Annual Report

Silicones –
A World
2016
of Unlimited
Potential

14
Silicon
WACKER –
At a Glance

€ million 2016 2015 Change

in %

Results /  Return
Sales 5,404.2 5,296.2 2.0
EBITDA1 1,101.4 1,048.8 5.0
EBITDA margin 2 (%) 20.4 19.8 n. a.
EBIT 3 366.2 473.4 – 22.6
EBIT margin 2 (%) 6.8 8.9 n. a.

Financial result – 101.4 –  66.7 52.0

Income before income taxes 264.8 406.7 – 34.9
Net income for the year 189.3 241.8 – 21.7

Earnings per share (basic / diluted) (€) 3.61 4.97 – 27.4

ROCE (%) 6.1 8.1 n. a.

Financial Position /  Cash Flows

Total assets 7,461.6 7,264.4 2.7
Equity 2,593.2 2,795.1 – 7.2
Equity ratio (%) 34.8 38.5 n. a.
Financial liabilities 1,458.2 1,455.4 0.2
Net financial debt 4 992.5 1,074.0 – 7.6
Capital expenditures 5 427.6 834.0 –  48.7
Depreciation / amortization 735.2 575.4 27.8
Net cash flow 6 400.6 22.5 > 100

Research and Development

Research and development expenses 183.4 175.3 4.6

Employees
Personnel expenses 1,379.4 1,350.1 2.2
Employees (December 31, number) 17,205 16,972 1.4

1
EBITDA is EBIT before depreciation and amortization.
2
Margins are calculated based on sales.
3
EBIT is the result from continuing operations for the period before interest and other financial results, and income taxes.
4
Sum of cash and cash equivalents, noncurrent and current securities, and noncurrent and current financial liabilities.
5
Capital expenditures excluding acquisitions.
6
Sum of cash flow from operating activities (excluding changes in advance payments) and cash flow from long-term investing activities ( before securities),
including additions due to finance leases.
Annual Report Vision and Key Events in 2016
Silicones – Truly Multi-Talented
2
3

2016 A–
For Our Shareholders
Letter to Our Shareholders 27
Silicones – Executive Board
Report of the Supervisory Board
31
32
A World WACKER Stock in 2016 36

of Unlimited B–
Combined
Potential Management Report
Group Business Fundamentals 43
Goals and Strategies 49
Management Processes 51
Statutory Information on Takeovers 54
Business Report 55
Earnings 60
Net Assets 65
Financial Position 68
Non-Financial Performance Indicators
and Other Information 71
Management Report of Wacker Chemie AG 86
Risk Management Report 90
Outlook 106

C–
Consolidated
Financial Statements
Statement of Income 117
Statement of Comprehensive Income 118
Statement of Financial Position 119
Statement of Cash Flows 120
Statement of Changes in Equity  121
Reconciliation of Other Equity Items 122
Segment Information by Division 123
Segment Information by Region 124
Notes of the WACKER Group 125
Supervisory Board 176
Executive Board 177
Corporate Governance Report and
Declaration on Corporate Management 178
Declaration by the Executive Board
on Accounting Methods and Auditing 188
14
Auditors’ Report 189

Silicon is essential for silicone Further Information

production at WACKER. The shiny
gray semimetal is processed Multiyear Overview 190
into thousands of silicone Financial Glossary  /   Chemical Glossary 192
­p roducts at the company’s sites
in Burghausen, Nünchritz and List of Tables and Figures 194
Zhangjiagang. Index 195
 Vision and Key Events in 2016

Vision –
As an innovative chemical company, WACKER makes
a vital contribution to improving the quality of life
around the world. In the future, we want to continue
developing and supplying solutions that meet our
own expectations of adding value for our customers
and shareholders, and growing sustainably.

2016 –
Key Events
March – To mark World Refugee Day on June 20, WACKER is boosting its R&D for silicones in
WACKER expanded its technical competence SchlaU, a Munich-based refugee initiative, the USA with a new lab complex in Ann Arbor,
center in Singapore to include a new devel- and Wacker Chemie AG launched a project to Michigan. The complex is dedicated to de-
opment and test lab for silicone elastomers, enable young refugees in the Bavarian dis- veloping new products and business fields in
which are used, for example, in the electronics trict of Altötting to start their working lives. North, Central and South America, and will
and healthcare sectors. The silicones and We donated a total of € 200,000 to the SchlaU officially open in the first half of 2017.
polymeric-binder labs for construction appli- School. The collaboration with WACKER’s Burg­
cations were also modernized. hausen Vocational Training Center ( BBiW ) At the K 2016 plastics show in Düsseldorf,
aims to help young refugees living in Bavaria’s WACKER presented innovative products and
April – Altötting district learn German and to find technologies for key industries such as the
them suitable training places.
2 The new polysilicon site in the US state
of  Tennessee officially opened. The site in
automotive, electronics, lighting and health-
care sectors. Among other innovations,
Charleston is WACKER’s largest single invest- August – WACKER showcased textile sensors of silicone
ment ever, totaling some US$ 2.5  billion. We Dr. Alexander Filippou, Professor of Inorganic film, crystal-clear encapsulation compounds
finished commissioning the production facil- Chemistry at the University of Bonn, Germany, for LED s , and optical lenses. WACKER also
ities there on schedule in the third quarter. received the 2016 WACKER Silicone Award. presented the world’s first-ever industrial 3D
Full capacity is over 20,000 metric tons The award was presented at the eighth printer for silicones.
per annum. Around 650 people work at the ­European Silicon Days in Poznań, Poland, in
Charles­ton site. recognition of Filippou’s groundbreaking
work in the field of organosilicon chemistry.

November –
A pilot reactor for vinyl acetate-ethylene
copolymer ( VAE ) dispersions came on stream
at the Nanjing site in the Chinese province of
October – Jiangsu. With the new plant, we are intensi-
WACKER presented the Alexander Wacker fying our local R&D and expanding our local
June – Innovation Award 2016 to a research team in product developments, application technol-
WACKER began expanding its production Burghausen for developing a 3D printing ogy and customer service offerings.
capacities for silicone rubber at the Jincheon process. The first industrial 3D printer manu-
site in South Korea. We are erecting new factures parts from silicones. The high-tech December –
plants for manufacturing more silicone seal­ printer is called ACEO ® Imagine Series K, WACKER BIOSOLUTIONS acquired a large-scale
ants, specialty silicones and liquid silicone and  the procedure developed by WACKER fermentation plant in northern Spain. The
rubber for the construction, electronics and researchers is a milestone in additive manu- plant at the León site will produce cysteine
automotive industries. facturing. for foods and pharmaceutical products by
fermentation processes. The acquisition is a
strategic step toward meeting our custom-
ers’ cysteine demand in the long term and
offering other bioengineered products.

Wacker Chemie AG – Annual Report 2016

Silicones – Truly Multi-Talented

Silicones –
Truly Multi-Talented

We encounter them every day – in

smartphones, cars, textiles, paints and
coatings, but also in lipsticks, detergents
and medical applications. They are
the 3,000 different silicone products that
WACKER manufactures.
3

They have unique properties unsurpassed

in their diversity by any other polymer.
They are resistant not only to heat, but
also to low temperatures. They are
sealants and insulating materials, but
also lubricants and release agents.
They are water-repellent, elastic, UV-­
resistant and extremely durable. And they
provide glossy surfaces while making
textiles soft and supple.

Wacker Chemie AG – Annual Report 2016

 Silicones –

Silicones –
Diverse
Applications

Wacker Chemie AG – Annual Report 2016

Diverse Applications

Wacker Chemie AG – Annual Report 2016

 Silicones –

Silicones –
Unlimited

Co
Cl

nsu
ea
Potential

ni

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ag

rC
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–
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of fac ad
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n of traffic- be onc rete
ar ing structur –
es (b ridge s an
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cks) –
Binders for silic one resi
n emulsio n paints –

Natural stone conservation (consolidation and hydrophobization) –

Construction foam –
ts –
Joint se alan
rofile s –
G a s ket p
s–
g ta p e
Jointin
s–
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lea
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Wacker Chemie AG – Annual Report 2016

 Unlimited Potential

~ € 36 billion
rt
nspo
s
s ke t
– Tr a

cs
d ga

oni in industry value added

ke t s

ctr
otive

s
er s is generated annually by

ns
r- he

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silicones
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a Silicones are chameleons among

at
er

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El s
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Ra

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–

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–

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oa s
po ie capacity for change, they range from
rc or
er

om o s
En

C l at c es s nic
s silicone fluids, emulsions and resins
– su ac s e nt tro
In le er um ele
c through to silicone elastomers.
– ab rm tr er
fo ns
– C ans gi ow WACKER’s product portfolio covers
Tr u r i n
n dp
– s a some 3,000 different silicones.
ea er s
– M nsum to r
o d uc Hardly any material has so many
i te s
n
–C ico
pos
s
em aic useful properties. Silicone elasto-
–S olt om
tov –C
h o cs mers are used, e. g., to protect car
–P
Pl a s ti
me rs – electronics against moisture and
s to les dirt, and to prevent short circuiting
Ela ar tic
r i n te d le s
–P a r tic in  high-voltage power lines. Anti-
t r uded a r ticle
s
–E x
olde d
foam agents prevent washing ma-
n - m
c tio chines from foaming over. Silicones
– Inje
s
m p os ite athing give skin and hair a silky sheen. 7
– Co and she
le m a nu fac tu re
– Ca b Specialty silanes and silicone resins
g
– Pad pr intin keep the walls of buildings dry while
– Additive s allowing water vapor to escape from
– Impregnating agents the interior. When it comes to ap-
– Polyethy lene cros slinking plications, silicones offer almost
– Pr ecis io n ca ­unlimited potential.
sting
– M oldm
a k ing

Coatin
gs – A
– G la
– Co
s s ju
r ros
ion
gs
dhes
ives
45 %
–C pr ot Liquid Silicones
oil c ecti
–E oat on Almost half of WACKER silicones are
qui ing
pm s
–H
ou
ent fluids, emulsions, resins and silanes,
seh eng
–G old ine i. e. liquid in form. They usually act
las er in
–M s / g ap g
plia behind the scenes, as it were, pro-
ica las n c
–H im s -re e s
i pr inf viding special surface effects or
– E ghly eg
na
orc
lec he tio e d serving as processing aids.
–W tro at- n lam
oo m re ina
– a sis te s
Fi d gn ta
l te co et nt
ra at s co
in ati

55 %
nd gs ng
C

cl s /
h e te r

ea   tu
–

n- bu
m t r e s ex n t s a l s
W

ro lar
–

ic
a

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dia Solid Silicones

– A eldi

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te to
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n

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Most WACKER silicones are solids –

at
tif

no
–R

us
m
ga
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lo
tr
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gy i. e. rubbers that cure to form solid

tio

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elastomers. Elastic silicone mold-

fill

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rm

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ings are used in the plastics industry

n
nt

at

nd

and many other sectors.

s

er
ia

lu
br
ic
an
ts

Wacker Chemie AG – Annual Report 2016

 Silicones –

Silicones –
Our Business at a Glance

~ € 10 27 %
70 Years
Billion Sales in Asia
WACKER SILICONES generates some-
what less than 30 percent of its sales
The age of silicones began at WACKER Silicone Market in Asia, making it the second-largest
on August 2, 1947, making the chemical The silicone market is polarized. market after Europe. Our silicone
company Europe’s first silicone pro- ­Accounting for 35 percent of the mar- business in India and Southeast Asia
ducer. Today, silicones account for ket, Dow Corning is currently the grew at a particularly fast rate in 2016.
over a third of WACKER’s total sales of largest silicone manufacturer capable Rising living standards in emerging
€ 5.4  billion. of producing its own raw materials. Asian markets are fueling demand for
WACKER ranks second with 17 percent, high-­q uality products that contain
just ahead of Momentive. WACKER is silicone.
Raw Material from Holla world No. 1 in a variety of application
8 Silicone production requires one thing fields, such as building protection.
in particular: silicon metal. It is the The value chain operated by the
most important raw material after largest silicone ­producers with back-
methanol. WACKER’s production site ward integration amounts to around
in Holla, Norway, meets about a third €  10  billion.
of our total demand. The remainder
is purchased on global markets. Cap-
tive production has key advantages, Breakdown of Sales
making WACKER slightly less depen- WACKER SILICONES has been steadily
dent on price trends. increasing its sales for years. 2016 was WACKER’s Zhangjiagang plant in China
the first time that its sales surpassed
the two-billion-euro mark.

