Annual Report 2021

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Creating tomorrow’s solutions

Dear Shareholders,

For the second year in a row, the coronavirus pandemic made exceptional demands on us all. It had a strong impact on our actions and behavior, and compelled us to show a high degree of flexibility. Many companies found it difficult to mitigate the effects of the pandemic. Many procedures and processes we had taken for granted were no longer applicable.

In economic terms, WACKER made it through this period well – even better than expected. For WACKER, 2021 was a record-breaking year. Group sales entered a new dimension, surpassing the six-billion-euro mark for the first time. This increase was down to strong organic growth across all four of our business divisions. EBITDA more than doubled to over €1.5 billion – despite a significant year-over-year increase in raw-material prices. Higher EBITDA had a positive impact on net income for the year, which came in at €828 million.

Other KPIs were also indicative of a strong business year.

At €761 million, net cash flow was even better than the already high prior-year figure. The strong cash inflow from operating activities enhanced the company’s financial stability even further. At year end, we posted net financial assets of around €550 million. To sum up: 2021 was the most successful year in the company’s history.

This success will have a positive effect on the size of the dividend. At the Annual Shareholders’ Meeting in May, the Supervisory Board and Executive Board will propose a dividend of €8.00 per share. That means we are distributing around 50 percent of Group net income to you, our shareholders.

Our success in the past fiscal year was chiefly due to the efforts of our employees. It is they who have enabled WACKER to keep its production and business operations running in a flexible, coordinated and extremely disciplined manner since the start of the pandemic. This took tremendous effort. I personally am proud of how our WACKER team has mastered this difficult situation. That is why I and the entire Executive Board wish to thank each and every WACKER employee and pay them our respects for this great achievement. In recognition of this exceptional performance, we paid all our employees an additional bonus in 2021.

WACKER is back on a growth trajectory and we want to grow even faster going forward. Already in 2021, we increased our capital expenditures to over €340 million. At the same time, we rounded off and strengthened our portfolio with two key acquisitions. WACKER SILICONES, our biggest division, took a 60-percent stake in SICO, a manufacturer of specialty silanes based in China. This acquisition expands our technological expertise in the world’s most important chemical market and broadens the range of high-quality specialty products we can offer our customers.

Our purchase of Genopis, a US-based plasmid DNA manufacturer, completes WACKER BIOSOLUTIONS’ portfolio as a contract development and manufacturing organization for the pharma industry. It also gives us our own production capacity in the United States, an important biopharmaceutical market. Both these acquisitions are key to our future growth strategy.

All of WACKER’s business divisions achieved substantial increases in their sales in 2021. This growth was due to a significant rise in volumes and to better prices. Among our chemical divisions, WACKER SILICONES posted a strong rise in EBITDA. Despite higher raw-material prices, WACKER POLYMERS almost matched its prior-year EBITDA figure. WACKER BIOSOLUTIONS grew its biotechnology business and achieved a slight increase in EBITDA. WACKER POLYSILICON performed exceptionally well. Sales and earnings surged due to volume growth – also for semiconductor-grade polysilicon – and to substantially higher prices for solar-grade silicon as well as improvements in the cost of goods sold.

Shape the Future, the efficiency program we launched two years ago, was another factor in the positive earnings trend. In 2021, it helped us save around €160 million in costs. This year, our objective is to achieve savings of more than €200 million and to bring the program to an end. From 2023 onward, we expect to see annual cost savings of €250 million.

We are now setting our sights on the future and beginning the next chapter in our success story.

The first highlight will be the new and ambitious sustainability goals we presented last year. For us, there are two aspects to sustainability. First, we are going to significantly improve our own ecological footprint: by 2030, we want to reduce our absolute greenhouse gas emissions by 50 percent. Second, the growing importance of sustainability in all areas of life is opening up attractive business opportunities for us. The products and applications we offer enable our customers to achieve their own sustainability goals. More than two-thirds of our product portfolio already contribute to this value driver. One thing is clear: without our chemicals it will not be possible to tackle the challenges posed by climate protection.

Our new growth targets, which we aim to achieve by 2030, are another highlight. Our unique, diverse and solution-driven product portfolio offers us additional profitable business opportunities – opportunities we intend to make the most of. That is precisely what our customers and the markets expect of us. We have already received a lot of positive feedback from our customers in this regard. At the end of March, we will present our new growth strategy to the capital markets. The course is clear: we want to accelerate our growth in the years ahead. Without the trust of our customers this would not be possible – customer satisfaction is the key to our long-term success.

What are our goals for 2022?

