– A Year of Transformation 2014 Wacker Chemie AG, November 2014
4 4 CREATING TOMORROW`S SOLUTIONS 2014 – A Year of Transformation Wacker Chemie AG, November 2014 2014 – A Year of Transformation November 2014 0 of 58 4 4 Disclaimer The information contained in this presentation is for background purposes only and is subject to amendment, revision and updating. Certain statements and information contained in this presentation may relate to future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties. In addition to statements which are forward-looking by reason of context, including without limitation, statements referring to risk limitations, operational profitability, financial strength, performance targets, profitable growth opportunities, and risk adequate pricing, other words such as "may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, or continue", "potential, future, or further", and similar expressions identify forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions which could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These include, among other factors, changing business or other market conditions and the prospects for growth anticipated by the Company's management. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The Company does not undertake any obligation to update or revise any statements contained in this presentation, whether as a result of new information, future events or otherwise. In particular, you should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. 2014 – A Year of Transformation November 2014 1 of 58 4 4 Our Business Portfolio is a Foundation for Growth… WACKER BIOSOLUTIONS WACKER SILICONES High potential for future development No. 2 with global footprint Leading positions in key growth segments WACKER POLYMERS No. 1 in dispersible polymer powders No. 1 in VAE dispersions Global footprint *) FY 2013 Sales €4.5 bn WACKER POLYSILICON Siltronic No. 1 Cost and quality leader Technology leader, ranking as no. 3 Enabling industry growth Balanced base of customers Note: Percentages based on external sales per segment *) Others 2014 – A Year of Transformation November 2014 2 of 58 4 4 Strong Track Record: Expecting strong Growth into 2017 Long Term Historic Sales Growth Target 2017: €6 - 6.5 bn €m 7,000 ~6% CAGR 6,000 €4.6 bn €4.5bn 5,000 4,000 3,000 2,000 1,000 0 1997 1999 2001 2014 – A Year of Transformation November 2014 2003 2005 2007 2009 2011 2013 2015 2017 3 of 58 4 4 Mid-term Financial Targets Target 2012 to 2017 Sales EBITDA ROCE €6 - 6.5 bn (~6% CAGR)* €1.2 bn (~20% margin) > 11% * CAGR 2012/2017 2014 – A Year of Transformation November 2014 4 of 58 4 4 Entering the Next Phase: From Asset Growth to Cash Generation Ratio of Capital Spending vs. Depreciation capex between 1.3 and 2.2x depreciation 2005 2012 capex < depreciation 2013 capex >< depreciation 2017 2018 2022 Create Leverage Expand 2005 – 2012 2013 – 2017 2018 – 2022 Focus on capital intensive growth: Focus on profitability and cash: Eight additional sites globally Execute cost roadmaps Focus on selective expansion of production network: Increased capacities 7x in Polysilicon, 3x in VAE dispersions, 2x Siloxane, 6x 300 mm wafer Leverage global asset base The customer dimension: Focus on quality growth, growing specialty sales Selective growth projects Exploring further Verbund and debottlenecking opportunities Invest below depreciation Global presence and market penetration with technical centers and global sales structures 2014 – A Year of Transformation November 2014 5 of 58 4 4 Positioned for Sustained Sales and Earnings Growth WACKER: A Leading Specialty Chemicals Company Advanced Materials Tech-based products ranging from standard to high value added Focus on innovation and customized solutions Compelling Growth Addressing high-growth markets Local presence in all regions Capitalizing on emerging markets growth Strong Cost Position World-scale plants, integrated production, proprietary process know-how Targeted cost reduction programs implemented Significant CapEx program concluded, now leveraging a global asset base Leading Market Positions A global leader in most addressed segments and markets… … particularly at the individual customer level 2014 – A Year of Transformation November 2014 6 of 58 4 4 Create: Global Market Presence Technical Center & WACKER ACADEMY Market Penetration in all Emerging Regions China Nünchritz Canton, OH Chino Adrian Local products and services Moscow Beijing Burghausen Akeno Seoul Dubai Kolkata Shanghai Mumbai Shunde Korea Focus on products for the electronic market Singapore Jandira India Melbourne Focus on textile applications Brazil Expanding Technical Center presence, local products and services 22 Technical Centers worldwide to service customers and develop products & applications 9 WACKER ACADEMY sites provide training and product know-how tailored to our customers‘ needs. 