How To Grow A Chemical Company

Transcription

1 7 th Capital Markets Day London, July 1, 2013 CREATING TOMORROW`S SOLUTIONS

2 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. 1

3 Capital Markets Day 2013 WACKER GROUP Dr Staudigl, CEO: The Next Five Years Dr Ohler, Member of EB: POLYMERS Mr Willems, Member of EB: SILICONES Mr Schindlbeck, President WACKER POLYSILICON Dr Rauhut, CFO: Financials Dr Staudigl, CEO: Summary 2

4 CREATING TOMORROW`S SOLUTIONS WACKER The Next Five Years Dr Rudolf Staudigl, CEO Capital Markets Day 2013, London

5 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 4

6 Our Business Portfolio: A Foundation for Growth WACKER BIOSOLUTIONS High potential for future development WACKER POLYMERS WACKER SILICONES Strong no. 3 with global footprint Leading positions in key growth segments No. 1 in dispersible polymer powders No. 1 in VAE dispersions Global footprint *) FY 2012 Sales 4.6 bn WACKER POLYSILICON No. 1 Cost and quality leader Enabling industry growth Siltronic Technology leader, ranking as no. 3 Balanced base of customers Note: Percentages based on external sales per segment *) Others 5

7 Strong Track Record: Expecting Strong Growth into 2017 Long Term Historic Sales Growth m 7,000 6,000 5,000 4,635 m ~6% CAGR Target 2017: 6,000-6,500 m 4,000 3,000 2,000 1,

8 The Next Five Years: Introducing Financial Targets Target 2017 Sales EBITDA bn (~6% CAGR)* 1.2 bn (~20% margin) ROCE > 11% * CAGR 2012/2017 7

9 Entering the Next Phase: From Asset Growth to Cash Generation Ratio of Capital Spending vs. Depreciation capex between 1.3 and 2.2x depreciation capex < depreciation capex >< depreciation Create Focus on capital intensive growth: Eight additional sites globally Increased capacities 7x in Polysilicon, 3x in VAE dispersions, 2x Siloxane, 6x 300 mm wafer The customer dimension: Global presence and market penetration with technical centers and global sales structures Leverage Focus on profitability and cash: Execute cost roadmaps Leverage global asset base Focus on quality growth, growing specialty sales Invest below depreciation Expand Focus on selective expansion of production network: Selective growth projects Exploring further Verbund and debottlenecking opportunities 8

10 Create: Building a Global Asset Base Integrated Sites Siloxane 120 kt Siloxane +10 kt Nünchritz Polysilicon expansion +15 kt Polysilicon expansion +37 kt Siloxane expansion up to 110 kt by 2007 Siloxane +10kt Burghausen Dispersible Powder +50 kt 300 mm Wafer +60kw/m VAE Dispersions +66 kt Tennessee Polysilicon expansion +20 kt WACKER SILICONES WACKER POLYSILICON WACKER POLYMERS Siltronic 9

11 Create: Building a Global Asset Base Specialist Sites JV with Dow Corning: Siloxane /Fumed Silica + ~210 kt Zhangjiagang Downstream Elastomers / Sealants Downstream Polymers / Oils Singapore JV with Samsung: 300 mm Wafer +200 kw/m JV with Samsung: +100 kw/m Calvert City Nanjing Acquisition of APP VAE Dispersions +60 kt Dispersible Powder +50 kt VAE Dispersions +30 kt VAE Dispersions +60 kt PVAc solid resins +20 kt WACKER SILICONES WACKER POLYMERS Siltronic WACKER BIOSOLUTIONS 10

12 Create: Global Market Presence Technical Center & WACKER ACADEMY Market Penetration in all Emerging Regions China Local products and services Chino Adrian Nünchritz Canton, OH Burghausen Jandira Moscow Beijing Akeno Dubai Kolkata Seoul Shanghai Mumbai Shunde Singapore Melbourne Korea Focus on products for the electronic market India 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. South East Asia Mobile technical center Sales TC Academy Plant 11

13 Leverage: Cash Generation Chemicals Verbund WACKER POLYSILICON Siltronic Focus on specialties Application-driven Decreasing capital intensity Key beneficiary from solar growth Leading in product quality and cost Maintaining No. 3 market position Competitive in cost and capability Self-sufficient, cash-generating After scale-up: cash generation Harvesting cash 12

14 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 13

15 Leverage: Shifting Focus to Downstream Products Raw Material Upstream Downstream Customers Industries Methanol Silicon Metal Siloxane Pyrogenic Silica Silicones Construction Automotive suppliers Paints and coatings Textiles, print and paper Personal care Polysilicon Solar wafers, cells and modules Electronic wafers Semiconductors Ethylene Acetic Acid Vinylacetate Monomer (VAM) Vinylacetate ethylene (VAE) Dispersible Polymer Powders (DPP) Polyvinyl Acetate (PVAc) Engineered fabrics, coatings, adhesives, carpet Construction, remodeling, insulation Food, automotive Starch/ Dextrose Microbiological fermentation Therapeutic proteins food ingredients Food, life sciences, household 14

16 Chemicals: Enhancing Quality of Life Global Trends BELSIL Growing population & rising welfare in emerging countries Increasing sales of personal care products Our contribution: BELSIL for gloss and feel Silicone Fluids & Emulsions in Personal Care Living Comfort Urbanization ELASTOSIL LR Airbags in cars = Safety first Silicones used as an airtight coating of woven fabrics Low flammability Our contribution: ELASTOSIL LR Silicone liquid rubber for the Automotive Industry Mobility Resource Savings VINNAPAS dispersions/dispersible powders Buildings consume 40% of primary energy Need to reduce consumption of heating energy Our contribution: VINNAPAS dispersions and dispersible powders for external thermal insulation 15

