Management Report of Wacker Chemie AG

(Additional Information Pursuant to the German Commercial Code)

The management report of Wacker Chemie AG and the Group management report for 2024 are combined in accordance with Section 315 (5) in connection with Section 298 (2) of the German Commercial Code (HGB). The annual financial statements of Wacker Chemie AG (prepared in accordance with the German Commercial Code) and the combined management report are published simultaneously in Germany’s Company Register.

The combined management report includes all reporting elements pertaining to Wacker Chemie AG that are required by law. Further to our report on the WACKER Group, we explain here developments at Wacker Chemie AG.

Wacker Chemie AG is the parent company of the WACKER Group and has its headquarters in Munich, Germany. It operates through four business divisions – Silicones, Polymers, Biosolutions and Polysilicon – which generate a substantial portion of the Group’s sales. Wacker Chemie AG’s directly and indirectly held subsidiaries and investments located in Germany and abroad have a strong influence on its business. The company has a total of 51 subsidiaries, joint ventures and associated companies, and also provides the Group with corporate functions. Wacker Chemie AG’s Executive Board exercises key management functions for the Group as a whole, which include determining the Group’s strategy, allocating resources (such as funds for investment spending), and bearing responsibility for managing executive personnel and corporate finances. Wacker Chemie AG’s Executive Board also oversees communications with the company’s key stakeholders, especially with the capital markets and shareholders.

The key performance indicators used in corporate management are implemented groupwide in the business divisions. Corporate goals are defined and reported for the divisions on a groupwide basis. Even though Wacker Chemie AG is an independent entity, no separate key performance indicators are defined or reported for it. For more information, please refer to the respective details provided for the WACKER Group as a whole.

The general business conditions of Wacker Chemie AG are essentially the same as those of the Group.

The annual financial statements of Wacker Chemie AG were prepared in accordance with the German Commercial Code (HGB) and the German Stock Corporation Act (AktG). These statements differ substantially from the IFRS figures in relation to fixed assets, depreciation/amortization and impairments, financial instruments, right-of-use assets and financial liabilities in connection with lease accounting, provisions for pensions, and deferred taxes. As regards EBITDA, there are only slight differences between IFRS and HGB figures.

Wacker Chemie AG’s earnings pursuant to the German Commercial Code

Wacker Chemie AG’s earnings in 2024 were characterized by lower sales, an associated decline in the cost of materials, and income from inventory buildup, with lower prices and volumes the main factor behind the decline in our Polysilicon division. At year-end, Wacker Chemie AG posted net income of €27.4 million (2023: €66.6 million). That was €39.2 million less than a year earlier.

Sales fell from €4.87 billion to €4.09 billion, a drop of 16.0 percent year over year. This trend is due primarily to much lower volumes and to lower prices for solar-grade polysilicon in the Polysilicon division. Sales in 2024 dropped by 40.3 percent from €1.61 billion to €958.4 million. At Silicones, sales of €1.97 billion were up 3.8 percent (2023: €1.90 billion). Polymers’ sales totaled €766.0 million (2023: €852.9 million), a drop of 10.2 percent. Sales in the Biosolutions division were on par with the previous year at €143.6 million (2023: €145.9 million).

The cost of materials decreased by €375.0 million in 2024 to €2.61 billion (2023: €2.98 billion). This was due to efficiency measures, as well as lower volumes and procurement prices for strategic raw materials in 2024, with the decline in average silicon metal prices in the course of the year having the biggest impact. While energy costs also declined, they remained at a high level. A provision for contingent losses set up for long-term gas forward contracts in the amount of €14.3 million had the opposite effect. By contrast, there was a slight year-over-year increase in prices for methanol and vinyl acetate monomer. Ethylene prices were at the same level as in 2023. The material-to-sales ratio decreased to 59.5 percent in 2024 (2023: 61.8 percent).

Personnel costs increased by 2.5 percent to €1.12 billion (2023: €1.10 billion), mainly due to wage increases relating to collective-bargaining agreements. Lower allocations to provisions for pensions had the opposite effect. At year-end 2024, Wacker Chemie AG had 10,245 employees (Dec. 31, 2023: 10,207). The employee-expense ratio rose to 25.7 percent (2023: 22.8 percent).

Depreciation, amortization and impairments rose to €172.1 million on the back of another increase in capital expenditures (2023: €158.6 million), up by 8.5 percent.