2014 – A Year of Transformation November 2014 South East Asia Mobile technical center Sales TC Academy Plant 7 of 58 4 4 Create: Sales Network and Customer Relations Building a Sustainable Competitive Advantage Chemicals: Establishing a global network of technical centers Global sales network to create and develop specialty solutions Leveraging centralized upstream facilities into local growth opportunities Customer focus drives product evolution WACKER POLYSILICON: Addressing the solar opportunity with specialized production technologies Supplier of choice, leading in quality and cost Siltronic: Improved global production footprint for 300 mm Repeated Quality Award wins from industry leaders 2014 – A Year of Transformation November 2014 8 of 58 4 4 Leverage: Shifting Focus to Downstream Products Raw Material Upstream Methanol Siloxane Silicon Metal Pyrogenic Silica Downstream Silicones Electronic wafers Vinylacetate ethylene (VAE) Vinylacetate Monomer (VAM) Acetic Acid Starch/ Dextrose Microbiological fermentation 2014 – A Year of Transformation November 2014 Construction Automotive suppliers Paints and coatings Textiles, print and paper Personal care Solar wafers, cells and modules Polysilicon Ethylene Customers’ Industries Dispersible Polymer Powders (DPP) Polyvinyl Acetate (PVAc) Therapeutic proteins food ingredients Semiconductors Engineered fabrics, coatings, adhesives, carpet Construction, remodeling, insulation Food, automotive Food, life sciences, household 9 of 58 4 4 Chemicals: The Way Forward Strong and well established global market presence Growth opportunities in emerging markets Addressing global trends with advanced chemical products Leveraging existing upstream capacities will reduce capital intensity of growth Continuous productivity improvements and Verbund production support cost competitiveness Target 2012 to 2017: Sales growth ~7% CAGR / EBITDA margin >16.0% 2014 – A Year of Transformation November 2014 10 of 58 4 4 Reduce Capital Intensity of Growth – Leverage Existing Upstream Capacities Upstream Downstream Global Regional Compounds & Formulations Local Silicon Metal Elastomers Compounds Siloxane Emulsions & Fluids SILMIX® VAM Resins Emulsions VAE dispersions Dispersible Powders Capital Intensity Value Creation 2012 - 2017 growing share of specialties from 2/3 to 3/4 of sales 2014 – A Year of Transformation November 2014 11 of 58 4 4 SILICONES: An Integrated Global Player in a Leading Market Position Competitive Landscape 2013 2 raw materials Methanol Sales Development (€m) – 5 years Silicon Metal Silanes 7 product groups Siloxane Fluids & Emulsions Resins 1,600 Fumed Silica OF Silanes 1,581 1,594 1,648 1,672 2010 2011 2012 2013 1,239 1,200 800 Elastomers 400 > 3000 products & endless applications 0 2009 Supply Chain Market Characteristics Others 14% Reduced cyclicality through broad market penetration and wide customer base WACKER 17% Historic growth rates 3% above worldwide GDP Bluestar 7% 29% Shin Etsu 11% ≈€10* bn Dow Corning 35% High entry barriers (capital and technology) Key drivers spur sustainable market growth Innovation broaden scope of applications Momentive 17% Silane/Siloxane backward integrated suppliers WACKER JV participations fully consolidated WACKER estimates 2014 – A Year of Transformation November 2014 12 of 58 4 4 Customization: Combining a Unique Set of Properties Hydrophobic Formable Adhesive Electrically conducting Broad spectrum of adjustable properties Intrinsic properties Thermal stability UV-resistant Inert, Chemical resistant amongst others Hydrophilic Form stable 2014 – A Year of Transformation November 2014 Release Insulating Silicones are high performance products, suitable for multiple applications 13 