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WACKER posts double-digit sales and earnings growth in Q2 2008
- In Q2 2008, group sales increased 17 persent to 1.12 billion - Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 22 percent to 318 million in the second quarter - EBITDA margin reached 28.3 percent - Earnings per share up 18 percent to 3.08 - Forecast for full-year 2008 remains unchanged with sales growth clearly above 10 percent, EBITDA expected to increase, investments total to about 1 billion
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Munich (euro adhoc) - July 31, 2008 - Wacker Chemie AG generated double-digit, year-on-year sales and earnings growth in Q2 2008. Consolidated sales for the quarter reached EUR1,123.0 million (Q2 2007: EUR959.0m) - a 17 percent gain. This dynamic growth was primarily fueled by volume increases, higher prices and the full consolidation of WACKER´s former partnership company APP. The weaker US dollar, in contrast, dampened growth by 7 percent. Sales for the full first half of 2008 reached EUR2,142.5 million, rising 13 percent compared to EUR1,902.7 million a year ago. Earnings growth was even more pronounced - despite the fact that raw-material costs, energy costs and exchange-rate effects clearly exceeded prior-year´s levels. In Q2 2008, WACKER posted earnings before interest, taxes, depreciation and amortization (EBITDA) of EUR317.9 million, up 22 percent from the year-ago period (EUR260.8m). As a result, the EBITDA margin grew to 28.3 percent (Q2 2007: 27.2 percent). For the full first half of 2008, EBITDA totaled EUR609.0 million compared to EUR526.3 million in last year´s first half.
Once again, WACKER´s main earnings drivers were polysilicon and semiconductors. WACKER POLYSILICON´s EBITDA grew by EUR70.0 million, thus more than tripling prior-year´s figure. At EUR112.0 million, Siltronic AG nearly matched last year´s EBITDA (Q2 2007: EUR122.8m) and accounted for over a third of the Group´s earnings before interest, taxes, depreciation and amortization in Q2 2008. In contrast, the chemical divisions saw their earnings impacted by higher raw-material and energy costs. This meant they did not quite achieve their prior-year EBITDA levels.
The Group´s Q2 earnings before interest and taxes (EBIT) rose 26 percent to EUR224.9 million (Q2 2007: EUR178.2m). Net income climbed 18 percent year on year to EUR152.8 million (EUR130.0m). As a result, earnings per share amounted to EUR3.08 (Q2 2007: EUR2.62), up 18 percent. For the full first-half of 2008, WACKER generated an EBIT of EUR423.6 million (EUR366.1m). During the same period, consolidated net income rose to EUR283.4 million (EUR244.5m) and earnings per share reached EUR5.70 (EUR4.92).
The Munich-based chemical company confirmed its full-year 2008 forecast for higher sales and earnings. Consolidated sales should exceed the prior-year figure by clearly over 10 percent. EBITDA is expected to climb, too. All in all, WACKER is investing roughly EUR1 billion in pursuing its growth and expansion strategy during the current year.
"We´ve again managed to boost both sales and earnings despite the increasingly difficult economic environment," said Group CEO Rudolf Staudigl in Munich on Thursday. "Our success in the first six months was mainly driven by strategic investments in capacity expansion and, above all, vibrant solar-industry demand. With additional volumes and our market and cost leadership in many business fields, we consider ourselves well prepared to progress on our growth course even in a more difficult economic climate.
Regions In Q2 2008, the WACKER Group posted further sales gains in Asia´s dynamic markets, where sales reached EUR367.5 million (Q2 2007: EUR328.7m). Asia accounted for 33 percent of the Group´s total second-quarter sales. Europe (excluding Germany) took second place with EUR266.5 million (Q2 2007: EUR271.5m). As for Germany, WACKER posted April-June sales of EUR248.4 million, up 48 percent from the prior-year period (EUR168.4m). This means Germany had the greatest regional sales gain in the period under review. Sharp German growth was primarily due to two factors. First, the substantial rise in polysilicon deliveries to Germany´s solar sector. Second, the full consolidation of the former partnership company APP - a measure that also greatly influenced sales in the Americas, where WACKER reported April-June sales of EUR205.5 million (EUR160.9m). In the remaining regions, WACKER posted second-quarter sales of EUR35.1 million (Q2 2007: EUR29.5m).
