Wacker Chemie : After A Good First Half-Year, WACKER Expects EBITDA to be at Upper End of Forecast Range

Group earnings before interest, taxes, depreciation and amortization (EBITDA) came to €300.0 million in Q2 2016. This is 9 percent less than a year ago (€329.0 million), but 31 percent more than a quarter earlier (€228.9 million). The EBITDA margin for the reporting quarter was 21.6 percent, after 24.0 percent in Q2 2015 and 17.4 percent in Q1 2016. Group earnings before interest and taxes (EBIT) amounted to €110.9 million in Q2 2016 (Q2 2015: €187.9 million), yielding an EBIT margin of 8.0 percent (Q2 2015: 13.7 percent). Net income for the reporting quarter amounted to €58.9 million (Q2 2015: €108.2 million) and earnings per share came in at €1.15 (Q2 2015: €2.21).

The year-over-year drop in EBITDA was due predominantly to the effect of advance payments retained and damages received a year ago. In Q2 2015, WACKER had terminated contractual and delivery relationships with customers from the solar sector, resulting in special income of €86.7 million. For the reporting quarter, WACKER posted €7.0 million in special income items. Adjusted for these non-recurring effects, EBITDA grew by around 21 percent year over year. This growth was primarily attributable to higher sales volumes and good cost levels.

WACKER has specified its earnings forecast for full-year 2016. EBITDA on a comparable basis - i.e. adjusted to exclude special income from damages received and from terminated contractual and delivery relationships with solar customers - is expected to be between 5 and 10 percent higher than last year. Given its good performance in the first half of 2016, WACKER now assumes that adjusted EBITDA will be at the upper end of this range. The company still expects to post a low single-digit percentage increase in Group sales.

'After the first six months of the current fiscal year, WACKER's operational performance is on a good trajectory,' said CEO Rudolf Staudigl in Munich on Thursday. 'For silicon wafers, volumes were still subdued in Q2 2016 because of market conditions. In contrast, our chemical divisions and polysilicon business continued to benefit from strong customer demand. Our sales in the reporting quarter were also positively influenced by polysilicon prices that were noticeably better than at the start of the year. Although the risks for the global economy remain high, we are now confident about reaching the upper end of the forecast range for our 2016 targets due to our good business performance in the first half of the year.'

Regions

In Q2 2016, Group sales were higher year over year in all regions apart from the Americas.

The Group's sales in Asia totaled €582.0 million in the reporting quarter, up about 1 percent from last year's figure of €577.4 million.

In Europe, WACKER achieved sales of €325.6 million in April through June 2016 (Q2 2015: €314.1 million), up about 4 percent year over year. Business performance in Germany was even better, with sales there totaling €182.8 million in the reporting quarter, compared with €172.1 million a year earlier. That represented a year-over-year increase of 6 percent.

Sales in the Americas amounted to €236.6 million, 4 percent lower than in Q2 2015 (€249.8 million) due to price and volume effects.

Capital Expenditures and Net Cash Flow

In Q2 2016, the Group's capital expenditures amounted to €88.0 million (Q2 2015: €214.2 million), representing a year-over-year decrease of 59 percent.

One focus of capital spending in the reporting quarter was the remaining work needed to finish the new polysilicon site in Charleston, Tennessee (USA). Commissioning of the Charleston production facilities proceeded as planned in the April-through-June period. Funds were also invested to modernize crystal-pulling facilities and further automate production at Siltronic, as well as to expand capacities for downstream silicone products.

The Group's net cash flow was €126.0 million in Q2 2016, after €21.0 million in Q2 2015, with substantially reduced capital expenditures being the main reason for this increase.

Employees

Relative to the preceding quarter, the number of WACKER employees worldwide remained virtually unchanged in Q2 2016. The Group had 17,081 employees as of June 30, 2016 (March 31, 2016: 17,048). As of the end of the reporting quarter, WACKER had 12,230 employees in Germany (March 31, 2016: 12,266) and 4,851 at its international sites (March 31, 2015: 4,782).

Business Divisions

WACKER SILICONES generated total sales of €514.4 million in April through June (Q2 2015: €506.3 million). This rise of 2 percent was mainly attributable to volume growth. In contrast, sales were dampened by year-on-year price softening for a number of product groups and by exchange-rate effects, particularly in emerging economies. Sales were 5 percent higher than in the preceding quarter (€491.3 million). WACKER SILICONES' EBITDA reached €93.7 million in the reporting quarter, 21 percent higher than a year ago (€77.3 million). EBITDA grew by 7 percent relative to the preceding quarter (€87.9 million). In addition to sales growth, low costs and a high plant-utilization rate averaging over 90 percent had a positive impact on earnings. The EBITDA margin improved in Q2 2016 to reach 18.2 percent, after 15.3 percent a year ago and 17.9 percent in the preceding quarter.