of 58 4 4 SILICONES: Specialty focus creates Value Standards Exchangeable Specialties Specified properties Price elastic Value based pricing Low requirement for technical service Technical service is a key success factor Customized solutions Standards Business Strategy Increase our specialty business to 50% of Siloxane volume within 4 years Sell standards with low cost to serve Siloxane Volume Specialties 35% Specialties 50% 2013 Standards 65% 2014 – A Year of Transformation November 2014 2017 Standards 50% 14 of 58 4 4 Optical Bonding: Partnering with “VIA Optronics” – Global Operations and Fast Growth The Challenge The Solution: WACKER SilGel® Reflections (due to sunlight etc.) can easily A transparent silicone gel bonds the surface of occur at Liquid Crystal Displays (LCD) due to a design constraint that requires a gap between the cover glass or touchscreen and LCD Applies to all kind of LCD displays in TV, smart phones, tablets, notebooks, displays in cars, planes & trains 2014 – A Year of Transformation November 2014 the touchscreen to the LCD which prevents reflections Advantages of silicone gels: Outdoor readability, energy saving (reduce brightness of displays), dampening In comparison to organic compounds: highly elastic, non yellowing, reduced shrinkage 15 of 58 4 4 Silicones in Cars: Growing Number of Applications Additional Electric Heater: Gaskets Air-Circulation: Flaps, Gaskets Vibration Dampers, Buffers Wiper Blades Airbag Coating Rain Sensor/ Camera: Coupling Cushion Sunroof Profiles Interior: Switches, Light Guides, Cupholders Fuel Cell: Gaskets AdBlue Systems: Heating Mats, Gaskets Actuator: Membranes Exhaust Pipe Hangers, Dampers Spark Plug Boots, Ignition Cables Engine/Radiator/ Intercooler/EGR: Seals, Gaskets Hybrid Cables, Connectors ABS/ESP controllers: Sealing, Vibration Decoupling Frame Turbo Charger, Radiator Hoses Oil-System: Anti-DrainBack Valves PDC, Radar, Airbag Sensors: gaskets 2014 – A Year of Transformation November 2014 Lighting: Seals, Lenses Dust Covers, CVJ Boots Engine Mounts Wire Harness: Connector, MultiCavity Seals Car Key: Keypads 16 of 58 4 4 SILICONES: Growth Target 6% with Improved Profitability Our Roadmap 2017 1 Value creation We push our specialty business by investing in downstream production and service close to our customers 2 Innovation We permanently investigate opportunities for organic replacement to open up new markets for silicones 3 Cost We continuously improve our cost position through operational excellence 2014 – A Year of Transformation November 2014 17 of 58 4 4 POLYMERS: Global Leader in High Growth Markets Sales Development (€m) – 5 years Supply Chain Raw Material Upstream VAE Downstream Dispersions DPP Acetic Acid & Ethylene Key Markets 1,200 Construction Nonwovens & Textiles 900 Adhesives 600 740 810 2009 2010 928 1,003 979 2011 2012 2013 Carpet VAM PVAc PVOH Coatings & Paints 0 VAE = Vinyl acetate ethylene, VAM = Vinyl acetate monomer, PVAc = Polyvinyl acetate, PVOH = Polyvinyl alcohol DPP = Dispersible Polymer Powders Capacity Landscape 2013 (Capacities) Others WACKER 2nd in the market Market Characteristics Diverse market and customer base Others WACKER Dispersible Polymer Powders 300 VAE Dispersions 2nd in the market Historic growth above GDP Key trends, innovation and new applications drive growth Moderate capital entry barriers and high technology barriers in most segments Innovation and in-depth formulating expertise broaden scope of applications Source: WACKER estimates 2014 – A Year of Transformation November 2014 18 of 58 4 4 Key Growth Markets VAE Dispersions: Replacement in Carpet and Caulks & Sealants Carpet Caulks & Sealants Expand the use of VAE dispersions through Replacement of SB Latex Growth in caulks - mastics at expense of vinyl acrylic and acrylic dispersions 2014 – A Year of Transformation November 2014 19 of 58 4 4 Key Growth Lever Dispersible Polymer Powder: Transformation to Polymer Modified Dry Mortars “WACKER On Wheels” in Vietnam and Indonesia Educational tool to close the gap on awareness for Polymer technology in emerging markets 2014 – A Year of Transformation November 2014 Magicgrip® in India Transformation from traditional method to modified CTA method through Magicgrip® 20 of 58 4 4 Polymers Targets continued Growth of 8% p.a. Our Roadmap 2017 