17 Leverage: Proximity to Customer Technical Center & WACKER ACADEMY Market Penetration in all Emerging Regions China Local products and services Chino Adrian Nünchritz Canton, OH Burghausen Jandira Moscow Beijing Akeno Dubai Kolkata Seoul Shanghai Mumbai Shunde Singapore Melbourne Korea Focus on products for the electronic market India 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. South East Asia Mobile technical center Sales TC Academy Plant 16

18 Chemicals: Global Presence Opens up Growth Opportunities Americas Europe Asia +7% +5% +11% ,400 1, , >8,000 customers >10,000 customers >14,000 customers RoW >2,000 customers Chemicals sales in m EUR 17

19 POLYSILICON: The Way Forward Fast cost decrease in Solar PV unlocks growth Polysilicon Market: 12% growth expected ( ) 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 18

20 POLYSILICON: Fast Cost Decrease of Solar PV Unlocks Growth Roof-top System Prices* LCOE & Electricity Price Off-grid Applications young market mature market household power price Germany China TX CA PV becoming very competitive and easy-to-install PV can be built very fast and in small increments Steep price decline of storage solutions Cheap electricity for remote areas with no access to grid annual solar energy yield(kwh/kwp) US Germany Module BOS BOS = Balance of System *best practice Q /Wp 1.0 /Wp 0.5 /Wp size of electricity market LCOE vs. power price = room for positive NPV (assumes full grid access) 19

21 POLYSILICON Expansion Tennessee (Poly 11): Establishing a Platform for Future Growth in the US Tennessee 20kt p.a. Lower Electricity Cost in the US (indexed) 100 Germany = Electricity Price + FiT Surcharge (2013) + Grid usage fee + Other charges US = List price TN provider Feb Planned ramp up of Polysilicon production in Currency diversification for the Group Growth platform for chemical products in the USA Germany (Industry High- Voltage) USA (TN) Assumptions: Data based on Year end 2012, USD/EUR: 1.35 Source: WACKER estimates, market data 20

22 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 21

23 Siltronic: Growing Demand for 300 mm Wafer Market by Diameter (million cm²) 3,500 ~ 4 % 3,000 2,500 2,000 1,500 < 0 % 1, < 0 % SD 200 mm 300 mm CAGR 300 mm volume continues to grow as smaller diameters are substituted Source: SEMI; SD = Small Diameter 22

24 Siltronic: Singapore JV with Samsung for 300 mm Siltronic Samsung Wafer Pte. Ltd. (SSW) Joint Venture with Samsung (50:50) Siltronic has an option on the majority of the venture Further capacity increase from debottlenecking possible JV consolidated at-equity: dilutes Siltronic performance representation Assuming full consolidation of the JV, Siltronic pro-forma results*: In m Sales 1,125 1,030 EBITDA Capacity: >300 kw/m EBITDA % * excl. restructering 23

25 Siltronic: Recognized for Outstanding Performance Examples Winner of Intel's Preferred Quality Supplier Award 2006, 2010 & 2012 Winner of Intel s highest supplier award: Supplier Continuous Quality Improvement 2011 Regional Supplier Recognition Award 2013 Winner of Fairchild s Supplier of the Year Award Annual QCDS 1 st Place wafer Supplier Award

26 Siltronic Strategy: Focus on Cash Generation Create High capital intensity 300 mm expansion Strengthen market position with JV Leading edge technology Harvest 2013 onwards Focus on 300 mm in Asia No 450 mm investment Continue rationalization outside of Asia CapEx below depreciation CapEx above depreciation Strategy: Focus on low CapEx and 300 mm in Asia 25

27 WACKER: Strict Cost Management Throughout the Group Cost Program Siltronic Polysilicon Chemicals Group Personnel Built-in flexibility Capacities tightly managed Raw Materials Energy Strategic sourcing Central function Globalization Investment decisions reflecting local energy cost Optimization sites Cost road map 300 mm Cost road map solar WOS Power Plus next WOS Power Plus next Overhead: Efficiency program central functions 26

28 WACKER Financial Targets for 2017: Sales of bn with Profit Above Costs of Capital in m 2012 actual 2017 target Sales 4,635 6,000 6,500 CAGR ~ 6 % EBITDA 795 1,200 Margin 17 % ~ 20 % ROCE 5 % > 11 % CapEx (% of sales) 24 % Below depreciation 27

29 The Path to 2017: WACKER Is an Attractive Investment Advanced Materials Compelling Growth Strong Cost Position Leading Market Positions Leading market shares and global presence Lower CapEx Growing share of chemicals specialty products Well defined cost roadmaps Well positioned to harvest the solar opportunity 2017 Sales bn (~6% CAGR) EBITDA 1.2 bn (~ 20% margin) ROCE > 11% 28

30 CREATING TOMORROW`S SOLUTIONS POLYMERS Expansion, Innovation, Substitution Dr Tobias Ohler, Member of EB Capital Markets Day 2013, London

31 POLYMERS at a Glance Competitive Landscape 2012* VAE Dispersions Dispersible Polymer Powders > 250 Polymer Products > 10,000 Customers Others WACKER Others WACKER 2 nd in the market 2 nd in the market Market Characteristics Diverse market and customer base Historic growth above GDP Steady margins via price formulas Pricing power as market leader High technology barriers in most segments Broadened scope of applications 13 Technical Centers 5 Production Sites Customer integration and process optimization is our key to success * Capacities; WACKER estimates 30

