Wacker predicts flat 2011 earnings on higher raw material costs

16 March 2011 13:10  [Source: ICIS news]

Wacker Chemie Chief executive officer Rudolf Staudigl (Source: Wacker Chemie)MUNICH (ICIS)--A strong rise in raw material costs will hit Wacker Chemie’s earnings this year, the German producer warned on Wednesday.

Chief executive officer Rudolf Staudigl said sales are expected to improve but “on the earnings front, higher raw material costs will hold back growth”.

Earnings will also be affected by start-up costs at the company’s new polysilicon plant in Nunchritz, Germany, he added.

The robust recovery of the global economy is pushing up raw material costs, Staudigl told journalists at the company’s annual press briefing, following the release of its 2010 and fourth-quarter results.

“In January and February, the prices of our key raw materials – silicon, ethylene and methanol – were significantly above the prior-year average,” he said. “Compensating for this will not be easy.”

Wacker is predicting that 2011 sales will exceed €5bn ($7bn), from €4.76bn in 2010, but that earnings before interest, tax, depreciation and amortisation (EBITDA) will remain stable at 2010 levels.

For 2010, EBITDA nearly doubled to €1.19bn from €606.7m, while sales were 27.7% higher.

Wacker expects to achieve an EBITDA margin of 25% for the first quarter of 2011, as increased raw material prices are yet to have an impact, Staudigl said. Sales for the three month period are expected to exceed €1.2bn and EBITDA will be more than €300m, he said.

This year, Wacker expects raw materials costs to rise by €100m or more, depending partly on the oil supply situation, said Staudigl. The increase will be much higher than last year, when raw material costs increased by €60m-70m, he noted.

In particular, he blamed the rising cost of silicon - caused by limited supply and the energy intensive production process - for the increases.

Wacker expects the global economic upturn to continue this year, but at a slower pace than in 2010. The upswing continued to benefit Wacker’s operations in January and February, said Staudigl.

“Group sales were much higher year on year. In every business field, demand was high and sustained.”

Wacker intends to invest about €950m this year, focused mainly on the polysilicon division. The figure includes the polysilicon capacity expansion projects at Burghausen and Nunchritz in Germany, announced earlier this week.

The company will also start constructing a new polysilicon plant at Cleveland in the US this year. The €1.1bn project is expected to be completed by the end of 2013.

“This fresh capacity will give us more independence from high energy prices in Germany,” said Staudigl.

Wacker has already contractually secured almost the entire output from the Cleveland project for 2014, he added.

($1 = €0.71)

For more on Wacker Chemie visit ICIS company intelligence

By: Anna Jagger
+44 20 8652 3214

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