Expansion We invest in downstream production and service close to our customers 2 Innovation We push new solutions beyond our core, working in a global set-up with our R&D activities 3 Substitution We explore new substitution opportunities in the non VAE systems 1 2014 – A Year of Transformation November 2014 21 of 58 4 4 BIOSOLUTIONS: Acquisition SCIL – Bioengineered Pharmaceutical Proteins 1,500l fermenter capacity for pharmaceutical actives GMP* certified operations Protein refolding technology complements WACKER portfolio WACKER BIOSOLUTIONS becomes a full-service provider for the microbial manufacture of biologics *GMP = „Good Manufacturing Practice“, a standard in pharmaceutical manufacturing, 2014 – A Year of Transformation November 2014 22 of 58 4 4 POLYSILICON: The Way Forward Fast cost decrease in Solar PV unlocks growth Polysilicon Market: 14% growth expected (2013 - 2017) Market growth on a broader base: more and more markets >100 MW or even >1 GW Prices expected to rise to reinvestment levels Pricing differentiates between Polysilicon qualities Competitive pressure drives cost and conversion efficiency – WACKER leads in cost and quality Cost reduction roadmaps implemented to maintain leading cost and quality position Target 2012 to 2017: Sales growth ~7% CAGR / EBITDA margin >20.0% 2014 – A Year of Transformation November 2014 23 of 58 4 4 WACKER POLYSILICON Leading in Cost and Quality Sales Development (€m) – 5 years Production Chain Raw Material Upstream Downstream Key Markets 1,800 1,369 Salt Polysilicon Silicon Metal Hydrogen Electronic wafer Semiconductors Solar wafer Solar Modules 1,200 1,448 1,136 1,121 924 600 0 2009 Competitive Landscape 2013 TBEA 2% WACKER 23% 29% 213 kt REC 9% Hemlock 12% GCL 23% OCI 16% Source: Industry announcements; WACKER estimate 2014 – A Year of Transformation November 2014 2011 2012 2013 Market Characteristics Others 10% DAQO 2% Tokuyama 3% 2010 PV market growth still intact driven by increasing competitiveness of PV electricity, despite declining subsidies Excellent product quality is key to highest conversion efficiencies in solar Cost and quality are both decisive for market success Prices stabilized, but delayed capacity expansion announced Intense competition further drives industry consolidation 24 of 58 4 4 POLYSILICON: Fast Cost Decrease of Solar PV Unlocks Growth Roof-top System Prices* LCOE & Electricity Price PV becoming very competitive and easy-to-install mature market household power price Germany young market Off-grid Applications PV can be built very fast and in small increments CA China TX Steep price decline of storage solutions Cheap electricity for remote areas with no access to grid 1000 1400 1800 annual solar energy yield(kWh/kWp) US Germany Module BOS BOS = Balance of System *best practice Q2 2014 2014 – A Year of Transformation November 2014 1.5 €/Wp 1.0 €/Wp 0.5 €/Wp size of electricity market Δ LCOE vs. power price = room for positive NPV (assumes full grid access) 25 of 58 4 4 Polysilicon Market: Strong Market Growth at 14% CAGR Expected Global Polysilicon Shipments (kt) 360 half, flat due to continued inventory correction and lower consumption per Watt CAGR 2013-2017: 14% 224 211 2013 shipments with stronger 2nd Increasingly competitive C-Si PV 213 drives polysilicon demand Silicon-based PV offers highest 162 conversion efficiencies and proven long-term stability at lowest cost 92 2009 2010 2011 2012 2013 Electronic 2014 – A Year of Transformation November 2014 2017e Solar Assumption: 2017: 80 GW (incl. 10% thinfilm share); Silicon consumption < 5 g/Wp in 2017; Shipment figures incl. time-delay shipment/installation 26 of 58 4 4 Polysilicon Supply & Demand Balanced – New Entrants Have to Prove Competitiveness in Terms of Cost & Quality Global Polysilicon Demand (kt) versus Capacity of Active Manufacturers Only a limited number of producers still operating after consolidation phase in 2012 & 2013 350 300 PV market: 2013: ~40 GW 2014: ~44-50 GW 2015: ~49-65 GW Additional capacity expected to come online in 2015 – questionable whether new entrants will produce cost-effective 250 200 150 Capacity Announcements 100 Active Capacities Total Demand (HIGH CASE) 50 Total Demand (LOW CASE) Electronic Demand 0 2010 2011 2012 2013 2014 2015 Sources: market surveys, industry