27%

12
Asia

47%
Europe

Sites
20% WACKER operates 26 production sites
USA around the world, 12 of which belong
6% to the integrated production network
Rest of run by WACKER SILICONES. Located
world
in  Europe, Asia and the Americas,
these sites supply global growth
Silicon-metal production site in Holla, markets. The company’s Burghausen
Norway and Nünch­r itz sites in Germany and
Zhangjiagang in China play a key role.

Wacker Chemie AG – Annual Report 2016

Our Business at a Glance

3,000
They make sales products, as well as
silanes and siloxanes, which are key
upstream and intermediate products.
The division’s fully integrated produc-
tion system is unique, making it pos- Products
sible to treat byproducts and return Turn two into seven and then into

4,566
them to the production cycle, where 3,000: that’s silicone production at
they are processed into value-added WACKER in a nutshell. WACKER uses
sales products. two raw materials – silicon metal and
methanol – to make 3,000 different

22
silicone products in seven product Employees
lines: silanes, siloxanes, silicone flu- Nearly a third of WACKER employees
ids and emulsions, elastomers, resins, work at the company’s largest busi-
pyrogenic silica and, the most recent ness division, most of them in research,
Technical addition to the WACKER SILICONES fam- technical support and production.
Competence Centers ily, organofunctional silanes. Almost 60 percent of them are based
Our technical centers are based locally in Germany. Investments and expand-
to enable us to develop tailored mar- ing sales markets, especially in Asia,
ket solutions – a service that benefits are causing the number of employees
silicone customers as well. Every coun- based outside Germany to rise at an
try has its own distinct raw materials, above-average rate.
processing conditions, applications,
legal regulations and standards, not
to mention consumer expectations.
WACKER’s silicone experts adapt prod-
ucts accordingly and show customers
how to get the most out of silicones. 9
WACKER ACADEMY regularly provides

4,200 m2
training at our technical centers, with
courses designed for sales staff, cus-
tomers, distributors and universities.

Highly elastic silicone elastomer for R&D Lab Facility

vibration dampers The Group’s largest silicones research
laboratory facility is in Burghausen. In
this facility, which occupies an area of
4,200 square meters, we develop silicone
film, encapsulants, coatings, silicone
gels and surfactants for the next gen-
eration of products. WACKER SILICONES’

WACKER: technical support and quality control

units are among the departments that
use a number of laboratories there.

the world’s
second-
Technical competence center
in Pangyo, South Korea largest
producer of
silicones
Wacker Chemie AG – Annual Report 2016
 Silicones –

Five Questions –
On Course for Growth
with Silicones
Interview with
Dr. Robert Gnann,
President of
WACKER SILICONES

1 –
10 WACKER is currently the world’s
No. 2 silicones producer. What is your
strategy for further growth?

Dr. Gnann: We have a clear goal. We

want to continue growing at over 4 per-
cent per year – significantly faster
than the global chemical industry. We
have created the best conditions for
this with our full-scale production
plants for upstream products. Now,
we are selectively expanding our
­capacities for downstream products.
In the USA, we are currently building a
new pyrogenic silica plant in order
to become the No. 2 producer in this
business. At the same time, we are
continuing to expand our consultancy
and service portfolio – particularly in
growth regions such as Asia and South
America, where we have a policy of
using strong, locally based teams
that work closely with customers. As
far as our products are concerned,
we want to offer more high-quality
specialties, while also continually
optimizing our technologies and pro-
cesses – thus further improving our
cost position.

Wacker Chemie AG – Annual Report 2016

Five Questions – On Course for Growth with Silicones

2 – 3 –
silicones, which are in huge demand.
The issue here is to produce materials
of uniformly high quality at the lowest
possible cost. We are pursuing an
What makes WACKER SILICONES So the aim is to keep on improving optimum-mix strategy, not only offer-
better than its rivals? silicones and modifying their ing high-efficiency production of com-
In other words, how do you hold ­properties for new applications? modity silicones, but also a growing
your own against the competition? share of tailored specialties that add
Dr. Gnann: Yes, but not only that. We value for customers.
Dr. Gnann: One of our biggest strengths are heavily reliant on fundamental in-

5 –
is the comprehensive customer ser- novations. Take 3D printing of silicone
vice our first-rate specialists provide parts, for example. Until recently, there
all over the world. We operate over a was no mature industrial 3D printing
dozen technical competence centers technology available for silicones. We
across five continents. This proximity developed everything from scratch – WACKER already manufactures over
to our customers, understanding their starting with the technology and the 3,000 different silicone grades,
requirements and developing solu- specialty silicone through to control which are used in almost every area
tions with them is what distinguishes software for the printer. of industry, from construction to
us from many of our competitors. electronics. Won’t the range of new
applications be exhausted sooner
A good example of our extensive cus- or later?
tomer policy can be seen in South
Korea. We have our Center of Excel- Dr. Gnann: I’ve got no worries on that
lence for Electronics Applications score. First, new technologies that
there, and work hand in hand with use silicones are coming along all
the world’s leading electronics com- the time. Just think of electromobility.
panies to develop new solutions. In Second, existing applications are be- 11
the USA, we are currently building a ing continually enhanced. The tradi-
new research center at Ann Arbor. tional self-adhesive plaster complete
Customers get far more from us than with wound dressing is almost 100
just silicone: they gain a highly ex- years old, but wound dressings with
perienced advisor and reliable devel- silicones set entirely new bench-
opment partner, who has a detailed marks. They are soft, flexible, breath-
understanding of their needs, and able and adhere securely, yet can be
helps them to reach their goals. peeled off much less painfully after-
ward.

4 – And we can even modify established

products such as silicone fluids so
that they can be used as heat-transfer
That doesn’t sound like a business media in solar thermal power gener-
that will consume thousands of ators, where they significantly im-
tons of silicone per year. Do you see prove efficiency. These are just two
WACKER SILICONES’ future in niche examples of many. I’m convinced sili-
­applications? cones will demonstrate their superior
properties in many applications that
Dr. Gnann: First, I don’t think it’s at all we haven’t even thought of yet. There
justified to assume that 3D printing are no limits to the creativity of our
will remain a niche application. The outstanding teams around the world.
technology may still be young, but it
has enormous potential. However, it’s
true that global-scale plants like the
ones we operate will never be utilized
to capacity just by producing specialty
products. We also need commodity

Wacker Chemie AG – Annual Report 2016

 Silicones –

Gentle Protection –
Less Pain

Healthcare
Solid Silicones

1
4
“We want wound patients to suffer
2
less pain in the future,” says Dr. Birgit
Auzias. To meet this goal, she and
her team in Burghausen are testing a
wide variety of silicone gels used to
12 coat bandages and wound dressings
for treating chronic and extensive
wounds. Changing dressings is trau-
matic for some 40 percent of patients.
“With our silicone gel, we are helping
these people,” she adds. Such gels “There is huge demand
are breathable and adhere gently for professional silicone
to  the skin, promoting the healing
wound dressings.”
process.
Dr. Birgit Auzias
Chemist
Silicone Dressings Are in Demand
There is considerable demand for
professional wound dressings. This
is because more and more people in
industrialized countries suffer from
chronic wounds. People with diabetes
are particularly affected: there are
over 360 million of them worldwide
and their number might even rise to 1 Self-adhesive pad for
3
900 million by 2030. “Demand is very electrotherapy
strong and growing fast,” says Auzias,
2 Determining the softness
who collaborates with all major dress- developing our silicones,” Auzias ex- of ­s ilicone gel
ing manufacturers. In Europe, WACKER plains. The latest trend is functional
is now a leader in this segment. The wound dressings with integrated sen- 3 Silicone wound contact
layer, developed together
company has been producing medi- sors that can release medication or with KET‑LIEGAU
cal silicones for 20 years. Respirator measure whether patients are los-
masks, artificial limbs and baby paci- ing too much fluid. Silicones are ideal 4 Dr. Birgit Auzias is
­r esponsible for silicone
fiers are just some of the varied appli- for embedding sensors in a wound wound-care ­p roducts
cations available. “We are constantly dressing. at WACKER.

Wacker Chemie AG – Annual Report 2016

Healthcare – Textiles

Smart Silicones –
Thinner than a Human Hair

Textiles
Solid and Liquid Silicones

1 2

Leggings with integrated silicone wearing and soft. That’s not a prob-
3
sensors caused a minor sensation at lem for silicones. Specialty silicone
the K 2016 international plastics trade fluids ensure that sportswear feels
show in Düsseldorf. These high-tech soft and keeps out moisture, yet
tights can measure body movements ­a bsorbs sweat. Silicone additives
and visualize them on a smartphone create brilliant colors and stop fabric 13
or PC. Currently, only one company from creasing. Work clothing is often
can supply the precision silicone films coated with flame-retardant silicones,
for this application in the high quality which can be a life-saving feature for
required: WACKER. These films are firefighters.
produced in cleanroom conditions in
Burghausen. They are extremely elas-
tic and ultrathin, sometimes even
Facts and Figures
thinner than a human hair.
Experts expect
LEAP Technology of Denmark – which the ­market for stretch
has partnered WACKER to develop
sensors to grow by
wearables – coats the films with
­c onductive electrodes, enabling the 40 percent over
sensors to measure deformations the next ten years.
precisely. Demand for such technolo-
gies is huge. Experts expect the mar-
ket for pressure sensors and stretch WACKER developed the first silicone
sensors to grow by 40 percent over products for the textiles and leather
the next ten years. sectors 50 years ago. Today, silicones
are used at every manufacturing stage,
1 Functional textiles for
Functional Clothing ranging from fiber production to tex- sport and leisure are very
Equipping textiles with smart technol- tile finishing. Innovative precision sili- popular.
ogy is a future trend in the functional cone films from WACKER now make
2 Silicones cause water to
clothing sector. Yet, even without sen- textiles not only soft, water-repellent roll off in beads. The
sors, these fabrics still have to be and breathable, but also smart. ­textile can still breathe.
multi-talented. They are expected to
3 Absorbent yet fluffy
be water-repellent and light as a ­textiles – both are possible
feather as well as breathable, hard-­ with specialty silicones.