At €325.7 million, total sales at WACKER POLYMERS were 4 percent higher than the year-earlier figure (€314.6 million) and 14 percent above the preceding quarter (€285.9 million). Volumes for dispersions and dispersible polymer powders grew substantially, both year over year and quarter over quarter. The division's EBITDA increased to €78.2 million in the reporting quarter, after €56.8 million in Q2 2015, up 38 percent. In addition to volume-driven sales growth, this increase was largely attributable to the very good cost level, itself in part a result of the high plant-utilization rate of around 90 percent. Compared with a quarter earlier (€64.4 million), EBITDA grew by 21 percent. The EBITDA margin rose in Q2 2016 to reach 24.0 percent, after 18.1 percent a year ago and 22.5 percent in the preceding quarter.

WACKER BIOSOLUTIONS generated total sales of €53.2 million from April through June 2016 (Q2 2015: €52.7 million), up 1 percent on a year ago. Relative to the preceding quarter (€49.6 million), the division's sales were up by 7 percent, with somewhat higher volumes for a number of products being the main driver of this growth. At €9.0 million, second-quarter EBITDA at WACKER BIOSOLUTIONS was 5 percent below the year-earlier figure (€9.5 million) and down 6 percent on the preceding quarter (€9.6 million). Earnings in the reporting quarter were dampened by maintenance work on production facilities and by expenses incurred to close down the former production plant in Wuxi, China. The EBITDA margin came in at 16.9 percent, after 18.0 percent a year ago and 19.4 percent in Q1 2016.

At €272.2 million, WACKER POLYSILICON's total sales in the reporting quarter were some 4 percent higher than a year earlier (€261.3 million). Significantly higher volumes year over year more than compensated for lower polysilicon prices. The division almost matched its sales figure of the preceding quarter (€273.1 million), largely because average prices were noticeably higher quarter over quarter. On the other hand, volumes were somewhat lower than in Q1 2016, since less inventory was available for sale. WACKER POLYSILICON's reporting-quarter EBITDA amounted to €77.7 million, compared with €161.4 million in Q2 2015. This decline of 52 percent was mainly due to a prior-year non-recurring effect. In Q2 2015, the division had terminated contractual and delivery relationships with some solar-sector customers and, as a result, had retained advance payments and received damages totaling €86.7 million. In the reporting quarter, WACKER posted €7.0 million in special income of this kind. The start-up costs for the new polysilicon site in Charleston, which amounted to around €18 million in the reporting quarter, were another factor reducing the division's earnings. Compared with the preceding quarter (€39.4 million), EBITDA almost doubled. From April through June 2016, WACKER POLYSILICON's EBITDA margin came in at 28.5 percent, after 61.8 percent in Q2 2015 and 14.4 percent in Q1 2016.

Siltronic reported total sales of €229.8 million in Q2 2016, down 7 percent from last year's figure of €246.7 million. Somewhat lower volumes - due to subdued market demand - dampened sales, as did semiconductor wafer prices that were noticeably lower year over year. Relative to the preceding quarter (€220.6 million), sales were up 4 percent. Siltronic's reporting-quarter EBITDA amounted to €35.0 million, compared with €31.4 million in Q2 2015, an increase of 12 percent. In Q2 2015, EBITDA had been impacted by currency hedging losses of €17.6 million, compared with only €2.7 million in the reporting quarter. Relative to the preceding quarter (€23.6 million), EBITDA was up by around 48 percent, mainly due to sales growth and lower currency hedging losses. Siltronic's EBITDA margin climbed to 15.2 percent in the reporting quarter, after 12.7 percent in Q2 2015 and 10.7 percent in Q1 2016.

Outlook

Consensus estimates by economic experts indicate that the global economy is set to continue growing moderately through the rest of 2016. But the recovery remains fragile, and risks to economic growth have increased in recent months.

For full-year 2016, WACKER expects to post a low-to-mid single-digit percentage sales increase at its chemical and polysilicon businesses. Sales at Siltronic are likely to decline by a low-to-mid single-digit percentage.

EBITDA at WACKER SILICONES should be markedly above the prior-year figure. WACKER POLYMERS, too, expects to achieve a noticeable year-over-year increase. EBITDA at WACKER BIOSOLUTIONS is expected to be on a par with last year. WACKER POLYSILICON anticipates that its EBITDA will decline significantly year over year, since less special income - in the form of advance payments retained and damages received - is expected in 2016 than was posted last year. EBITDA will also be reduced by start-up costs at the new polysilicon production site in Charleston, Tennessee. Siltronic continues to anticipate a slight improvement in the EBITDA margin compared with last year.

Overall, WACKER expects Group sales to rise by a low single-digit percentage in fiscal 2016. WACKER has specified its EBITDA forecast of an increase of between 5 and 10 percent on a comparable basis, i.e. when adjusted to exclude special income. Given its good performance in the first half of the year, WACKER now assumes that adjusted EBITDA will be at the upper end of this range. The EBITDA margin, on the other hand, will be somewhat lower, since no major special-income items are expected. Additionally, there will be further start-up costs at the new production site in Charleston, Tennessee (USA). Capital expenditures will be about €425 million, substantially lower than a year ago. Depreciation will reach around €720 million, significantly above last year's level. Group net income is projected to be markedly lower than in the previous year. WACKER expects net cash flow to be clearly positive. Net financial debt as of year-end 2016 is anticipated to be slightly below last year's level.

Information for editorial offices: The Q2 2016 report is available for download on the WACKER website (www.wacker.com) under Investor Relations.