WACKER ends third quarter with good results

WACKER ends third quarter with good results

German Wacker Chemie AG’s Q3 2016 sales were slightly lower year over year, while its earnings before interest, taxes, depreciation and amortization (EBITDA) were substantially higher than last year. The Munich-based chemical group posted sales of EUR 1346.1 million in the reporting quarter (Q3 2015: EUR 1357.9 million), down 1 %Wacker

This slight decrease was chiefly due to lower year-over-year prices for solar silicon, semiconductor wafers and some chemical products. Generally higher volumes did not fully offset these price effects. Relative to the preceding quarter (EUR 1386.2 million), sales were down by 3 %, primarily due to a decline in volumes for polysilicon and some chemical products.

WACKER achieved EBITDA of EUR 300.9 million in Q3 2016, 14 percent more than a year ago (EUR 264.3 million) and on a par with the preceding quarter (EUR 300.0 million). The Group’s EBITDA margin for July through September 2016 was 22.4 %, compared with 19.5 % a year ago and 21.6 % in the prior quarter. The substantial year-over- year increase in EBITDA was primarily attributable to the good cost level.

Group earnings before interest and taxes (EBIT) amounted to EUR 115.2 million in Q3 2016 (Q3 2015: EUR 125.5 million). That was a year- over-year decrease of 8 % and yielded an EBIT margin of 8.6 %, compared with 9.2 % a year ago. Substantially higher depreciation contributed to the year-over-year decline in EBIT.

Net income for the reporting quarter amounted to EUR 67.5 million (Q3 2015: EUR 58.2 million) and earnings per share came in at EUR 1.29 (Q3 2015: EUR 1.21).

The full-year 2016 forecast remains unchanged. The company continues to expect a low single-digit percentage increase in Group sales. 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 % higher than last year. After the positive business performance in the first half of the year, WACKER already announced at the end of July that it expected adjusted EBITDA to come in at the upper end of this range.

“Although the underlying conditions were not always easy, WACKER performed well from July through September,” said CEO Rudolf Staudigl in Munich on Thursday. “EBITDA at the chemical divisions and at Siltronic continued to grow both year over year and quarter over quarter. The market environment for our polysilicon business was more difficult, with solar customers ordering substantially less material in September than in the preceding months. Since then, however, there have been increasing indications that demand for solar silicon is picking up again.”

Regions

In Q3 2016, sales were subdued in every region except Germany. Group sales in Asia amounted to EUR 571.5 million in the reporting quarter, down by around 1 % from last year’s figure of EUR 575.8 million. In Europe (excluding Germany), WACKER achieved sales of EUR 302.0 million in Q3 2016 (Q3 2015: EUR 316.5 million), some 5 % below the year-earlier figure. The business trend in Germany was positive, with sales totalling EUR 182.9 million in the reporting quarter, compared with EUR 173.6 million a year earlier, a rise of about 5 %. In the Americas, sales of EUR 238.6 million were on a par with Q3 2015 (EUR 238.9 million).

Capital Expenditures and Net Cash Flow

In Q3 2016, the Group’s capital expenditures amounted to EUR 98.9 million (Q3 2015: EUR 220.5 million), down 55 %. The funds were in- vested, among other things, in expanding capacities for downstream silicone products and in the further automation of production at Siltronic. Commissioning of the production facilities at WACKER’s new polysilicon site in Charleston, Tennessee (USA), was completed as planned in the reporting quarter.

The Group’s net cash flow was EUR229.9 million in Q3 2016, after EUR36.2 million in Q3 2015. This marked increase was chiefly due to a combination of higher gross cash flow and substantially lower capital expenditures.

Employees

Relative to the preceding quarter, the number of WACKER employees worldwide remained virtually unchanged in Q3 2016. As of September 30, the Group had 17136 employees (June 30, 2016: 17081). As of the end of the reporting quarter, WACKER had 12,179 employees in Germany (June 30, 2016: 12230) and 4957 at its international sites (June 30, 2016: 4851).

Business Divisions

In Q3 2016, WACKER SILICONES posted total sales of EUR503.1 million, on a par with the year-earlier level (EUR501.9 million). While volumes were somewhat higher than a year ago, prices for a number of product groups edged lower. Negative exchange-rate effects also decreased sales marginally. The division’s sales were some 2 percent below the preceding quarter (EUR514.4 million) due to price and volume effects.

EBITDA at WACKER SILICONES reached EUR100.7 million in the reporting quarter, around 23 % higher than a year ago (EUR 81.6 million). Compared with the preceding quarter (EUR93.7 million), it was up 8 %. Earnings were lifted by high plant utilization – over 90 %ç on average – and by low costs. The EBITDA margin improved to 20.0 % in Q3 2016, after 16.3 percent a year ago and 18.2 percent in the preceding quarter.

