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Despite solid Q3, Wacker lowers full year guidance

Wacker Chemie AG has reported a relatively positive third quarter (Q3) 2011. However, the company is cautious about both the photovoltaic and semiconductor industries going forward. As a result, it has lowered its full year guidance.

Wacker’s polysilicon business reported increased Q3 sales. Image: Wacker Chemie AG.

In comparison to Q3 2010, the chemical company has managed to increase its sales by one percent, from €1.27 billion to reach €1.28 billion. EBITDA, however, saw a seven percent drop from the same period last year, from €340 million to €317.6 million. EBITDA margin was also down at 24.8 percent, compared to 26.8 percent in Q3 2010.

Q3 2011 EBIT additionally took a hit, falling 16 percent from €234.3 million in Q3 2010 to €197.2 million. Furthermore, EBIT margin was 15.4 percent, in comparison to 18.5 percent in Q3 2010. Net income for the period, meanwhile, came in at €124.9 million (Q3 2010: €155.8 million).

The decrease in earnings was primarily attributed to high raw material prices. For example, said Wacker, ethylene was nearly 20 percent more expensive in Q3 2011 than Q3 2010. However, the company also incurred start-up costs for its new polysilicon production facility in Nünchritz, Germany. It added that the plant will reach full operating capacity - 15,000 metric tons - in Q2 2012.

Going forward, Wacker expects the weak global economy to affect demand for its products. In particular, it says that high inventories in the photovoltaic market are causing both price and consolidation pressures.

As such, it said that sales revenues and margins for its polysilicon business will be lower in Q4 2011 than in Q3. "Amid these developments, Wacker may not quite achieve the sales and earnings figures forecast earlier," said the company in a statement.

Overall, Wacker’s polysilicon business reported increased Q3 sales, having risen eight percent from Q3 2010 to reach €378.2 million. "Despite extreme overcapacity and initial consolidation in the downstream value-added stages of the solar industry (wafers, cells, modules), demand for the division’s high-quality polysilicon remained very strong in the period under review," continued the statement.

However, an EBITDA of €179.4 million was achieved, thus representing a six percent decline from Q3 2010. EBITDA margin, meanwhile was down from 54.3 percent in Q3 2010 to  47.4 percent.

Due to the uncertainties in the solar and semiconductor segments, the company expects to generate sales of around €5 billion in 2011, and an EBIDTA of €1.9 billion, which is at the same level as last year.

The statement added, "For the fourth quarter, the Group anticipates substantially lower sales volumes and revenues, especially in its semiconductor business, coupled with declining plant utilization." Meanwhile, "In the Group’s polysilicon business, fourth-quarter sales revenues and margins will fall short of the preceding quarter’s figures as customers tighten their inventories."

Wacker did not provide any guidance for 2012.