WACKER CHEMIE AG NAVIGATING THE CRISIS Dr. Rudolf Staudigl (CEO) 4th Annual Piper Jaffray Clean Technology and Renewables Conference New York, February 19 th 2009 CREATING TOMORROW'S SOLUTIONS
POLYSILICON THRIVES OTHER SEGMENTS SEE VOLUME DECLINES Overview Wacker Chemie AG Solar Setup Polysilicon high purity material for high conversion efficiencies. It s all about electricity. Wafer JV - growing with a secure poly base. Semi steep inventory correction underway, drive for capability continues Chemicals versatile silicones and home insulation with DP Financial position Managing the crisis what s our focus today WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 1
DISCLAIMER The information contained in this presentation is for background purposes only and is subject to amendment, revision and updating. Certain statements contained in this presentation may be statements of 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, as well as the words "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 Wacker Chemie AG 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. Wacker Chemie AG 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. WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 2
WACKER CHEMIE: HIGHLY INTEGRATED OPERATIONS BASED ON TWO KEY RAW MATERIALS Raw Material Silicon Metal Upstream Downstream Customers Industries Siloxane Fumed Silica Silicones Construction Automotive Suppliers Paints and Coatings Textiles Print and Paper, Personal Care Polysilicon Electronic Wafers Hyperpure Silicon Wafers Semiconductors Solar Ingots Solar Wafers Solar Modules Eng. Fabrics, Coatings. Adhesives VAE Dispersible Polymer Powders Construction (Tile Adhesives. Dry Mortars. EIFS) Ethylene VAM PVAc Printing Inks / Coatings, Chewing Gum Base* Ketene Fine Chemicals Food, Pharmaceuticals Household Care Products Cosmetics VAM = Vinyl acetate monomer. PVAc = Polyvinyl acetate. PVB = Polyvinyl butyral * Responsibility for sales with Fine Chemicals WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 3
POSITIONING THE PORTFOLIO ALONG MEGATRENDS Growth Megatrends Digitization Invest in 300 mm Accelerate growth through Siltronic Samsung Wafer Pte. Ltd. Maintain quality leadership Further improve productivity Regional Growth Renewable Energy Meet growing customer needs Seize solar opportunities Expand capacity with leading TCS technologies Resource Saving Global GDP Focus on advances high valueadded materials Develop worldwide production footprint Grow above the market Penetrate markets through Technical Centers Leverage value chain Integrate APP business Increase production capacities GLOBAL MEGATRENDS AND SUSTAINABILITY DRIVE OUR GROWTH WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 4
THREE APPROACHES TO SOLAR Chunk and granular Polysilicon Current negotiations for Poly 9 contracts Collected > 850m of prepayments until the end of 2008 Produced 11.8kt of Polysilicon in 2008, growing to 35.5kt by the end of 2011 Ingot sales at Siltronic Opportunistic decision between semi-wafers or solar ingot sale Optimizing crystal pulling capacities for 200 mm Multicrystalline wafers WACKER SCHOTT Joint Venture to expand to 1GW in 2012 Increasing share of solar sales WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 5
WACKER POLYSILICON SOLUTIONS FOR ALL SILICON GROWTH TECHNOLOGIES Chunks CZ pulling, Casting Rods FZ pulling, CZ pulling Granules EFG, String ribbon, EMC WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 6
BETTER RESULTS WITH HIGH PURITY POLYSILICON high-purity Solar Poly Solar Crystal Wafer Cell Module System perfect crystallization / high yields / optimal electrical characteristics ultra-thin wafers / low breakage / low kerf loss high cell efficiency / low breakage / electrical long-term stability high module efficiency / high power per area high system efficiency / low BOS* cost per Watt / long lifetime / low cost per kwh *BOS = Balance of System WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 7
