Wacker remains below the previous year’s figures due to lower sales prices in the 1st quarter

Wacker closed the first quarter of 2024 with lower sales and earnings compared to the strong prior-year quarter. The chemical company generated sales of around €1.5 billion in the quarter under review. This is 15 per cent less than in the same period of the previous year (€ 1.74 billion). The main reason for the decline was lower sales prices. In contrast, sales rose by 8 per cent compared to the previous quarter (€1.38 billion).

Wacker generated earnings before interest, taxes, depreciation and amortisation (EBITDA) of €172 million in the first quarter of 2024. This is 39 per cent less than in the previous year (€ 281 million). Compared to the previous quarter (€ 135 million), EBITDA increased by 27 per cent. In addition to lower sales prices, negative currency effects were also responsible for the lower result compared to the previous year. Compared to the previous quarter, consistent cost-cutting measures had a positive impact on EBITDA. The results of the operating segments developed as expected in the first quarter. The EBITDA margin for the three months from January to March 2024 was 11.6 per cent (previous year: 16.1 per cent). In the previous quarter, it was 9.8 per cent.

Due to the factors mentioned above, consolidated earnings before interest and taxes (EBIT) fell significantly compared to the previous year. It totalled € 63 million in the quarter under review. This is 65 per cent less than a year ago (€ 178 million) and corresponds to an EBIT margin of 4.2 per cent (Q1 2023: 10.2 per cent). Net profit for the reporting quarter totalled € 48 million (Q1 2023: € 147 million). Earnings per share thus totalled € 0.89 (Q1 2023: € 2.90).

Declining development

Wacker has confirmed its forecast for 2024. Accordingly, the company expects business to decline slightly compared to the previous year. Sales are expected to be in the range of €6 billion to €6.5 billion. The chemical group expects EBITDA to be between € 600 million and € 800 million. The company is assuming rising sales volumes and lower sales prices.

“As expected, the ongoing economic weakness and lower sales prices have been reflected in our figures,” said Group CEO Christian Hartel in Munich on Thursday. “In terms of turnover and earnings, we were down on the strong prior-year quarter.” Compared to the fourth quarter of 2023, the number of orders has risen again. “Customers have started to replenish their inventories from the very low levels seen recently. Demand for silicones in particular developed positively in the first quarter,” says Hartel. “However, this is not yet a clear sign of a sustained turnaround.”

Wacker is responding to the persistently weak market environment with consistent cost-cutting measures. “We are continuing to pursue a restrictive personnel policy, streamlining processes and saving on our material costs,” explained Hartel. In the medium and long term, the CEO was optimistic. Strategically and financially, Wacker is well positioned. “We remain committed to our growth targets until 2030,” emphasised Hartel. Global megatrends such as renewable energies, electromobility, digitalisation and biopharmaceuticals are driving the business.

Regions

Sales in the first quarter of 2024 were lower than in the previous year in all regions. In Asia, sales totalled € 573 million, down 22% on the previous year (€ 733 million). In the Americas, sales fell by 7 per cent to € 258 million in the quarter under review (Q1 2023: € 278 million). In Europe, sales totalled € 573 million (Q1 2023: € 649 million). This is a decrease of 12 per cent.

Investments and net cash flow

At € 117 million, the Group’s investments in the first quarter of 2024 were 12 per cent higher than the previous year’s figure (€ 104 million). The funds were channelled into expansion projects in all four divisions in Europe, Asia and the USA. In Burghausen, for example, the company is currently expanding capacity for the production of polysilicon for semiconductor applications. Polymer capacities are being expanded in Calvert City, USA. An mRNA centre of excellence is being built at the biotech site in Halle, which will open in June 2024. Wacker is investing in a new production site for silicones in Karlovy Vary, Czech Republic, which is scheduled to go into operation in 2025. Net cash flow in the first quarter of 2024 totalled €-126 million, a significant decrease on the prior-year figure (€49 million).

