Comparing Actual with Forecast Performance

WACKER did not change the 2019 targets it had set early that year for EBITDA margin, ROCE, net financial debt and capital expenditures, but it did adjust its expectations for sales, EBITDA, depreciation/amortization and net cash flow as conditions worsened during the year. The main reasons for the revisions were not only the weakening global economy, but also the absence of a recovery in solar-grade polysilicon prices in the second half of 2019 – which WACKER had originally forecast in consensus with many market experts.

Guidance Lowered During the Year

At the start of 2019, WACKER projected that it would grow its sales by a mid-single-digit percentage. The EBITDA margin and ROCE would be substantially lower than a year earlier, with EBITDA 10 to 20 percent lower. Net cash flow would be clearly positive and substantially higher than the year before. Capital expenditures would reach around €400 million, with depreciation/amortization amounting to around €525 million. Net financial debt would be higher than a year earlier.

In its Q1 Interim Report of April 2019, WACKER left its projections unchanged.

In its Q2 Interim Report, WACKER provided more specific guidance for EBITDA. With China’s solar-market upturn still not in sight, WACKER’s mid-2019 expectations were that EBITDA was likely to be closer to the bottom end of its projected range of 10 to 20 percent lower year over year. The Group lifted its guidance for full-year depreciation /amortization to around €550 million. For all the other key financial performance indicators, the outlook remained unchanged.

In its Q3 Interim Report, WACKER noticeably lowered its expectations for EBITDA and net cash flow. This was due to the continued decline in solar-grade polysilicon prices and the weakening global economy. Sales would likely be on par with the year before and EBITDA some 30 percent below the prior-year level. Net cash flow was projected to be clearly positive, but lower than a year earlier. The outlook for all the other key performance indicators remained unchanged. As explained at the start of the year, full-year guidance did not include insurance compensation for the incident-related damage incurred at the Charleston site.

WACKER Achieves Its Q3 Sales and EBITDA Targets, with Impairment of Fixed Assets Increasing Depreciation/Amortization and Impairments

In 2019, WACKER posted sales of €4.93 billion, almost on par with the year-earlier level (€4.98 billion). The slight decline of 1 percent was mainly due to lower prices, especially for solar-grade polysilicon, but also for standard silicones. Sales were supported by higher volumes overall, by product-mix effects and by the year-over-year rise in the US dollar.

EBITDA was €783.4 million, down 15.8 percent (2018: €930.0 million). The EBITDA figure included special income of €112.5 million in insurance compensation for the incident-related damage incurred at Charleston. Adjusted for this amount, EBITDA amounted to €670.9 million – down 27.9 percent, it was in line with the guidance issued in Q3. The EBITDA margin, in turn, was markedly lower than in the prior year.

Net cash flow of €184.4 million was clearly positive. Adjusted for the cash inflow of roughly €100 million, it was below the year-earlier figure as projected. As expected, ROCE of -11.3 percent was substantially below the prior-year level.

In 2019, capital expenditures reached €379.5 million, slightly below the some €400 million previously projected.

At €713.7 million, year-end net financial debt was higher than the previous year, as forecast at the start of the year. The increase was mainly due to first-time application of IFRS 16.

As announced in early December 2019, WACKER’s 2019 financial statements include an impairment charge on the carrying amount of its hyperpure-polysilicon production facilities. At €760.0 million, the charge reflects the company’s subdued expectations for the future trend in solar-grade polysilicon prices. In consequence, full-year depreciation /amortization and impairments totaled €1.32 billion, markedly above the most recent guidance of around €550 million.