WACKER’s performance in 2018 was marked by the strength of our chemical business and by difficult conditions in the solar market. Overall, sales rose by 1 percent to €4.98 billion. EBITDA (earnings before interest, taxes, depreciation and amortization) came in at €930 million, 8 percent lower than the year before. The decline was due to the fact that insurance compensation was still outstanding for the shutdown caused by the loss event at our Charleston site in Tennessee (USA). Income from continuing operations rose, on the other hand, by 4 percent to €260 million.
The outstanding insurance payments affected our net financial debt. It came in at €609 million and was thus higher year over year. Net cash flow of around €125 million was clearly positive, but substantially lower than a year earlier because capital expenditures were higher (as planned), as were cash outflows for working capital and taxes.
Essentially, 2018 was a year of highs and lows for WACKER. Our chemical business performed very well, especially silicones. We increased silicone sales by 14 percent. The rise was fueled by volume gains for high-margin specialties and higher prices for standard products. Chemical-division EBITDA increased to more than €780 million, despite significantly higher raw-material costs, particularly in our polymer business.
We further strengthened WACKER BIOSOLUTIONS by acquiring a new production site for pharmaceutical actives. The acquisition doubled our capacity to a total of 4,000 liters in the fast-growing biopharmaceuticals market.
Another positive fact is that, after the loss event at Charleston in September 2017, we resumed polysilicon production there in Q2 2018 and, in December, reached full capacity.
But, aside from this good news, WACKER POLYSILICON faced very challenging market conditions in 2018. Business was dampened by China’s decision to curb feed-in tariffs for some solar projects and to cap the amount of new solar installations. As a result, solar-silicon volumes contracted markedly, with prices continuing to decline. We used this market situation to rebuild inventories, enabling us to supply customers much faster in the future.
Given our strong income from continuing operations, the Supervisory and Executive Boards will propose to the Annual Shareholders’ Meeting in May 2019 that a dividend of €2.50 per share should be distributed.
From today’s perspective, 2019 is not going to be an easy year for us. The global economy’s momentum has slowed significantly. Among the multiple reasons for this are international trade conflicts, the UK’s unresolved exit from the EU and slackening global demand for products and services.
For our business, we anticipate a slight decline in raw-material costs, but a substantial rise in electricity prices in Germany. That means pressure will ease on our chemical divisions but increase, in particular, on WACKER POLYSILICON’s earnings. The market situation for polysilicon will remain difficult in the weeks ahead. Yet we are confident of growing sales at every business division. For EBITDA, on the other hand, we anticipate a substantial decline, prompted mainly by very low average prices for polysilicon, as well as by lower prices for standard chemical products. We also expect Group net income to decrease.
We are doing our utmost to cut costs further. We see considerable potential for this in our polysilicon business, and are also working hard to enhance the cost situation in all other areas of the company.
At the same time, we are intensifying our focus at WACKER POLYSILICON. In this segment, we want to gain market share through customers in the semiconductor industry and increase our volumes of polysilicon for monocrystalline solar wafers.
Although the economy has clouded over, we look ahead, thinking and acting for the long term. That is why we continue to seize the opportunities that arise in our business. Demand for many of our products is very high, especially at our chemical divisions. Our investment spending thus focuses on expanding facilities for intermediate and downstream silicone products. We intend to enhance our portfolio of silicone specialties in the coming years.
The goals behind these measures are clear: we are preparing for the next growth step by continuing to strengthen our market positions. Importantly, we are pursuing the strategy set until 2020 of ensuring that our capital expenditures remain below the level of depreciation.
At WACKER, the future goes hand in hand with digitalization. Through digitalization, we will satisfy customer needs even better. It spans the entire value chain, from product development and manufacturing through to customer service. That is why, in 2017, we launched “WACKER digital,” a program for advancing the digital transformation at all stages of the value chain.
At present, we face economic headwinds rather than tailwinds. But we look ahead with optimism.
WACKER is well positioned to shape the future.
- We have the right products.
- We are developing new, innovative products and technologies.
- We hold leading positions in all of our key markets.
We have highly skilled employees, whose hard work and dedication were a key factor in WACKER’s successful performance last year. I sincerely thank them on behalf of the entire Executive Board.
It is our combination of expertise, experience, innovation, shared identity, performance and passion that makes WACKER unique. This is the source of our strength and our optimism. My Executive Board colleagues and I express our gratitude to our customers, suppliers and shareholders for the trust they have placed in us. Stay with us on the path ahead!
Munich, March 2019
Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG