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EANS-News: WACKER Experiences Stronger Customer Demand in Q2 2009
- Group sales up 6 percent on Q1 2009 at 926 million - Earnings before interest, taxes, depreciation and amortization climb 8 percent to 170 million - Reorganization-related impairment totaling 121 million prompts loss for the quarter of 75 million - Polysilicon business maintains strong earnings with an EBITDA margin of over 50 percent in Q2
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Munich (euro adhoc) - July 30, 2009 - Wacker Chemie AG profited from higher customer demand in Q2 2009. The global economic crisis did, however, continue to impact the Munich-based chemical company´s performance in the reporting period. Sales totaled EUR925.5 million (Q2 2008: EUR1,233.0m) - down 18 percent on the prior-year period. Compared to Q1 2009 (EUR872.5m), sales nevertheless rose 6 percent. This quarter-on-quarter gain was fueled by higher sales volumes at all divisions. Lower prices, though, burdened sales growth.
Factors that helped stabilize earnings in Q2 2009 were personnel and material cost savings, and lower year-on-year prices for ethylene and methanol, two key raw materials. On the other hand, production capacity utilization remained low in many areas and weighed on profitability. Second-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) amounted to EUR170.1 million (Q2 2008: EUR317.9m) - 47 percent below the strong prior-year value, but 8 percent up against Q1 2009 (EUR157.8m). Second-quarter EBITDA includes provisions of EUR15 million for the planned job cuts at Siltronic and WACKER SILICONES. This special effect burdened the earnings trend. The EBITDA margin reached 18.4 percent (Q2 2008: 28.3 percent), following 18.1 percent in Q1 2009.
Earnings before interest and taxes (EBIT) dropped to EUR-53.7 million (Q2 2008: EUR224.9m). The key factor behind the above-average EBIT decline were impairment losses of EUR121.3 million on Siltronic´s fixed assets. This impairment takes account of plans to concentrate Siltronic´s wafer production at lead sites and the expected semiconductor-market development. Adjusted for this special item and the provisions for job cuts, Q2 2009 EBIT would have been EUR82.6 million, up 42 percent compared to the first three months of 2009. The Q2 result was EUR-74.5 million (Q2 2008: EUR152.6m) and earnings per share were EUR-1.47 (Q2 2008: EUR3.08).
The Group´s polysilicon business made the largest contribution to Q2 2009 earnings. WACKER POLYSILICON´s EBITDA climbed 30 percent year-on-year to EUR136.0 million (Q2 2008: EUR104.8m). Although sales were lower than in Q1 2009, the EBITDA margin was once again over 50 percent. The other divisions improved their operational results compared to the first quarter.
For full-year 2009, WACKER still expects significantly lower sales and operational results than in the prior year. Although economic forecasts increasingly predict that global output will slowly stabilize, customers remain very cautious about placing orders. Due to the current business environment, they are ordering smaller quantities or concluding contracts with shorter durations. This is why it is difficult to say to what degree Q2´s stronger customer demand will continue during the rest of the year.
"In several of WACKER´s key customer sectors, demand picked up somewhat," said CEO Rudolf Staudigl in Munich this Thursday. "At the moment, though, it´s impossible to estimate just how long this recovery limited so far to sales volumes will last. That´s why we are continuing to improve our cost structures and optimize our processes and resource allocations. Such steps help us stabilize earnings."
Regions In Q2 2009, Asia remained WACKER´s largest market with a sales volume of EUR325.1 million (Q2 2008: EUR367.5m). Asia´s share of total sales equaled 35 percent (Q2 2008: 33 percent). Although customer demand in the region has risen significantly since the beginning of the year, sales here fell almost 12 percent year-on-year. In Germany, WACKER´s second-quarter sales were EUR192.6 million (Q2 2008: EUR248.4m) - a year-on-year decline of 23 percent. In the rest of Europe, sales were down 14 percent to EUR230.2 million (Q2 2008: EUR266.5m) compared to the prior-year period. In the Americas, Q2 2009 sales decreased by 28 percent year-on-year to EUR148.7 million (Q2 2008: EUR205.5m). The primary reasons here were the lower volumes of silicon monocrystals and semiconductor-wafer by-products sold to the solar industry. In the other regions, Q2 2009 sales totaled EUR28.9 million (Q2 2008: EUR35.1m).