The other operating result (other operating income less other operating expenses) came to €-573.8 million (2023: €-642.2 million). Other operating expenses include not only exchange-rate losses, but also selling expenses, maintenance, other contractor work, rents, servicing costs, R&D costs and costs assumed on behalf of subsidiaries. The overall figure for the previous year had included a non-recurring effect resulting from additions to provisions for contingent losses related to sales transactions in the amount of €39.2 million. The lower sales in 2024 resulted in lower logistics costs and selling expenses in particular. By contrast, the foreign currency result dropped by €29.8 million to €-10.5 million (2023: €19.3 million). Other operating income includes energy subsidies of €183.3 million (2023: €111.0 million).

The operating result was negative and was down on the 2023 figure of €-61.2 million, coming in at €-95.4 million. In particular, the lower operating performance in 2024 was the main reason for this development.

The result from investments largely includes expenses and income from profit-and-loss transfer agreements and dividend payments. At €95.5 million, it was higher than the prior-year figure of €64.4 million. Alongside a slight increase in dividend payments made by subsidiaries, the dividend income from investments was lower. An impairment loss on the stake in Wacker Química do Brasil Ltda., Jandira – São Paulo, Brazil, was reversed in the amount of €1.6 million in 2024. The shares in this company had been written down by €32.1 million in 2023.

The net interest result was positive once more at a lower level of €37.2 million (2023: €50.5 million). This was due to the higher interest on financial liabilities of €21.6 million. By contrast, income from the measurement of the plan assets for pension obligations increased by €25.1 million. The prior-year figure had included income from financial assets for the 2023 fiscal year.

Wacker Chemie AG – including those German subsidiaries with which it has profit-and-loss transfer agreements – recognized tax expense of €-23.8 million in the reporting year. In the previous year, tax income of €26.2 million had been recognized.

The net income for the year came to €27.4 million. Retained profit for 2024 – calculated as the profit carried forward from the previous year less €149.0 million in dividends paid – totaled €1.38 billion (2023: €1.50 billion).

Net assets and financial position of Wacker Chemie AG pursuant to the German Commercial Code

Wacker Chemie AG’s total assets rose 8 percent year over year to €7.96 billion (Dec. 31, 2023: €7.34 billion). The individual items in the statement of financial position did not develop uniformly.

In 2024, fixed assets increased to €4.45 billion (2023: €4.38 billion). Property, plant and equipment (tangible fixed assets) increased year over year, as capital expenditures in the amount of €394.0 million (Dec. 31, 2023: €356.0 million) exceeded depreciation of €169.3 million (Dec. 31, 2023: €155.5 million). Financial assets decreased from €3.03 billion to €2.88 billion. This can be attributed primarily to the repayment of fund assets that had been invested in the long term during the reporting year. All in all, fixed assets accounted for 56.0 percent of total assets, as against 59.7 percent in the previous year.

Inventories increased year over year and came to €1,175.4 million (Dec. 31, 2023: €889.3 million), up by 32.2 percent. This is due mainly to an increase in inventories in the Polysilicon division.

Trade receivables fell by 8.8 percent from €292.9 million to €267.1 million. Other receivables and other assets amounted to €962.9 million as of the reporting date (Dec. 31, 2023: €711.6 million), up by 35.3 percent. They included receivables from affiliated companies in the amount of €826.7 million (Dec. 31, 2023: €553.8 million). Receivables from intra-Group financing rose by €275.2 million to €609.8 million (Dec. 31, 2023: €338.2 million) due to the construction of the mRNA Competence Center in Halle.

As of December 31, 2024, Wacker Chemie AG held €129.9 million in securities and fixed-term deposits with maturities of over three months (Dec. 31, 2023: €181.6 million). The decline is due primarily to the sale of fixed-term deposits. Wacker Chemie AG’s bank deposits amounted to €920.8 million as of December 31, 2024 (Dec. 31, 2023: €820.1 million).

Equity came to €2.78 billion as of the reporting date (Dec. 31, 2023: €2.90 billion), yielding an equity ratio of 35.0 percent (Dec. 31, 2023: 39.6 percent). At Wacker Chemie AG’s annual shareholders’ meeting, a resolution was passed to distribute a dividend of €149.0 million from the retained profit for 2023. The remaining retained profit of €1,350.1 million was carried forward. As of December 31, 2024, retained profit totaled €1,377.5 million and comprised current net income of €27.4 million for 2024 and the profit carried forward from the preceding year.

