Outlook for 2020

WACKER’s main planning assumptions relate to raw-material and energy costs, personnel expenses and exchange rates. For 2020, we anticipate a euro exchange rate of US$1.15 (2019: 1.20). Average prices of our key raw materials should be marginally lower than last year. The cost of natural gas and electricity are slightly lower than last year. The majority of our raw-material and energy supplies are secured for 2020. The forecast does not include the one-off costs incurred to implement our Shape the Future program. At present, we cannot reliably assess the impact of the fast-spreading coronavirus.

Performance Indicators and Value-Based Management

WACKER’s key performance indicators are the same as last year.

Group Sales to Benefit from Volume Growth in 2020

For 2020, WACKER anticipates higher volumes in its chemical divisions, with average prices lower on balance. In our polysilicon business, we expect sales to rise, driven by an improved product mix. On average over the year, we expect polysilicon prices to be slightly lower than last year. Overall, Group sales are projected to climb by a low-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 return to a growth path in 2020, 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 will develop as follows at the Group level.

EBITDA margin and EBITDA: the EBITDA margin is expected to be somewhat lower than last year (2019: 15.9 percent). EBITDA will be around 20 percent lower than last year. The projected drop relates mainly to the insurance compensation of €112.5 million received in 2019 for damage incurred at our Charleston site (USA). Adjusted for this non-recurring effect, EBITDA is likely to decline by a mid-single-digit percentage versus last year. This Group guidance takes account of some of the economic uncertainty. We expect income from equity investments to be lower than last year. Group net income should rise substantially. The risk of a possible coronavirus pandemic is described in the Risk Management Report. Given the drastic developments since the end of February, we consider the risk of such an occurrence to be likely and its potential impact on WACKER’s earnings and financial position to be high (> €100 million). In consequence, EBITDA could decline by a two-digit percentage versus last year.

ROCE: ROCE is likely to be substantially higher than last year (2019: -11.3 percent).

Net cash flow: we expect net cash flow for 2020 to be clearly positive and substantially higher than last year, buoyed mainly by lower working-capital usage.

Outlook for Supplementary Performance Indicators at the Group Level

Capital expenditures: in 2020, capital expenditures will amount to around €350 million, on par with last year and below the level of depreciation/amortization. At around €425 million, depreciation/amortization will contract significantly. Investment projects include the new dispersion reactor in Ulsan (South Korea), and intermediate and downstream plants in Burghausen and Nünchritz (Germany).

Net financial debt: given the positive cash flow, net financial debt will be substantially lower than last year (2019: €714 million).

Divisional Trends in Sales and EBITDA

At WACKER SILICONES, we expect sales for 2020 to climb by a low-single-digit percentage versus last year. Growth will be driven by higher volumes for specialty applications. Lower average product prices will have the opposite effect. We expect sales to rise in all regions. EBITDA should be on par with last year due to lower average prices. Raw-material and energy prices will be slightly lower than last year. We expect the EBITDA margin to be slightly lower.

At WACKER POLYMERS, our projection is for sales to grow by a low-single-digit percentage, supported by higher volumes in dispersions and dispersible polymer powders. In this division, too, we anticipate sales growth in all regions. With raw-material prices at last year’s level, EBITDA should rise slightly thanks to productivity increases. We are forecasting a slight rise in the EBITDA margin.

We expect WACKER BIOSOLUTIONS to increase its sales by a high-single-digit percentage in 2020, with the main impetus coming from biopharmaceuticals. Both EBITDA and the EBITDA margin should be substantially higher than last year.

In our polysilicon business, we assume that sales will rise slightly, up by a low-single-digit percentage. Growth will be driven by an improved product mix as we shift toward high-value products. Cost savings will offset low average polysilicon prices. Energy prices are likely to decline marginally versus last year. When adjusted for the non-recurring effect of the insurance compensation received in 2019, EBITDA should be on par with last year.

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, 2019, WACKER had a total of €600 million in unused lines of credit with residual maturities of over one year.

Executive Board Statement on Overall Business Expectations

The risks to the economy will continue in 2020. According to economic forecasts, global growth will be on the same level as last year. At present, it is unclear how the partial agreement reached in the US-China trade conflict will affect the global economic trend. But the consensus is that there will not be a deep recession. Currently, it is not possible to reliably predict how the fast-spreading coronavirus, which first appeared in China, will impact global economic growth.

We are anticipating another difficult year for our business. We expect sales to climb again by a low-single-digit percentage in 2020. Adjusted for the non-recurring effect of insurance compensation, EBITDA will decline by a mid-single-digit percentage versus last year. This Group guidance takes account of some of the economic uncertainty. Raw-material costs are expected to be at last year’s level, with energy costs down slightly. Due to the drastic developments since the end of February, we rate the risk of a coronavirus pandemic as likely, with a potentially high impact (> €100 million) on WACKER’s earnings and financial position. In consequence, EBITDA could decline by a two-digit percentage versus last year.

At around €350 million, capital expenditures will be on par with last year. Depreciation/amortization will amount to around €425 million, substantially lower year than in 2019. We expect net cash flow to be clearly positive and markedly above last year’s figure. Net financial debt will decline due to positive cash flow.

Excess capacity for polysilicon and persistently low average prices are impeding WACKER POLYSILICON’s operating performance, despite our leading market and quality position. As regards the chemical divisions, we are confident that our excellent product portfolio will keep us on a growth trajectory and that our capital expenditures will meet market growth.

As of the preparation date of these financial statements, nothing had changed as regards our guidance.