announcements, WACKER estimate 2014 – A Year of Transformation November 2014 27 of 58 4 4 Decreasing Prices Open Up New Markets – USA and Asia with Highest Growth Potential Country 2011 2012 2013 2014e 2015e 0.9 – 1.1 2.2 – 2.4 0.7 – 0.9 5.0 – 6.0 8.6 – 10.4 1.2 – 1.8 2.2 – 2.7 1.2 – 1.8 5.1 – 7.3 9.7 – 13.6 1.1 – 1.3 13.5 – 14.5 1.1 – 1.4 8.8 – 9.4 6.5 – 6.8 4.6 – 5.9 ~44 – 50 GW 1.3 – 2.0 14.0 – 16.5 1.9 – 2.9 9.3 – 11.5 7.2 – 9.6 5.6 – 8.6 ~49 – 65 GW France Germany Italy Europe other Europe total 1.7 1.1 0.6 7.5 7.4 3.3 19.9 7.6 3.6 4.9 17.2 3.3 1.1 5.8 10.8 Australia 0.8 1.0 0.9 China India 2.5 4.8 12.9 0.4 0.9 1.0 Japan 1.3 2.5 6.8 USA 1.9 3.3 4.8 Rest of World 1.3 2.1 2.8 28 GW 32 GW 40 GW Total Sources: EPIA 02/2012, 05/2013, 05/2014, Industry announcements, WACKER estimate 2014 – A Year of Transformation November 2014 28 of 58 4 4 Competitive Pressure drives Cost and Conversion Efficiency – WACKER leads in Cost and Quality Usable Ingot Length (%) Production Costs (%) Solar Cell Efficiencies (%) Cell Efficiency Mainstream Multi Distribution Mainstream Mono 25 high-purity Polysilicon Super Mono 100% Number of cells 86% 20 76% low-quality Polysilicon 66% 15 cells with price discount cells with price premium Ingot Yield 10 60% 70% 80% 90% 2004 2006 2008 2010 2012 Cell efficient Higher quality longer usable length lower cost per wafer Higher quality supports greater efficiencies lower cost per wafer Narrow distribution and higher mean lower cost per wafer Source: WACKER estimates 2014 – A Year of Transformation November 2014 29 of 58 4 4 POLYSILICON Expansion Tennessee (Poly 11): establishing a Platform for Future Growth in the US Tennessee – 20kt p.a. Lower Electricity Cost in US (indexed) 100 Germany = Electricity Price + FiT Surcharge (2013) + Grid usage fee + Other charges US = List price TN provider June 2014 38 Planned ramp up of Polysilicon production in 2015 Currency diversification for the Group Growth platform for chemical products in the USA Germany (Industry HighVoltage) USA (TN) Assumptions: Data based on Year end 2012, USD/EUR: 1.35 Source: WACKER estimates, market data 2014 – A Year of Transformation November 2014 30 of 58 4 4 Strong Focus on Cost and Productivity – Process Innovation Specific Energy Consumption (kWh/kg)* Labor Productivity (kg/h)* Index = 100 Index = 100 100 -36% +270% 71 370 292 64 100 2005 2013 2017e 2005 2013 New deposition reactors Economies of scale New conversion reactors Yield improvements New process design Automation * Solar polysilicon process only, indexed weighted ø of all plants 2014 – A Year of Transformation November 2014 2017e * Total average for all sites, direct labor including analytics 31 of 58 4 4 POLYSILICON: Maintain Leadership in Cost and Quality Our Roadmap 2017 Competitive pressure drives module cost and conversion efficiency 1 Cost Cost reduction roadmap implemented to maintain WACKER’s leading cost position C-Si-PV moving towards efficiencies above 20% (module) 2 Quality Pricing differentiates between polysilicon qualities Develop products for all crystallization technologies in close cooperation with our customers 3 Customer Keep broad customer portfolio to react flexibly on market changes Expand capacities according to market demand 2014 – A Year of Transformation November 2014 32 of 58 4 4 Siltronic: The Way Forward Rising demand for 300 mm Continuous cost reduction programs in place Customer focus – recognized for outstanding performance Siltronic strategy - Focus on cash generation Target 2012 to 2017: Sales growth ~2% CAGR / *EBITDA margin >20.0% * pro forma, excluding restructuring 2012 2014 – A Year of Transformation November 2014 33 of 58 4 4 Siltronic: Focusing on 300 mm and Asia Sales Development (€m) – 5 years Value Chain WACKER Polysilicon Siltronic Ingots Wafer Key Markets Semiconductors 1,600 1,025 1,200 800 992 638 869 743 400 0 2009 2010 2011 Sales Semi 2012 2013 Sales non Semi Competitive Landscape 2013 Market Characteristics Silicon Wafer Market Share (on USD basis) Semi and silicon wafer markets move in tandem Global Wafers 6% Others 6% Siltronic 14% Historic silicon market growth of 8-12% CAGR with last 3 years moving sideways LG / Siltron 10% High volatility both annually and quarterly Sun Edison 11% 300 mm continues to grow while legacy diameter are trending down