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We understand that Wacker’s management had a difficult task after the strong start to the year. On one hand, we might have expected an upwards revision to the guidance and, on the other, the risks and uncertainties have increased in recent weeks and it would be negligent to ignore them. But investors have their own view, looking at the sharp share price drop.
However, reported sales growth was +4.6% and EBITDA was +8.0% ahead of consensus.
Companies: Wacker Chemie AG
Wacker reported a strong final quarter. In a nutshell, FY 2021 was an exceptional year pushing the proposed dividend to €8 per share, but business will soften in 2022.
After the release of the preliminary figures in January, consensus was still beaten (sales: +0.9%; EBITDA: +5.8%; net income: +7.7%).
We have already lowered our estimates in the light of skyrocketing energy and raw material prices, despite our strong view on the company.
Wacker released a set of additional figures which gave a better picture: 2021 was the best year since the IPO in 2006!
EBITDA exceeded the 2010 record high, which had been not really in reach for many years. This strong performance was mainly driven by substantial profitability gains in Silicones and Polysilicones due to better prices.
Despite management’s reluctance in providing an outlook so early in the year, it sees a continuation of the high demand in its product portfolio.
Wacker’s Q3 figures were a strong show of force in the P&L development. The performance left scratch-marks in the NWC inflows, which we believe will be patched up in Q4. Strong demand (1/3rd) and higher sales prices (2/3rds) were the drivers. Meanwhile Polysilicon’s business environment looks completely different compared to the beginning of the year with a strong positive effect on profitability, which has already forced us to take a positive stance.
Despite the easy comparables, management increased its guidance once again, especially on the profitability level. The beat to consensus was not meaningful (top line: +2.5%; profitability: 0%), but the reported figures were above our expectations. Silicones was a quite nice surprise. Polysilcon seems to be on its way to historic heights.
Wacker, like its peers, had a head start into beating its own rough guidance as well as our expectations and consensus, which was mainly attributable to significantly higher volumes as the passing on of higher raw material prices did not make a meaningful contribution. The top-line development helped the profitability line, which was additionally supported by the ongoing cost-cutting programme. As we felt a certain conservatism in the earlier guidance, it looks to us as if management has greater
Or Polysilicon’s ‘reincarnation’, which is expected by management looking at the strong profitability guidance and the potential contributors.
The high dividend proposal (€2.00 per share; AlphaValue: €0.50) looks to us like a sounding for a strong 2021. As Wacker had already announced preliminary figures (not very difference to this), the focus lies on the details and the 2021 perspectives.
After today’s management presentation, we have become more confident for 2021.
Wacker Chemie’s preliminary figures confirmed our expected profit increase in Q4, bringing Polysilicon’s EBITDA back into the black, also on a FY basis. The chemicals divisions painted a mixed picture in the last quarter, but all remained on the profitable side. Our top line as well as EBITDA expectations were beaten. The same was true for consensus.
Wacker’s Q3 figures showed a clear profitability improvement in Polysilicon and Polymers was a real positive surprise. We had expected a stronger performance in Polysilicons, but the figures met our punchy expectations at group level. Consensus was beaten.
Companies: WCH WCH WCH WKCMF
Wacker’s reported figures confirmed our broad picture of the company. The weaker performance was mainly driven by lower volumes rather than lower prices. The implemented cost-cutting measures did not really materialise. Consensus was barely beaten.
We value Wacker’s first virtual Investors Day as a good approach to communicate with investors, but it failed in a key aspect: helpful information. In essence, management did not provide additional strategic guidance nor additional figures. Our expectations might have been too high, but some cost figures on the months-ago announced cost-cutting measures would had been highly appreciated as, on the contrary, Wacker is willing to accept Polysilicon’s cash drain also for an undefined future.
Wacker has been working on its still loss-making polysilicon business, but the losses have not gone go away. Thankfully, Wacker is also active in the oil-based value chain, which gave EBITDA quite a nice push in addition to some lower corporate costs. In the light of the pandemic, management initiated some measures (lower capex) as expected.
The Q1 figures were better than expected, especially profitability, which is also true for consensus.
... but excludes the potential effects from COVID-19 and the cost-cutting programme. The reported FY figures were pretty much in line with those already communicated. Management’s dividend proposal does not reflect confidence. We understand that Wacker is struggling with the potential COVID-19 impacts, but that the (positive and negative) effects from the cost-cutting programme are still not determined, which does not look very professional to us.
In a manager’s training (?) book there is usually a chapter on how a manager should behave in an ‘emergency’ situation. It looks to us as if Wacker’s management has done just this. The announced efficiency programme pulls the ‘usual’ strings, but we don’t see the additional strategic announcements. So the proposed measures (local ones still have to be accepted by German employee representatives) are unlikely to be very meaningful.
Wacker’s preliminary report confirmed our cautious view on company’s management as we think a necessary (?) write-down is one thing, but not providing a strategic solution for the ailing polysilicon business is another thing. The photovoltaic business value chain has become dominated by Chinese companies for many reasons over the past year, but there are only some small business adjustments in this regard. We highly recommend any kind of solution for Polysilicon.
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11th September 2023
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This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment ob
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