Wacker Chemie sees sales, EBITDA drop in second quarter

Jun 07, 2023

MUNICH—A global slowdown in the chemical industry and lower sales prices impacted the bottom line across every business region, and three of four business segments, for Wacker Chemie A.G. in the second quarter of 2023.

Group sales for Q2 came in at about $1.91 billion, a 19-percent decrease from the $2.37 billion the German supplier generated in net sales in the second quarter of 2022, according to the firm's financial report released July 27.

EBITDA for the quarter came in at about $280 million, against an EBITDA of $684.7 million in the second quarter of 2022, a 59-percent decline. This represents an EBITDA margin of 14.6 percent in the second quarter of this year against an EBITDA margin of about 29 percent in the second quarter of 2022.

Sales in Q2 2023 did rise by 1 percent compared to the first quarter of this year, which came in at about $1.9 billion.

"The momentum of the global economy has weakened significantly in recent months," CEO Christian Hartel said during a conference call. "Wacker was also unable to escape this. In the first half of the year, we failed to match our strong prior-year figures in terms of both group sales and EBITDA."

The company expected stronger demand in the second half of 2023—an assumption that also was part of Wacker's forecast.

"So far, however, as with numerous other chemical companies, there is no sign of a recovery," Hartel said. "In the chemicals business, the majority of our customers are still faced with stagnating demand."

Sales volumes in Wacker's solar business saw a positive trend in the second quarter of this year after a weak start, Hartel added.

"At the same time, we are observing a fall in the price of solar silicon in China," he said. "In the biotechnology business, the development of earnings this year will once again be burdened by high investments in further growth. The same applies to all areas: High energy prices and inflation rates continue to slow down development."

Based on these continuing headwinds, Wacker has adjusted its full-year estimates.

Net sales for 2023 now are expected to come in between $7.1 billion and $7.4 billion, down from the previous estimate of $7.65 billion to $8.2 billion.

Revised EBITDA for the year is expected at between $874 million and $1.1 billion, down from a previous estimate of $1.2 billion to $1.5 billion.

The main reasons for the lower revised estimates, Wacker said, are lower sales volumes and prices, as well as a lower usage of production facilities in some cases.

"The persistently high prices for energy and raw materials also had a negative impact," Hartel said. "Wacker adjusted its expectations for fiscal 2023 in view of the persistently weak demand in numerous user industries, the ongoing destocking by customers and the year-on-year lower prices for many product groups."

Three of four business divisions for the Wacker Group saw a decline in net sales in the second quarter of 2023, with only Wacker Biosolutions achieving an increase in year-over-year net sales.

Wacker Silicones achieved total sales of $764.4 million in Q2 2023, against $1.02 billion in net sales in the second quarter of 2022. This represents an 8-percent decline year-over-year.

"Above all, lower prices and lower sales volumes slowed down the development of sales," Hartel said.

Wacker Silicones EBITDA for Q2 2023 registered $56.7 million, an 81-percent drop from Q2 2022, which was $301.8 million; and a 46-percent drop from the first quarter of this year.

"In addition to the lower prices, especially for standard products, the significantly lower capacity utilization of the production facilities compared to the previous year had a negative impact on the development of earnings," Wacker stated in its Q2 2023 financial report. "The persistently high energy and raw material prices also held back the development of earnings."

Wacker Polymers dropped 25 percent year-over-year, with net sales of $455.9 million in the second quarter of this year, against $604.6 million in net sales in Q2 2022. Sales fell in Q2 2023 by about 3 percent against the first quarter of this year.

The main reason for the decline was lower sales volume in this segment, Wacker said.

Wacker Polymers EBITDA totaled $83.1 million in Q2 2023, a 16-percent decline against an EBITDA of $99.5 million in Q2 2022.

Falling prices and lower plant usage affected EBITDA in this segment in the second quarter of this year, Wacker noted.

"The persistently high energy costs also slowed down the development of earnings," Hartel said.

EBITDA did, however, increase by about 7 percent against the first quarter of this year for Wacker Polymers.

Wacker Biosolutions, as mentioned, achieved total sales of about $99.5 million in Q2 2023, an 8-percent increase over Q2 2022 ($91.9 million) and an 18-percent increase over the first quarter of this year, according to Wacker.

EBITDA for Wacker Biosolutions, however, registered a loss of $547,000 in the second quarter of this year, compared with a Q2 2022 EBITDA of $8.6 million.

Finally, Wacker Polysilicon saw net sales of about $561.3 million in the second quarter of this year, a 10-percent decline from the $621.4 million generated in Q2 2022.

"The main reasons for this decline are the lower average prices for solar silicon compared to the previous year and the slightly lower sales volumes overall," Wacker stated. "In contrast, prices for polysilicon for semiconductor applications were higher in the quarter under review than a year ago."

EBITDA for Wacker Polysilicon registered $170.7 million, a 27-percent drop against an EBITDA of $234.2 million in Q2 2022.

"In addition to the price and volume effects mentioned, the persistently high energy costs and the high costs for silicon-metal slowed down the development of earnings," Wacker said.

Wacker Group sales fell in every geographic region in the second quarter of 2023, the company reported July 27.

In Asia, group sales dropped to $884.5 million in Q2 2023, from $1.03 billion in the second quarter of 2022, a 14-percent decline.

In the Americas, group sales dropped to $292.7 million in Q2 2023 from $380.2 million in the second quarter of 2022, a 23-percent decline.

And in Europe, groups sales in Q2 2023 came in at $653.4 million against $838 million in the second quarter of 2022, a 22-percent drop.

Though the second quarter, Wacker saw customers ridding themselves of inventory, but Hartel said the company still is well-positioned for growth in the medium- and long-term.

"With our Strategy 2030, we have a clear goal in mind: faster growth, high profitability and increased resilience in times of permanent change," he said.

Accomplishing this means investing in future growth—and Wacker has done that over the past year.

"In the past quarter, we significantly increased our investments in the global expansion of our capacities compared to the previous year," Hartel said.

A $100 million investment to expand VAE dispersion and powder capacity in China was made May 24.

Specifically, Wacker's VAE dispersions and powders are used in binders for tile adhesives, cement-based sealing systems, waterproofing membranes and carpet coatings.

The site in Nanjing, the capital of China's eastern Jiangsu Province, is expected to more than double Wacker's production capacity of vinyl acetate-ethylene copolymer dispersions and powders.

And the new production lines, which include a new reactor for dispersions and an additional spray dry system for powders, represent the chemical company's nod toward 20 percent of the world's construction market.

The expansion of the Wacker Biotechnology business also pushed ahead that same month.

The company spent $100 million on the purchase of Leon, Spain-based ADL BioPharma, a contract manufacturer for the food, pharmaceutical and consumer goods industries. Wacker now owns the entirety of the 1.6 million-sq.-ft. site in Northern Spain.

"This acquisition brings us a decisive step closer to the growth targets for our life science division," Hartel said. "We are also investing in the polysilicon business. In Burghausen, we are building a new production line for cleaning semiconductor-grade polysilicon."

The acquisition within Wacker Biosolutions "significantly strengthens" the life sciences division, adding about 300 employees and 2,000 cubic meters in fermentation capacity for Wacker.

With additional fermentation capacities, Wacker will look to further establish itself in sustainably produced food ingredients and the consumer product space, as well as within pharmaceutical proteins.

And in July 2022, Wacker announced a $200 million expansion for its Wacker Silicones facilities in Tennessee. That expansion remains in the feasibility study phase.

In total (and not including the Tennessee investment), group investments in the second quarter of 2023 alone amounted to about $158.3 million, according to Wacker.

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