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, as they have the detailed product and market expertise required for these tasks. We continuously use market observation and analysis tools to obtain, for example, a well-structured evaluation of industrial, market and competitor data. 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 discussed at regular Executive Board meetings. As a general rule, we elaborate different scenarios and risk-opportunity profiles for these issues before making decisions.

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 global GDP growth projected for 2020, WACKER sees good opportunities to again outpace global chemical production, especially in young markets and sales regions. The strongest momentum, in our view, will continue to come from China, India and Southeast Asia. We are constantly 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, which puts us in an excellent position to meet global megatrends. For example: the advance of urbanization, the trend toward conserving natural resources and energy, efforts to reduce CO₂ emissions, the world’s increasing mobility needs, 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 intends to keep raising 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. Our aim is to meet this growth with innovative products and technologies.

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 reliably protect 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 stems from the rising affluence of emerging economies, from increasing urbanization, and from the trend toward conserving natural resources and cutting 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. The addition of these powders enables mortar mixtures not only to be processed more easily and applied more thinly, but also to have substantially improved properties. At the moment, unmodified dry-mix mortars account for some 70 percent of the total used in the building sector. In many regions, construction experts have only just started to appreciate the benefits of polymer-modified dry-mix mortars. WACKER POLYMERS also sees growth potential in environmentally friendly water-based paints and coatings.

WACKER BIOSOLUTIONS expects major growth opportunities from bioengineered products. A special focus is on the production of pharmaceutical proteins. Through its Amsterdam site, acquired in 2018, the division has increased its capacity in this field markedly. At the same time, the 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) 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 anticipate most new capacity will be added. We also see further growth potential in the increasing global trend toward highly efficient monocrystalline solar cells. As a quality leader in the production of hyperpure polysilicon, WACKER POLYSILICON will benefit from this trend.

Strategic Opportunities

To seize growth opportunities in our divisions, we remain focused not only on satisfying rising customer demand, mainly through the cost-effective expansion of existing plants, but also on strengthening our capacity for downstream products. The capital expenditure for this in 2020 will be below the level of depreciation/amortization. Our priority remains expanding our capacity for silicone and polymer products. At Burghausen (Germany) and Adrian (USA), we are adding capacity for specialty silicones, liquid silicone rubber, hydrophobic silica and silicone emulsions. At Ulsan (South Korea), we are building a new plant for dispersions that will mainly be used to produce dispersible polymer powders for the construction sector.

Further strategic opportunities will evolve from our Shape the Future project, which is examining our processes and organizational structure to make WACKER leaner, faster and more flexible. The project supports our strategy for long-term sales and earnings growth, and will help us make better use of the potential of our technological and product portfolio. Our goal is to position WACKER effectively for the future so that we are successful in the short and long term, amid increasing competition and further economic fluctuations.

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. At 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: specific costs for auxiliaries; productivity advances on the manufacturing side; and broadening our choice of suppliers to secure more attractive purchasing terms.

We also expect performance-related opportunities to result from our “Zukunft gestalten” project. With a leaner and more efficient organizational structure, we expect significant savings in personnel expenses and material costs.