Net Cash Flow and Investments In the second quarter 2008, WACKER generated a net cash flow of EUR104.8 million (Q2 2007: EUR122.1m) even though its investments in current expansion projects again surpassed the comparable prior-year figure. The fact that net cash flow continued to remain strong was mainly due to upbeat business performance. Additionally, customer prepayments for future polysilicon shipments had a positive net cash flow effect of EUR30.8 million in the second quarter.
During Q2 2008, WACKER spent EUR181.4 million (Q2 2007: EUR180.7m) on strategic growth projects and on additional investments in property, plant and equipment, intangible assets and financial assets. The largest share of this sum - EUR84.1 million - went to WACKER POLYSILICON, which continued to expand capacity for hyperpure polycrystalline silicon at Burghausen as scheduled.
In Q2 2008, WACKER Group started up three new production facilities, as part of its drive to expand capacity for key strategic products in promising sectors and growth regions. Early April saw the official start-up of WACKER SCHOTT Solar GmbH´s site in Jena, Germany. Completed after only a six-month construction phase, this new facility produces solar-grade multicrystalline silicon wafers. Its nominal capacity is scheduled to reach 50 MW per year by fall 2008. In late April, WACKER DYMATIC - a joint venture between Wacker Chemie AG and DYMATIC Inc. - opened its new silicone emulsion plant at Zhangjiagang in China. The new facility will produce 30,000 metric tons per year of silicone emulsions and processing auxiliaries for China´s textile, leather and fiber industries. In Singapore, Siltronic Samsung Wafer Pte. Ltd. started production of 300 mm silicon wafers for the electronics industry in mid-June. Currently, these wafers are undergoing final qualification by several customers, including the main customer, Samsung Electronics.
Employees In Q2 2008, WACKER´s employee numbers remained almost constant. On June 30, 2008, the Group had 15,769 employees (March 31, 2008: 15,660). German sites accounted for 12,023 of the total (March 31, 2008: 11,935). Outside Germany, WACKER employed 3,746 people at the end of Q2 2008 (March 31, 2008: 3,725).
Business Divisions WACKER SILICONES reported total Q2 2008 sales of EUR380.6 million, beating the prior-year period by 8 percent (Q2 2007: EUR353.6m). Sales growth stemmed from volume gains and higher prices obtained in the marketplace. The division could only partially offset raw-material cost increases (especially for silicon metal), higher energy costs and the impact of a strong euro on exchange rates. Thus, it did not quite match the prior-year earnings level. WACKER SILICONES posted a second-quarter EBITDA of EUR60.5 million (Q2 2007: EUR68.0m), which yielded an EBIDTA margin of 15.9 percent (Q2 2007: 19.2 percent).
At WACKER POLYMERS, total sales soared to EUR244.6 million for April-June 2008 - a strong 46 percent increase over the second quarter of 2007 (EUR167.7m). This sales gain was primarily due to the fact that APP (the former partnership company acquired from Air Products) was consolidated for a full three months for the first time. Adjusted for this effect, sales rose 3 percent compared to the prior year. At EUR37.3 million, the division´s second-quarter EBITDA rose 8 percent year on year (Q2 2007: EUR34.2m). Sharp increases in raw-material, energy and transport costs and the weak US dollar dampened earnings growth. The EBITDA margin was 15.2 percent (Q2 2007: 20.6 percent).
The reorganization of WACKER FINE CHEMICALS as the Group´s biotech competence center is increasingly benefiting the division´s earnings performance. Although its Q2 sales total of EUR24.3 million was below last year´s second quarter (EUR27.6m), EBITDA of EUR3.3 million almost reached the prior-year level (EUR3.8m). The resultant EBITDA margin was 13.6 percent (13.8 percent). Volume increases led to very high capacity-utilization rates, especially for biotech products, such as cyclodextrins and cysteine. Capacity-utilization rates for fine chemicals are currently strong, too.
In Q2 2008, WACKER POLYSILICON boosted its total sales to a record EUR194.2 million (Q2 2007: EUR97.9m) - a year-on-year increase of 98 percent. Thanks to polysilicon capacity expansion at Burghausen, the division continued to benefit from strong, sustained demand. A strong positive impact also came from price effects. WACKER POLYSILICON´s earnings growth outstripped sales. Divisional EBITDA reached EUR104.8 million in the period under review, growing more than threefold (Q2 2007: EUR34.8m). At 54.0 percent, the Q2 EBITDA margin crossed the 50-percent threshold (Q2 2007: 35.5 percent).