Net Cash Flow and Investments Despite the difficult overall economic situation, WACKER continued its strategic expansion program in Q2. The Group invested a total of EUR194.3 million (Q2 2008: EUR181.4m), with net cash flow declining to EUR-110.2 million (Q2 2008: EUR104.8m). Compared to Q1 2009 (EUR70.9m), second-quarter net cash flow was impacted not only by continued investment, but also by performance-related salary components of EUR66.8 million paid in April for fiscal 2008. Importantly, the company did not pay out 2008´s performance-related compensation in full, but only half of the major portion. The remainder will be retained until the economic situation has sustainably and substantially improved.
Second-quarter investments focused on the expansion of production facilities for hyperpure polycrystalline silicon at Burghausen and Nünchritz. As a result, annual nominal capacity will rise successively and in accordance with demand from today´s 15,000 metric tons to over 35,000. To help finance the polysilicon facility being built at Nünchritz, WACKER obtained approval for a European Investment Bank long-term loan of over EUR400 million. The loan is a key component in financing the Nünchritz project. WACKER is planning on total investments of around EUR800 million at this site - creating some 450 jobs.
Employees On June 30, 2009, WACKER had 15,721 employees worldwide (March 31, 2009: 15,851) - 12,002 at German sites (March 31, 2009: 12,103) and 3,719 at sites outside Germany (March 31, 2009: 3,748). In early July 2009, the Group announced further steps to optimize its global production network. At Siltronic, the production of silicon wafers will be concentrated at lead sites according to individual diameters. Moreover, WACKER SILICONES is implementing structural improvements to reduce costs, increase flexibility and improve plant capacity utilization. All these measures will involve a cut of nearly 800 positions (compared to March 31, 2009) at Siltronic and WACKER SILICONES by the end of 2010. The job cuts will take place in a socially-acceptable manner. The goal is to avoid layoffs and instead make use of natural fluctuation, semi-retirement, severance packages and transfers. In particular, ongoing polysilicon expansion offers good job-creation opportunities. Employees from within the Group will be given priority when filling new positions in this area.
Business Divisions In Q2 2009, WACKER SILICONES generated total sales of EUR304.9 million (Q2 2008: EUR380.6m). Quarter-on-quarter, this was an increase of 15 percent (Q1 2009: EUR264.9 million). Whereas the elastomers business remained slow in the period under review, silicones for construction applications benefited from the seasonal upturn in demand from the building sector. Sales developed well in the medical engineering and power transmission/distribution segments, too. WACKER SILICONES achieved EBITDA of EUR37.2 million in the period under review (Q2 2008: EUR60.5m). This corresponds to an EBITDA margin of 12.2 percent (Q2 2008: 15.9 percent). Although prior-year figures were not reached, quarter-on-quarter performance was positive (Q1 2009´s EBITDA was EUR27.7 million and the EBITDA margin 10.5 percent). In Q2 2009, WACKER SILICONES´ earnings were chiefly burdened by lower year-on-year sales volumes. However, lower operating costs and more favorable exchange-rate effects had a positive influence on the result.
WACKER POLYMERS, too, profited from increased seasonal construction-sector demand for dispersions and dispersible polymer powder. The division posted total sales of EUR206.5 million, a year-on-year drop of almost 16 percent (Q2 2008: EUR244.6m). Compared to Q1 2009 (EUR172.3m), however, this represents an improvement of nearly 20 percent. WACKER POLYMERS generated Q2 EBITDA of EUR42.9 million (Q2 2008: EUR37.3m). Consequently, EBITDA was above both the prior-year and prior-quarter figures (Q1 2009: EUR21.5m). The EBITDA margin improved to 20.8 percent in the period under review, following 15.2 percent in Q2 2008 and 12.5 percent in Q1 2009. Lower raw-material and operating costs and improved capacity utilization positively impacted earnings performance.