32 POLYMERS Build on Acetic Acid and Ethylene Raw Material Acetic Acid + Ethylene Upstream Vinyl Acetate Monomer Vinyl Acetate Ethylene Polyvinyl acetate Dispersion Downstream Polyvinyl alcohol Dispersible Polymer Powder > 250 products in multiple applications 31

33 Products Serving Diverse End-Industries Portfolio 2012 Adhesives 20% Construction 47% Coatings & Paints 13% SOLID LIQUID Nonwovens & Textiles 10% Others 5% Carpet 7% Source: WACKER analysis 32

34 Construction Apps in New Housing and Renovations Ceramic Tile Adhesives External Thermal Insulation Composite Systems Skim Coats Self Levelling Compounds 33

35 POLYMERS Growing Twice the GDP for 10 Years Past Production Volumes WACKER POLYMERS Sales Global ~ 8% Recovery Global crisis GDP* ~ 4% Dispersible Polymer Powder Merchant Dispersion * Source: International Monetary Fund, January

36 We Build on 3 Drivers for Ongoing Growth Megatrends Key Drivers Living comfort Expansion Urbanization Innovation Resource savings Substitution 35

37 Expansion: Global No.1 with Strong Capacity Lead Others WACKER Capacity +218% 2008: M&A APP* / USA Dispersions 2009: Nanjing / China 2012: De-bottlenecking Calvert City / USA 2013: Nanjing / China 2 nd in the market : Ulsan / South Korea Others WACKER Capacity +32% 2007: Burghausen / Germany Dispersible Polymer Powders 2009: Nanjing / China 2 nd in the market * APP = Air Product Polymers 36

38 Expansion: Growing in All Regions with High Rates Americas Europe Asia +16% CAGR +6% CAGR +26% CAGR

39 Expansion: Local Service is Core to Develop Markets WACKER Technical Centers and WACKER ACADEMY Moscow Adrian Burghausen Allentown Mexico City Sao Paulo Zhangjiagang Dubai Suwon Shanghai Mumbai Singapore WACKER on Wheels Melbourne At key hubs Technical Center & WACKER ACADEMY #10 Technical Center #3.travelling the country 38

40 Innovation: Also R&D with Global Set-up Close to Markets Innovation Centers in Core Markets Burghausen Focus on low VOC*, formaldehyde and APEO* free Allentown Focus on solutions for carpet technology Adrian Allentown Burghausen Mexico City Sao Paulo Dubai Moscow R&D Center Technical Center & WACKER ACADEMY Technical Center Seoul Seoul Focus on local coating products Zhangjiagang Suwon Shanghai Mumbai Shanghai Singapore Focus on sustainability Melbourne and cost efficiency * VOC = volatile organic compound APEO = Alkylphenol ethoxylate 39

41 Innovation: In Close Cooperation with Customers Target: Unique Performance / Cost Ratio Ceramic Tile Adhessives ETICS* 1K water proofing membrane Vinyl Acetate Ethylene Shotcrete Powder Asphalt Blend Self Levelling Compounds Skim Coat Transformation Transformation Dispersion Asphalt Traditional systems 2K water proofing membrane Concrete Styrene Butadiene Latex Mortar Concrete Asphalt * ETICS = External Thermal Insulation Composite Systems 40

42 Substitution: Taking it to a New Level Styrene Butadiene Latex Material Vinyl Acetate Ethylene Thick-Bed Application Method Thin-Bed 2K pasty/wet Technology 1K dry Job-Site Mix Processing Ready-Mix 41

43 Substitution: Application Overlap as Opportunity for Substitution ~1,600 kt 6% 10% 15% 32% ~16,700 kt Other* ~3,900 kt 4% 64% 34% Vinyl Acetate Ethylene 2006 VAE market Total 2009market SBL market % 23% Styrene Butadiene Latex 19% 6% 2% 5% Construction Adhesives Coatings Nonwovens Carpet Paper Other Sources: Kline; F&S-study Strategic Assessment of the World Emulsion Polymer Markets 2012; WACKER analysis * Other: Pure acrylics, styrene acrylics, PVAc, vinyl acrylics, VA-copolymers 42

44 Substitution: Shale Gas Play Supports Cost Advantage New Emerging Shale Plays in USA Pricing Advantage VAE* versus SBL* in USA Stable price advantage since Source: eia, Energy Information Administration, May 2011 Source: ICIS, spot price FOB export * VAE: Vinyl Acetate Ethylene SBL: Styrene Butadiene Latex 43

45 Substitution: Carpet already a Success Story Carpet Market by Technology VAE 11% loops 240 kt (dry) SBL 84% carrier secondary backing VAE pre-coating secondary coating Key Drivers for VAE* in Carpet SBL* prices increased at rates well above VAE* Carpet manufacturers want to diversify and hedge against big SBL producers VAE has green attributes that are priority for industry (recycle / sustainability) Sources: Kline; F&S-study Strategic Assessment of the World Emulsion Polymer Markets 2012; WACKER analysis * VAE: Vinyl Acetate Ethylene SBL: Styrene Butadiene Latex 44

46 Polymers Targets Continued Growth of 8% p.a. Our Roadmap 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 45

47 CREATING TOMORROW`S SOLUTIONS SILICONES Growing Specialties Auguste Willems, Member of EB Capital Markets Day 2013, London

