Norway.
Net financial debt: net financial debt will be higher than in 2018 (€609.7 million) due to the first-time application of IFRS 16.
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Outlook for |
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Key Financial Performance Indicators |
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EBITDA margin (%) |
18.7 |
Substantially lower than a year ago |
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EBITDA (€ million) |
930.0 |
10 to 20% lower than a year ago |
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ROCE (%) |
5.9 |
Substantially below the prior-year level |
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Net cash flow (€ million) |
124.7 |
Clearly positive, substantially higher than last year |
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Supplementary Financial Performance Indicators |
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Sales (€ million) |
4,978.8 |
Mid-single-digit percentage increase |
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Capital expenditures (€ million) |
460.9 |
Around 400 |
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Net financial debt (€ million) |
609.7 |
Higher than last year |
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Depreciation (€ million) |
540.4 |
Around 525 |
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Divisional Sales and EBITDA Trends
At WACKER SILICONES, we expect to increase sales in 2019 by a low-single-digit percentage versus last year. Sales growth will be fueled by a rise in volumes and by improvements to the product mix. Lower prices for standard products will have the opposite effect. We expect sales to rise in all regions. With capacity utilization high, our aim is for specialty products to account for a higher proportion of our sales volumes. Given the lower prices for standard products, EBITDA is anticipated to be markedly below last year amid lower prices for some raw materials. We expect an EBITDA margin of about 20 percent.
At WACKER POLYMERS, sales are projected to climb by a mid-single-digit percentage versus last year. Dispersions and dispersible polymer powders will both contribute to this growth. We anticipate sales gains in all regions. EBITDA is projected to be markedly above last year’s level amid lower raw-material costs and price increases. We forecast an EBITDA margin of about 14 percent.
At WACKER BIOSOLUTIONS, we expect sales to climb by a mid-single-digit percentage in 2019. Growth will be driven by higher capacity utilization at our Amsterdam production site and by higher sales volumes in other areas. EBITDA is likely to be substantially higher than a year ago, as integration costs will be lower. We anticipate EBITDA of more than €30 million.
In our polysilicon business, we expect to generate strong volume growth in 2019 after the decline reported in 2018. Sales are expected to rise by a low-double-digit percentage. EBITDA is forecast to be balanced, and markedly lower than last year, reflecting substantially lower average prices for solar polysilicon and a stronger impact from energy prices.
Future Dividends
Our goal is to distribute about half of Group net income to shareholders, provided that the business situation permits this and the decision-making bodies agree.
Financing
The main features of our financing policy remain in place. We are confident that we have a strong financial profile with a sound capital structure and healthy maturities for our debt. As of December 31, 2018, WACKER had at its disposal unused lines of credit with residual maturities of over one year totaling €600 million.
Executive Board Statement on Overall Business Expectations
Economic and political risks are significantly higher in 2019 than last year. The world economy is currently experiencing a downturn, the full extent of which cannot be determined at present. In the past two months, economists lowered their growth forecasts for the global economy, though they project it will continue to expand.
As regards our business in 2019, we expect a slight decline in raw-material costs, but a substantial increase in electricity prices in Germany, which will impact WACKER POLYSILICON’s earnings in particular. Given these underlying conditions, Group sales are expected to increase by a mid-single-digit percentage overall. All our business divisions are likely to lift their sales.
EBITDA, on the other hand, will be down substantially versus last year, and we expect the EBITDA margin to be considerably lower as well. The main factors in this decrease are substantially lower average polysilicon prices, lower prices for standard chemical products and rising energy costs. We anticipate a substantial decline in Group net income.
Capital expenditures of around €400 million will again be significantly lower year over year. Depreciation will come in at around €525 million, down slightly from last year. We expect net cash flow in 2019 to be clearly positive and markedly above last year, as a result of less working-capital usage. Net financial debt is expected to be higher than last year.
Solar-silicon overcapacities in China are slowing the earnings trend at WACKER POLYSILICON – and thus at the Group – despite our leading market and quality position. For our chemical divisions, we are confident that our excellent products will keep us on our growth path and that our capital expenditures will support market growth.
At the date on which which these financial statements were prepared, no changes had been made to our forecast.