IT'S ABOUT GENERATING ELECTRICITY CELL EFFICIENCY IS THE BIG COST LEVER Market share of different PV technologies 100% 80% 60% 40% PV cell efficiencies in % (year 2007) Monocrystal Si: 16-22 Multicrystal Si: 14-18 Ribbon Si: 15-17 Copper-Ind.-Selenide: 10-13 Cadmium-Telluride: 7-11 Amorphous Si: 5-9 Source: LBBW 02/2008, Industry sources 20% 0% 2006 2010 2020 New Concepts Thin Film Crystalline Source: EPIA 12/2007 WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 8
WACKER FIRST CLASS FULLY INTEGRATED TECHNOLOGY CLOSED LOOPS FOR KEY AUXILIARIES Metallurgical Silicon HCl Membrane Electrolysis + HCl Synthesis Salt from WACKER s mine H 2 POLYSILICON TCS Production TCS Purification Polysilicon Deposition Conversion of SiCl 4 H 2 O 2 (air) SiCl 4 PYROGENIC SILICA Silicone Chemistry HCl Pyrogenic Silica Production WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 9
TWO TECHNOLOGIES MEET OUR CUSTOMERS NEEDS State of the Art TCS Process Fluidized Bed TCS Process for Granular Bell jar reactor PolySi U-rod PolySi slim rod Crushing Silicon rods Chunk Polysilicon Exhaust gas Quartz tube Reaction zone Heating zone Milling Seed particles Granular Polysilicon TCS + H 2 Exhaust Gas Electrical Power Resistive heater H 2 H 2 TCS + H 2 TCS Chunks characteristics Switchable reactors (Electronic/Solar) Large scale production > 50 years Time proven process - fast ramp up TCS Granular characteristics Continuous deposition based on fluidized bed technology Trichlorosilane as feed gas for high product yields Applicable for efficient crystallization processes WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 10
14.5KT CAPACITY AT YEAR END 2008 GROWING TO 35.5KT BY THE END OF 2011 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 14,500 t/a existing in Burghausen 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Recent capacity addition ahead of schedule 2011 Q1 Q2 Q3 Q4 650 t/a BGH ( Poly 5 ) TCS-granular, on track + 7,000 t/a +3,000 t/a BGH ( Poly 8 ) Debottlenecking + 10,000 t/a Nünchritz ( Poly 9 ) = Announcement Ramp up = Full capacity available Construction Progress Poly 7 Construction Progress Poly 8 October 2007 New reactor hall August 2008; reactor hall, recycle gas system December 2008 Distillation December 2008 New reactor hall WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 11
WACKER POLYSILICON STRONG OUTPUT INCREASE Polysilicon Production (MT) +~30% +46% Existing capacity: ~15,000 MT Poly 5 Ramp up +31% 11,800 >15,000 Poly 7 Poly 8 Poly 9 Fully ramped Well on track Well on track 6,200 8,100 2006 2007 2008 2009e WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 12
EXPECTING ANOTHER 50% OUTPUT IMPROVEMENT COMPARED TO CURRENT WACKER TECHNOLOGY Development of rod-deposition reactor output (rel. units) 500% reactors capable of electronic and solar reactor ouput (rel. units) 400% 300% 200% 100% total " production " 325 kg/y 0% Lab (1954) 1959 4 5 6 7 reactor generation 8 9 10 reactor next WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 13
POLY EXPANSIONS WELL ON TRACK Poly 7 - finalized Poly 8 well on track January 2009 January 2009 New Poly 9 site in Nünchritz/Saxony August 2008 January 2009 WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 14
POLY EXPANSION 9 - AT NÜNCHRITZ SITE: REPLICATING A SUCCESSFUL INTEGRATED MODEL Time to Market: - expansion 1 year faster than at a greenfield site Cost advantages: - significant benefit in capex - significant cost advantages from integration of Silicones and Polysilicon Skilled labor available Investment incentives: ~10% of project capex Stable electricity from public grid WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 15