Wacker Chemie AG – Annual Report 2016

 Silicones –

14

Wacker Chemie AG – Annual Report 2016

Light and Lighting

Crystal-Clear –
Protection for LED Chips

Light and 5 6

Lighting
Solid Silicones

The revolution is already well under-

way. Light from LED s ( light emitting
diodes) dominates our living rooms, “Our silicones
our offices, schools, streets and cars. ­provide the key material
Where lighting is still provided by con-
­properties for the
ventional luminaires, it will be replaced 15
by LED s before too long. According to ­luminaires of tomorrow.”
the Boston Consulting Group, six out Dr. JeongHan Kim
of every ten luminaires retailed in 2020 Head of the Electronics Competence Center

will be LED s . And for professional ap-

plications, the share will be as high as
80 percent. High-Tech Protection for LED Chips
The increase in light output makes
Far Eastern Developments greater demands on the encapsulation
Growth will be generated mainly in of the sensitive LED chips, and sili-
Asia. Electronics companies in coun- cones from WACKER have proven par-
tries such as Japan, South Korea and ticularly suitable for this. They protect
China are designing ever more efficient the electronic components against
luminaires. That is why WACKER is de- mechanical influences and corrosive 1 Cleanroom for high-­
veloping high-performance silicones – airborne pollutants such as sulfur. performance s
­ ilicones in
Jincheon, South Korea
without which the current boom in LED
performance would not be possible – They act as optical lenses, deflecting 2 Optical lenses made
in Pangyo, South Korea’s Silicon Valley. the light. Special additives can also of highly ­transparent
­s ilicone
“We are in constant contact with the be used to modify the light color. One
local electronics companies,” says property is essential: the silicone must 3 Test rig for LED luminaires
Dr. JeonHan Kim, head of the Center be crystal-clear and must not yellow
4 Analysis of encapsulants
of Electronics Excellence (CoEE ) in at high temperatures. “We develop and ­thermally conductive
Pangyo. “Speed is everything in this silicones specifically tailored to the silicones
business. We often have only a few specifications of high-performance
5 Silicone gel for LED
months in which to supply our cus- LED s ,” explains JeongHan Kim, who, ­luminaires
tomers with new silicone materials.” with his team, also develops silicone
gels for non-reflective displays. “Our 6 Dr. JeongHan Kim is head
of the ­E lectronics Com-
silicones provide the key material prop- petence Center in Pangyo,
erties for the luminaires of tomorrow.” South Korea.

Wacker Chemie AG – Annual Report 2016

 Silicones –

Toughest Demands –
Silicones on the March

Electrical 1 2

and Automotive
Systems
Solid Silicones

In the electronics lab in Burghausen,

Germany, tension is mounting. The
metering device starts moving almost “When it comes to
as soon as the lab assistant has ­silicones, developers
­s ecured the engine controller circuit
­a lways contact us first.”
16 board on the test rig. The nozzle zig-
zags across the circuit board, dis- Dr. Wolfgang Schattenmann
Head of Rubber Solutions
pensing a viscous fluid onto the
­electronic components. The process
is not complete until all the wires and
chips have been coated with a thick last five years, the demand for silicone 1 Burghausen is the biggest
layer of silicone. “It’s looking good,” gel has risen by a multiple of that,” ­p roduction site for silicone
products for the automotive
says Julia Henn, head of the Indus- says Henn. In addition, many of the ­industry.
trial Solutions business team, who is displays in today’s vehicles are now
watching the test closely. “It is crucial bonded with a high-tech specialty 2 Dr.  Wolfgang Schattenmann
is responsible for silicone
to completely cover the circuit board silicone from WACKER. It is heat-re- ­r ubber business.
with silicone gel. Only then is it reliably sistant and does not yellow.
protected.” 3 Optical lenses for driver
­a ssistance systems
For over 60 years, WACKER has been
Car drivers never see the specialty developing silicones for the auto in- 4 Tensile testing of silicone
gel  that WACKER has developed in dustry. It all started with lubricants, disks on the elastomer testing
Burghausen and in Pangyo, South impact absorbers and cylinder-head machine

Korea. All the same, large quantities gaskets. Then came spark plug boots, 5 Silicone engine mounts
of this high-tech silicone can be found turbocharger hoses and radiator gas- ­suppress unpleasant vibrations
in virtually every vehicle. Each of the kets. “Now, our range includes 800 in a car.
60 control devices installed in the silicone products for the automotive
6 The number of newly registered
­average mid-range car is coated with industry – almost a third of our sili- vehicles is growing worldwide.
a protective layer of silicone. The cone portfolio,” says Dr. Wolfgang Combustion engines, electric
power trains or hybrid models –
sensors that supply data for ever more Schattenmann, head of the Rubber
whatever drive is used, the
sophisticated driver-assistance sys- Solutions business team. ­industry is increasingly relying
tems are coated in silicone as well. on silicones.
WACKER now supplies every major
7 The engine compartment of
“Whereas car production has in- automotive contractor in the world. a car: silicones can be found
creased by about 3 percent over the “When it comes to silicones, develop- ­everywhere.

Wacker Chemie AG – Annual Report 2016

Electrical and Automotive Systems

3 4

17

Wacker Chemie AG – Annual Report 2016

 Silicones –

m
c b
d a
e
f
i g n o q x

h
p
l u

j
k v

s t
r y w

ers always contact us first,” explains battery’s service life. One solution a Electric auxiliary n Windshield
Schattenmann, who has a doctorate would be thermally conductive sili- heater: seals ­wipers

in chemistry. Take mass dampers, for cones, for which a dedicated produc- b Actuators: o Rain sensor  /
example. They suppress vibrations tion plant is being built in South ­m embranes camera:
and ensure that driving is safe and ­Korea. They not only seal the battery, ­p rotective pane
c Fuel cell: gasket
18 comfortable. WACKER has developed a but also ensure highly efficient ther- p Airbag coating
particularly robust silicone rubber for mal management. Self-adhesive, d Air circulation:
this application. “Silicones have the electrically insulating silicones are valves, gaskets q Sunroof seals

advantage of providing consistently already used in the on-board electrical e Spark plug r Drive train:
good damping, regardless of how hot systems of hybrid vehicles, ranging boots, ­ignition decoupling
or cold the conditions are.” from high-voltage cables to weather- and battery
­c ables s Cable protec-
packs. tion: weather-
But the future belongs to electro­ f Turbo-charger packs,
mobility. Sales of electric cars are still What with electromobility, digitali- and ­r adiator ­s ealing mats
hoses
very modest. There are 45 million cars zation and autonomous driving, cars t A BS /  ESP
on German roads, but only 156,000 are being completely reinvented. Yet g Engine- /  c harge- ­systems: sealing,
are electric or hybrid models. Never­ many materials are already reaching air cooler: vibration
­g askets ­decoupling
theless, the number of electric cars their limits. That is why industry is
worldwide rose by 73 percent in 2016. i ncreasingly focusing on silicone.
­ h Engine-oil u Exhaust-pipe
In China alone, the number has tripled “Silicones still offer a huge potential ­system: non-­ mounts: shock
return valves absorbers
since 2015. Henn and Schattenmann and scope for development,” says
agree: “The automotive industry is Schattenmann, adding that this is i PDC, radar, v Hybrid cables,
facing completely new challenges. true of both conventional combustion ­a irbag ­s ensors: weatherpacks
gaskets
Silicones are going to play an even engines and battery-operated drives w AdBlue systems:
greater role in the development of or fuel cells. “In a great many cases, j Lights: gaskets, heating mats,
technical solutions.” silicones are simply the best alter- ­optical lenses seals

native.” k Dust protection, x Interior: switches,

Batteries are just one example. Along- sleeves ­a mbient lighting,
side electric motors and controllers, cup holders
l Engine mounts
batteries are the most important com- y Car keys
ponent in the next generation of m Vibration
electric cars. Thermal management is ­d ampers and
shock absorbers
one of the major challenges. Over-
heating considerably shortens the

Wacker Chemie AG – Annual Report 2016

Electrical and Automotive Systems – Building Protection

Water-Repellent –
Molecular Umbrellas

Building
Protection
Liquid Silicones

1 2

The Capitol Building in Washington,

3
the statue of Christ the Redeemer in
Rio de Janeiro, and the moai figures “WACKER is the
on Easter Island – these three inter- ­technology leader when
nationally acclaimed landmarks could
it comes to building
not be more different, yet they have 19
one thing in common: they are pro- ­protection. Our products
tected against damp and corrosive enjoy benchmark status
salts by building-protection silicones across the industry.”
from WACKER. Thanks to the hydro-
Dr. Rudolf Hager
phobic effect of these silicones, water Head of Construction Chemicals
simply rolls off the surface, while
­w ater vapor can pass unhindered.
Consequently, moisture can escape
from the inside and the building ma- protect not only architectural monu-
terial remains permanently dry. ments across the globe, but also
concrete bridges and road tunnels,
Water-Repellent Network such as the Gotthard Tunnel in the
The protective effect hinges on spe- Swiss Alps, which is exposed to
cialty silicones and silanes, which react ­aggressive road salt.
with the substrate, forming a water-­
repellent network that keeps out Innovations are essential in securing
moisture like an invisible umbrella. future business, which is why WACKER’s
WACKER was the first silicone pro- technical service engineers all over
ducer to recognize this phenomenon the world are constantly working 1 Silicones and silanes
and to focus on the development of on  new products and solutions. ­p rotect ­facades against
damp and ­driving rain.
high-quality building-protection agents. The ­latest highlight is an anti-graffiti
­c oating, developed in Burghausen, 2 The statue of Christ the
We are now the market and technol- which finally makes expensive clean- ­Redeemer in Rio de
­Janeiro was treated with
ogy leader in this segment. Our mar- ing and repair work a thing of the a WACKER product.
ket share in Europe and South Amer- past. The silicone protects the facade
ica is over 50 percent, while our so well that graffiti and stubborn 3 Silicones can be used
to ­p rotect reinforced
additives and binders enjoy bench- stickers can be easily removed with ­concrete bridges against
mark status across the industry. They water only. aggressive salts.