48 SILICONES at a Glance Competitive Landscape 2012 Evonik 4% Bluestar 6% Shin Etsu 12% Others 9% 9.9* bn WACKER 16% 29% Dow Corning 37% > 3,000 Silicone Products > 20,000 Customers Momentive 16% Market Characteristics Reduced cyclical vulnerability through broad market penetration and wide customer base Historic growth rates above worldwide GDP High entry barriers (capital and technology) Global trends spur sustainable market growth Innovations broaden scope of applications *Source: WACKER estimates; Silane/Siloxane backward integrated suppliers; JV s incl. consolidated sales 17 Technical Centers Essential product or process material in many industries 3 Verbund sites 47

49 From Silicon Metal to Multiple Markets Quartz + Charcoal Quartz + Charcoal + Hydro Power 2 Raw Materials Silicon Metal Methanol Silanes 7 Product Groups Siloxane Resins OF* Silanes Fumed Silica Fluids & Emulsions Elastomers > 3,000 products in multiple applications * OF = Organofunctional 48

50 SILICONES Create Value in Many Industries Health Care 3% Automotive 3% Finished Goods 3% Advanced Processing Additives 39% Coatings 9% Energy & Electronics 7% 2012 ~ 10 bn* Construction 14% Manufacturing Machinery 8% Consumer Care 13% * w/o fumed silica / source: WACKER estimates 49

51 Unique Effects & Specific Properties Are the Reason Why Silicones Are Used in Many Applications Effects of Liquids Liquid" silicones are invisible to the end customer. They are characterized either by a surface effect or as process enhancer. Properties of Solids Solid silicones can be identified easily as they cure to become solid parts for various applications. Gloss Softening Defoaming Water repellent UV stable Insulating Release Lubricating Thermal Stability Long term elasticity Adhesion Weather Resistant Water repellent Water-Vapor Permeability UV stable Heat resistant Chemical resistant Microbial resistant Fluids, Emulsions, Resins, Silanes Elastomers 50

52 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 Release Insulating Silicones are high performance products, suitable for multiple applications 51

53 Serving Global Trends: Living Comfort and Urbanization Living Comfort Worldwide growing GDP, esp. in emerging regions Increasing welfare in emerging economies Longer life expectancy (Solutions for health/wellbeing) Phosphate free ecofriendly dishwasher tabs New surfactants require foam control using silicones Our contribution: SILFOAM SP Silicone antifoam agents in Consumer Care Urbanization Concentration of population in cities Investments in infrastructure* rise to cope with it Intelligent logistics will become mandatory *38 trillion USD investments needed in energy supply between 2011 and 2034 Overhead power lines are key to energy needs Insulating and water repellent, properties silicones can provide Our contribution: POWERSIL Silicone rubber/coatings for the Electric Power Industry * Source: 52

54 Serving Global Trends: Mobility and Resource Savings Mobility Global automotive market is growing with ~6 % Safety, security & sustainability demands increasing Individual mobility is driven by increasing welfare Engine performance boosted with turbo charger technology Silicones as heat-resistant component in turbo charger hoses Our contribution: ELASTOSIL R Silicone rubber for the Automotive Industry Resource Savings Scarcity of natural resources Growing population (~9 bn people in 2050) Pressure on reducing emissions Thermal insulation offers large energy saving potential HDK structure supports optimum heat insulation Our contribution: WACKER HDK Wacker Silica for Vacuum Insulation Panels (VIP) 53

55 Strategy Silicones: Moving Towards Specialties 54

56 Specialty Focus Creates Value Standards Exchangeable Price elastic Specialities Specified properties Value based pricing Standards Low requirement for technical service Technical service is a key success factor Customized solutions Business Strategy Increase our specialty business to 50% of Siloxane volume within 4 years Sell standards with low cost to serve Siloxane Volume Specialties 33% Specialties 50% Standards 67% 2012 Standards 50%

57 Specialties Meet Increasing Performance Requirements Standard Solution Silicone oils in façade paints add water repellent effect Short-term effect only (durability ~2 years) Standard product: Silicone Fluid (WACKER: AK Fluids) Silicone polymers can be used as glue for labels Not suitable in high-speed- /high volume processes Standard product: Non-Silicone products or silicone polymer & standard additives Specialty Solution Facade protection Labelling vapor diffusion Silicone resins in façade paints add durably effects such as water repellency water vapor permeability Silicone dehesive systems used in release labels Customized formulations to enable high speed labeling WACKER specialty solution: Silres BS WACKER specialty solution: Dehesive AMA 56

58 Specialties Strengthen Customer Retention Unilever & WACKER a strong customer & supplier relationship Long-term relationship development From selling standards to selling specialties due to our Ability to meet customer quality standards globally Strong local support provided in all regions Innovation capabilities creating customer benefits Value Creation Award Juni 2013 WACKER Silicones helped Unilever to significantly reduce the cost for silicone emulsions for hair care products by expanding capacities and developing affordable cost-effective solutions from its site in India. Specialty focus creates value for the Customer & WACKER 57

59 More Specialties Require Strong Local Presence Technical Center & WACKER ACADEMY Production sites Holla Chino Adrian Nünchritz Canton, OH Burghausen Moscow Beijing Akeno Dubai Kolkata Seoul Shanghai Mumbai Shunde Chino Adrian North Canton Nünchritz Pilzen Burghausen Calcutta Zhangjiagang Shunde Tsukuba Jincheon Jandira Singapore Jandira Melbourne 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. Tech. Center Tech. Center + ACADEMY Integrated Production Site Production Site Backward integration in Si-Metal 3 world scale upstream sites in Burghausen, Nünchritz and Sales TC Academy Zhangjiagang (Joint venture) Global footprint of flexible downstream operations for localized products Plant 58