S.E.H. 27% PC era coming to an end. Market growth increasingly coming from smartphone and tablets SUMCO Group 26% Source: Gartner (June 2014) 2014 – A Year of Transformation November 2014 Source: Siltronic estimates 34 of 58 4 4 Siltronic: Industry Volume Development - Flattish in Past Years, now Rising Development of Wafer Diameters (mn cm² per month 3MMA*) 4,000 3,500 mn sqcm / month 3,000 2,500 SD 200 mm 2,000 300 mm 1,500 1,000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: SEMI up to Sep 2014; since Jul'12: data includes total GlobalWafers group * 3MMA three month moving average 2014 – A Year of Transformation November 2014 35 of 58 4 4 Siltronic: Leading Wafer Area Growth - Shift from PC to Megatrend Mobility Wafer Demand 2013, bn. cm² Growth 2015 vs. 2014 Ø ~ 5% Mobility 18.5 PC and periphery 14.0 Living 10.5 Industry 5.5 Automotive 5.0 Storage Others 3.5 1.5 ~ 15% ~ 0% ~ -5% ~ 10% ~ 10% ~ 0% ~ -15% Source: IHS Silicon Application Market Forecast Tool (Q3 2014, 25.08.2014) 2014 – A Year of Transformation November 2014 36 of 58 4 4 Siltronic: 300 mm Continuous Cost Reduction Program Siltronic 300 mm variable Costs, relative per Wafer -9% -12% -16% >-10% 2010 2011 2014 – A Year of Transformation November 2014 2012 2013 2014e 37 of 58 4 4 Siltronic Strategy: Focus on Cash Generation Create Harvest 2005 - 2012 2013 onwards High capital intensity Focus on 300 mm in Asia 300 mm expansion No 450 mm investment Strengthen market position with JV Continue rationalization outside of Asia Leading edge technology CapEx below depreciation CapEx above depreciation Strategy: Focus on low capex and 300 mm in Asia 2014 – A Year of Transformation November 2014 38 of 58 4 4 WACKER: The Way Forward Financial Targets for 2017 Financial Stability & Profitability Summary: The Path to 2017 Outlook 2014 2014 – A Year of Transformation November 2014 39 of 58 4 4 WACKER Financial Targets for 2017 Sales of €6.0 – 6.5 bn with Profit above Costs of Capital Sales 2012 2013 guidance 2013 2014 guidance 2017 target 4,635 ~ 4,500 4,479 Mid-single-digit % increase 6,000 – 6,500 ~6% CAGR EBITDA 795 Lower 679 Approx. 1,000 1,200 ~20% Margin 17% Lower 15% Substantial Increase to over 20% ROCE 5% lower 2.2% Significant increase > 11% 24% ~ 500 11%; 504 Approx. 550 Below depreciation CapEx (% of sales) 2014 – A Year of Transformation November 2014 40 of 58 4 4 Balance Sheet: Financial Stability – Target Capital Structure Group Balance Sheet – Target Structure 2017 Drivers Drivers Equity ratio: Historical level ~40% Non-current assets Equity 2013-2017: CapEx below depreciation Depreciation of certain polysilicon assets accelerated from 2012 onwards Financial debt incl. prepayments Pension provisions DIO: ~50 days and DSO: ~50 days despite increasing globalization Working capital Minimum level for operations Liquidity 2014 – A Year of Transformation November 2014 Dividend policy: in general, minimum 25% of net income Prepayments almost fully repaid by 2017 Target: Net financial debt = 1x EBITDA Impact of IAS 19 considered Liabilities / other accruals 41 of 58 4 4 Profit & Loss Statement: Improving Profitability through 2017 WACKER P&L 2013 (€m) €m Sales Cost of goods sold Gross profit from sales Gross profit margin (in %) Selling expenses Research and development expenses General administrative expenses Other operating income Other operating expenses Targeted Development until 2017: 2013 4,479 -3,815 664 15% -272 -174 -112 255 -210 Operating result Equity result EBIT Interest result Other financial result Income before taxes Income taxes Net income for the period 151 -36 114 -27 -57 31 -89 6 EBIT Depreciation/amortization EBITDA 114 564 679 2014 – A Year of Transformation November 2014 Gross profit margin with increase of up to 550 bps, driven by Accelerating growth in specialties Improving market environment in POLYSILICON Lower D&A in relation to sales Limited overhead growth – SG&A to decrease to less than 7% of sales EBIT growth compensates higher interest expense Tax rate reverting back to statutory tax rate mid-term (~30%) Prior to Poly 11 ramp-up: Tennessee investment reduces ROCE by up to 150 bps 42 of 58 4 4 Aggressive Cost Roadmaps: Targeting > €100m in 2014 Measures Chemicals POLYSILICON WOS WACKER Operating System: targeting continuous cost decrease in specific