Wacker Chemie AG – Annual Report 2016

 Silicones –

20 3

Wacker Chemie AG – Annual Report 2016

Consumer Care

Less Foam –
Less Water Consumption

Consumer Care Facts and Figures

Liquid Silicones
WACKER’s antifoam
agents reduce water
­c onsumption in
­h andwashed laundry
by 50 percent.
5 That saves up to 20 liters
We have developed specialty silicones
of water per rinse.
6
that help improve the standard deter-
gents used around the world for de-
cades, making them more sustainable requirement is that the surface of
and more easily tailored to the indi- these paper tissues feels soft to the
vidual needs of customers in different skin. 21
regions. That has enabled us to tap
new growth potential. Silicones from WACKER make that
possible. They can be anchored on
Conserving Water the fibers and project out of the paper
Half the world’s population still washes surface like hairs. When skin brushes
clothes by hand, and washing machines against them, they bend extremely
remain a luxury in countries such as easily with hardly any perceptible
Vietnam, the Philippines and Thailand. ­resistance, while having next to no
The foam needed to begin the washing effect on the tissue’s tensile strength
process has to be rinsed away after- or water absorption.
wards with large amounts of water.
To further enhance these properties,
This is where WACKER’s innovative sil- 1 WACKER develops tailored WACKER experts incorporate hydro-
icone fluids for fabric care come into products for detergent philic molecules into the silicones.
­m anufacturers.
play. As additives in innovative deter- And, with specialty additives that we
gents, they rupture the foam lamellae, BELSIL® silicone elastomer
2  develop in our local applications labs,
with amazing results. Total water gel for cosmetics and the paper products can be custom-
skin-care products
­demand drops by 50 percent because ized to meet the individual needs of
fewer rinses are necessary. That is a 3 Silicone defoamers keep consumers all over the world.
huge advantage for countries where foam under control.

clean water is scarce. 4 

G MP emulsion facility in
Nünchritz
Soft and Absorbent
5 Absorption test: specialty
Rising standards of living are driving ­s ilicone softeners im-
global demand for paper-based cos- prove water absorption.
metic wipes and moist tissues. The
6 Filling facility for cos­
market for such tissues is growing metic-grade silicone
by  around 5 percent annually. A key emulsions

Wacker Chemie AG – Annual Report 2016

 Silicones –

Looking to the Future –

Shaping Tomorrow’s
Trends
kets or other silicone components
now no longer need to be made in
large production runs for reasons of
cost. They are simply printed on de-
mand. Even web-based supply chains

US$ 26
are possible – which are important for
reaping the benefits of Industry 4.0.
Not only major automotive and aero-

Billion
space companies are interested in the
innovative 3D process, but also manu-
facturers from the sports, leisure and
life sciences sectors. The vision of
3D Printing printing three-dimensional objects
There was an eager throng around with an industrially mature process
the booth as many visitors to the 20th ACEO ® technology uses a drop-on-­ has become reality.
22 International Trade Fair for Plastics demand method.
and Rubber – K 2016 – jockeyed to see
the first industrial-scale 3D printer for WACKER’s technology uses the “drop-
silicones. WACKER was unveiling a on-demand” method, in which the
genuine world’s first, and its business printer head deposits tiny silicone
model is no less groundbreaking. Cus- droplets on a substrate, building up Wave Power
tomers can upload their design to our a  homogeneous silicone layer ex- When waves strike the quay wall
Webshop or print it themselves under tremely rapidly. sending spray high into the air, even
professional guidance at our Open landlubbers can appreciate the mas-
Print Lab. The finished article is then Printing then starts again on the next sive energy being released. According
shipped to them. layer. In this way, parts with widely to United Nations projections, the
varying shapes, colors and hard- world’s wave energy potential is 29,500
According to Wohlers Associates, an nesses are built up layer by layer  – terawatt hours – more than the entire
independent US consultancy, 3D pro- there are no limits to the creative
cesses are set to reach sales of over ­p otential. With the aid of support

Waves
US$ 26 billion by 2021. material, it is even possible to print
overhangs, lattice structures and
complex geometries.

WACKER markets the new 3D process

store an
under the name ACEO®. It offers entirely
new production and design potential. energy
potential
Silicone prototypes can now be
printed rapidly with relatively modest
technical effort – it is enough to use a
computer drawing or a model gener-
ated by imaging techniques. Even
of 29,500
3D printing of silicone elastomers
spare parts manufacturers benefit
from WACKER’s new technology – gas- TWh
Wacker Chemie AG – Annual Report 2016
Looking to the Future

WACKER is now the world’s No. 3 man-

ufacturer in this business, and demand
for HDK®, as the product is called at
WACKER, continues to rise. Chemists
and engineers in Burg­h ausen are
therefore developing the perfect re-

1,000 °C
actor. Their goal is to increase yield,
produce HDK® in even better quality,
and slash manufacturing costs.

Perfect Process Pyrogenic silica is produced in an

Every top athlete knows that the only oxyhydrogen flame at over 1,000 °C. To
way to reach peak performance is to understand how the process works,
never stop working on yourself. Those WACKER researchers have developed
Transforming the power of nature who don’t will fall behind. a computer model in which 120 pro-
into energy cessors compute over eight million
points in every run. Ten seconds of
planet’s annual energy demand. Up to
now, however, no systems have been 120 real-time process takes up to three
weeks to compute, with the high-per-
available that are technologically formance computers working around
mature enough to harness this power.
Mechanical or hydraulic power sta-
processors, the clock.

tions are out of the question, since

they have to be continually maintained 8 million The effort is worth it, however. These
computer models have allowed WACKER

points –
on the high seas. to build a pilot reactor in Burghausen,
where tests are now being carried
So industry has taken a different out that will benefit all WACKER’s HDK® 23
­a pproach, namely water-filled rubber
tubes fitted with flexible capacitors of
10 seconds plants, including the new production
facility in Charleston, Tennessee (USA ).
electroactive material. The rise and
fall of the waves continually stretches of real
and compresses these mini power
stations, converting the mechanical
wave energy into electrical power.
time takes
The tubes are maintenance-free and
extremely efficient. 3 weeks
WACKER supplies the key starting
­materials for the converters: ultrathin
to compute
silicone films. They are the only mate-
rials with the right electrical proper- Exactly the same principle applies at
ties and are also extremely flexible WACKER. Five decades ago, we started
and maintenance-free. manufacturing pyrogenic silica. This
colorless powder – highly pure amor-
WACKER is the only company in the phous silicon dioxide – is to be found
world to manufacture this precision in many day-to-day products. HDK® facility
film in large quantities. The first proto-
types with the WACKER material are It thermally insulates refrigerators,
already being tested, and the first controls the flow of paints and ad-
power stations should be ready for hesives, prevents toner from forming
service within a few years. Wave con- lumps, and makes silicones as solid
verters made of silicone should then as rubber.
be  able to generate electricity from
the inexhaustible rise and fall of the
waves.

Wacker Chemie AG – Annual Report 2016

 Silicones – Looking to the Future

tromobility, would be completely un-

feasible without silicon chemistry. Our
goal is to combine the latest research
findings with WACKER’s experience and
knowledge gained from over 70 years
R&D in the field of silicone research. The
Where do innovations come from? first fruits of this union of science and
They emerge from knowledge, creativ- industry are impressive: over 30 re-
ity and persistence, and the determi- search projects, ten new patents and
nation to improve things. At WACKER 35 scientific publications.
SILICONES, over 400 employees – about
10 percent of the division’s work-
force  – are working on tomorrow’s
products. Silicones have exceptional
chemical and mechanical properties, 400 employees at WACKER SILICONES
giving them a more diverse range of are developing the next generation

19
applications than almost any other of products.

material, and are an important source

of our future growth. Currently, over applications and solutions for the

Prize­
100 research projects are in progress healthcare, medical, electronic, life
at WACKER SILICONES – a strategy that sciences and coatings industries.
is paying off. The new-product rate, Covering 1,000 square meters and

winners
i. e . sales of products that are less featuring its own analytical facilities,
than five years old, is growing three the huge lab complex is located close
times faster than business with our to the University of Michigan – one of
longstanding silicone grades. the most reputable in the USA. The
24 blend of science, numerous start-ups Silicone Award
and well-established companies offers WACKER carried out pioneering work
just the right climate for developing some 30 years ago when it set itself
new applications and products. The the goals of promoting progress in
goal is clear: WACKER wants to continue silicon chemistry, kick-starting new
to grow in the world’s second-biggest research strategies, and facilitating
chemical market. product innovations. We created the
WACKER Silicone Award with the aim
of fostering outstanding research work
in the field of organosilicon chemistry.
Research is one of the key sources It is among the most important inter-
of future growth. national awards in this sector. So
far, 19 international researchers have

2017
received the Silicone Award. The latest
winner is Professor Alexander Filippou,
WACKER’s Silicon Chemistry silicon researcher at the University of
Institute at the Technical Bonn, who was able to accept the
Ann Arbor University of Munich award personally in September 2016 at
Another success factor is the inter- WACKER also benefits from the exper- the European Silicone Days in Poznań,
nationalization of our R&D work. Our tise of external specialists and scien- Poland.
three-step model consists of technical tists. That is why, together with the
competence centers, WACKER ACADEMY German elite university TU München,
and international research centers. Our we created the internationally unique
new lab in Ann Arbor (Michigan, USA) Institute of Silicon Chemistry over a
is the latest addition to our global sili- decade ago. Silicon chemistry is still a
cones research network. In mid-2017, young field, whose potential is by no
we will begin developing innovative means exhausted. Key megatrends,
products there for markets in North, such as information technology, re-
Central and South America, including newable energy generation and elec-

Wacker Chemie AG – Annual Report 2016

25 – 40

For Our Shareholders

For Our Shareholders

Whether as molded parts, cable

insulation or nail care additives in
nail polish – silicones are highly
versatile, and the material of choice
in many applications.
A–
For Our Shareholders
Letter to Our Shareholders 27
Executive Board 31
Report of the Supervisory Board 32
WACKER Stock in 2016 36
Fiscal 2016 was a good year for WACKER. Sales grew by 2 percent to
€ 5.40 billion. Adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) increased by more than 18 percent to reach
€ 1.08 billion, an even better figure than we had forecast. Substantially
higher levels of depreciation – a result of our capital expenditures
in recent years – did lower our net profit for the year at the Group
level, though.

The positive business trend was also evident in other key financial
indicators. We reduced our net financial debt to below the one-
billion-euro mark and, at around € 400 million, our net cash flow grew
significantly.

These results would not have been possible without the high levels
of commitment and outstanding expertise of our employees. Their
strong performance was a key factor in our success. On behalf of the
entire Executive Board, I sincerely thank all our employees for their
hard work.

Commissioning of our new production site in Charleston, Tennessee

(USA) was one the most important events for us in 2016. Ramping
up such a technically complex greenfield plant was a formidable task –
and everyone involved accomplished it with great success. All of
the facilities are now in operation and we are producing polysilicon of
exceptional quality at the site.