60 SILICONES have Grown at 6% since 2003 Americas Europe Asia +4% CAGR +4% CAGR +15% CAGR in mn 59

61 Our Innovation Capabilities Support our Specialty Strategy Product Innovation Strong R&D pipeline: over the last five years ~13% of our annual sales came from new products Substitution Drivers Process efficiency & unique material Substitution properties Drivers: Process efficiency & unique material properties POWERSIL As alternative to ceramic, glass or EPDM in HV-insulators New Markets Unique set of material properties is opening up new markets ELASTOSIL SOLAR RTV Used as lens material in CPV modules due to its long-term UV stability 60

62 Operational Excellence is in our Genes Development of Specific Operating Cost from 2003 to 2012 (2003 = 100%) ~30% Energy Cost Reduction / kg Sx* Produced in Burghausen & Nünchritz *Sx = Siloxane 61

63 Lowering Capital Intensity Upstream Downstream Compounds & Formulations Global Regional Local Silicon Metal Siloxane Elastomers Emulsions & Fluids Resins Compounds Emulsions SILMIX Large Verbund sites Economies of scale Mid-size regional capacities Cost leadership e.g. via continous production lines Flexible capacities for customized local formulations Capital Intensity Value Creation Growing share of specialties from 2/3 to 3/4 of sales Specialty production area 62

64 Competitiveness Along the Entire Value Chain Raw Material Upstream Downstream Key Markets Expand supplier base Extend raw material base Backward integration in Si- Metal Yield increase Optimize Verbund Improvements in process efficiency New capacities for specialties Regional Production Local product modification Innovative solutions improve cost and performance of our customers products: UV addition cure systems accelerate production cycles Specific energy cost/kg Sx *Sx = Siloxane 63

65 SILICONES: Growth Target 6% with Improved Profitability Our Roadmap 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 64

66 CREATING TOMORROW`S SOLUTIONS POLYSILICON Leading in Quality and Cost Ewald Schindlbeck, President WACKER POLYSILICON Capital Markets Day 2013, London

67 POLYSILICON at a Glance Production Chain Revenue ( m) Raw Material Salt Silicon Metal Upstream Polysilicon Downstream Electronic wafer Key Markets Semiconductors 828 1,121 1,369 1,448 1,136 Hydrogen Solar Modules Competitive Landscape* 2012 Supply & Demand (kt, Electronic and Solar) Others 22% WACKER 18% 29% REC 10% 210 kt GCL 19% OCI 14% Hemlock 17% Source: Industry announcements; WACKER estimate * Global shipments Capacity Announcements Active Capacities Total Demand (High Case) Total Demand (Low Case) Electronic Demand Sources: market surveys, industry announcements, WACKER estimate 66

68 Growing with the Market: Full Production Potential at all Platforms up to 150 kt Actual Polysilicon Shipments and Planned Year-End Capacities (kt) Year-End Nameplate Capacities e The ramp of Poly 11 plant in Tennessee will start in mid

69 Tennessee Project on Track (New Schedule): Plant Capacity of 20 kt with New Processes Milestones 01-06/2011 site development 06/2011 start of construction work 06/2012 start of assembly work Mid 2015 planned ramp up poly production Full capacity increases to more than 20 kt following technology and process upgrades. About $2 bn total investment 68

70 PV now Competitive with other Power Sources PV System Price* Development ( /Wp) and LCOE** ( /kwh, 30 year lifetime) Germany /Wp reached in Germany & China! Germany Japan China Italy 1.5 /Wp 1.0 /Wp Wind Offshore Wind Onshore Gas California e Module BOS Irradiation in kwh/kwp *average price during calendar year; ground-mounted systems **Levelized Cost of Electricity Sources: market surveys, industry announcements, WACKER estimates 69

71 USA and Asia with High Growth Potential - European Market Expected to Shrink Country e 2014e France Germany Italy Rest of Europe Europe Australia China India Japan USA CAGR 6-25% Rest of World Total 18 GW 28 GW ~32 GW ~34-40 GW ~40-50 GW CAGR 12-25% Sources: EPIA 05/2010, 02/2012 and 05/2013, industry news, WACKER estimate, CAGR based on 2012 numbers 70

72 PV Spreading to New Global Markets Upcoming New Markets for Solar Installations with GW Potential Ukraine Chile Brasil Namibia Israel Uganda Turkey Saudi Arabia Pakistan Myanmar UAE Thailand Indonesia Argentina South Africa Source: WACKER analysis 71

73 Fast Cost Decrease of Solar PV Unlocks Growth Roof-top System Prices* LCOE & Electricity Price Off-grid Applications young market mature market household power price Germany China TX CA PV becoming very competitive and easy-to-install PV can be built very fast and in small increments Steep price decline of storage solutions Cheap electricity for remote areas with no access to grid annual solar energy yield(kwh/kwp) US Germany Module BOS BOS = Balance of System *best practice Q /Wp 1.0 /Wp 0.5 /Wp size of electricity market LCOE vs. power price = room for positive NPV (assumes full grid access) 72

74 Crystalline PV Systems as Cost Leader Typical Ground-Mounted System Cost Structure ( /Wp, Q1 2013) BOS Cost Inverter Mechanical & electr. parts Labor Other Module Cost (best practice) BOS Cost > Mechanical & electrical parts > Labor Module Cost c-si CdTe 16% Effiency 12% Effiency Polysilicon Wafer Cell Module Source: WACKER analysis 73