operating costs Raw Materials: expanded supplier portfolio Raw material and energy cost: optimized yields, loss reduction, raw material and energy recovery, process optimization Electricity: reduced consumption in major process steps (conversion, deposition) Labor: reduce set-up times and non-value-added activities Personnel Expenses: continuous productivity improvement Logistics: lean processes, optimized packaging Technical spending: optimize inspection cycles, spare part storage Supplies: expanded supplier portfolio Maintenance Expenses: standardization, spare parts logistics (sourcing/storage level) Siltronic Raw materials and energy costs: optimize specific raw material and energy consumption, increase yield Supplies: reduce consumption of supplies Labor: reduce personnel costs, set-up times Site loading rules Process optimization across the entire value chain Process yield enhancement Asset utilization: debottlenecking Total expected cost savings 2013: €200m reached €225m 2014 – A Year of Transformation November 2014 43 of 58 4 4 Price Decline over €1 bn within Two Years (22% of Sales) – Mainly in POLYSILICON WACKER Group: Sales Development (€m) 5,000 4,910 158 703 4,500 4,635 270 366 301 Price Volume 91 4,479 Currency 2013 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2011 Price Volume 2014 – A Year of Transformation November 2014 Currency Spalte1 2012 44 of 58 4 4 The Path to 2017: WACKER Is an Attractive Investment 2017 Advanced Materials Leading market shares and global presence Compelling Growth Lower CapEx Growing share of chemicals specialty products Strong Cost Position Sales €6 - 6.5 bn (~6% CAGR) EBITDA €1.2 bn (~20% margin) Well defined cost roadmaps Well positioned to harvest the solar opportunity ROCE >11% Leading Market Positions 2014 – A Year of Transformation November 2014 45 of 58 4 4 WACKER: Updated Guidance FY 2014 2013 Outlook 2014 4,478.9 Mid-single-digit % increase 678.7 Approx. 1,000 15.2 Substantial increase to over 20% 6.3 Substantial improvement Net cash flow (€m) 109.7 Markedly pos. NCF at prior-year level CapEx (€m) 503.7 Approx. 550 Net financial debt (€m) 792.2 Increase of around 300 Depreciation 564.4 Approx. 600 2.2 Substantial increase Sales (€m) EBITDA (€m) EBITDA margin (%) Group net income (€m) ROCE 2014 – A Year of Transformation November 2014 46 of 58 CREATING TOMORROW`S SOLUTIONS 3rd Quarter 2014 – Conference Call Note October 30th, 2014 Q3 2014 – Call Note October 30th, 2014 47 of 29 4 4 WACKER: Strong Performance in Q3 supported by Special Effects in €m Q3 2014 Q2 2014 % QoQ Q3 2013 % YoY Sales 1,232.2 1,242.3 -0.8 1,165.4 5.7 229.5 51.4 28.2% 18.5% - 14.4% - 196.3 82.1 139.1 35.1 459.3 15.9% 6.6% - 3.0% - 119.0 29.4 304.8 5.4 2,103.7 2.43 0.64 279.7 0.09 >100 347.5* EBITDA EBITDA margin EBIT EBIT margin Result for the period EPS in € 167.9 * 107.0 *incl. retained prepayments and damages from cancelled and reorganized contracts: Q3/13 €13,2m; Q3/14 €92,3m 2014 – A Year of Transformation November 2014 48 of 58 4 4 Guidance Update: Expect now about €1bn in EBITDA for FY 2014 WACKER Q3 2014 Comments FY 2014 Outlook All segments with higher sales yoy FY sales above 2013 EBITDA includes €92.3m special effects Further focus on cost roadmap Capex €153m, mostly for Tennessee/POLYSILICON FY EBITDA margin >20% expected Net Cash Flow €178m FY tax rate due to ongoing better results in Germany expected at about 40% Net financial debt €906m Net income €119m / EPS 2.43€ Tax rate 34%, driven by higher result in Germany 2014 – A Year of Transformation November 2014 49 of 58 4 4 Strong Performance in All Segments Q3 2014 Sales1) Q3 2014 EBITDA 2% 17% 18% 4% 2% 52% Total: €1,232.2m 23% 10% 20% Total: €347,5m 36% 14% 2% Siltronic WACKER SILICONES WACKER POLYMERS WACKER BIOSOLUTIONS WACKER POLYSILICON Others 1) 2014 – A Year of Transformation November 2014 based on external sales 50 of 58 4 4 Singapore 300mm Integration and Tennessee Expansion Drive FY 2014 Net Financial Debt up by €300m YoY Balance Sheet (%) Assets Total €7.0bn €6.3bn Characteristics 09/30/14 Liabilities Total €7.0bn €6.3bn 30% Non current assets: €4,742m Securities, cash and cash equivalents: €687m Provisions for pensions: €1,582m 35% Net financial debt: €906m 66% 67% 22% Equity: €2,114m 17% Equity 10% 13% Pension Accruals Noncurrent Assets 23% Current