At WACKER POLYMERS, total sales of EUR 308.2 million in the reporting quarter were 2 percent lower than a year ago (EUR 313.0 million) and The Group’s net cash flow was EUR 229.9 million in Q3 2016, after EUR 36.2 million in Q3 2015. This marked increase was chiefly due to a combination of higher gross cash flow and substantially lower capital expenditures.

Employees

Relative to the preceding quarter, the number of WACKER employees worldwide remained virtually unchanged in Q3 2016. As of September 30, the Group had 17136 employees (June 30, 2016: 17081). As of the end of the reporting quarter, WACKER had 12179 employees in Germany (June 30, 2016: 12230) and 4957 at its international sites (June 30, 2016: 4851).

Business Divisions

In Q3 2016, WACKER SILICONES posted total sales of EUR 503.1 million, on a par with the year-earlier level (EUR 501.9 million). While volumes were somewhat higher than a year ago, prices for a number of product groups edged lower. Negative exchange-rate effects also decreased sales marginally. The division’s sales were some 2 % below the preceding quarter (EUR 514.4 million) due to price and volume effects.

EBITDA at WACKER SILICONES reached EUR 100.7 million in the reporting quarter, around 23 % higher than a year ago (EUR 81.6 million). Compared with the preceding quarter (EUR 93.7 million), it was up 8 %. Earnings were lifted by high plant utilization – over 90 % on average – and by low costs. The EBITDA margin improved to 20.0 % in Q3 2016, after 16.3 % a year ago and 18.2 % in the preceding quarter.

At WACKER POLYMERS, total sales of EUR 308.2 million in the reporting quarter were 2 % lower than a year ago (EUR 313.0 million) and WACKER POLYSILICON generated sales totalling EUR 253.0 million in the reporting quarter, down 7 % over both last year (EUR 271.4 million) and the preceding quarter (EUR 272.2 million). Volumes remained almost unchanged versus last year, while average prices for solar silicon were lower. Compared with the preceding quarter, volumes slowed substantially because customers ordered less solar silicon toward the end of the reporting quarter. WACKER POLYSILICON’s EBITDA totalled EUR 82.3 million from July through September (Q3 2015: EUR 91.8 million). The main reason for this 10 % decline was that EUR17.8 million in advance payments retained and damages received were recorded in Q3 2015, whereas no special income of this kind was posted in the reporting quarter. Adjusted for this income, the division’s EBITDA grew by 11 percent year over year. Relative to the preceding quarter (EUR77.7 million), EBITDA was up 6 percent. This increase reflected the fact that no further start-up costs for the new Charleston site were incurred in the reporting quarter. WACKER POLYSILICON’s July- through-September EBITDA margin was 32.5 %, after 33.8 % in Q3 2015 and 28.5 % in Q2 2016.

Siltronic generated total sales of EUR236.7 million in Q3 2016, up some 3 % from last year’s EUR 230.6 million. A year-over-year increase in volumes, including inventory sales, compensated for lower average prices. Favourable exchange rates also had a positive impact on the sales trend. Compared with the preceding quarter (EUR 229.8 million), sales were also up 3 %. This rise was due to somewhat higher volumes than in Q2 2016 and positive exchange-rate effects, with average prices remaining virtually unchanged. Reporting-quarter EBITDA at Siltronic reached EUR 36.9 million, after EUR 29.4 million a year earlier, an increase of 26 %. In Q3 2015, currency-hedging losses had reduced EBITDA by EUR 15.5 million, while the corresponding reporting-quarter figure was only EUR 6.8 million. Relative to the preceding quarter (EUR 35.0 million), EBITDA was up by around 5 percent, with higher sales and a good cost situation lifting earnings. Siltronic’s EBITDA margin was 15.6 % in the reporting quarter, after 12.7 % in Q3 2015 and 15.2 % in Q2 2016.

Outlook

WACKER expects its chemical-business sales to increase slightly for full-year 2016, whereas sales at Siltronic and WACKER POLYSILICON are likely to edge down.

EBITDA at WACKER SILICONES should be markedly above last year’s figure. WACKER POLYMERS also expects to post a noticeable increase compared with last year. WACKER BIOSOLUTIONS projects its EBITDA margin to remain more or less unchanged year over year. WACKER POLYSILICON anticipates that its EBITDA will decline significantly year over year, since less special income from advance payments retained and damages received will be posted in 2016 than last year. Full-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 its EBITDA margin compared with last year.

Overall, WACKER continues to expect Group sales to rise by a low single-digit percentage in fiscal 2016. EBITDA should climb by be- tween 5 and 10 percent on a comparable basis, i.e. when adjusted to exclude special income. As already announced at the end of July following the company’s positive business performance in the first half of the year, WACKER continues to expect adjusted EBITDA to come in 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. Capital expenditures will come to about EUR 425 million, substantially lower than a year ago. Depreciation will amount to around EUR 720 million, significantly above last year’s level. Group net income should be markedly lower year over year. WACKER expects net cash flow to be clearly positive. Net financial debt at year-end 2016 is anticipated to be slightly lower than last year.

www.wacker.com


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