The dynamic growth of last year will continue this year. We expect to see another significant increase in sales, which will grow to around €7 billion. We expect EBITDA to come in between €1.2 billion and €1.5 billion, with the higher figure on par with last year. However, price increases for some of our key raw materials, coupled with high energy prices, are creating strong headwinds in this area. Overall, we currently expect this to have an impact of around €1 billion on EBITDA. That will dampen earnings. WACKER’s capital expenditures will rise this year, with planned CAPEX set to be clearly higher than depreciation/amortization. Our focus will be on meeting strong customer demand at our chemical divisions, on expanding our biotechnology business and on producing semiconductor-grade polysilicon.

We have taken a big step forward in reforming our company pension model, reaching an agreement on key aspects of the reform with the employee representatives. Starting this year, we will offer new recruits in Germany retirement benefits in the shape of direct commitments on a funded basis. We will secure the pension entitlements earned via a trust company, which will use its assets solely to finance the pension obligations. That will reduce our provisions for pensions going forward and thus lessen the burden on our financial position.

We were unable to realize our plan to sell our 30.8-percent stake in Siltronic AG to Taiwan-based GlobalWafers. Germany’s Ministry of Economic Affairs and Climate Action did not approve the sale before expiry of the contract closing period on January 31, 2022. We regret the ministry’s decision, as we remain convinced that Siltronic and GlobalWafers would be stronger as a single entity than each company is on its own. Together, they would have been the world’s No. 2 silicon wafer manufacturer, with exceptionally strong roots in Europe. Nevertheless, the ministry’s decision does not alter our medium-term goal of selling our investment in Siltronic AG.

This letter to shareholders, detailing the events of last year and the future outlook for our company, is my first. 2021 was a very eventful year for WACKER and also for me personally. We made progress in a number of areas – and we continue to focus on the future.

I am convinced that WACKER has excellent potential to continue achieving profitable growth – and we want to make the most of this.

We have a clear strategy, meaning we know the direction in which we want to go.

Our finances are solid. We have the financial scope to grow.

We are close to our customers, which is our key to long-term success.

We are focused on sustainability, meaning we are doing our homework and leveraging our expertise in solutions for sustainability to ensure our future business success.

We are developing the right products in line with our aspiration of “creating tomorrow’s solutions.”

We have an outstanding team – people who work together with enthusiasm to build a positive future.

That is why I ask you, our shareholders, to continue placing your trust in us. Stay with us on the path ahead.

I thank you – also on behalf of the entire Executive Board – for the confidence you have placed in us thus far. I also wish to express my gratitude to all our customers and suppliers for their partnership and also for their understanding – amid supply bottlenecks, material shortages and logistics problems, last year was not always easy.

WACKER stands for the future – and for the optimism to shape it.

Munich, March 2022

Dr. Christian Hartel
President & CEO of Wacker Chemie AG

Biotech processes use living cells or enzymes to transform or produce substances. Depending on the application, a distinction is made between red, green and white biotechnology. Red biotechnology: medical and pharmaceutical applications. Green biotechnology: agricultural applications. White biotechnology: biotech-based products and industrial processes, e.g. in the chemical, textile and food industries.
Earnings before interest, taxes, depreciation and amortization.
Substance outputs, noise, vibrations, light, heat or radiation emitted into the environment by an industrial plant.
Net Cash Flow
Net cash flow is defined as the sum of cash flow from operating activities and cash flow from long-term investing activities (excluding securities).
A polymer is a large molecule made up of smaller molecular units (monomers). It contains between 10,000 and 100,000 monomers. Polymers can be long or ball-shaped.
Hyperpure polycrystalline silicon from WACKER POLYSILICON is used for manufacturing wafers for the electronics and solar industries. To produce it, metallurgical-grade silicon is converted into liquid trichlorosilane, highly distilled and deposited in hyperpure form at 1,000 degrees Celsius.
Silanes are used as monomers for the synthesis of siloxanes or sold directly as reagents or raw materials. Typical applications include surface treatment, agents (medically active substances) in pharmaceutical synthesis, and coupling agents for coatings.
After oxygen, silicon is the most common element in the Earth’s crust. In nature, it occurs without exception in the form of compounds, chiefly silicon dioxide and silicates. Silicon is obtained through energy-intensive reaction of quartz sand with carbon and is the most important raw material in the electronics industry.
General term used to describe compounds of organic molecules and silicon. According to their areas of application, silicones can be classified as fluids, resins or rubber grades. Silicones are characterized by a myriad of outstanding properties. Typical areas of application include construction, the electrical and electronics industries, shipping and transportation, textiles and paper coatings.