Provisions for pensions and similar obligations decreased by €30.0 million year over year to €951.7 million (Dec. 31, 2023: €981.7 million), although the development in the value of plan assets exceeded the increase in pension obligations. Other provisions – comprising those for personnel, taxes and environmental protection – rose by €49.0 million in 2024, coming in at €540.0 million (Dec. 31, 2023: €491.0 million). This increase can be explained, in particular, by income tax provisions, the provision related to contract manufacturing for polysilicon and a provision for long-term gas forward contracts. This was offset in 2024 by the utilization of provisions for contingent losses from sales agreements. Provisions accounted for around 18.7 percent of total equity and liabilities (2023: 20.1 percent).

As of the reporting date, financial liabilities came to €2,721.3 million (Dec. 31, 2023: €1,890.8 million). This equates to an increase of 43.9 percent. Bank liabilities amounted to €1,514.0 million (Dec. 31, 2023: €1,194.2 million). Liabilities due to affiliated companies increased by €509.8 million to €1,197.7 million as of the reporting date (Dec. 31, 2023: €687.9 million). The main increase was in liabilities related to contract manufacturing for polysilicon. Financial liabilities accounted for 34.2 percent of total equity and liabilities compared with 25.8 percent a year earlier.

Trade payables amounted to €542.0 million as of the reporting date (Dec. 31, 2023: €597.0 million). As of the reporting date, other liabilities amounted to €411.2 million (Dec. 31, 2023: €466.1 million). The decrease can be explained first and foremost by advance payments received on supply contracts, particularly for polysilicon. They fell €29.5 million to €268.8 million (Dec. 31, 2023: €298.3 million).

Deferred income came to €11.8 million as of the reporting date (Dec. 31, 2023: €13.1 million), and mainly comprised a payment by Siltronic AG to Wacker Chemie AG for the transfer of employees.

Cash flow from operating activities was negative in 2024 and came to €-153.4 million (2023: €399.5 million), mainly due to inventory buildup.

Wacker Chemie AG generated a cash outflow of €-193.8 million from its investing activities (2023: cash inflow of €312.3 million). This includes investment in property, plant and equipment (tangible fixed assets) of €-399.0 million. The repayment of fund assets that had been invested in the long term resulted in a cash inflow of €135.9 million in 2024. The repayment of loans classified as financial assets and the sale of securities and fixed-term deposits resulted in a cash inflow of €144.8 million (2023: €705.9 million). Net cash flow – defined as the sum of cash flow from operating activities and cash flow from long-term investing activities (excluding securities and fixed-term deposits) – was negative in the reporting year and amounted to €-461.1 million, as against the positive figure of €188.3 million in 2023. This was driven, in particular, by the negative impact of lower cash flow from operating activities.

Cash flow from financing activities totaled €447.9 million (2023: €-610.0 million). Intra-Group financing resulted in a cash inflow of €277.1 million (2023: cash outflow of €-162.4 million). The dividend for the 2023 fiscal year resulted in a cash outflow of €149.0 million.

All in all, cash and cash equivalents increased by €100.7 million to €920.8 million (2023: €820.1 million).

Risks and opportunities

Wacker Chemie AG’s business performance is subject to essentially the same risks and opportunities as the WACKER Group. Wacker Chemie AG’s exposure to the risks associated with its subsidiaries and investments depends on the size of its stakes in the respective entities. The measurement of holdings is affected in particular by the risks specified in the Risk Management Report. Through our subsidiaries and investments, we could face impairments arising from legal or contractual contingencies (especially financing). These contingencies are explained in the Notes to the financial statements of Wacker Chemie AG. As the parent company of the WACKER Group, Wacker Chemie AG is integrated in the groupwide risk management system.

For further details, see the Financial Instruments section of this Annual Report. A description of the internal control system for Wacker Chemie AG, as mandated by Section 289 (5) of the German Commercial Code (HGB), can be found in the section on the Internal Control System (ICS) and the Internal Control System for Accounting.

Outlook

WACKER’s main planning assumptions relate to raw-material and energy costs, personnel expenses and exchange rates. The expectations for Wacker Chemie AG’s business performance in the year ahead are essentially the same as those for the WACKER Group, which are explained in full in the Group’s Outlook section.

Publication

The annual financial statements of Wacker Chemie AG, for which PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft issued an unqualified audit opinion and which include, in particular, the statement of financial position and the statement of income shown here, have been submitted to the Company Register provider and can be accessed on the Company Register website. Wacker Chemie AG’s annual financial statements are published together with those of the WACKER Group. These annual financial statements can be requested from Wacker Chemie AG, Gisela-Stein-Straße 1, 81671 Munich, Germany. They are also available online.