Employees

The number of employees at Wacker worldwide increased slightly in the quarter under review. As at 31 March 2024, the Group employed 16,425 people (31/12/2023: 16,378). There were 10,641 employees at the Wacker sites in Germany (31 Dec. 2023: 10,621) and 5,784 at the international sites (31 Dec. 2022: 5,757).

Business segments

Wacker Silicones generated total sales of €710 million in the first quarter of 2024. This is 7 per cent less than in the previous year (€ 760 million). The main reason for this decline was lower prices. Compared to the previous quarter (€ 610 million), however, the division’s sales grew by 17 per cent. The increase in customer demand compared to the previous quarter had a positive impact here. At € 81 million, EBITDA for Wacker Silikones fell by 15 percent compared to the previous year (€ 96 million). Compared to the previous quarter (€37 million), however, it more than doubled. In addition to higher sales, this was due to higher capacity utilisation, lower raw material prices and a positive investment result. The EBITDA margin in Q1 2024 was 11.4 percent, compared to 12.6 percent in Q1 2023 and 6.1 percent in Q4 2023.

At €372 million, Wacker Polymers‘ total sales in the quarter under review were 13 percent below the prior-year figure (€428 million). This was primarily due to lower prices. Compared to the previous quarter (€342 million), however, sales increased by 9 percent. EBITDA amounted to € 56 million in the first quarter of 2024. This is a decrease of 21 per cent compared to the previous year (€ 71 million). This development is due to lower sales prices with a slight increase in sales volume. Compared to the previous quarter (€ 32 million), EBITDA increased by 75 per cent. Among other things, higher sales and increased plant utilisation had a positive impact here. The EBITDA margin was 15.0% in the first quarter of 2024 after 16.6% in the previous year and 9.3% in the previous quarter.

Wacker Biosolutions‘ total sales totalled €72 million in the first quarter of 2024, slightly below the previous year’s level (€77 million). Compared to the previous quarter (€ 93 million), sales fell by 23%, mainly due to lower sales volumes. At € 4.6 million, EBITDA in the quarter under review was significantly higher than in the previous year (€ -1.6 million). This was due to a better mix of products and customer projects in the biopharmaceuticals business. Compared to the previous quarter, the figure fell by 61 per cent (€ 11.7 million). The EBITDA margin was 6.4 percent, compared to -2.1 percent in the previous year and 12.6 percent in Q4 2023.

Wacker Polysilicon generated total sales of €300 million in the quarter under review. This is 32 percent less than in the previous year (€441 million). Compared to the previous quarter (€303 million), sales remained at the same level. The reason for the year-on-year decline was the significantly lower prices for solar silicon. Wacker Polysilicon’s EBITDA amounted to €43 million in the quarter under review, down 56 percent on the previous year (€98 million) due to lower prices. Compared to the previous quarter (€21 million), EBITDA more than doubled. Among other things, lower energy costs had a positive effect here. Earnings in the previous quarter were also negatively impacted by year-end closing effects. From January to March 2024, the EBITDA margin for the division was 14.5 per cent, compared to 22.2 per cent in Q1 2023 and 6.8 per cent in Q4 2023.

Outlook

Wacker presented its estimates for the company’s expected development in the current year in detail in the forecast report of the 2023 Annual Report. The company has now confirmed this forecast. Wacker expects business to decline slightly in 2024 due to the continued weak market environment. Specifically, the company anticipates sales in the range of €6 billion to €6.5 billion. EBITDA is expected to be between € 600 million and € 800 million. The EBITDA margin is expected to be significantly lower than in the previous year, while investments will be slightly lower than in the previous year. Investments will significantly exceed depreciation and amortisation, which is expected to amount to € 450 million in 2024. The company expects net profit for the year to be significantly lower than the previous year. Net financial debt is expected to increase. Net cash flow is expected to be negative in 2024 and significantly below the previous year.