Annual Report 2022

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Creating tomorrow’s solutions

Dear Shareholders,

Peace and freedom are the foundations for security and prosperity, and these foundations were thoroughly shaken by the Russian invasion of Ukraine on February 24, 2022. The war in Europe is an acid test for the entire world and has thrown the global economy off balance.

Amid this unpredictable and unstable situation, WACKER performed exceptionally well in 2022. With €8.2 billion in sales and EBITDA of €2.1 billion, it was by far the most successful year in the company’s history – and this despite the strong headwinds we encountered in terms of energy, raw-material and logistics costs, which were €1.3 billion higher year over year.

Other key financial indicators also underscore just how strong our performance was in 2022.

At around €440 million, net cash flow remained at a high level, with a significant increase in capital expenditures having an impact. WACKER again posted net financial assets in the triple-digit-million range – totaling around €400 million. Net income for the year surpassed the high figure of 2021 by a wide margin, coming in at around €1.3 billion.

This will have a positive effect on the dividend. At the Annual Shareholders’ Meeting in May, the Supervisory Board and Executive Board will propose a dividend of €12 per share. That means we are distributing around 50 percent of Group net income to you, our shareholders.

Achieving these results last year was no matter of course. Our success was down to a joint effort by all WACKER employees. Everyone made a contribution through their work, and I take this opportunity to thank all of you on behalf of the entire Executive Board. Thank you for all your excellent work. Thank you for this outstanding team effort, which deserves the utmost respect.

WACKER continued to grow in 2022. Every business division achieved double-digit growth rates in sales. Higher selling prices were the chief reason for this growth. In our chemical business, WACKER SILICONES posted significant growth in EBITDA in the first nine months of the year, before earnings slowed in the fourth quarter as customers ran down their inventories. WACKER POLYMERS grew its EBITDA by more than 10 percent thanks to higher selling prices and positive product-mix effects. Despite annual sales surpassing €300 million for the first time, EBITDA in the biotechnology segment declined year over year. Non-recurring factors such as integration costs as well as upfront costs for the new mRNA Competence Center in Halle impacted earnings. The polysilicon business performed particularly well, with higher selling prices and strong demand contributing to a surge in both sales and earnings.

Growth rates were strong not only for sales and earnings, but also for capital expenditures. Last year, we invested some €550 million to expand our production capacities in all regions across the globe. The lion’s share went to our chemical divisions to further strengthen our market position with liquid and solid silicone rubber grades.

A lighthouse project in this context is our new silicones site in Panagarh, India, which came on stream in July 2022. India has been an attractive growth market for us for many years now, and its importance continues to grow rapidly. This year, India will chair the G20 forum, comprising the world’s 20 largest economies. At the same time, India is set to become the most populous country on Earth. India’s economy grew by 7 percent last year, stronger than any country in Asia. This example underscores that we are active in the markets of tomorrow – and investing in them as well.

Another key project is the establishment of our mRNA Competence Center in Halle. In April 2022, we were selected by the German government as a partner in its Pandemic Preparedness Plan, with the goal of producing mRNA-based vaccines. This was a huge vote of confidence for us. It illustrates the expertise and innovative strength of WACKER BIOSOLUTIONS. By adding additional capacity at our Halle site, we are paving the way for the future of medicine.

All this investment spending is in line with the strategic goals we presented to the capital markets in London in March 2022. The core of our strategy is: faster growth, high profitability and better resilience in times of constant change.

But a strategy is worthless if it is not firmly entrenched in the corporate culture. That is why our employees’ identification with the company, their attitude, principles and sense of responsibility are so important to the success of the strategy. Only by pulling together will we succeed in achieving our goals. We at WACKER have these strong cultural foundations, and we need to preserve and strengthen them.

In everything we do, our focus is on our customers. It is decisive that we align our innovations with our customers’ needs. Without the trust of our customers, growth would not be possible. Their satisfaction is the key to our long-term success.

What are the specifics of our Group strategy?

Sales are planned to rise to over €10 billion by 2030, driven by volume growth and a better product mix. Up to now, the annual average growth rate has been between 4 and 5 percent. In the future, it should be higher, by a factor of between 1.5 and 2.

WACKER is focused on high profitability. We are aiming for an EBITDA margin of more than 20 percent by 2030. In relation to capital employed, our goal is to earn twice our cost of capital.

Higher capital expenditures are a key component of our strategy and an important stepping stone toward achieving our goals. WACKER has the financial strength needed for such capital expenditures. In the coming years, our capex is set to be substantially higher than depreciation/amortization. More than €400 million will be invested in in our chemical divisions, WACKER SILICONES and WACKER POLYMERS. WACKER BIOSOLUTIONS is to receive over €80 million, while around €100 million a year is destined for WACKER POLYSILICON.

Sustainability is an integral part of our strategy. For us, stronger growth and sustainable operations are not mutually exclusive. We at WACKER want to achieve both – we want to grow and continue down the path to net zero. We have significantly raised the bar for our sustainable development goals. By 2030, we want to reduce our CO2 emissions by 50 percent – in absolute terms and regardless of volume growth. In the same period, we aim to reduce specific energy consumption and specific water withdrawal by 15 percent each.

On top of that, our product portfolio is to comply fully with defined sustainability standards. WACKER’s business operations are to be net zero by 2045.

With our strategy, we have set the course for the coming years.

As far as we can judge at the moment, it will not be possible this year to continue WACKER’s strong operational growth of the last two years. The global economy has slowed significantly. Around the world, the economic and political environment remains volatile. Everywhere, we discern trends whose outcomes cannot be predicted. High energy prices, especially in Europe, are impacting our business.

We expect our sales and earnings this year to be lower than in the standout year of 2022. Sales are likely to be in the region of €7-7.5 billion. We expect EBITDA to come in between €1.1 billion and €1.4 billion. This year, WACKER will again increase its investment spending to make the most of future growth opportunities with our customers. Capital expenditures at our chemical divisions will focus mainly on expanding our portfolio of specialty products. In the biotechnology field, we will ramp up the ongoing expansion of our sites. In our polysilicon business, the focus will be on semiconductor applications.

Even though we currently face economic headwinds rather than tailwinds, we look to the future with optimism.

Our strategy provides us with clear goals: faster growth, high profitability and better resilience in times of constant change.

We will successfully pursue our chosen path because we are well-placed to do so: with our high-quality products, our strong presence in all the world’s regions and our excellent workforce.

We are scaling up our capital expenditures. We have the necessary financial scope to add sustainable value.

We are focused on sustainability, which means we are doing our homework and leveraging our expertise in sustainable products and solutions to ensure the future success of our business.

All these factors are creating many possibilities and opportunities for us to continue growing profitably – and we will make systematic use of these. We remain the architect of our own success and will rely on our spirit, speed and confidence.

We would be pleased if you, our shareholders, would continue to accompany us on this path.

On behalf of the entire Executive Board, I thank you for the confidence you have placed in us thus far. I also wish to thank all our customers and suppliers for the partnership we enjoy with them. They are a key part of our global network.

Our job is to ensure WACKER continues advancing step by step. I can promise you this: We will continue to pursue this path with both resolution and enthusiasm.

Munich, March 2023

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.
Capital Employed (CE)
Capital employed is the sum of average noncurrent assets (less noncurrent securities and deferred tax assets), plus inventories and trade receivables (less trade payables). It is the variable used in calculating the cost of capital.
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).
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 °C.
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.