Fiscal 2019 was no ordinary year for WACKER. The trade conflict between the USA and China slowed global economic growth and incurred high tangible and intangible costs. At the same time, we saw major economies protecting their companies against international competitors through state intervention, thus calling into question the principle of free trade.
In Asia, on the other hand, we see dynamic change, with competition intensifying in the chemical industry. Anyone who cannot keep up will lose their market share. For WACKER’s future, this means an even stronger local presence in Asian markets. At the same time, we need a strong industrial base in Europe to avoid being dependent on individual markets.
These political and economic challenges require us to become more flexible and to adapt our business processes. Special measures and efforts are needed to cope with the trends facing us. Cost management and innovation will be decisive for WACKER’s future success. WACKER has to seize growth opportunities and, at the same time, adjust its cost structures to the economic environment. It is a difficult balancing act to accomplish. We will actively shape the transformation ahead.
A key driver of future growth will be to translate our great technological expertise and innovative strength even more effectively into commercial success. New applications for our customers are an important lever in this process. WACKER BIOSOLUTIONS, our smallest division, is a good example of how to harness new market and business potential by using tomorrow’s technologies.
In 2019, our chemical business was a stable anchor, even though we clearly felt the impact of growing chemical competition. In polysilicon, business was dampened not only by excess capacity and a further strong price decline across the entire supply chain, but also by high energy costs. As a result, we recognized an impairment charge on our production facilities and posted a negative net result for the year.
Our long-standing policy of financial stability enables us to cope even with extraordinary financial burdens without endangering the company’s economic substance. We continue to attach great importance to a cautious, forward-looking financial policy. Our positive net cash flow and low level of net financial debt are key indicators of this approach.
We face tough challenges in the year ahead. The transformation of our business processes in the coming months will entail a lot of hard work and will call for endurance, tenacity and courage. It is not going to be an easy task, but it will be decisive for the company’s future prospects.
The Supervisory Board wishes to thank all WACKER’s employees for their high-level of commitment and strong performance last year.
Continuous Dialogue with the Executive Board
At WACKER, sound corporate governance and control are built on a relationship of trust between the Executive Board and Supervisory Board as they work closely together in the company’s interest. In 2019, the Supervisory Board performed – with great diligence – the duties incumbent upon it under law, the Articles of Association and its own Rules of Procedure. The Supervisory Board was involved at an early stage in every decision of fundamental significance for the company.
In both written and oral reports, the Executive Board regularly provided us with timely and comprehensive information on corporate planning, strategic development, business operations, and the current state of Wacker Chemie AG and the Group, including the risk situation, and compliance and sustainability issues. The Chairman of the Supervisory Board remained in close contact with the Executive Board, especially with the CEO – also outside of the scheduled Supervisory Board meetings – and was kept informed of the business situation, current trends and key business transactions. Any deviations from business plans and targets were explained to the Supervisory Board in detail.
Wherever required by statutory provisions or the Articles of Association, the Supervisory Board voted on the reports and proposals of the Executive Board after detailed examination and discussion.
In the reporting year, we paid particularly close attention to investment projects, the current earnings situation, including the risk position and risk management, as well as the company’s liquidity and financial position.
The Supervisory Board held four ordinary meetings in 2019, two in the first half of the year and two in the second. Between meetings, the Executive Board informed us in detail by means of written reports about all projects and plans of particular importance to the Group. At its full meetings and in its committees, the Supervisory Board discussed in detail business transactions of importance to the company and referred to the reports submitted by the Executive Board. The full meetings were prepared by shareholder and employee representatives in their own separate sessions.
A total of three members were excused from one Supervisory Board meeting each; otherwise, all members of the Supervisory Board attended all of its meetings. All committee members attended all of their respective committee meetings.
The Supervisory Board’s Main Areas of Deliberation
The development of sales, earnings and employment at the Group and its individual segments were the subject of regular consultations in the full meetings of the Supervisory Board. At each meeting, the Supervisory Board evaluated the Executive Board’s performance – on the basis of the reports submitted by the Executive Board – and discussed strategic development opportunities and other key topics with the Executive Board. There was no need for additional monitoring measures, such as the inspection of corporate documents or the appointment of experts.
The major areas of deliberation dealt with by the Supervisory Board were:
- The globally challenging market environment, especially high energy costs and the polysilicon-market trend
- The rise in protectionism and trade disputes, in particular anti-dumping proceedings against the solar and other industries in the USA, EU and China; their impact on WACKER; and corresponding courses of action
- The impairment charge recognized on polysilicon production facilities
- Various M&A projects (including a stake in Nexeon in the field of lithium-ion batteries, and the integration of acquisitions made in Spain and the Netherlands)
- Starting up the HDK® facility in Charleston, Tennessee (USA) and the new silicon-metal furnace in Holla (Norway)
- The increase in provisions for pensions because of lower discount rates
- Financing activities
- The German Act implementing the Second Shareholder Rights Directive, and the planned revision of the German Corporate Governance Code
- Performance of the share price
The Supervisory Board discussed the WACKER Group’s plans for 2020 at its meeting of December 5, 2019. On that occasion, the Supervisory Board also dealt with medium-term corporate plans for the period 2020–2024. In addition, it discussed and approved the capital-expenditure budget for 2020.