LEADING IN POLYSILICON TECHNOLOGY WACKER POLYSILICON: Competitive Advantages and Strengths More than 50 years of expertise in polysilicon Dedicated poly grades for all solar applications Switchable reactor technology for polysilicon chunks (semi/solar grade) Lowest specific energy consumption in industry Unique operations setup with fully integrated processes for polysilicon & byproducts Independent and secure power supply by own hydro power and cogeneration unit Strong in-house engineering for accelerated build-up of new plants WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 16 Strategy
ADDITIONAL VALUE ADDED BY PARTNERING WITH SCHOTT Solar Poly Solar Crystal Wafer Cell Module System WACKER SCHOTT Poly 50 / 50 WACKER SCHOTT Solar Manufacturing JV Wafer 51 / 49 WACKER SCHOTT Solar Sales JV Wafer Merchant Market WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 17
WACKER SCHOTT SOLAR (50/50 JV): EXPANDING SOLAR ACTIVITIES Contributed assets EFG Plant (Alzenau/Germany) SCHOTT Solar EFG (Edge defined Film-fed Growth) manufacturing site with wafer pulling Ramp-up plan in MW, year-end 1,000 Crystallization Fab (Jena/Germany) Crystallization fab for high purity Calcium-fluoride converted to mc-silicon Polysilicon (Burghausen/Germany) High quality poly-silicon for solar Targets Leading solar wafer supplier Growth faster than the market Capacity: 1 GW in 2012 Investment: ~ 370m until 2012 120 275 2008 2009 2010 2011 In-house wafer demand from scratch Serving merchant market from 2008 Technology feedback along entire value chain Leader in cost and quality Reduction of wafer thickness Improved usage of silicon (in g/wp) Continued process development Cost reduction through economies of scale 2012 WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 18
STRATEGY OF WACKER POLYSILICON: CREATING VALUE OVER THE LONG TERM Serving two market segments: solar and semi-conductor Structuring a broad customer and product portfolio Partnering with our customers by prepayment contracts for up to 80 % of our capacity Strengthening quality leadership Reducing costs by innovating process technology WACKER POLYSILICON will participate above average in two fast growing market segments with attractive margins. WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 19
2008 WAS A STRONG YEAR FOR WACKER CHEMIE Q4 DOWN ON SEASONALITY PLUS GLOBAL CRISIS FY 2008 FY 2007 Change in % Sales 4.3bn 3.78bn +14% EBITDA 1.05bn 1.00bn +5% EBITDA margin 24.5% 26.5% - Strong FY 2008 performance on capacity build-up, pricing and strong volumes - Q4 sales up YoY by ~10%, but volume declines across the board except for polysilicon Tough conditions persist, Polysilicon continues to thrive WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 20
SILTRONIC: END OF 2008 VOLUME CRASH STEEPER AND DEEPER THAN DOT-COM Billed Silicon Area mn sqcm 5,500 5,000 4,500 4,000 3,500 3,000 2,500 Asian Financial Crisis Dot Com Double Dip End of 2004 Nightmare 2008 Financial Crisis Q4 2008 area down 37 % sequential, 35 % year-over-year Slope of decline (indicated by red lines) clearly steeper than during dot.com period 2,000 1,500 1,000 Nevertheless on the long run silicon area was growing substantially 500 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: SEMI WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 21
SILTRONIC: CRISIS IMPACT STALLS SALES Challenges Sharp decline in demand Supply chain destocking accelerates Price pressure on wafers continues Solar spot business slows Answers Focus on cash management Temporary capacity adjustment via short-term work (Germany)/ rotating fab shutdowns (overseas) Focus shifting from capacity to capability: 2009 capex reduction WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 22
CHEMICALS: INDUSTRIAL PRODUCTION DROPPING FAST Source : Bloomberg WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 23
CHEMICALS: VOLUMES DOWN AS CRISIS UNFOLDS Challenges Volume/Orders slow down significantly Slowing consumer spending Construction and other industrial markets down Answers Focus on cash management Adjusting capacities with short-term work Hold market positions Secure raw material supply Increase productivity * Emerging Markets WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 24