WACKER’s three chemical divisions again lifted their sales last year
amid strong volume growth. WACKER SILICONES even surpassed the
two-billion-euro sales mark for the first time and continued to
consolidate its position as the world’s second-biggest manufacturer of
silicones. This trend underscores the fact that our products offer us
plenty of potential for further growth in global markets. EBITDA at our
chemical divisions totaled around € 6 60 million, climbing even faster
than sales.
Our polysilicon business performed well amid continuing low prices
and the remaining commissioning costs incurred for our new produc­
tion site in Charleston. Our sales volumes continued to rise and
our production capacities were fully utilized, enabling us to increase
our total sales.

Our semiconductor wafer business benefited from strong customer

demand in the second half of the year. Higher sales volumes, further
cost reductions and lower currency-hedging expenses all helped
Siltronic grow EBITDA significantly, which more than made up for the
generally lower silicon wafer prices.

At our Capital Market Day in Burghausen in October 2016, we

presented WACKER’s strategic priorities for the period up to 2020.

The key pillars of our strategy are as follows:

– Our capital expenditures will remain below the level of depreciation

over the period. We will invest in plants for producing inter­
mediates and downstream products in order to leverage growth
potential in specific regions.

– With these new capacities, we intend to grow more strongly

than the chemical-industry average. Product innovations and a
higher share of specialty products in our portfolio should help
secure this growth.

– Sustainability will become an ever more crucial factor in all our

business processes – from the optimal use of raw materials
and greater process efficiency through to the development of
sustainable products that reduce CO 2 emissions.

– Our operating activities will focus on ensuring a high level of

profitability. We are targeting an EBITDA margin of over 16 percent
for our chemical divisions, while the target margin for our poly­
silicon business will be in excess of 30 percent.
– Lower capital expenditures, sustained growth, cost improvements
and highly profitable operations will all ensure a continuously
positive net cash flow.

The fact that analysts, investors and other capital market players
all responded very positively to our strategy has reinforced our resolve
to implement it consistently.

Over the last 15 years, WACKER has spent a lot on its investment and
internationalization initiative. Now, you – our shareholders – should
reap the benefits. Previously, WACKER’s policy was to distribute at least
25 percent of net income as a dividend. That figure will now rise to
around half of net income. Consequently, at the Annual Shareholders’
Meeting in May 2017, the Supervisory Board and Executive Board
will propose a dividend payment of € 2.00 per share, corresponding to
more than half of our net income for 2016.

After a successful 2016, we are also optimistic about the current year.
We expect growth momentum to be similar to last year. As regards
sales, we are confident of achieving a slightly higher percentage
increase than last year. Headwinds will mainly come from raw-material
prices, which are currently rising substantially. This could also
impact the EBITDA trend. As a result, we anticipate that EBITDA
(adjusted for special income) will come in at a similar level to last year.
If current market conditions remain positive during the year, there
will be additional opportunities.

A topic that concerns us deeply at the moment is the gradual

abandonment of the principle of free trade. We have been witnessing
an increase in protectionism, and not just since the Brexit vote
in June 2016. Since the global financial crisis in 2008, more and more
countries have been trying to protect their national economies.

The number of trade barriers erected has been on the rise for years.
They include anti-dumping measures, i.e. import duties on foreign
products. According to a survey carried out by the Centre for Economic
Policy Research, the number of protective measures introduced
has risen from 155 in 2009 to more than 460 today. We know from our
own experience what a strong impact such trade barriers can have
on business.

As a company, we are doing everything in our power to support free

trade. We are convinced that free trade is the only way to create
affluence and growth in the future and to ensure that more and more
people around the world benefit.

With its broad range of quality products, WACKER makes the everyday
lives of people across the world’s regions easier, simpler and more
convenient. We aim to continue devoting all our strength to harnessing
these opportunities – the potential is huge.

On behalf of the entire Executive Board, I sincerely thank our customers

and suppliers for their constructive collaboration and our sharehol­d­
ers for their trust. We look to the future with optimism and hope that
you will stay with us on the path ahead.

Munich, March 2017

Dr. Rudolf Staudigl
President & CEO of Wacker Chemie AG
For Our Shareholders – Executive Board

Executive Board

31

Dr. Christian Hartel Auguste Willems Dr. Rudolf Staudigl Dr. Tobias Ohler

President & CEO
WACKER POLYMERS WACKER SILICONES WACKER POLYSILICON SILTRONIC
Human Resources WACKER BIOSOLUTIONS Executive Personnel Corporate Accounting and Tax
(Personnel Director) Sales & Distribution Corporate Development Corporate Controlling
Corporate Engineering Corporate Research & Development Corporate Communications Corporate Finance and Insurance
Region: Asia Intellectual Property Investor Relations Information Technology
Site Management Corporate Auditing Technical Procurement & Logistics
Corporate Security Legal Raw Materials & Energy
Environment, Health, Safety Compliance Region: The Americas
Product Stewardship Retirement Benefits
Regions: Europe, Middle East (since July 1, 2016)

Wacker Chemie AG – Annual Report 2016

 For Our Shareholders – Report of the Supervisory Board

Report of the
Supervisory Board

32

Dr. Peter-Alexander Wacker
Chairman of the Supervisory Board of Wacker Chemie AG

Wacker Chemie AG – Annual Report 2016

For Our Shareholders – Report of the Supervisory Board

WACKER’s employees have played a major role on this road

to success. The Supervisory Board of Wacker Chemie AG
thanks them sincerely for all their hard work and their high
level of commitment.

Continuous Dialogue with the Executive Board

At WACKER, sound corporate governance and control are
built on a relationship of trust between the Executive Board
Commissioning of the new production site in Charleston, and Supervisory Board as they work closely together in
Tennessee (USA ) marked the end of a ten-year phase of the company’s interest. In 2016, the Supervisory Board
high capital expenditures, during which the company at performed – with great diligence – the duties incumbent
times reinvested as much as 25 percent of its sales. upon it under law, the Articles of Association and its own
WACKER has now entered a new strategic phase and, in the Rules of Procedure. The Supervisory Board was involved at
period through 2020, will reap the benefits of these large- an early stage in every decision of fundamental significance
scale investments. for the company.

This next phase will be characterized by further organic In both written and oral reports, the Executive Board regu-
growth in our business operations, by high inflows of liquid larly provided us with timely and comprehensive information
funds and by a substantial reduction in net financial debt. on corporate planning, strategic development, business
These measures will enhance the company’s financial operations, and the current state of Wacker Chemie AG
strength. At the same time, they will equip us for future and the Group, including the risk situation and compliance
business challenges and will lay the foundations for the issues. Outside of the scheduled Supervisory Board meet-
next capital-intensive phase of the company’s growth. ings, the Chairman of the Supervisory Board also remained
in close contact with the Executive Board, especially with
During our recent phase of intensive investment, we also the CEO, and was kept informed of the business situation,
managed in parallel to achieve strong organic growth in our current trends and key business transactions. Any devia-
three chemical divisions, to consolidate and build on our tions from business plans and targets were explained to 33
competitive position, and to enhance our profitability. Today, the Supervisory Board in detail.
chemical business accounts for more than 60 percent of
the WACKER Group’s sales and adjusted EBITDA. Wherever required by statutory provisions or the Articles of
Association, the Supervisory Board voted on the reports and
WACKER POLYMERS is the global market leader in dispersions proposals of the Executive Board after detailed examination
and dispersible polymer powders based on vinyl acetate-­ and discussion.
ethylene. WACKER SILICONES is the world’s second-largest
silicone manufacturer and the market leader in Europe. In the reporting year, we paid particularly close attention to
WACKER BIOSOLUTIONS has rounded out its portfolio with investment projects, the current earnings situation, in-
selective strategic acquisitions that offer good growth cluding the risk position and risk management, as well as
opportunities in promising fields. the company’s liquidity and financial position.

As for polysilicon, WACKER leads not only in cost and The Supervisory Board held four ordinary meetings in
quality, but also in terms of quantities sold. 2016, two in the first half of the year and two in the second.
Between meetings, the Executive Board informed us in
This trend underscores the fact that WACKER has products detail by means of written reports about all projects and
of recognized high quality to supply customers in almost plans of particular importance to the Group. At its full
every key industry across the globe. Our task for the future meetings and in its committees, the Supervisory Board
is to translate our high levels of technological expertise discussed in detail business transactions important to the
and innovative power into business success. To this end, company on the basis of the reports submitted by the
we have created a strong, global position for our company Executive Board. The full meetings were prepared by
over recent years. shareholder and employee representatives in their own
separate sessions.

Wacker Chemie AG – Annual Report 2016

 For Our Shareholders – Report of the Supervisory Board

Every member of the Supervisory Board attended at least The Audit Committee met five times last year. Its work
half of the meetings of the Supervisory Board, and all ­included the audit of the annual financial statements of
committee members attended all of their respective com- Wacker Chemie AG and the Group for 2015 and of the
mittee meetings. consolidated interim financial statements for the first half-
year. It also discussed the Group’s quarterly financial
The Supervisory Board’s Main Areas of Deliberation ­figures and issues relating to risk management, compliance
The development of sales, earnings and employment at and auditing. The Audit Committee also submitted a rec-
the Group and its individual segments were the subject of ommendation to the Supervisory Board for the latter’s
regular deliberations in the full meetings. At each meeting, proposal at the Annual Shareholders’ Meeting for appoint-
the Supervisory Board evaluated the Executive Board’s ment of an auditor for fiscal 2016. In addition, it awarded
performance – on the basis of Executive Board reports – the auditing contract for fiscal 2016 and determined the
and discussed strategic development opportunities and focus of auditing.
other key topics with the Executive Board. There was no
need for additional monitoring measures, such as the A further area in which the Audit Committee was active
­inspection of corporate documents or the appointment of was in implementing a bid and selection procedure for the
experts. audit for fiscal 2017 in accordance with Art. 16 (3) of Regula-
tion (EU) No. 537 / 2014 of the European Parliament and of the
Major areas of deliberation dealt with by the Supervisory Council of 16 April 2014 (EU Auditing Regulation). Based on
Board were: the results of this procedure, the Audit Committee made a
recommendation to the Supervisory Board concerning the
–  The pyrogenic silica (HDK® ) project at the proposal to be made by the latter to the Annual Sharehold-
­Charleston site in Tennessee (USA ) ers’ Meeting to nominate the auditors for fiscal 2017. The
– The acquisition of a fermentation plant in Spain Audit Committee also dealt with the amended requirements
– 
Future and ongoing investment projects of the EU Auditing Regulation, in particular elaborating a
– 
The anti-dumping proceedings against the solar policy for approving what are termed “non-audit services.”
­industry in the USA, EU and China; their impact on
34 WACKER; and corresponding courses of action The Executive Committee met once in 2016, discussing
– 
The progress of construction at the polysilicon personnel matters in relation to the Executive Board (e. g.
­production site in Tennessee determining overall compensation, setting the performance
– 
The new EU Market Abuse Regulation goals for the variable compensation component, adjusting
– 
The requirements of the new EU Auditing Regulation the fixed annual salary).
and Germany’s Auditing Reform Act as well as
the resulting changes to the rules for the Audit The Mediation Committee did not need to be convened
­Committee contained in the Supervisory Board’s last year.
Rules of Procedure
– 
Performance of the share price The Supervisory Board was regularly informed about the
– 
Group financing activities committees’ work.

