After a record year, Wacker invests in further growth

Wacker Chemie AG ended 2022 with new all-time highs for sales and earnings. Presenting its annual report, the Munich-based chemical company confirmed Group sales of €8.21bn in 2022 (2021: €6.21bn), up 32% yr-on-yr.

Substantially higher selling prices were the main growth driver. Sales also benefited from positive exchange-rate effects due to the stronger US dollar. On the other hand, overall volumes were down somewhat versus the previous year, dampening sales.

In 2022, Group EBITDA rose 35% yr-on-yr, coming in at €2.08bn (2021: €1.54bn), yielding an EBITDA margin of 25.4% (2021: 24.8 %). In addition to a marked increase in sales, cost savings from the Group’s ongoing efficiency programmes had a positive impact on operating performance. On the other hand, sharp increases in energy, raw-material and logistics costs weighed on EBITDA, amounting to additional costs of around €1.3bn yr-on-yr. 

Due to the effects described above, Group EBIT grew by 48% to around €1.68bn (2021: €1.13bn), resulting in an EBIT margin of 20.5% (2021: 18.3%). Depreciation and amortisation amounted to €402M in 2022 (2021: €404M). Net income for 2022 was €1.28bn (2021: €828M). 

Wacker is headed for a new record with its dividend. The Executive and Supervisory Boards will propose a dividend of €12.00 per share at the Annual Shareholders’ Meeting. Accordingly, WACKER will be distributing roughly 50%  of its net income for the year, in line with its dividend policy. Based on the number of shares entitled to dividends as of December 31, 2022, the total cash dividend corresponds to a payout of €596M. Calculated in relation to Wacker’s average share price in 2022, the dividend yield is 8.6%. 

“The war in Europe is an acid test for the entire world and has thrown the global economy off balance,” said CEO Christian Hartel in Munich on Tuesday. Amid these unpredictable and unstable conditions, he said, Wacker had had a highly successful business year: “With €8.2bn in sales and EBITDA of more than €2bn, it was by far the most successful year in the company’s history.” 

From today’s point of view, this strong operational growth, which Wacker was able to achieve in the past couple of years, will not continue in 2023: “The global economy has slowed significantly. Around the world, the economic and political environment remains volatile. High energy prices, especially in Europe, continue to impact our business,” Hartel said. 

In the first two months of this year, demand declined across a large number of customer sectors, with Group sales and EBITDA both lower than last year. Overall, Wacker expects to post Group sales of about €1.7bn in Q1 2023 (Q1 2022: €2.08bn). Group EBITDA will also be lower in Q1 2023. It is expected to come in between €250M and €280M, amid lower selling prices and declining volumes. 

Wacker expects to post Group sales of between €7bn and €7.5bn in 2023, due to a combination of significantly lower selling prices, volume growth in the course of the year and positive product-mix effects in the chemical divisions. Based on these trends, Group EBITDA is expected to come in between €1.1bn and €1.4bn. Slightly higher energy costs will also dampen EBITDA. 

“Even though we currently face economic headwinds rather than tailwinds, we look to the future with optimism,” Hartel went on to say. Last year, Wacker had plotted its strategic course for the coming years. “Our Strategy 2030 provides us with clear goals: faster growth, high profitability and better resilience in times of constant change,” Hartel explained. He stated that a key component in achieving these goals would be higher investments, which would be spread across more than 40 different projects and rise to around €650M in 2023. “Investments at our chemical divisions will focus mainly on expanding our portfolio of specialty products. In the biotechnology field, we will ramp up the ongoing expansion of our sites. In our polysilicon business, the focus will be on semiconductor applications,” said Hartel.

Capital Expenditures 

In 2022, capital expenditures reached €547M (2021: €344M), up 59% yr-on-yr. 

Wacker invested in expanding its production capacities in all regions across the globe. The lion’s share of capex went to the company’s chemical divisions, with funds being invested, for example, in new facilities for intermediates and downstream products for liquid silicone rubber at the Adrian, Michigan site in the USA and at Burghausen, as well as in high-temperature vulcanising solid silicone rubber at the Panagarh site in India. Capacity was also increased at Nünchritz and at the subsidiary SICO Performance Material at its site in Jining, China. Further funds were invested in construction of a dispersion reactor and spray dryer at the Nanjing site in China. 

In the biotechnology field, the Amsterdam site was further expanded. At the Halle site, construction commenced on the mRNA Competence Center. Further investments went toward new equipment in plants producing particularly high-quality polysilicon for semiconductor applications. 

Employees 

The number of Group employees increased by 1,319 in 2022. As of December 31, 2022, WACKER had 15,725 employees worldwide (Dec. 31, 2021: 14,406). This included 10,424 employees at its sites in Germany (Dec. 31, 2021: 10,006) and 5,301 at its international sites (Dec. 31, 2021: 4,400).  

Outlook 

In 2022, Wacker set the course to accelerate its growth in the coming years. In March of last year, the Group presented to the capital markets its strategic goals for the period until 2030. Sales are planned to rise to over €10bn  by 2030, This growth will be driven by volume growth and a better product mix as well as a focus on sustainable products and applications. Up to now, the annual average growth rate has been between 4 and 5%. In the future, it should be higher, by a factor of between 1.5 and 2. At the same time, Wacker is focused on high profitability. The company is aiming for an EBITDA margin of more than 20% by 2030. The goal is to earn twice the cost of capital. 

“Higher investments are an important stepping stone towards achieving our goals. In the coming years, capex will be markedly higher than depreciation,” underscored CEO Christian Hartel. Wacker had the financial strength needed for such capital expenditures, he said, with more than €400M per year to be invested in Wacker’s chemical divisions – Wacker Silicones and Wacker Polymers. Wacker Biosolutions is to see over €80M per year, while investments of about €100M per year are planned for Wacker Polysilicon. “Sustainability remains an integral part of our Strategy 2030. We have significantly raised the bar for our sustainable development goals. Our aim is to achieve a 50% reduction in our carbon emissions by 2030 – in absolute terms and regardless of volume growth. We also want to reach net zero by 2045. For us, stronger growth and sustainable operations are not mutually exclusive,” said Hartel. 

Wacker expects to post Group sales of between €7bn and €7.5bn in 2023. EBITDA is expected to come in between €1.1bn and €1.4bn, with significantly lower selling prices in particular dampening earnings. The EBITDA margin is likely to decline substan-tially compared with last year. At €650M, capital expenditures will rise substantially year over year. They will also be clearly higher than depreciation/amortisation, which will amount to about €450M. Group net income for the year will be markedly lower than last year. Net cash flow should be positive, but substantially lower than last year. Wacker is expected to post low net financial debt in 2023. 

The company expects its chemical business to post lower sales this year, due chiefly to declining selling prices. Wacker Silicones expects to generate sales of between €3.1bn and €3.3bn and to post an EBITDA margin of around 15%. Sales at Wacker Polymers are likely to amount to around €1.8bn, while its EBITDA margin should be slightly higher than last year. 

The Group expects Wacker Biosolutions to post sales growth, likely in the low double-digit percentage range. EBITDA should be significantly higher than last year.

Wacker Polysilicon expects to generate sales of between €1.6bn and €1.8bn in 2023, driven by lower average polysilicon prices and reduced volumes due to changes in the product mix. EBITDA is likely to come in between €300M and €500M.