WACKER FINE CHEMICALS has managed to stabilize its sales in 2009, with a second-quarter figure of EUR22.1 million (Q2 2008: EUR24.3m) after first-quarter sales of EUR21.6 million. Following EUR1.9 million in Q1 2009, WACKER FINE CHEMICALS improved its EBITDA to EUR3.3 million (Q2 2008: EUR3.3m) in the period under review. This raised the EBITDA margin from 8.8 percent in the prior quarter to the current 14.9 percent (Q2 2008: 13.6 percent). Business was upbeat for bioengineered cysteine and pharmaceutical-sector cyclodextrins. Pharmaceutical proteins (biologics) performed well, too.
At WACKER POLYSILICON, second-quarter business remained on a growth course with total polysilicon sales amounting to EUR269.1 million (Q2 2008: EUR194.2m). The year-on-year increase of 39 percent resulted from additional Burghausen production capacities that came on stream in the second half of 2008. However, the record of EUR315.0 million in Q1 2009 was not matched. This was primarily due to falling spot-market prices for solar-grade polysilicon and a seasonal lack of demand for road salt. In Q1 of this year, the industrial salt business had contributed around EUR20 million to the division´s sales. In the April-to-June 2009 quarter, WACKER POLYSILICON´s EBITDA was EUR136.0 (Q2 2008: EUR104.8m), following EUR168.1 million in Q1 2009. The EBITDA margin dropped from 54.0 percent in Q2 2008 to 50.5 percent in Q2 2009.
Siltronic´s semiconductor business improved somewhat in Q2 2009 compared to the first three months of the year. Siltronic generated total second-quarter sales of EUR153.1 million (Q2 2008: EUR351.7m). This was an improvement of 22 percent compared to the weak prior quarter (EUR126.0 million). Due to increased demand, capacity utilization at production facilities was better in the period under review compared to Q1 2009. The utilization rate is now above 50 percent again. In contrast, all wafer diameters suffered from ever stronger price pressures. Although favorable exchange-rate effects and measures to reduce overall costs (particularly personnel costs) positively impacted the result, they could not offset other factors. Lower market prices, the persistently unsatisfactory capacity-utilization situation, and provisions of EUR8.7 million for planned job cuts meant that Siltronic´s second-quarter EBITDA was again in negative territory at EUR-58.2 million (Q2 2008: EUR112.0m). Siltronic had initiated extensive measures to cut personnel and material costs already in Q1 2009. At the beginning of July 2009, farther-reaching measures were announced to optimize production capacities. The aim is to concentrate silicon-wafer production at lead sites according to the best cost structure for each wafer diameter.
Outlook WACKER expects the global recession to continue in the second half of fiscal 2009. Current forecasts increasingly predict that the global economy will slowly stabilize and that 2010 will see a slight rebound. Following the sharp business downturn at the beginning of 2009, however, WACKER´s full-year sales and operating earnings will be well below those of 2008. In light of the current business environment, customers are still cautious about placing orders. They are ordering smaller quantities or concluding contracts with shorter durations. This is why it is difficult to say to what degree Q2´s stronger customer demand will continue during the rest of the year.
The measures that WACKER took very early on to counter the global financial and economic crisis are proving effective. Key measures include budget cuts, short-time work, restraints on hiring, the relinquishment of remuneration components, modified investment planning, and securing enough financial leeway for operations. The Munich-based chemical company´s latest decisions to optimize its global production network and processes at WACKER SILICONES and Siltronic are aimed at reinforcing groupwide operational performance and competitiveness. Restructuring involves the loss of some 800 positions. The job cuts, which are to be implemented in a socially-acceptable manner, will give further relief to the Group´s cost structures.