SILICONES ARE EVERYWHERE GDP SLOWING HITS WITH FULL FORCE Silicones: a Unique Set of Product Properties Tailoring of customized solutions Flexibility Hydophobicity Insulating Softening Heat resistance Radiation resistance Unique property profiles Glossiness UV-stability Transparency Advanced processability Adhesion Foam control Discharge safety Dielectricity Durability Release properties Superior performance in consumer goods Megatrends Drive Silicones Growth Mobility/Fuel Efficiency Construction Convenience/Fashion Health & Wellness Safety WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 25
WACKER POLYMERS - RATIONALE FOR EIFS PERSISTS, DESPITE THE CRISIS ENERGY SAVINGS Energy conservation Exterior insulation and finish systems Roof coating VINNAPAS Powders are key enabling material We demonstrate and promote the advantages of Thermal Insulation Systems GZ Winter Summer 37 45 Beijing Shanghai Guangzhou SH 35 50 BJ 16 40 Sample: Houses in China Average energy saving in % WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 26
WACKER HAS ACHIEVED A SOLID FINANCIAL POSITION A PREREQUISITE FOR WEATHERING THE STORM WACKER Group Total 4.6bn 3.9bn 11% 9% 28% 27% Structure of Balance Sheet (%) Total 4.6bn 3.9bn 7% 6% 8% 9% 40% 37% Characteristics Non-current assets: 2,860m Provisions for pensions: 387m Cash: 495m, net financial debt: -189m Total prepayments Polysilicon received (09/30/08): 798m Equity: 2,080m Capex in Q3: 219m Cash & Cash E. Current Asset Fixed Asset 62% 64% 45% 48% Financial Debt Pension Accruals Accruals + Liabil. Equity 09/30/08 12/31/07 09/30/08 12/31/07 WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 27
DOMINANT INFLUENCE FROM FX AND RAW MATERIALS SOME SUPPORTIVE SIGNALS USD/EURO Ethylene Contract (EUR/MT) Si-Metal Spot (EUR/MT) 1,60 Peak: 1.58 1.400, 2.800, 1,50 1.250, 2.400, 1,40 1.100, 2.000, 1,30 1,20 12/06 03/07 06/07 09/07 12/07 03/08 06/08 09/08 12/08 950 800 12/06 03/07 06/07 09/07 12/07 03/08 06/08 09/08 12/08 Source: CRU Provider, Ethylene Market Price Europe, free delivered 1.600, 1.200, WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 28 12/06 03/07 06/07 09/07 12/07 03/08 06/08 09/08 12/08 Source: ICIS, Si-Metal Market Price Europe free delivered
NAVIGATING THE CRISIS OUR FOCUS TODAY TRADING CONDITIONS Rapidly declining demand semi/auto/construction Plant utilization in line with industry Temporary work reduction and short-time work KEY METRICS Working capital management is key Review of non-strategic CapEx Close watch on customers/suppliers Focus on Cash WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 29
WACKER: ISSUER, CONTACT AND ADDITIONAL INFORMATION ISSUER AND CONTACT Wacker Chemie AG Hanns-Seidel-Platz 4 D-81737 Munich Investor Relations Mr. Joerg Hoffmann Tel. +49 89 6279 1633 Fax +49 89 6279 2933 joerg.hoffmann@wacker.com www.wacker.com ISIN: WKN: Deutsche Börse: Ticker Bloomberg: Ticker Reuters: Listing: ADDITIONAL INFORMATION DE000WCH8881 WCH888 WCH CHM/WCK.GR CHE/WCHG.DE Frankfurt Stock Exchange Prime Standard FINANCIAL CALENDER March 18, 2009 Full Year 2008 April 29, 2009 1st Quarter 2009 May 8, 2009 Annual Shareholder Meeting July 30, 2009 2nd Quarter 2009 Sep 17, 2009 Capital Market Day Nov. 5, 2009 3rd Quarter 2009 WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 30
WACKER S TCS ROD PROCESS COMBINES LOW ENERGY CONSUMPTION WITH MAXIMUM PRODUCT QUALITY Energy consumption per kg solar silicon 3 relative units 2 1 Performance? depending on reactor type 0 Monosilane Rod mg-si- Refining Monosilane Granular WACKER TCS-Rod WACKER TCS- Granular total process: silane production + deposition Standard TCS- Equipment Source: REC Offering Memorandum, May 2006; REC Capital Markets Day, 22/11/2006; GT Solar 09/2008, Centrotherm 04/2008, WACKER estimates WACKER CHEMIE AG Navigating the Crisis, February 2009 Slide 31