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WACKER Raises its Forecast for 2010 After Strong Third Quarter

Published on 2010-11-05. Author : SpecialChem

MUNICH -- Wacker Chemie AG has revised upward its sales and earnings forecast for full-year 2010 after a strong third quarter. July-to-September sales at the Munich-based chemical group climbed 29 percent to €1,269.5 (Q3 2009: €986.5 million). The increase was mainly fueled by higher sales volumes. Customer demand was strong this year during the usually weaker summer vacation period. Growth was also supported by the US dollar's strength compared to a year earlier. All in all, prices were at about the same level as Q3 2009. WACKER's earnings soared compared to both the year-earlier quarter and Q2 2010.

Earnings before interest, taxes, depreciation and amortization (EBITDA) reached €340.0 million, gaining 85 percent year over year (Q3 2009: €184.0 million) and advancing three times faster than sales. Last year's third-quarter EBITDA had been reduced by non-recurring charges of about €52 million at WACKER POLYSILICON due to exiting the WACKER SCHOTT joint venture. The main earnings drivers were higher sales volumes and revenues. As in Q2, plant utilization was strong at the Group's chemical and polysilicon businesses. This benefited specific production costs. In July through September 2010, the Group's EBITDA margin continued its upward path, climbing to 26.8 percent from 18.7 percent a year ago. WACKER's earnings before interest and taxes (EBIT) rose to €234.3 (Q3 2009: €82.9 million). The EBIT margin increased to 18.5 percent compared to last year's 8.4 percent. Third-quarter net income reached €155.8 million (Q3 2009: €35.9 million), yielding earnings per share of €3.13 (Q3 2009: €0.68).

WACKER's semiconductor and chemical divisions all contributed to Q3's robust earnings. The semiconductor division, Siltronic, continued on its positive earnings trend and generated further EBITDA growth. Its July-to-September EBITDA of €31.6 million (Q3 2009: €-21.6 million) was 76 percent higher than in Q2 2010 (€18.0 million). The three chemical divisions reported EBITDA of €123.1 million, up 6 percent on last year (Q3 2009: €116.0 million). WACKER POLYSILICON more than doubled its EBITDA year over year. At €189.9 million, it rose 120 percent against Q3 2009's €86.5 million. Compared to the preceding quarter, its EBITDA grew about 9 percent (Q2 2010: €174.6 million). At the end of September, the division had sold virtually its entire production output for the current and next two years. Moreover, it already has contracts covering most of the output planned for 2013, including volumes from a facility under construction at Nünchritz (Germany).

For full-year 2010, WACKER expects new sales and earnings records. The Munich-based chemical company anticipates consolidated sales of well over €4.6 billion, with EBITDA exceeding €1.1 billion.

"Following our strong third quarter, WACKER is headed for a new record year," said CEO Rudolf Staudigl in Munich on Thursday. "We expect to surpass our EBITDA peak value of 2008 by about €100 million. Every division is experiencing strong demand for WACKER products. Even if demand edges down over coming months, which seems likely, market conditions will remain favorable. The outlook is good for increasing our sales again next year."

Regions

In Q3 2010, WACKER achieved robust double-digit growth in all key regions of the world. Asia reinforced its position as WACKER's largest market. July-to-September sales there rose to €466.6 million, up 32 percent on Q3 2009 (€354.4 million). China accounted for about 60 percent of WACKER's Asian sales. WACKER also posted strong sales growth in Germany and the rest of Europe. In Germany, sales climbed to €228.9 million, up 27 percent on Q3 2009 (€180.4 million). In the other European countries, WACKER's business grew some 26 percent, with sales climbing to €319.8 million (Q3 2009: €253.8 million). In the Americas, WACKER increased its third-quarter sales by 34 percent to €218.2 million (Q3 2009: €162.7 million). Expansion there was supported not only by greater customer demand, but also by the US dollar's strength compared to a year earlier. In the other regions, third-quarter sales rose 2 percent to €36.0 million (Q3 2009: €35.2 million). Overall, WACKER generated 82 percent of its third-quarter sales with customers outside Germany.

Investments and Net Cash Flow

In the reporting period, WACKER invested €215.5 million in plant, property and equipment, and financial assets (Q3 2009: €171.8 million). Of this total, about three-quarters were allocated to WACKER SILICONES and WACKER POLYSILICON. Investments at WACKER SILICONES focused on the acquisition of a silicon-metal site at Holla in Norway. WACKER POLYSILICON's investment priority was its new German polysilicon plant, which is under construction at Nünchritz and progressing as planned. Although third-quarter investment spending was high, WACKER more than doubled its net cash flow to €192.4 million (Q3 2009: €92.7 million). Two factors supported net cash flow: the continued strength of WACKER's operational business and the inflow of €88.7 million in advance payments for future poly-silicon deliveries.

Employees

As of September 30, 2010, WACKER had 16,184 employees world-wide (June 30, 2010: 15,901). Payroll expansion was in response to higher staffing needs due to the dynamic business trend, greater plant utilization and the addition of new production capacities. On September 30, 2010, WACKER had 12,188 employees in Germany (June 30, 2010: 12,105) and 3,996 at its international sites (June 30, 2010: 3,796).

Business Divisions

In Q3 2010, WACKER SILICONES posted total sales of €421.3 million, up 23 percent on last year's third quarter (€343.9 million). Silicones remained very much in demand during the usually weaker summer months thanks to a strong stream of orders from the construction, electronics, mechanical-engineering and automotive sectors. The division also reported new records for pyrogenic-silica sales volumes and revenues. The division's EBITDA reached €77.9 million, over 12 percent higher than a year ago (Q3 2009: €69.4 million). The corresponding EBITDA margin was 18.5 percent (Q3 2009: 20.2 percent).

