Opportunities Report

Opportunity Management System

WACKER’s opportunity management system remained unchanged from the previous year. It is both a divisional and Group-level instrument. We identify operational opportunities and leverage them in our business divisions, which possess the detailed product and market expertise required. We continuously use market observation and analysis tools to obtain a well-structured evaluation of market, industry and competitor data, for instance. In addition, we conduct customer interviews to evaluate future opportunities. The monitoring process – how WACKER seizes opportunities – is based on key indicators (such as rolling forecasts and current-status reporting).

Opportunity Management System

Strategic opportunities of overriding importance – such as strategy adjustments, potential acquisitions, collaborations and partnerships – are handled at the Executive Board level. Such opportunities are incorporated into WACKER’s annual strategy-development and planning process, with current issues being discussed at regular Executive Board meetings. We generally elaborate different scenarios and risk-opportunity profiles before making decisions on such issues.

WACKER has identified a whole range of opportunities for advancing the Group’s success over the next few years.

Overall Economic Opportunities

In addition to the growth projected for the world economy in 2019, WACKER sees good opportunities to again outpace global chemical production, especially in emerging markets and sales regions. The strongest momentum, in our view, will continue to come from China, India and Southeast Asia. We are continuously expanding our presence in these markets to seize the opportunities there. Our technical competence centers and the WACKER ACADEMY are pivotal in achieving WACKER’s high standard of service and customer proximity.

Sector-Specific Opportunities

Sector-specific opportunities primarily result from our broad product portfolio. It puts us in an excellent position to meet global megatrends. Examples are the advance of urbanization, the trend toward conserving natural resources and energy, the world’s increasing need for mobility, and the growing demand for products that enhance the quality of life. These trends remain as important as ever to our business.

Rising affluence in emerging-market economies, particularly in Asia, coupled with ever more stringent market and customer requirements, is fueling demand for products incorporating high-value silicones. To benefit from this development, WACKER is continuing to lift the percentage of high-value specialty silicones in its portfolio versus standard products. Areas of special focus range from the automotive and cosmetics sectors, to personal care, health, medicine, electronics and clothing. We intend to satisfy this growth with innovative products and technologies in wound care, cosmetics, textile care, plastics processing, electronics and 3D printing.

We see good growth prospects for WACKER SILICONES in the electrical and electronics market, especially in automotive electronics. Growth is being spurred by digitalization, connectivity and electromobility. Electronic automotive assistance systems, for example, are becoming increasingly important and are indispensable for autonomous driving. Current studies predict that the number of largely autonomous vehicles among new registrations will reach some 76 million by 2035. Silicone gels and silicone encapsulants are what protects the sensors and electronic components needed in such vehicles. During the next few years, electromobility is likely to gain further momentum. By 2025, the number of electric cars sold annually is expected to rise from 3 million to 25 million. Electric vehicles also require high-performance batteries. That is why we have developed new, thermally conductive silicones. They enable effective thermal management to ensure long-lasting, maintenance-free batteries.

At WACKER POLYMERS, growth potential is fueled by rising affluence in emerging economies, by increasing urbanization, and by the trend toward conserving natural resources and reducing carbon dioxide emissions. The shift away from conventional building materials and construction methods to value-added systems will continue. A key aspect here is the use of dispersible polymer powders for modifying cement. Through the addition of these polymer powders, mortar mixtures are easier to process, can be applied more thinly and their properties can be substantially improved. So far, though, some 80 percent of dry-mix mortars used in the building sector are not modified. In many regions, construction experts have only just started to appreciate the benefits of polymer-modified dry-mix mortars. WACKER POLYMERS also sees further potential in environmentally friendly, water-based paints and coatings, and in its material-substitution business.

At WACKER BIOSOLUTIONS, the main growth opportunities are anticipated from bioengineered products. A special focus will be on the production of pharmaceutical proteins. Our capacities in that field grew strongly with the division’s April 2018 acquisition of the Amsterdam site. At the same time, the new site’s expertise in live microbial products is a valuable addition to our technology portfolio. In cyclodextrins, we are developing new applications (e. g. for egg-free baked goods and low-fat desserts). We also expect to see growth in cysteine and other fermentation-generated food products, such as vegetarian-grade meat flavors. Our large-scale fermentation plant in León, Spain, which started production in August 2018, will enable us to meet this rising demand over the long term.

Energy remains a key megatrend, with the photovoltaic industry at the forefront. The competitiveness of solar power relative to other energy sources continues to spur demand for photovoltaic systems. Across the globe, the use of renewable energy is increasing. China, India and the USA are where we still anticipate most new capacity to be added. We also see further growth potential in the increasing global trend toward highly efficient monocrystalline solar cells. WACKER POLYSILICON, a producer of hyperpure polysilicon and a cost and quality leader, will benefit from these developments.

Strategic Opportunities

Our expansion of upstream-product capacity in recent years has given WACKER opportunities for further growth at its business divisions. Now, our focus – until at least 2020 – is on satisfying our customers’ growing demand, mainly by expanding existing plants cost-effectively, and on strengthening our capacity for downstream products. The capital expenditure for these projects will be below the level of depreciation. A project priority is to expand our silicone production. At Burghausen (Germany), Adrian (USA) and Zhangjiagang (China), we are adding production capacity for liquid silicone rubber, for high- and room-temperature-vulcanizing silicone, and for thermally conductive silicone compounds. At our Charleston site in the USA, we are building a pyrogenic silica plant, which is scheduled to come on stream this year. We are additionally looking into building a plant for high-temperature-vulcanizing silicone rubber there. The aim of these measures is to meet the high demand for silicones in key sectors such as the automotive, electronics and medical-technology industries. Currently, we are building new facilities for dispersions and dispersible polymer powders at Ulsan (South Korea), mainly to supply the construction sector.

Performance-Related Opportunities

WACKER has a number of opportunities for improving its cost structures, processes and productivity. At WACKER POLYSILICON, we are continuing to implement our program to cut production costs. In our chemical divisions, we are tapping further cost-cutting potential with our productivity and efficiency program – the Wacker Operating System. Our various cost-cutting levers include the specific costs for auxiliaries, productivity advances on the manufacturing side, and broadening our choice of suppliers to secure more attractive purchasing terms.

Increasing digitalization opens up a multitude of possibilities to serve our customers more efficiently, to further reduce our production costs and to enhance the productivity of our manufacturing process. For example, we use data flows from our production facilities to carry out predictive maintenance. Since early 2019, we have been using a new software system to manage our customer relationships. It will make our sales employees more flexible, interconnected and location-independent. We started our WACKER Digital program in 2017 to systematically promote and firmly entrench the digital transformation across the entire company. The program brings together new and ongoing digitalization projects, creating the basis for new ways of using digital technology.