Earnings
Group Sales of €4.93 Billion Almost at Prior Year’s €4.98 Billion
Group sales in 2019 were on par with the year before. The slight decline of 1 percent was mainly due to lower prices, especially for solar-grade polysilicon, but also for standard silicones. Sales were supported by generally higher volumes, product-mix effects and the year-over-year rise in the US dollar. WACKER SILICONES posted sales of €2.45 billion (2018: €2.50 billion), down only 2 percent from its high year-earlier figure despite noticeably lower prices for standard silicones. WACKER POLYMERS generated sales of €1.32 billion in 2019 (2018: €1.28 billion), up 3 percent. Sales at WACKER BIOSOLUTIONS rose 7 percent to €243.0 million (2018: €227.0 million). At WACKER POLYSILICON, on the other hand, sales declined 5 percent to €780.0 million (2018: €823.5 million). Solar-grade polysilicon business was impacted by substantially lower prices, and strong volume growth did not fully offset that effect.
For further information on the business divisions, please refer to the Segments section.
WACKER generated the majority of its sales outside of Germany. International sales came in at €4.13 billion (2018: €4.11 billion), accounting for 84 percent of total sales.
For further information, please refer to the Regions section.
Year-over-Year Sales Comparison € million
Group EBITDA at €783.4 Million, with EBITDA Margin of 15.9 Percent
Group EBITDA declined 16 percent year over year, coming in at €783.4 million (2018: €930.0 million). The EBITDA margin of 15.9 percent was lower than the previous year (2018: 18.7 percent). EBITDA included €112.5 million in insurance compensation for the damage from the 2017 incident at Charleston. WACKER recognized this compensation under cost of goods sold. Adjusted for this amount, EBITDA was €670.9 million, down 28 percent versus the previous year. The main factors dampening earnings were markedly reduced average prices for solar-grade polysilicon, lower prices for standard silicones and the effects of inventory valuation adjustments. In the prior year, business-interruption costs at the Charleston, Tennessee site (USA) had reduced EBITDA. Following the incident, we gradually ramped up production again at the site from May through December 2018. Lower raw-material costs had a positive impact on earnings.
A positive factor for EBITDA was the Group’s income from investments in joint ventures and associates, coming it at €54.3 million (2018: €131.7 million). Investment income from Siltronic contributed €51.4 million (2018: €99.9 million) to the result from investments in joint ventures and associates.
Initial application of IFRS 16 (Leases) benefited EBITDA by around €35 million. At the same time, it increased amortization and interest expense.
For further information on the business divisions, please refer to the Segments section.
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€ million |
2019 |
2018 |
Change in % |
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EBITDA |
783.4 |
930.0 |
-15.8 |
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Depreciation/amortization, impairments and reversals of fixed assets |
-1,319.7 |
-540.4 |
>100 |
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EBIT |
-536.3 |
389.6 |
n.a. |
EBIT Negative Due to Impairments
Group earnings before interest and taxes (EBIT) totaled €-536.3 million in the reporting period (2018: €389.6 million), yielding an EBITDA margin of -10.9 percent (2018: 7.8 percent). Due to lower polysilicon prices, an impairment charge of €760.0 million was recognized on WACKER POLYSILICON’s fixed assets as of December 31, 2019. WACKER expects the price trend for solar-grade polysilicon to remain subdued. Total depreciation/amortization and impairments amounted to €1.32 billion in 2019 (2018: €540.4 million). The application of IFRS 16 led to a slight increase in depreciation/amortization.
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€ million |
2019 |
2018 |
Change in % |
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EBIT |
-536.3 |
389.6 |
n.a. |
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Financial result |
-54.9 |
-65.2 |
-15.8 |
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Income before income taxes |
-591.2 |
324.4 |
n.a. |
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Income taxes |
-38.4 |
-64.3 |
-40.3 |
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Net result for the year |
-629.6 |
260.1 |
n.a. |
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Of which |
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Attributable to Wacker Chemie AG shareholders |
-642.6 |
246.1 |
n.a. |
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Attributable to non-controlling interests |
13.0 |
14.0 |
-7.1 |
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Earnings per common share (€) (basic/diluted) |
-12.94 |
4.95 |
n.a. |
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Average number of shares outstanding (weighted) |
49,677,983 |
49,677,983 |
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Cost of Goods Sold Unchanged Year over Year
At €803.2 million, gross profit from sales was 8 percent lower than the year before (2018: €874.7 million). The cost of goods sold came in at €4.13 billion (2018: €4.10 billion). The gross margin was 16.3 percent (2018: 17.6 percent). The insurance compensation of €112.5 million received in September was posted under cost of goods sold. Inventory valuation adjustments increased the cost of goods sold by €46.3 million. The Group’s cost-of-sales ratio rose from 82 percent to 84 percent.
Functional Costs Almost Unchanged
Other functional costs (selling, R&D and general administrative expenses) were 1 percent higher year over year, climbing to €633.4 million (2018: €627.8 million). This increase was mainly due to higher personnel expenses across all corporate sectors. Administrative expenses, on the other hand, were lower.
Other Operating Income and Expenses
In 2019, the balance of other operating income and expenses was €-760.4 million (2018: €11.0 million). Other operating expenses included an impairment charge of €760 million on WACKER POLYSILICON’s fixed assets. A solar-market recovery failed to materialize in Q4 2019 and WACKER expects prices for solar-grade polysilicon to remain low going forward. The impaired facilities are located at the Charleston site in the USA and in Germany. In 2019, WACKER retained advance payments of €19.3 million received in connection with its contractual and delivery relationship with a solar customer, recognizing them under other operating income. Foreign currency losses of €-12.8 million (2018: €-6.9 million) lowered other operating income and expenses.
Result from Investments
Due to lower investment income from Siltronic AG, the result from investments in joint ventures and associates fell to €54.3 million (2018: €131.7 million). Investment income from Siltronic accounted for €51.4 million (2018: €99.9 million). In the prior year, the result from investments had also included the positive effects of remeasurements of other investments.
Financial and Net Interest Result
WACKER’s financial result improved year over year, coming in at €-54.9 million (2018: €-65.2 million). Interest income was €10.6 million (2018: €8.0 million) and interest expenses amounted to €20.3 million (2018: €22.1 million). The net interest result was thus €-9.7 million (2018: €-14.1 million). WACKER repaid financial liabilities and agreed new financing at favorable interest rates.
The other financial result was €-45.2 million (2018: €-51.1 million). It included not only the interest-rate effects of provisions for pensions and other provisions, but also exchange-rate effects and the costs of derivative financial instruments used to hedge Group loans.
Income Taxes
WACKER reported tax expenses of €38.4 million for 2019 (2018: €64.3 million). Adjusted for the impairment loss of €760 million, the Group’s effective tax rate was 22.7 percent (2018: 19.8 percent). Recognized after tax, the investment income from Siltronic AG formed part of pre-tax income and reduced the effective tax rate.
The Group’s Net Result
Partly due to the effects mentioned, the Group’s net result entered negative territory. The net loss was €-629.6 million. A year earlier, the Group had posted net income of €260.1 million.
Return on Capital Employed (ROCE)
The return on capital employed (ROCE) sets earnings before interest and taxes (EBIT) in relation to the capital employed for business activities. Investment income from Siltronic and the corresponding carrying amount in equity are not included when ROCE is calculated.
In the reporting year, ROCE was -11.3 percent (2018: 5.9 percent). The decline stemmed from significantly negative EBIT. High working capital lifted capital employed, which rose from €4,917.0 million to €5,183.5 million in the year under review. It did not yet include the impairment charge on WACKER POLYSILICON’s fixed assets.