WACKER POLYMERS generated total Q3 sales of €225.8 million, surpassing last year's figure by 13 percent (Q3 2009: €200.2 million). Sales growth stemmed mainly from volume increases for dispersible polymer powders and dispersions. WACKER POLYMERS, too, did not experience the usual seasonal slackness this summer. Demand from the construction industry - the division's pivotal market - remained strong. Despite higher sales volumes and stable prices, WACKER POLYMERS' third-quarter EBITDA of €39.7 million was almost 7 percent lower than the year-earlier quarter (€42.6 million). Earnings were held back by ethylene prices, which were much higher than a year ago. The division, however, increased its EBITDA by 5 percent against Q2 2010 (€37.8 million). The third-quarter EBITDA margin was 17.6 percent (Q3 2009: 21.3 percent).

With demand high across all product segments, WACKER BIOSOLUTIONS increased its total Q3 sales to €37.0 million - up almost 14 percent on Q3 2009 (€32.6 million). Gumbase sales volumes rose around 11 percent and acetylacetone prices were well up on the previous year. The division also reported strong sales growth for cysteine, cyclodextrins and pharmaceutical proteins. WACKER BIOSOLUTIONS generated third-quarter EBITDA of €5.5 million (Q3 2009: €4.0 million). As a result, it strengthened its EBITDA margin to 14.9 percent (Q3 2009: 12.3 percent).

At WACKER POLYSILICON, sales volumes, sales revenues and earnings remained at record levels in Q3 2010. The division boosted its sales revenues by 30 percent year over year to €349.5 million (Q3 2009: €268.6 million). It also raised its production output by over 50 percent, in large part due to its new Poly 8 facility, which is operating at full nominal capacity since the preceding quarter. Further volume gains came from technological improvements. With output much higher, the division raised its production target in September for full-year 2010 - from over 24,000 metric tons of hyperpure polysilicon to roughly 29,000 metric tons. All the division's facilities are currently operating at full capacity. Third-quarter polysilicon demand remained very high both in the photovoltaic and semiconductor markets. WACKER POLYSILICON more than doubled its EBITDA compared to last year's third quarter. At €189.9 million, EBITDA was 120 percent up on Q3 2009 (€86.5 million). A year ago, WACKER POLYSILICON's earnings had been reduced by non-recurring charges of about €52 million from exiting the WACKER SCHOTT joint venture. In Q3 2010, the EBITDA margin stayed at a very high level of 54.3 percent (Q3 2009: 32.2 percent).

Siltronic strengthened its positive sales and earnings trend in Q3 2010. Total sales soared 61 percent to €280.4 million (Q3 2009: €174.0 million). So far, 2010's quarterly sales have grown steadily, climbing to their present level from €219.1 million in Q1 and €255.8 million in Q2. July-to-September sales volumes were about 30 percent above the prior-year period. Prices, too, were generally above Q3 2009, with particularly strong increases for smaller diameters, above all for epitaxial wafers. Favorable exchange-rate effects additionally benefited business. In Q3 2010, Siltronic generated further earnings growth, with EBITDA reaching €31.6 million (Q3 2009: €-21.6 million). Siltronic had recognized losses in the comparable quarter last year, with positive EBITDA in Q1 2010 marking the turnaround. For the first time in seven quarters, Siltronic also posted positive EBIT of €8.0 million - an important milestone on its path to higher earnings. Siltronic's third-quarter EBITDA margin was 11.3 percent, compared to -12.4 percent in Q3 2009.

Outlook

After benefiting from some strong growth impulses in the first half of 2010, the world economy will become more subdued toward the end of the year and beyond. Although the pace of global recovery is slowing, growth momentum remains intact. Given the current economic trends and forecasts, WACKER expects customer demand and sales volumes to remain strong and steady at all its divisions. Healthy order books point to good plant utilization rates through the turn of the year 2010/2011 and beyond. If customer demand stays high, prices for WACKER products are likely to develop well overall. Although WACKER anticipates, as in the past, that Q4's sales and earnings will not reach Q3's level due to the usual seasonality of business (which affects construction, for example), this will not appreciably dampen the generally positive market trend, according to WACKER.

On September 15, 2010, the EU Commission announced that it had authorized a regional investment grant of €97.5 million for WACKER's polysilicon facility at Nünchritz, Germany. These funds, which will be used in stages (in line with the project's progress), have not yet been fully included in the current-year investment budget. Another budget-related factor is that WACKER has improved its expenditure flows for several smaller-scale investment projects. For these reasons, investments in full-year 2010 will be lower than planned. Previously estimated at some €750 million, the figure will now be in the region of €700 million instead.

Following its very good Q3 performance, WACKER predicts new sales and EBITDA records for full-year 2010. The Group expects it will substantially surpass its earlier 2010 sales forecast of €4.5 billion by well over €100 million. According to current estimates, full-year EBITDA will exceed €1.1 billion. Provided that the experts' expectations prove correct and the global economy advances as anticipated, WACKER sees a good chance of further increasing sales in 2011. Earnings next year will depend on raw-material and energy costs, for example, and product-price trends.

About Wacker:

WACKER POLYMERS is a leading producer of state-of-the-art binders and polymer additives in the form of dispersible polymer powders and dispersions, polyvinyl acetates, surface coating resins and polyvinyl alcohol solutions. These products are used by companies in the construction, automotive, architectural coatings, nonwovens, paper and adhesives sectors, as well as by manufacturers of printing inks and surface coatings. WACKER POLYMERS has production sites in Germany, China, South Korea and the USA, as well as a global sales network and technology centers in all major regions.

Source: Wacker


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