Wacker investing for growth after strong 2022

MUNICH—A record year in sales for Wacker Chemie A.G. has given the silicone giant the financial strength to increase its capital investments moving forward, despite an expected slowdown in sales growth in 2023.

Benefiting from higher selling prices and a positive exchange rate from a strong U.S. dollar, Wacker saw record overall sales of $8.93 billion in 2022, according to official financial results issued March 14. The results confirmed preliminary results issued in January.

Last year's high mark for the German chemical company compares to $6.74 billion in net sales in 2021, a 32-percent jump. All business units contributed in 2022.

"The war in Europe is a crucial test for the entire world, and it has thrown the global economy out of balance," CEO Christian Hartel said March 13 in Munich. "In this unpredictable and unstable situation, Wacker was able to shape fiscal 2022 very successfully. It was by far the most successful year in Wacker's history."

The successful sales year has given Wacker a beneficial investment-to-depreciation ratio heading in to 2023. As such, the company said it will invest $696 million in its facilities (across the globe) this year.

"Increased investment is an important stepping stone to achieve our goals. In the coming years, investments will be significantly higher than depreciation," Hartel said. "Wacker has the necessary financial strength for this."

Hartel expects more than $429 million will go to Wacker Silicones and Wacker Polymers in the coming year.

More than $85.8 million is earmarked for Wacker Biosolutions and around $107.3 million per year is planned for Wacker Polysilicones.

"Sustainability is an integral part of our 2030 strategy," Hartel said. "We have raised the bar for our sustainability goals significantly. We want to reduce emissions by 50 percent by 2030, in absolute figures and regardless of volume growth.

"We want to be climate neutral by 2045. For us, growing faster and doing business sustainably are not a contradiction in terms."

Wacker set the stage last year for the continued capital expenditures, which were 59 percent higher in 2022 than in 2021 (at about $592 million last year against about $374 million in 2021).

A vast majority of the expenditures went toward capacity expansions in all four business segments, including HCR and LSR capacity expansions in the U.S., Germany, India and China, among other locations.

In the field of biotechnology, the Amsterdam site was further expanded, and construction of an mRNA competence center has begun at the company's Halle, Germany, site. Further investments were made in 2022 in plant technology for high-quality polysilicon for semiconductor applications.

The number of employees in the group increased by 1,319 in the 2022 financial year. As of Dec. 31, 2022, Wacker had 15,725 employees worldwide against 14,406 employees at the conclusion of 2021.

This year's sales are expected to come in at between $7.5 billion and $8 billion.

"The high growth that Wacker has achieved operationally over the past two years will not be sustained this year," Hartel said. "The momentum of the global economy has weakened significantly. The global economic and political environment remains volatile.

"High energy prices, especially in Europe, continue to weigh on our business."

In the first two months of this year, demand fell in a large number of customer sectors, according to Wacker.

Both group sales and EBITDA are down on the previous year.

"Even if we are currently feeling more of a headwind than a tailwind, we are optimistic about the future," Hartel said. "With our Strategy 2030, we have clear goals in mind: faster growth, high profitability and increased resilience in times of permanent change."

According to Wacker's 2022 final financial report, EBITDA came in at $2.27 billion, an increase of about 35 percent over 2021's EBITDA of $1.67 billion.

Sharp increases in energy, raw material and logistics costs slowed down the development of EBITDA, with additional costs measuring around $1.4 billion year-over-year, according to Wacker.

Net income in 2022 came in at $1.4 billion, according to Wacker, compared to about $900 million in 2021.

The group was led in 2022 by Wacker Silicones, which saw $3.75 billion in net sales (33 percent growth), according to the final report. In addition to higher selling prices, high-margin specialty silicones, many of which were added to Wacker's portfolio in the last two years, performed well.

Wacker Polysilicones, which produces polysilicon for the semiconductor and photovoltaic industries, saw net sales last year of $2.48 billion, an increase of 50 percent over 2021's $1.66 billion in sales.

Wacker Polymers, which produces dispersible polymer powders, dispersions, solid resins and solutions, concluded 2022 with $2.17 billion in net sales, up 19 percent over 2021's net sales of $1.81 billion for that division.

Wacker Biosolutions, which produces cyclodextrins, cysteine and biologics, saw $358 million in net sales in 2022 against $321 million in sales in 2021, an increase of 12 percent, according to Wacker.

Sales numbers were negatively impacted by overall volumes, which were down in 2022, especially in the fourth quarter as the international construction space slowed.