Value-Based Management Is Integral to Our Corporate Policies

Value-based management is an integral part of our corporate policy. Its purpose is to achieve long-term and sustainable growth in our company’s value. In our management processes, we distinguish between performance parameters and budget parameters. Performance parameters serve the financial management of the company. They include the EBITDA margin and ROCE. As a target value, the EBITDA margin measures the company’s performance relative to its competition, with ROCE showing how efficiently the company employs its capital. The budget parameters EBITDA and net cash flow are also important for management control. In addition to these indicators, BVC (business value contribution) is used as a dedicated budget parameter for calculating variable compensation for Executive Board members. The EBITDA trend is considered to be the most important financial indicator for communication with capital markets.

Key financial performance indicators for the WACKER Group

In 2025, the key financial performance indicators for value-based management were as follows:

• The EBITDA margin (EBITDA as a percentage of sales): We compare historical performance with planned performance as well as with that of the competition, and use the results to calculate a target EBITDA margin. We calculate the weighted divisional average as our target margin for the Group.

• ROCE, or return on capital employed. ROCE is defined as earnings before interest and taxes (EBIT) divided by capital employed. The total of noncurrent assets required for business operations and of working capital makes up our capital employed. Capital employed for a particular year under review is calculated based on the average value for the last four quarters, starting in the fourth quarter of the previous year. ROCE is a clear indicator of how profitably the capital required for business operations is being employed.

• EBITDA (earnings before interest, taxes, depreciation and amortization): This shows the company’s operational performance capability before considering the cost of capital. We set absolute EBITDA targets for the business divisions and take the cost of capital into account by using BVC (Business Value Contribution) to determine the internal budget target. To calculate the BVC, the cost of capital and non-operational factors such as restructuring expenses are deducted from EBIT.

• Net cash flow (defined as the sum of cash flow from operating activities and long-term investing activities before securities). Net cash flow shows whether we can finance ongoing operations and necessary investments with the funds from our own operating activities. WACKER’s goal is to generate a sustained positive net cash flow. Apart from profitability, the main factors affecting net cash flow are the effective management of net current assets and the level of capital expenditures.

Changes in accounting policies resulted in adjustments being made to our key performance indicators in 2025. The result from investments in associates was reclassified to the financial result, meaning that it is no longer a component of the EBITDA margin, ROCE or EBITDA. Further information can be found under “Changes in accounting policies” in the Notes to the consolidated financial statements. In addition, starting in 2025, restructuring expenses are, for the first time, eliminated as non-operational factors when the BVC is calcuated.

Supplementary financial performance indicators

Alongside the main financial performance indicators, we use other performance indicators that provide us with information on sales and liquidity trends, as well as on the Group’s debt.

The supplementary financial performance indicators include:

• Sales: Profitable growth is an important factor in increasing the company’s value over the long term and one of the main drivers of a positive cash flow trend.

• Capital expenditures: As part of our medium-term planning, we set capital-expenditure priorities and an investment budget. Capital expenditures do not include right-of-use assets from lease accounting.

• Net financial debt: We define net financial debt as the total noncurrent and current financial liabilities and the available liquidity, consisting of securities, cash and cash equivalents.

Development of key financial performance indicators in 2025

EBITDA margin: We expected the EBITDA margin in 2025 to be on par with the prior-year level. The Group actually achieved an EBITDA margin of 7.8 percent. As prices were low, volumes declined and plant-utilization rates were lower in some cases, the EBITDA margin fell well short of expectations. It was also impacted by an unfavorable exchange-rate trend between the euro and US dollar.

EBITDA: WACKER initially expected EBITDA for 2025 to come in between €700 million and €900 million (2024: €743.6 million). In July, the company lowered the forecast to a range of between €500 million and €700 million. This adjustment was due to the overall weak market environment, the resultant decline in sales and prices during the first half of the year, and to lower plant-utilization rate in some cases. In addition, the unfavorable exchange-rate trend between the euro and US dollar had a negative impact. On the polysilicon front, WACKER had, moreover, expected the trade-policy uncertainties in the US market for solar-grade polysilicon to have been resolved over the course of the year, with the expectation that demand would have recovered. This did not prove to be the case. Energy costs in Germany remain uncompetitive by international standards, which had a negative impact too. The forecast made in July was already based on the new EBITDA definition necessitated by the reclassification of the result from investments to the financial result. Since no recovery was discernible at the start of the third quarter either, WACKER refined its expectation in the lower half of the expected range of €500 million to €700 million when it presented its Q3 figures. At year-end, EBITDA totaled €426.7 million. Earnings were impacted by special effects of €102.6 million associated with restructuring as part of the company’s PACE cost-saving project. Excluding special effects for restructuring, EBITDA comes in at €529.3 million, which is in the lower half of the forecast range as was to be expected. The discrepancy between the original guidance and the actual result is due to the effects described.

ROCE: In March 2025, WACKER assumed that full-year ROCE would be at the prior-year level. When the results for Q2 were presented, this forecast was revised to “substantially below the prior-year level.” WACKER actually achieved a ROCE of -3.1 percent in 2025. The decline was due to the effects that were described above and which led to a lower EBIT.

Net cash flow: A positive net cash flow substantially higher than in the previous year was forecast in March 2025. In July 2025, WACKER communicated that it expected a more or less balanced net cash flow. WACKER once more adjusted the forecast for this KPI in October 2025. A negative net cash flow was now forecast, although it was expected to be significantly higher than in the previous year. In 2025, WACKER actually achieved a net cash flow of €-3.6 million, down considerably against 2024 (€-326.0 million). The main reason for the improvement was a significant reduction in inventories. The deviation between the original guidance and the actual result is due to the lower EBITDA.