75 PV Potential: 20% of Global Electricity Demand PV Share of Global Electricity Demand (%) 20% 15% Solar (PV & CSP) could contribute up to 50% of global electricity supply in 2060 according to IEA* 10% 20% Scenario = 1 million tons polysilicon p.a. in % 0% Low Case High Case Base Case 20% Szenario Source: WACKER analysis; *IEA interview, Photon 08/2011 CSP = concentrated solar power 74

76 Polysilicon Market: 12% Volume Growth Expected Global Polysilicon Shipments (kt) CAGR : 12% shipments decreased due to inventory correction in solar and lower consumption per watt PV now competitive with most other sources of electricity both renewable and fossil fuels 92 Silicon-based PV enables highest conversion efficiencies and proven long-term stability at lowest cost Electronic Solar Assumptions: 2017: 75 GW (incl. 10% thinfilm share); Silicon Consumption 5.0 g/wp in 2017; Shipment figures incl. time-delay shipment/installation Source: WACKER analysis 75

77 Current Market Price Limits Polysilicon Supply Global Polysilicon Demand (kt) versus Capacity of still Active Manufacturers PV market: 2013: ~34-40 GW 2014: ~40-50 GW Only a limited number of producers still operating Further capacity expansion plans halted / significantly delayed Pricing sets high entry barrier for new entrants Capacity Announcements Active Capacities Total Demand (High Case) Total Demand (Low Case) Electronic Demand Sources: market surveys, industry announcements, WACKER estimate 76

78 Leading Cost Position for High Quality Material Guarantees an Essential Competitive Advantage Relative Cash Cost Position of Solar Polysilicon Competitors Estimated Solar Demand 2013 /kg ~25-30 US$/kg needed to reactivate idled capacities Suppliers Top 5 Suppliers # 6-11 Suppliers # 12 - n Low Quality High Quality Not suitable as 100% feedstock MT 77

79 Different Polysilicon Qualities Sell for Different Prices Impact of Polysilicon Quality on Prices 140% High Quality Polysilicon 120% Key to improved wafer performance: 100% 100% Higher charge carrier lifetime 80% 60% 40% 20% 0% High Quality (Fe: 9-10N) 75% Medium Quality (Fe: 8-9N) 50% Low Quality (Fe: 6-7N) Improved resistivity Higher ingot yields Improved recycling of polysilicon Lower wafer production costs Precondition for high cell efficiencies, resulting in: Reduced BOS Cost per Watt 60% 30% 10% Lower LCOE Market Share Source: WACKER estimates, price data based on import statistics and industry sources 78

80 Low Cost, Highly Efficient Crystallization Requires High Purity Polysilicon Multiple Pulling as Promising Future High Volume Crystallization Technique High purity poly feedstock (Fe = 50 pptw) vs. low quality feedstock (Fe = 10,000 pptw) 1.5 x at/cm 3 * Ingot 1 Ingot 2 Yield diff. after 4 ingots Fe conc. low quality feedstock high purity poly 0 Yield 86% 75% 65% 56% 92% 92% 92% 92% (yield NOT limited by feedstock) No multiple pulling of high performance ingots without high purity polysilicon *) typical high efficiency wafer specification for τ > 1 msec 79

81 Preliminary EU Duties on PV Sector Despite Opposition from Majority of Member States Voting on AD Duty in EU 4 Supporters of AD duty 5 Abstentions 18 Rejections Current Status EU vs. CN Expected major results from potential duties from Polysilicon to Modules: Solar applications get more expensive Growth of the European solar market will slow down by an estimated 2-3 GW already in 2013 Duties will not support competitive position for European Manufacturers European share in global installations will decline; market focus of polysilicon will shift from China to other countries 80

82 Duties on Modules May Dampen PV Demand in 2013 But Strong Growth Expected from 2014 Onwards High PV system prices and comparatively high LCOE Grid parity reached in some market niches (e.g. diesel generation) Markets mainly driven by attractive regulatory frameworks (e.g. Europe) PV market growth strongly dominated by European countries (e.g. Germany) Cut of incentives and declining markets in Europe (e.g. Italy, Germany) AD/CVD cases led to market uncertainty LCOE competitive with other Renewables (e.g. wind) and conventional energy sources Declining markets in Europe were offset by raising demand from USA & Asia 2014ff Further decline of PV system prices to below 1 /W LCOE competitive with most other energy sources Electricity markets around the globe are increasingly penetrated by Photovoltaics Strong & sustainable growth drivers enable PV to become a main pillar of global electricity supply High market growth Moderate market growth High market growth 81

83 Economic and Ecologic Motives Lead to a Strong Growth of Global Solar Power Economic Motivation Increasing global demand for electricity Quick project realization and low variable costs for Solar Power Plants Fast development of solutions for energy self consumption & storage Competitive LCOE are reached in nearly all electricity markets Ecological Motivation Reduction of CO 2 emissions Increasing awareness of individuals and governments for ecological issues 82

84 Strong Focus on Cost and Productivity Process Innovation Specific Energy Consumption (kwh/kg)* Index = % Labor Productivity (kg/h)* Index = % e New deposition reactors New conversion reactors New process design e Economies of scale Yield improvements Automation * Solar polysilicon process only, indexed weighted ø of all plants. * Total average for all sites, direct labor including analytics 83

85 Broadest Product Offering Serving all Technologies in both Semi and Solar Chunks CZ pulling, Casting Rods FZ pulling, CZ pulling Granules Recharging, continuous processes 84