The Supervisory Board discussed the WACKER Group’s Corporate Governance

plans for fiscal 2017 at its meeting of December 6, 2016. Last year, the Supervisory Board again looked closely at
On that occasion, the Supervisory Board also dealt with corporate-governance standards. At its meeting of Decem-
medium-term corporate plans for the period 2017 – 2021. It ber 6, 2016, the Supervisory Board discussed application
also discussed and approved the capital-expenditure of the German Corporate Governance Code and adopted
budget for 2017. the annual Declaration of Conformity that must be sub-
mitted jointly by the Executive and Supervisory Boards in
Work in the Committees accordance with Section 161 of the German Stock Corpo-
The Supervisory Board is assisted in its work by the com- ration Act ( AktG ). Shareholders can access the Declaration
mittees it has constituted. WACKER’s Supervisory Board on the company’s website.
has created three committees – an Audit Committee, an
Executive Committee, and a Mediation Committee ( in In its Corporate Governance Report, the Executive Board
­accordance with Section 27 (3) of the German Co-Determi- provides details – also on behalf of the Supervisory
nation Act ( MitbestG )). With the exception of the Audit Board – of corporate governance at WACKER in accordance
Committee, which is chaired by Franz-Josef Kortüm, the with Item 3.10 of the German Corporate Governance Code.
Chairman of the Supervisory Board, Dr. Peter-Alexander For further details, please refer to page 178
Wacker, chairs the committees.

Wacker Chemie AG – Annual Report 2016

For Our Shareholders – Report of the Supervisory Board

At its meeting in December 2016, the Supervisory Board We therefore approve the annual financial statements of
also discussed the efficiency of its activities and found Wacker Chemie AG and the consolidated financial state-
that it works efficiently – one reason being the regular ments as of December 31, 2016 as prepared by the Executive
preliminary discussions regarding the Supervisory Board Board. The annual financial statements of Wacker Chemie AG
meetings. are hereby adopted. We concur with the Executive Board’s
proposal for the distribution of retained profit.
Audit of the Annual Financial Statements
of Wacker Chemie AG and the WACKER Group Changes in the Composition of the Supervisory
KPMG AG Wirtschaftsprüfungsgesellschaft, Munich, audited and Executive Boards
the annual financial statements of Wacker Chemie AG for Anton Eisenacker, deputy chairman of the Supervisory
fiscal 2016, the consolidated financial statements and the Board and longstanding employee representative in that
combined management report (as of Dec. 31, 2016), as body, stepped down with effect from December 31, 2016,
prepared by the Executive Board, including the relevant owing to his imminent retirement (February 2017). We wish
accounts. to thank him for his tireless efforts and his constructive
collaboration in the past years and wish him all the very best
The Supervisory Board’s Audit Committee had awarded for the future. Hansgeorg Schuster, who had already been
the auditing contract in accordance with the resolution of elected an alternate member, automatically succeeded
the Annual Shareholders’ Meeting of May 20, 2016. The Mr. Eisenacker on the Supervisory Board with effect from
auditors issued an unqualified audit report. January 1, 2017.

The auditors also examined the risk management sys- Likewise effective January 1, 2017, Manfred Köppl was
tem in accordance with Section 91 of the German Stock elected new deputy chairman of the Supervisory Board,
­C orporation Act ( AktG ). The audit verified that the risk also automatically succeeding Mr. Eisenacker in the Exec-
management system and internal control system meet the utive Committee and Mediation Committee in accordance
legal requirements. No risks endangering the continued with the Rules of Procedure and /or the statutory require-
existence of the company were identified. The financial-­ ments. As Mr. Köppl was already an elected member of
statement documents (including the auditors’ reports, the the Mediation Committee, the employee representatives 35
combined management report and the Executive Board’s on the Supervisory Board elected Eduard-Harald Klein
proposal for the distribution of profits) were submitted to as  an additional member of the Mediation Committee.
all the Supervisory Board members in good time. The full Supervisory Board elected Mr. Köppl to succeed
Mr. Eisenacker on the Audit Committee.
At its meeting of February 27, 2017, the Audit Committee
closely examined the aforementioned financial statements There were no changes in the composition of the Executive
and reports, as well as the auditors’ reports on the sepa- Board in fiscal 2016.
rate and consolidated financial statements, and discussed
them in detail with the auditors before reporting to the full The Supervisory Board expresses its thanks to the Exec­
Supervisory Board. At its meeting of March 7, 2017, the full utive Board and to the company’s employees and employee
Supervisory Board closely examined and discussed the representatives. Their efforts have helped Wacker Chemie AG
relevant annual accounting documents with knowledge and have another successful year.
in consideration of both the report of the Audit Committee
and the auditors’ reports. The auditors took part in the Munich, March 7, 2017
deliberations at both meetings. They reported on the main The Supervisory Board

results of the audit and were available to the Audit Com-

mittee and the full Supervisory Board to answer questions
and provide supplementary information.

After concluding our own examination, we raise no ob­

jections to the annual financial statements of Wacker
Chemie AG, the consolidated financial statements, the Dr. Peter-Alexander Wacker
combined management report, or the auditors’ reports. Chairman of the Supervisory Board of Wacker Chemie AG

Wacker Chemie AG – Annual Report 2016

 For Our Shareholders – WACKER Stock in 2016

WACKER Stock in 2016 Global stock markets were uneven and volatile in Q2 2016.
Accommodative monetary policy in Europe and the USA
once again supported share prices in April. But later in
the quarter, the markets were increasingly dominated by
concerns about a possible British exit from the European
Union and its impact on the world economy. There was
also speculation about the US Federal Reserve possibly
WACKER’s share price was influenced by a variety of factors raising the federal funds rate. Both of these developments
during 2016. They included business developments in the unsettled the international financial markets and pushed
European chemical industry, polysilicon prices and semi- down the world’s major market indices.
conductor-sector demand. Negative reports on specific
topics, but also macroeconomic events such as Brexit and At their June meetings, both the European Central Bank
the economic trend in China, led to strong price fluctua- and the Federal Reserve left their key interest rates un-
tions, particularly in the first half of the year. In the final changed. The negative outcome of the referendum in the
third of the year, WACKER’s stock price rose markedly, United Kingdom caught many market participants off
spurred by Siltronic’s positive value trend, by the ongoing guard, however. After the result was announced on June 24,
strength of business at WACKER’s chemical divisions, and the pound plunged to its lowest level against the US dollar
by the polysilicon market’s price recovery amid continued in 31 years. The world’s major stock indices fell by over
robust demand. 10 percent at times. Not until the end of the month did the
markets regain some ground.
Concerns about the future economic trend in China and the
expansionary monetary policy of the major central banks After getting off to a good start, the DAX and MDAX indices
in the USA and Europe dominated international financial-­ trended sideways in May. By the end of the second quarter,
market sentiment in the first quarter of 2016. Investors were the two indices recovered at least part of the substantial
unsettled by the turbulence in the Chinese stock markets losses triggered by the UK vote to exit the EU. On balance,
early in the year. The losses on Asian stock markets and the DAX dropped around 1 percent in the April-through-
36 the Chinese economy’s marked slowdown put substantial June quarter, while the MDAX finished June trading down
pressure on stock prices, especially those of major export- 2 percent.
ing companies, dragging down key indices worldwide. In
response to low inflation and continued deflationary fears Despite the difficult conditions in the financial markets in
in Europe, the European Central Bank (ECB) decided on the second quarter, WACKER stock outperformed both the
March 10 to lower its main refinancing rate to zero percent DAX and the MDAX. The stock opened Q2 2016 trading at
for the first time ever. Following significant losses at the € 76.48 and closed at € 78.46 on June 30, almost 3 percent
start of the year, Germany’s DAX and MDAX indices had higher than at the start of the quarter and equivalent to a
recovered somewhat by mid-February. The DAX dropped market capitalization of around € 3.9 billion.
around 3 percent overall, while the MDAX closed unchanged
compared with the beginning of the year. Global stock markets performed solidly in Q3 2016. After a
slow start in early July, initial concerns about Brexit and its
Despite the unfavorable financial-market conditions, WACKER potential global economic impact increasingly receded.
stock performed somewhat better than these two German
benchmark indices in the first quarter of 2016. The shares From August onward, the world’s major equity indices
opened trading in Q1 2016 at € 75.61. In line with the general began to recover, mainly due to the fact that interest rates
stock-market trend, the price initially fell, touching its low remained low in the USA, while Europe and Japan continued
for the year of € 5 8.73 on February 11. The stock made up to pursue accommodative monetary policy. Germany’s
that lost ground in the following weeks, closing at € 77.34 on main equity benchmark, the DAX, gained around 8 percent
March 31. from the beginning of July through the end of September,
posting its first positive quarter of the year. The MDAX also
rose in Q3 2016, gaining 7 percent.

Wacker Chemie AG – Annual Report 2016

For Our Shareholders – WACKER Stock in 2016

WACKER stock started Q3 2016 at € 8 0.03, initially trending WACKER’s share price moved upward, outperforming the
upward in line with the DAX and MDAX. On July 27, it posted two German benchmark indices by a wide margin. In early
its high for the quarter of € 87.49. In the weeks that followed, October, WACKER held its annual Capital Market Day in
the stock largely moved sideways. Then came a period of Burghausen. The company’s Executive Board and senior
extensive pressure, beginning in early September. One management used the occasion to introduce the new cor-
reason for this was rising concern among market partici- porate strategy and discuss current market developments.
pants about future developments in the solar industry. The stronger-than-average increase in the share price at
It was reported, for example, that the People’s Republic of year-end was driven by the rapid recovery in demand for
China had already achieved its target of around 20 giga- high-quality polysilicon, by the positive business trend for
watts in new photovoltaic capacity for the full year in the chemicals, by favorable earnings expectations for Siltronic
first half of 2016. In response, prices and volumes fell in and by exchange-rate effects. From the beginning of Octo-
September. WACKER stock gradually declined to reach its ber through year-end, WACKER stock gained 28.9 percent,
third-quarter low of € 71.50 on September 23. It did recover advancing from € 76.69 to € 98.85, and reached its year-high
some ground by the end of the quarter. On balance, how- on the last trading day of the year. The market capitalization
ever, WACKER stock lost around 6 percent from the be­ at year-end was € 4.9 billion.
ginning of July through the end of September, closing the
three-month period at a price of € 75.00, equivalent to a During the year, discussions with capital-market partici-
market capitalization of around € 3.7 billion. pants were dominated by questions about market equi­
librium with regard to polysilicon and the announced exit
The fourth quarter was influenced by the outcome of the from Siltronic. In addition, there was increasing focus
US elections on November 8. Initial uncertainty in the mar- on  the success and market prospects of the chemical
kets turned into positive expectations as to the future ­divisions.
­development of the US economy under a President Donald
Trump. The US dollar gained substantially against the euro Performance of WACKER Stock Compared
during November and December. The DAX climbed by with DAX and MDAX
8.1 percent in Q4 and the MDAX by 2.3 percent. In full-year 2016, the DAX and MDAX indices gained 11.6 per-
cent and 9.5 percent, respectively. WACKER’s share price 37
increased by 30.7 percent during the same period. The stock
started the year at € 75.61 (opening price on Jan. 4, 2016)
and at year-end stood at € 98.85.