Siltronic generated total Q2 sales of EUR351.7 million (Q2 2007: EUR370.9m). That is 5 percent below last year´s second quarter but 2 percent above the first quarter of 2008. Q2 sales were influenced, on the one hand, by a price drop for all wafer diameters and, on the other, by the strong euro´s impact on exchange rates. Volumes for 300 mm wafers rose again. This did not, however, offset volume decreases for 200 mm wafers and smaller diameters. As in Q1 2008, Siltronic again used free crystal-growing capacity to produce monocrystals for the solar industry. Solar business had a very positive effect on sales, as well as earnings margins. Siltronic posted an April-June EBITDA of EUR112.0 million (Q2 2007: EUR122.8m). The corresponding EBITDA margin was 31.8 percent (Q2 2007: 33.1 percent).
Outlook At mid-2008, WACKER and its five business divisions were firmly on course despite noticeable economic headwinds. Consequently, the Executive Board reaffirms its full-year forecast for 2008, anticipating a year-on-year sales growth of clearly above 10 percent. It also expects earnings before interest, taxes, depreciation and amortization (EBITDA) to climb. The final level of earnings growth will largely depend on how trends will materialize for the global economy, raw-material and energy costs, and exchange rates.
Q2 saw the successful start-up of several new production facilities. For the remainder of the year, WACKER will mainly focus its efforts to drive operational growth on opening production plants for pyrogenic silica (Zhangjiagang, China) and polysilicon (Burghausen, Germany), expanding its WACKER SCHOTT Solar joint venture (Jena, Germany), continuing development of the Group´s new Nanjing polymer site (China), and integrating APP and WPS - WACKER´s former partnership companies - into WACKER POLYMERS.
With these and other measures, WACKER Group intends to reinforce its market positions and competitive strength in tomorrow´s key markets. By doing so, it focuses on creating the right conditions for continued sustainable and profitable growth. Total investments in the current fiscal year are expected to amount to some EUR1 billion.
WACKER's Key Figures |EUR million |Q2 2008 |Q2 2007 |Change | |6M 2008|6M 2007|Change | | | | |in % | | | |in % | |Sales |1,123.0 |959.0 |17 | |2,142.5|1,902.7|13 | |EBITDA1 |317.9 |260.8 |22 | |609.0 |526.3 |16 | |EBITDA margin2 |28.3% |27.2% |4 | |28.4% |27.7% |3 | |EBIT3 |224.9 |178.2 |26 | |423.6 |366.1 |16 | |EBIT margin2 |20.0% |18.6% |8 | |19.8% |19.2% |3 | | | | | | | | | | |Financial result |-3.1 |-6.2 |-50 | |-3.9 |-11.6 |-66 | |Income before taxes |221.8 |172.0 |29 | |419.7 |354.5 |18 | |Net income |152.8 |130.0 |18 | |283.4 |244.5 |16 | | | | | | | | | | |Earnings per share in |3.08 |2.62 |18 | |5.70 |4.92 |16 | |EUR | | | | | | | | | | | | | | | | | |Investments (incl. |181.4 |180.7 |0 | |326.9 |271.7 |20 | |financial assets) | | | | | | | | | | | | | | | | | |Investments in |2.2 |0.0 |n.a. | |-171.2 |0.0 |n.a. | |acquisitions | | | | | | | | | | | | | | | | | |Net cash flow |104.8 |122.1 |-14 | |101.5 |346.3 |-71 | | | | | | | |EUR million |June 30,|June 30,|Dec. 31| | | |2008 |2007 |, 2007 | | |Equity |1,906.1 |1,695.2 |1,865.6| | |Financial liabilities |222.2 |291.0 |217.8 | | |Provisions for pensions |379.2 |362.5 |369.2 | | |Net financial debt |-101.6 |144.3 |-148.7 | | |Total assets |4,225.0 |3,588.3 |3,918.1| | | | | | | | |Employees (number at end|15,769 |14,892 |15,044 | | |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 reporting period before interest and other financial result, limited partnership interests and income tax. Information for editorial offices: the Q2 2008 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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