86 Well Balanced Customer Structure with Focus on Asian Growth Regions Volumes Shipped by Customer Volumes Shipped by Region Customers % America 5% Europe 20% Others 30% 2012 (38kt) 2012 (38kt) Customers % Asia 75% 85

87 Contract Resolution: Adjusting Long Term Agreements Number of Long Term Agreements Industry consolidation ongoing Some customers actively exit solar Some customers unable to survive Some companies are undecided Two Options: Find win-win solutions Terminate LTA and claim damage payments 86

88 High Quality Poly Helps Leveraging Major Cost Reduction Potentials for Multi and Mono Cells Usable Ingot Length (%) Solar Cell Efficiencies (%) Cell Efficiency Distribution Production Costs (%) 100% 25 Mainstream Multi Mainstream Mono Super Mono high-purity Polysilicon low-quality Polysilicon 86% 76% 66% Number of cells cells with price discount cells with price premium Ingot Yield 60% 70% 80% 90% 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 87

89 POLYSILICON: Maintain Leadership in Cost and Quality Our Roadmap Cost Competitive pressure drives module cost and conversion efficiency Cost reduction roadmap implemented to maintain WACKER s leading cost position 2 Quality C-Si-PV moving towards efficiencies above 20% (module) Pricing differentiates between polysilicon qualities 3 Customer Develop products for all crystallization technologies in close cooperation with our customers Keep broad customer portfolio to react flexibly on market changes Expand capacities according to market demand 88

90 CREATING TOMORROW`S SOLUTIONS WACKER Mid-Term Financial Targets Dr. Joachim Rauhut, CFO Capital Markets Day 2013, London

91 Mid-Term Financial Targets Agenda Sales & Profitability Capital Intensity Target Capital Structure Summary 90

92 The Next Five Years: Introducing Financial Targets Target 2017 Sales EBITDA 6 6.5bn (~6% CAGR)* 1.2bn (~20% margin) ROCE >11% * CAGR 2012/

93 Price Decline of ~ 1 bn within Two Years (20% of Sales) Mainly in POLYSILICON WACKER Group: Sales Development ( m) 5,000 4,500 4,000 4, ,635 ~350 ~4,500 3,500 3,000 2,500 2,000 1,500 1, Price Volume Currency Spalte Price Volume Currency 2013e 92

94 Mid-Term Group Targets WACKER Group: Sales, EBITDA ( m) Sales ( m) EBITDA ( m) Assumptions: ~6% p.a. 6,500 ~9% p.a. 6,000 4, ,200 Normal economic environment F/X: EUR/USD: 1.30 ASP solar polysilicon recovery to reinvestment level for cost leaders

95 Sales: Global Presence Opens up Growth Opportunities Americas Europe Asia ~6% ~4% ~9% 830 1,750 1, >8,000 customers >10,000 customers >14,000 customers RoW >2,000 customers Group sales in m 94

96 Sales: Growth Varies by Segment Chemicals POLYSILICON Siltronic ~7% CAGR ~7% CAGR ~2% CAGR * Growth Drivers Strong customer relations: 22 TCs; 9 WACKER ACADEMY sites Regional differentiation: global operations with focus on emerging countries Product innovation and substitution Product differentiation: growing share of specialties Growth Drivers Leader in cost and quality Diversified customer base High share of LTA s Production footprint on two continents Growth Drivers Focus on 300 mm growth in Asia Rising demand for 300 mm JV with Samsung in Singapore Strong customer focus Ongoing efficiency initiatives Sales ( bn) * Excl. salt, fumed silica 95

97 EBITDA Divisional Targets 2017: Focus on Profitability and Cash Generation Chemicals POLYSILICON Siltronic 37.4%* 12.9% >16.0% >20.0% >20.0%** 11.0%* Increasing share of specialties Comprehensive program to improve efficiency in place (WOS) Continuously earning substantial premium on WACC Comprehensive cost road map in execution to further improve return profile Poly 11 construction phase increases capital employed but no offsetting earnings until ended ramp-up (early 2016 assumed) Focus on cash generation Reduced CapEx Cost road map 300 mm EBITDA-margin (% of sales) * Excl. salt, fumed silica ** pro forma, excluding restructuring

98 Strict Cost Management throughout the Group Cost Program Siltronic Polysilicon Chemicals Group Personnel Built-in flexibility Capacities tightly managed Raw Materials Energy Strategic sourcing Central function Globalization Investment decisions reflecting local energy cost Optimization sites Cost road map 300 mm Cost road map solar WOS Power Plus next WOS Power Plus next Overhead: Efficiency program central functions 97

99 Personnel Expenses: Benefits from Flexibility Personnel Expenses* ( m) Temporary Staff (FTE) Total Staff (FTE) 1,298 1,204 <1, , ,800 15, e Q1/12 Q2/12 Q3/12 Q4/ Variable salary components: 2011: > 100 m 2012: < 50 m 2013: Further reduction expected Temporary staff: Primary use in manufacturing of cyclical divisions (Siltronic, POLYSILICON) Total staff: Reduction from restructuring * Incl. cost of temps 98

100 Regional Dynamics Impacting Raw Materials Si-Metal Methanol Ethylene VAM* Market Characteristics and Influences on Pricing Global market Regional price differences caused by non-refundable Chinese VAT and transportation cost Global market Regional price differences caused by transportation cost current market prices Europe above Asia Regional procurement markets Pricing defined by NAPHTA price development and regional dynamics Regional procurement markets Pricing defined by NAPHTA price development and regional dynamics Share of Total Raw Material Cost** 21% 17% 6% 12% Central contract management; various strategies * VAM = Vinylacetate monomer ** Chemicals,