1.1 WACKER Share Performance ( indexed to 100) 1

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

130

120

110

100

90

80

70

 WACKER 1    DAX 
30    MDAX  
1
 100 = € 77.52 ( year-end closing price on Dec. 30, 2015)

Wacker Chemie AG – Annual Report 2016

 For Our Shareholders – WACKER Stock in 2016

1.2 Facts & Figures on Wacker Chemie AG’s Stock Shareholder Structure
Wacker Chemie AG’s largest shareholder is Dr. Alexander
€
Wacker Familiengesellschaft mbH, Munich, with over
Year-high (on Dec. 30, 2016) 98.85 50 percent of the voting shares (2015: over 50 percent). Blue
Year-low (on Feb. 11, 2016) 58.73 Elephant Holding GmbH (Pöcking, Germany) once again
Year-end closing price (on Dec. 30, 2015) 77.52 had no voting-share changes to report in 2016, with its
Year-end closing price (on Dec. 30, 2016) 98.85 holding in Wacker Chemie AG remaining at over 10 percent
Performance for the year (without dividend ) (%) 27.52 (2015: over 10 percent).
Year-end market capitalization
(shares outstanding; prior year: 3.85) ( billion) 4.91 Free Float: Strong Growth in European Interest
Average daily trading volume 1
According to our shareholder analysis (Dec. 31, 2016), the
( prior year: 17.9) (million) 15.8
number of shareholders in the USA once again decreased
Earnings per share ( prior year: 4.97 ) 3.61
substantially during the year. In December 2015, the level of
Dividend per share ( proposal ) 2.00
US-held shares was 47 percent. A year later, it was 29 per-
Dividend yield 2 (%) 2.6
cent. The level of German-held shares rose to 31 percent
1
Trading platforms ( Xetra, Chi-X and Turquoise). (2015: 22 percent). Our strongest shareholder growth in
2
Dividend proposal based on an average weighted share price of € 78.12 in 2016.
2016 came from the UK, where investors held 15 percent of
the shares (2015: 7 percent). Share ownership declined in
Canada (from 8 percent to 5 percent) and in Switzerland
Earnings per Share of € 3.61 (from 4 percent to 3 percent). On the other hand, shares
Earnings per share ( EPS) are calculated by dividing net held by investors from the rest of Europe – excluding
­income allocable to Wacker Chemie AG shareholders by Germany, Switzerland and the UK – increased from 11 per-
the weighted average of all shares in circulation during cent to 17 percent.
the year. In the reporting period, the number of shares in
circulation was 49,677,983. On this basis, the EPS was € 3.61.
1.4 Useful Information on WACKER Stock
38 Dividend Payment of € 2.00 per Share
At the Annual Shareholders’ Meeting of Wacker Chemie AG ISIN DE000WCH8881
held in Munich on May 20, 2016, all Executive Board and German security
Supervisory Board proposals were adopted by large identification number ( WKN ) WCH888

­majorities. WACKER distributed a shareholder dividend for Frankfurt Stock Exchange WCH

2015 totaling € 99.3 million (€ 74.5 million for the year before). Bloomberg CHM  /   WCK.GR

The dividend per dividend-bearing share was € 2.00 (€ 1.50 Reuters CHE  /   WCHG.DE

the year before). The dividend yield based on WACKER’s Capital stock € 260,763,000
Number of shares
average share price in 2015 was 2.2 percent (1.7 percent the
(Dec. 31, 2016) 52,152,600
year before).

1.3 Dividend Trends Market Capitalization and Weighting

( Weighting as of December 30, 2016)
€ 2015 2014 2013
WACKER’s year-end market capitalization increased from
€ 3.85 billion to € 4.91 billion (total stock without treasury
Dividend 2.00 1.50 0.50 shares). WACKER’s MDAX market capitalization based on the
Dividend yield (%) 2.2 1.7 0.8 free float was € 1.5 billion (2015: € 1.2 billion). WACKER thus had
Net result for the year an MDAX weighting of 0.84 percent, after 0.75 percent in the
(allocable to WACKER’s prior year, and is currently ranked 27th by 12-month trading
shareholders) (million) 246.7 203.8 2.6
volume (2015: 25th) and 41st by market capitalization (2015:
Dividend payout (million) 99.3 74.5 24.8
47th) among the 50 companies in the index. WACKER’s GEX
Distribution ratio (%) 40.3 36.6 > 100
weighting was 10.3 percent.

Wacker Chemie AG – Annual Report 2016

For Our Shareholders – WACKER Stock in 2016

Deutsche Börse AG’s GEX mid-cap index ( introduced in –

Goldman Sachs  /  Berenberg German Corporate
January 2005) comprises owner-dominated companies ­Conference in Munich
listed in the Prime Standard on the Frankfurt Stock Ex- –
Baader Investment Conference in Munich
change. At year-end 2016, WACKER ranked third in the GEX –
Sanford C. Bernstein 12th Annual European
weighting. ­Strategic Decisions Conference in London
–
Baird Industrial Conference in Chicago
Trading Volume –
Citi’s Milan Chemical Symposium in Milan
In the reporting period, the average daily trading volume –
Morgan Stanley Global Chemicals Conference
on the Xetra, Chi-X and Turquoise trading platforms for in Boston
WACKER stock was approximately 203,000 shares, which –
Citi’s Basic Materials Conference in New York
was slightly above the prior-year figure of around 197,000 –
HSBC Zurich Investors Conference in Zurich
shares. –
Berenberg European Corporate Conference
in ­London
Short Positions in WACKER Stock –
Bank of America Merrill Lynch: European
At the end of 2016, short sales of Wacker Chemie AG’s stock ­Chemicals Conference in London
amounting to 6.30 percent of the shares outstanding were
reported as per Section 30h of the German Securities Trad- On October 11, 2016, Wacker Chemie AG hosted investors
ing Act ( WpHG ). The largest position amounted to 1.47 per- and analysts at its 8th Capital Market Day in Burghausen.
cent. Short positions exceeding 0.5 percent of the shares During the two-day event, German and international visitors
outstanding are published in Germany’s Federal Gazette. came to Burghausen in large numbers to learn more about
www.bundesanzeiger.de the WACKER Group’s current positioning and strategies. The
attendees also had the opportunity to get to know WACKER’s
WACKER Communicates Closely with Capital Markets management personally and ask numerous questions.
Key elements of our corporate strategy include achieving
organic growth, investing in promising markets and reduc-
ing capital intensity across all segments. These priorities 1.5 Banks and Investment Firms Covering and Rating WACKER
are reinforced through continuous and open communication 39
with institutional and private investors and with analysts. Bankhaus Lampe KG J.P. Morgan Cazenove Ltd.
Berenberg Kepler Cheuvreux
On many occasions, Executive Board members attended Citi Investment Research Landesbank
events in person to answer questions from capital-market ­B aden-­Württemberg
Commerzbank ­ Mainfirst
participants. There were 14 roadshows with a total of
Corporates & Markets
22 roadshow days in Germany, Europe, the USA and Asia.
Credit Suisse Securities Macquarie Capital
We held about 480 meetings in total, both in person and by (Europe) Ltd. (Europe) Ltd.
telephone, as well as some 70 group discussions, and we Deutsche Bank AG Metzler Equity Research
participated in various international conferences. WACKER DZ Bank AG Morgan Stanley & Co.
gave presentations at the following events, among others: ­I nternational Ltd.
Exane BNP Paribas Norddeutsche Landesbank
– Oddo Forum in Lyon Girozentrale

– 
fairesearch GmbH & Co. KG SG Securities
Commerzbank German Mid-Cap Investment
Hauck & Aufhäuser UBS Ltd.
­ onference in New York
C Institutional Research AG
– 
Mainfirst Corporate Conference in Copenhagen HSBC Trinkaus &
– 
Deutsche Bank: German, Swiss and Austrian Burkhardt AG Warburg Research GmbH
­Conference in Berlin Independent Research GmbH
– 
Credit Suisse Global Chemicals and Agriculture
As of the end of December 2016
­Conference in London
– 
Warburg Highlights in Hamburg
– 
Berenberg Chemicals & Food Ingredients
­Conference in London
– 
Macquarie 9th Alternative Energy Conference
in ­London

Wacker Chemie AG – Annual Report 2016

 For Our Shareholders – WACKER Stock in 2016

In 2016, many investment banks changed their analysts. As

a result, there will be a new group of analysts covering
WACKER in the future. Their number in 2016 was 23 (2015: 21).
During the year, analysts’ consensus price target for WACKER
stock rose. In Q1, the average price target for WACKER stock
was € 78.59 (14 estimates). At year-end 2016, though, analysts
set their fair-value price target at € 87.82 on average (17 esti-
mates), which was 12 percent higher than at the start of the
year.

On our website, we regularly report on the consensus of

analysts’ expectations for the current year. Moreover, our
website offers extensive information on WACKER stock. In
addition to financial reports, a Fact Book, presentations
and publications (viewable online or downloadable), our
website lists all our key financial-calendar dates, with
contact information if you have any questions. Videos of
our annual press conference and other events are also
available for online viewing, or as an audio stream. Inves-
tors can additionally subscribe to an email newsletter that
provides immediate updates on new developments in the
Group. As was the case last year, we are also offering an
online version of our Annual Report for 2016.

40

Wacker Chemie AG – Annual Report 2016

41 – 114
Combined
Management Report

Management Report

The properties of silicones

can be customized – making
them equally suitable for
shower heads or pacifi ers.
B–
Combined
Management Report
Group Business Fundamentals 43
Goals and Strategies 49
Management Processes 51
Statutory Information on Takeovers 54
Business Report 55
Earnings 60
Net Assets 65
Financial Position 68
Non-Financial Performance Indicators
and Other Information 71
Management Report of Wacker Chemie AG 86
Risk Management Report 90
Outlook 106
Combined Management Report – Group Business Fundamentals

Group Business ACADEMY, where we offer technical training sessions on our

products and their application fields. In 2016, we expanded
Fundamentals our existing technical competence center in Singapore.