Assets 24% Securities, Cash & Cash E. 10% 23% Prepayments received: €731m Capex: €343m Prepayments 22% Financial Debt 10% 09/30/14 12/31/13 2014 – A Year of Transformation November 2014 15% 13% Accruals & Liabilities 09/30/14 12/31/13 51 of 58 4 4 EBITDA and EBIT Impact of Special Effects - Overview 2013 Special Effects Silicones: Siloxane JV effects Q1 Q2 Q3 Q1 Q2 Q3 13.7 - - Polysilicon: Retained prepayments & damages from cancelled contracts 32.2 23.8 13.2 8.4 114.0 0.0 92.3 EBITDA 32.2 23.8 13.2 22.1 114.0 0.0 92.3 - -31.1 - - - 114.0 0.0 92.3 EBIT - - Q4 - Siltronic: Special depreciation for disused assets - 2014 - 32.2 23.8 13.2 2014 – A Year of Transformation November 2014 -9.0 52 of 58 4 4 Raw Materials: Si-Metal Spot and VAM* up, but Methanol down Ethylene Contract (€/MT) Si-Metal Contract (€/MT) 1,400 2,200 Raw Materials 2013 (€m) Chemicals Others Si Metal VAM* Ethylene 2,150 1,300 2,100 1,200 2,050 1,100 2,000 1,000 Source: ICIS, Ethylene Market Price Europe, free delivered 2014 – A Year of Transformation November 2014 09/14 05/14 01/14 09/13 05/13 01/13 1,900 Methanol 09/12 09/14 05/14 01/14 09/13 05/13 01/13 09/12 900 1,950 Source: Source: CRU-Provider, Si-Metal Contract Price Europe free delivered Costs of top 4 raw materials 21% of chemicals segment sales *VAM = Vinylacetate monomer 53 of 58 4 4 Raw Materials: VAM* Shortage Drives up Costs 220% VAM Avg Spot NW Europe = 878 €/MT = 100 (06/12) 200% indexed 180% 160% 140% 120% 100% 80% 06/12 10/12 02/13 06/13 10/13 02/14 VAM Avg Spot Asia, ICIS VAM Avg Spot East China, Chemease VAM Avg Spot US Gulf, IHS VAM Avg Spot NW Europe, ICIS 06/14 USA: IHS Spot Export-Avg., FOB US Gulf Coast / Europe: ICIS Spot FD NW Europe / Asia: ICIS Spot CFR NE Asia / China: Chemease Spot, Avg., East China *VAM = Vinylacetate monomer 2014 – A Year of Transformation November 2014 54 of 58 4 4 1 Cent Change in USD/€ Exchange Rate had an Impact of €4.4m on FY-EBITDA in 2013, unhedged* USD/EURO Development External Sales and Net USD Exposure 1.40 2,909 Chemicals 202 1.35 845 1.30 Polysilicon 1.25 736 Siltronic 09/14 07/14 05/14 03/14 01/14 11/13 09/13 07/13 05/13 03/13 01/13 11/12 1.20 09/12 385 Source: www.x-rates.com/d/USD/EUR/hist2014.html 2014 – A Year of Transformation November 2014 External Sales FY 2013 Net USD Exposure FY 2013 *Standard Hedging policy = 50% of net exposure, 12 months rolling forward 55 of 58 4 4 WACKER: Group Sales 6% above Previous Year Sales in €m Q3 2014 Q2 2014 %QoQ Q3 2013 %YoY CHEMICALS 780.7 773.3 1.0 732.9 6.5 WACKER SILICONES 447.5 441.2 1.4 429.4 4.2 WACKER POLYMERS 288.0 285.5 0.9 265.4 8.5 45.2 46.6 -3.0 38.1 18.6 WACKER POLYSILICON 252.4 273.2 -7.6 235.7 7.1 Siltronic 216.0 210.4 2.7 197.1 9.6 39.8 39.5 0.8 48.1 -17.3 -56.7 -54.1 4.8 -48.4 17.1 1,232.2 1,242.3 -0.8 1,165.4 5.7 WACKER BIOSOLUTIONS Others Consolidation 2014 – A Year of Transformation November 2014 56 of 58 4 4 WACKER: EBITDA w/o one-offs around 65% above Q3/2013 EBITDA in €m Q3 2014 Q2 2014 %QoQ Q3 2013 %YoY 123.1 109.1 12.8 109.6 12.3 WACKER SILICONES 69.5 57.4 21.1 59.2 17.4 WACKER POLYMERS 48.2 43.5 10.8 45.1 6.9 5.4 8.2 -34.1 5.3 1.9 180.3* 87.9 >100 46.6* >100 33.2 28.1 18.1 5.2 >100 Others 9.1 4.8 89.6 5.2 75.0 Consolidation 1.8 -0.4 n.a. 1.3 38.5 347.5 229.5 51.4 167.9 >100 CHEMICALS WACKER BIOSOLUTIONS WACKER POLYSILICON Siltronic *incl. retained prepayments and damages from cancelled and reorganized contracts: Q3/13 €13.2m; Q3/14: €92.3m 2014 – A Year of Transformation November 2014 57 of 58 4 4 WACKER: Issuer, Contact and Additional Information Issuer and Contact Additional Information WACKER CHEMIE AG Hanns-Seidel-Platz 4 D-81737 Munich ISIN: DE000WCH8881 WKN: WCH888 Investor Relations contacts Deutsche Börse: WCH Mr. Joerg Hoffmann, CFA Tel. +49 89 6279 1633 joerg.hoffmann@wacker.com Ticker Bloomberg: CHM/WCH:GR Ticker Reuters: CHE/WCHG.DE Mrs. Judith Distelrath Tel. +49 89 6279 1560 judith.distelrath@wacker.com Listing: Frankfurt Stock Exchange Prime Standard Financial Calendar 11/25/14 – 11/26/14 Deutsches Eigenkapitalforum in Frankfurt 03/17/15 – FY Results 2014 04/30/15 – Q1 Results 2015 05/08/15 – Annual Shareholders’ Meeting 08/03/15 – Q2 Results 2015 10/29/15 – Q3 Results 2015 2014 – A Year of Transformation November 2014 58 of 58
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