To secure and bolster operational financing, WACKER extended a EUR300 million syndicated credit facility in 2008 by another year to 2013. In Q1 2009, the Group also secured new three-year credit lines, totaling almost EUR200 million. In May 2009, WACKER received approval for a favorable, long-term loan of EUR400 million from the European Investment Bank for the construction of its new Nünchritz polysilicon production facility. The related contractual agreements have meanwhile been signed. In addition, the Group successfully issued a promissory note bond (Schuldschein) on the market during Q2. By June 30, 2009, EUR155 million in funds had been made available to WACKER, with a further EUR25 million coming in July. In total, the Group now has EUR1.2 billion in financing.
Even though it is not yet clear when the global recession will end, WACKER remains optimistic about the future. For the long term, the chemical company believes that key megatrends will remain strong, enabling the company to sustainably profit from them. The company has a whole series of products to serve the power generation and energy saving megatrends. As in the past, the largest growth opportunities there arise from the manufacture of solar-grade polysilicon. In view of its strong regional presence in Asia´s growth markets and in emerging economies elsewhere, the company can offer a whole range of products and solutions that are ideal for raising living standards in these regions. This is why WACKER is optimistic about returning to its growth course as soon as the global economy recovers.
@@start.t2@@WACKER's Key Figures
|EUR million |Q2 2009 |Q2 2008 |Change |6M 2009|6M 2008|Change|
| | | |in % | | |in % |
|Sales |925.5 |1,123.0 |-17.6 |1,798.0|2,142.5|-16.1 |
|EBITDA1 |170.1 |317.9 |-46.5 |327.9 |609.0 |-46.2 |
|EBITDA margin2 |18.4% |28.3% |-35.1 |18.2% |28.4% |-35.8 |
|EBIT3 |-53.7 |224.9 |n.a. |4.5 |423.6 |-98.9 |
|EBIT margin2 |-5.8% |20.0% |n.a. |0.3% |19.8% |-98.7 |
| | | | | | | |
|Financial result |-6.3 |-3.1 |>100 |-13.4 |-3.9 |>100 |
|Income before taxes |-60.0 |221.8 |n.a. |-8.9 |419.7 |n.a. |
|Result for the period |-74.5 |152.6 |n.a. |-69.0 |283.2 |n.a. |
| | | | | | | |
|Earnings per share in |-1.47 |3.08 |n.a. |-1.30 |5.70 |n.a. |
| | | | | | | |
|Investments (incl. |194.3 |181.4 |7.1 |371.1 |326.9 |13.5 |
|financial assets) | | | | | | |
|Investments in |0.0 |2.2 |-100.0 |0.0 |-171.2 |-100.0|
|acquisitions | | | | | | |
|Net cash flow |-110.2 |104.8 |n.a. |-39.3 |101.5 |n.a. |
| | | | |
|EUR million |June 30,|June 30,|December|
| |2009 |2008 |31, 2008|
| | | | |
|Equity |1,955.6 |1,906.1 |2,082.8 |
|Financial liabilities |424.1 |222.2 |272.4 |
|Provisions for pensions |388.5 |379.2 |376.1 |
|Net financial debt |81.5 |-101.6 |-32.9 |
|Total assets |4,584.0 |4,225.0 |4,625.1 |
| | | | |
|Employees (number at end|15,721 |15,769 |15,922 |
|of period) | | | |
1 EBITDA is EBIT before depreciation and amortization. 2 Margins are calculated based on sales. 3 EBIT is the result from continuing operations for the period before interest and other financial results, limited partnership interests and income tax.@@end@@
Information for editorial offices: The Q2 2009 report can be downloaded from WACKER´s website (www.wacker.com) under Investor Relations.
This press release contains forward-looking statements based on assumptions and estimates of WACKER´s Executive Board. Although we assume the expectations in these forward-looking statements are realistic, we cannot guarantee they will prove to be correct. The assumptions may harbor risks and uncertainties that may cause the actual figures to differ considerably from the forward-looking statements. Factors that may cause such discrepancies include, among other things, changes in the economic and business environment, variations in exchange and interest rates, the introduction of competing products, lack of acceptance for new products or services, and changes in corporate strategy. WACKER does not plan to update the forward-looking statements, nor does it assume the obligation to do so.
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ots Originaltext: Wacker Chemie AG
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