101 Target for Specific Energy Consumption: Reduction by One Third from 2007 through 2022 Specific Energy Consumption Lower Electricity Cost in the US (indexed) -22% -11% 100 Germany = Electricity Price + FiT Surcharge (2013) + Grid usage fee + Other charges US = List price TN provider Power plus next: Systematic approach to further reduce the specific energy consumption Target derived from theoretical optimal value Every operating unit comprised Germany (Industry High-Voltage) USA (TN) Assumptions: Data based on Year end 2012, USD/EUR: 1.35 Source: WACKER estimates, market data 100

102 Aggressive Cost Roadmaps in all Businesses Chemicals POLYSILICON Siltronic Measures WOS WACKER Operating System: targeting continuous cost decrease in specific operating costs Raw material and energy cost: optimized yields, loss reduction, raw material and energy recovery, process optimization Labor: reduce set-up times and non-value-added activities Logistics: lean processes, optimized packaging Technical spending: optimize inspection cycles, spare part storage Asset utilization: debottlenecking Raw Materials: expanded supplier portfolio Supplies: expanded supplier portfolio Electricity: reduced consumption in major process steps (conversion, deposition) Personnel Expenses: continuous productivity improvement Maintenance Expenses: standardization, spare parts logistics (sourcing/storage level) Process yield enhancement 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 Total expected cost savings 2013: 200 m 101

103 Chemicals: Continuous Productivity Improvements Chemicals Burghausen Site Specific Operating Costs ( /ton) Specific Energy Consumption (kwh/ton) Labor Productivity (kg/h) -13% -24% +11% savings of 100 m in specific operating costs achieved 102

104 POLYSILICON: Strong Focus on Cost and Productivity Specific Energy Consumption (kwh/kg)* Labor Productivity (kg/h)* Index = % Index = % e New deposition reactors New conversion reactors New process design e Economies of scale Yield improvements Automation * Solar polysilicon process only, indexed weighted ø of all plants * Total average for all sites, direct labor including analytics 103

105 Siltronic: 300 mm Continuous Cost Reduction Program Siltronic 300 mm Variable Costs, relative per Wafer -9% -12% Targeting annual cost declines in variable costs of 10 % for the next two years 104

106 Mid-Term Financial Targets Agenda Sales & Profitability Capital Intensity Target Capital Structure Summary 105

107 Entering the Next Phase: From Asset Growth to Cash Generation Ratio of Capital Spending vs. Depreciation CapEx between 1.3 and 2.2x depreciation CapEx < depreciation CapEx >< depreciation Create Focus on capital intensive growth: Eight additional sites globally Increased capacities 7x in Polysilicon, 3x in VAE dispersions, 2x Siloxane, 6x 300 mm wafer The customer dimension: Global presence and market penetration with technical centers and global sales structures Leverage Focus on profitability and cash: Execute cost roadmaps Leverage global asset base Focus on quality growth, growing specialty sales Invest below depreciation Expand Focus on selective expansion of production network: Selective growth projects Exploring further Verbund and debottlenecking opportunities 106

108 CapEx: 2013e Reduced by 50% vs CapEx vs. Depreciation Expense WACKER Group ( m) 1,200 1,095 1, % ~ 550 ~ 550 ~ 600 ~ Ø e Ø 2014e-2017e Depreciation CapEx (asset additions) 107

109 Leverage Phase Requires Lower CapEx for Growth Share of Maintenance of Business (MOB) Rising Depreciation vs. CapEx ( m, Ø p.a.) Investment Focus (% of total CapEx) m Ø CapEx p.a. ~ 400 m Ø CapEx p.a ~ % ~ % % 40% 0 Create Leverage 2013e-2017e Create Leverage 2013e-2017e Depreciation CapEx (asset additions) MOB Growth 108

110 Leverage Phase: Downstream Invest with Lower Capital Intensity Capital Intensity (Annual Sales / CapEx) 2 Powder Dryer Silicones (RTV-1) 1 Fumed Silica (HDK) Polysilicon Greenfield (incl. infrastructure) 0 Upstream Downstream 109

111 Working Capital: Inventories Driven by Fluctuation in Poly Demand DSO* Stable, No Write-Offs Inventories ( m) Trade Receivables ( m) DIO* DSO vs. 2010: Increase from General raw material inflation Safety stock silicon metal DSO slightly increasing from ongoing globalization Only minor write-offs, despite weak financial situation of many solar customers Demand fluctuations in polysilicon * DSO = Days of Sales Outstanding DIO = Days of Inventory Outstanding 110

112 Net Cash Flow*: 2013e Net Cash Flow Significantly Improved vs Net Cash Flow* ( m) > , Ø e Ø 2014e-2017e Gross cash flow CapEx (cash flow) Net cash flow* * Prepayments not considered 111

113 Mid-Term Financial Targets AGENDA Sales & Profitability Capital Intensity Target Capital Structure Summary 112

114 Returning Cash to Shareholders: General Dividend Policy Unchanged Dividend Policy and Financial Target Basic dividend policy: Minimum 25% payout of net income Temporary deviations possible Boundary conditions: 1.80 Overall business conditions Financial status Approval of AGM Dividend 2013 (payout for 2012): Payout ratio of 26% (2012: 31%) Dividend/Share Bonus/Share Total payout : 598 m 113