Work in the Committees
The Supervisory Board is assisted in its work by the committees it has constituted. WACKER’s Supervisory Board has created three committees – an Audit Committee, an Executive Committee, and a Mediation Committee (the latter in accordance with Section 27 (3) of the German Co-Determination Act (MitbestG)). With the exception of the Audit Committee, which is chaired by Franz-Josef Kortüm, Dr. Peter-Alexander Wacker, the Chairman of the Supervisory Board, chairs the committees.
The Audit Committee met four times last year. Its work included the audit of the annual financial statements of Wacker Chemie AG and the Group for 2018 and of the consolidated interim financial statements for the first half-year. It also discussed the Group’s quarterly financial figures, CSR reporting, and issues relating to risk management, compliance and auditing. The committee monitored the independence of the auditors and also discussed the additional services they had provided. Moreover, the Audit Committee submitted a recommendation to the Supervisory Board for the latter’s proposal to the Annual Shareholders’ Meeting for appointing an auditor for 2019. It then awarded the auditing contract for 2019 and determined the focus of auditing.
The Executive Committee met once in 2019, discussing personnel matters in relation to the Executive Board (e.g. determining overall compensation, and setting the performance goals for the variable compensation component).
The Mediation Committee did not need to be convened last year.
The Supervisory Board was regularly informed about the committees’ work.
Last year, the Supervisory Board again looked closely at corporate-governance standards. At its meeting of December 5, 2019, the Supervisory Board dealt with application of the German Corporate Governance Code and adopted the annual Declaration of Conformity that must be submitted jointly by the Executive and Supervisory Boards in accordance with Section 161 of the German Stock Corporation Act (AktG). Shareholders can access the Declaration on the company’s website.
In its Corporate Governance Report, the Executive Board provides details – also on behalf of the Supervisory Board – of corporate governance at WACKER in accordance with Item 3.10 of the German Corporate Governance Code.
For further details, please refer to the Corporate Governance Report
At its meeting in December 2019, the Supervisory Board also discussed the efficiency of its activities and found that it works efficiently – for example, due to the regular preliminary discussions regarding the Supervisory Board meetings, the comprehensive reports provided by the Executive Board and the documents received well in advance of the meetings.
Audit of the Annual Financial Statements of Wacker Chemie AG and the WACKER Group
KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, audited the annual financial statements of Wacker Chemie AG for 2019, the consolidated financial statements and the combined management report (as of Dec. 31, 2019), as prepared by the Executive Board. It also audited the relevant accounts.
The Supervisory Board’s Audit Committee had awarded the auditing contract in accordance with the resolution of the Annual Shareholders’ Meeting of May 23, 2019. The auditors issued an unqualified audit report.
The auditors also examined the risk management system in accordance with Section 91 of the German Stock Corporation Act (AktG). The audit verified that the risk management system and internal control system meet the legal requirements. No risks endangering the continued existence of the company were identified. The auditors also carried out a voluntary review of the combined non-financial report for Wacker Chemie AG and the Group. Their review confirmed that this report, too, meets the legal requirements.
The financial-statement documents (including the auditors’ reports, the combined management report and the Executive Board’s proposal for the distribution of profits) were submitted to all the Supervisory Board members in good time.
At its meeting of February 27, 2020, the Audit Committee examined and discussed in detail the financial statements, the combined management report, the combined non-financial report for Wacker Chemie AG and the Group (as per Sections 289b and 315b of the German Commercial Code – HGB) as well as the auditors’ reports. At its meeting of March 11, 2020, the full Supervisory Board closely examined and discussed the relevant annual accounting documents – including the combined non-financial report for Wacker Chemie AG and the Group – with knowledge and in consideration of both the report of the Audit Committee and the auditors’ reports. The auditors took part in the deliberations at both meetings. They reported on the main results of the audit – in particular the key audit matters described in the auditors’ report – and were available to answer questions and provide supplementary information.
After concluding our own examination, we have no objections to raise to the annual financial statements of Wacker Chemie AG, the consolidated financial statements, the combined management report, the combined non-financial report for Wacker Chemie AG and the Group, or the auditors’ reports.
We therefore approve the annual financial statements of Wacker Chemie AG and the consolidated financial statements as of December 31, 2019 as prepared by the Executive Board. The annual financial statements of Wacker Chemie AG are hereby adopted. We concur with the Executive Board’s proposal for the distribution of retained profit.
Changes in the Composition of the Supervisory and Executive Boards
Due to retirement, Seppel Kraus, a long-standing employee representative on the Supervisory Board, stepped down at the end of June 30, 2019. The Supervisory Board would like to thank Mr. Kraus for all his valuable, enriching and collegial work over the years, and wishes him all the best for the future.
A new Supervisory Board member, Beate Rohrig, was appointed as employee representative at the Executive Board’s request by order of the District Court of Munich dated July 18, 2019.
The Supervisory Board thanks the Executive Board and the company’s employees and employee representatives for their dedicated work.
Munich, March 11, 2020
The Supervisory Board
Dr. Peter-Alexander Wacker,
Chairman of the Supervisory Board of Wacker Chemie AG