26 Production Sites
WACKER’s integrated global production system consists of
26 production sites (2015: 25). Ten are in Europe, eight in the
Americas and eight in Asia. The Group’s key production
Business Model of the Group location is Burghausen (Germany). At this site alone, we
have some 9,700 employees (including temporary workers
WACKER is a global company with state-of-the-art specialty and trainees). In 2016, Burghausen manufactured 810,000
chemical products. Our portfolio includes over 3,200 prod- metric tons of product, accounting for around 50 percent
ucts supplied in over 100 countries. WACKER products are of the Group’s production output. Nünchritz is WACKER’s
found in countless everyday items, ranging from cosmetic second multidivisional site alongside Burghausen.
powders to solar cells. See Figure 2.2 on page 44

Silicon Is Our Main Starting Material

Most of our products are based on inorganic starting Legal Structure
­materials. Silicon-based products account for 80 percent
of WACKER sales, and products that are primarily ethylene-­ In November 2005, WACKER became a stock corporation
related for 20 percent. Our customers come from virtually ( AG) under German law. Headquartered in Munich, Wacker
every major sector, ranging from consumer goods, food, Chemie AG holds a direct or indirect stake in 59 companies
pharmaceuticals, textiles and the solar, electrical / electronics belonging to the WACKER Group. The consolidated financial
and base-chemical industries, to medical technology, bio- statements cover 56 fully consolidated companies. Two
tech and mechanical engineering. As a manufacturer of companies are accounted for using the equity method.
silicones and polymers, WACKER is particularly well repre- Wacker Chemie AG and a number of its subsidiaries also
sented in the automotive and construction sectors. We are have branch offices, but they are of only minor significance 43
also a key supplier of silicon wafers to the semiconductor for the Group.
industry. WACKER is one of the world’s largest manufacturers For more information about changes in the scope of consolidation and the
resulting effects, please refer to the Notes to the Consolidated Financial
of polycrystalline silicon for the solar industry.
Statements and to the Scope of Consolidation section.

Technical Competence Centers Support Sales

and Marketing Activities Five Operating Divisions
WACKER operates all over the world. Our sales strategy is WACKER is based on a matrix organization with clearly
centered around expanding our presence in growth markets. d­efined functions. The Group has five business divisions,
In total, WACKER has 51 sales offices in 31 countries. Our each with global responsibility for its products, manufac-
sales organization is supplemented not only by a network turing facilities, markets, customers and results. Regional
of technical competence centers, where customers learn organizations are responsible for all business in their
about WACKER’s product portfolio, but also by the WACKER ­r espective countries. WACKER’s corporate departments

2.1 Key Factors for Multidivisional Sites

WACK E R Group

Burghausen Nünchritz

Captive Integrated Qualified Long-term Areas on site

energy supply production employees supplier available for
from local area relations expansion

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 Combined Management Report – Group Business Fundamentals

2.2 WACKER’s Production and Sales Sites and Technical Competence Centers 1

9 56
7 38 57 52
1 45 58
5 43 2 51
6 8
4239
47 37 43 59
62 40
12 49 48 6344 41 60
61 54
46 64
11 53
55
50

10

65

North and South America Asia Europe

1 Adrian, Michigan, USA 3 7 Dhaka, Bangladesh
2 Allentown, Pennsylvania, USA 3 8 Beijing, China 27
3 Calvert City, Kentucky, USA 3 9 Chengdu, China 30
4 Charleston, Tennessee, USA 4 0 Guangzhou, China
44 5 Chino, California, USA 41 Hong Kong, China 29
6 Dalton, Georgia, USA 42 Nanjing, China
26 28
7 Eddyville, Iowa, USA 4 3 Shanghai, China 24
8 North Canton, Ohio, USA 4 4 Shunde, China 33 35
9 Portland, Oregon, USA 4 5 Zhangjiagang, China 36
23 25
10 Jandira, São Paulo, Brazil 4 6 Chennai, India
11 Bogotá, Colombia 47 Delhi, India 32
34
12 Mexico City, Mexico 4 8 Kolkata, India 31
4 9 Mumbai, India
Europe 5 0 Jakarta, Indonesia
13 Burghausen, Germany 51 Tokyo, Japan
14 Freiberg, Saxony, Germany 5 2 Tsukuba (Akeno), Japan
15 Halle  (Saale), Germany 5 3 Kuala Lumpur, Malaysia
16 Jena, Germany 5 4 Makati City, Philippines
17 Cologne, Germany 5 5 Singapore
Germany
18 Munich, Germany 5 6 Jincheon, South Korea
19 Nünchritz, Germany 5 7 Seoul, South Korea
2 0 Riemerling, Germany 5 8 Ulsan, South Korea
2 1 Stetten, Germany 5 9 Hsinchu, Taiwan
2 2 Stuttgart, Germany 6 0 Taipei, Taiwan
2 3 Lyon, France 6 1 Bangkok, Thailand
2 4 Bracknell, Great Britain 6 2 Dubai, United Arab Emirates
15
2 5 Milan, Italy 6 3 Hanoi, Vietnam
17 16 19
2 6 Krommenie, Netherlands 6 4 Ho Chi Minh City, Vietnam 14
2 7 Kyrksæterøra, Holla, Norway
2 8 Warsaw, Poland Australia
2 9 Moscow, Russia 6 5 Melbourne, Victoria, Australia 22
3 0 Solna, Sweden 18 13
31 Barcelona, Spain Production site 20
21
3 2 León, Spain Sales site
3 3 Plzeň, Czech Republic Technical competence center
3 4 Istanbul, Turkey
3 5 Kiev, Ukraine 1
Only majority-owned subsidiaries and
3 6 Budapest, Hungary joint ventures

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Group Business Fundamentals

primarily provide services for the whole Group, although Wacker Chemie AG is the parent company and thus deter-
some also have production-related functions. mines the Group’s strategy, overall management, resource
See Figure 2.5 on page 46 allocation, funding, and communications with key target
groups (especially with the capital market and shareholders).

Management and Supervision Executive Board and Supervisory Board in Fiscal 2016
Changes occurred on the Supervisory Board in 2016.
In compliance with the German Stock Corporation Act
( AktG ), Wacker Chemie AG has a two-tier management The Vice Chairman of the Supervisory Board, Anton
system, comprising the Executive Board and Supervisory Eisenacker, stepped down effective December 31, 2016
Board. The Executive Board has four members. upon his retirement. At its meeting of December 6, 2016,
the Supervisory Board elected Manfred Köppl, already
a board member, as its new Vice Chairman effective Jan-
2.3 Executive Board Responsibilities uary 1, 2017. As a result, Hansgeorg Schuster, already
elected an alternate member, became a full member of the
Dr. Rudolf Staudigl Supervisory Board as of January 1, 2017.
President & CEO
WACKER POLYSILICON
Executive Personnel, Corporate Development, Declaration on Corporate Management
Corporate Communications, Investor Relations, The declaration on corporate management required by
Corporate Auditing, Legal, Compliance, Sections 289a and 315 (5) of the German Commercial Code
Retirement Benefits (since July 1, 2016)
(HGB) is included in the corporate governance report. This
Dr. Christian Hartel declaration forms part of the combined management
WACKER POLYMERS ­report and is also available online. It contains the Executive
Human Resources (Personnel Director), Corporate Engineering and Supervisory Boards’ work procedures, the declaration
Region: Asia
of conformity pursuant to Section 161 of the German Stock
Dr. Tobias Ohler Corporation Act ( AktG ), and information on key corporate
SILTRONIC management practices. 45
Corporate Accounting and Tax, Corporate Controlling,
www.wacker.com  /corporate-governance
Corporate Finance and Insurance, Information Technology,
Technical Procurement & Logistics, Raw Materials & Energy
Region: The Americas Executive Board and Supervisory Board Compensation
Executive Board compensation contains both fixed and
Auguste Willems
variable components. The main features of the compensation
WACKER SILICONES
WACKER BIOSOLUTIONS system for the Executive Board and Supervisory Board are
Sales & Distribution, Corporate Research & Development, described in the compensation report, which is included in
Intellectual Property, Site Management, Corporate Security,
the corporate governance report. The compensation report
Environment  /  H ealth  /  S afety, Product Stewardship
Regions: Europe, Middle East is also part of the combined management report.

2.4 Group Structure

­WACK E R Group

Corporate departments Business divisions

WACKER WACKER WACKER WACKER SILTRONIC

SILICONES POLYMERS BIOSOLUTIONS POLYSILICON

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 Combined Management Report – Group Business Fundamentals

Key Products, Services and Integrated Production System –

Business Processes WACKER’s Greatest Strength
The highly integrated material loops at its major sites in
The range of products and services at each of our divisions Burghausen, Nünchritz and Zhangjiagang are one of the
generally remained unchanged in 2016. In several application WACKER Group’s key competitive advantages. The basic
areas, though, we expanded our product portfolio. With principle of integrated production is to use the byproducts
over 2,800 products, WACKER SILICONES has our broadest from one stage as starting materials for making other
offering. The division manufactures specialties tailored to products. The auxiliaries required for this, such as silanes,
customers’ specific needs, and standard products primarily are recycled in a closed loop. Waste heat from one pro-
used as starting materials in silicone production. cess is utilized in other chemical processes. Integrated
production not only cuts energy and resource consumption,
WACKER POLYMERS manufactures state-of-the-art binders but also improves the use of raw materials in the long term,
and polymeric additives (such as dispersible polymer and integrates environmental protection into our processes.
powders and dispersions). These are used in diverse
­industrial applications or as base chemicals. Customers
include the paint, coating, paper and adhesive industries. Major Sales Markets
The main customer for polymeric binders is the construction and Competitive Positions
industry.
In 2016, there was a change in the competitive position of
WACKER BIOSOLUTIONS, our smallest division, supplies cus- one of WACKER’s four biggest divisions by sales. Following
tomized biotech and catalog products for the fine-­chemical the takeover of SunEdison Semiconductor by Global
sector. Products include pharmaceutical proteins, cyclo- ­Wafers, a semiconductor group based in Taiwan, Siltronic
dextrins, cysteine, polyvinyl acetate solid resins ( for became the number four manufacturer of silicon. The
­gumbase), organic intermediates and acetylacetone. The competitive positions of WACKER’s other divisions remained
division focuses on customer-specific solutions for growth unchanged, and we are among the top three suppliers
areas, such as food additives, pharmaceutical actives and worldwide in these three areas. We are the world market
46 agrochemicals. leader for a number of products, such as VINNAPAS ®
­dispersible polymer powders for the construction industry.
WACKER POLYSILICON produces hyperpure polysilicon for Asia is the key sales region for our products, followed
semiconductors and electronics and – above all – for the by Europe and the Americas.
solar sector. Most of this polysilicon is sent to external See Table 2.6 on page 47

customers. Internally, we provide polysilicon to Siltronic.

Competitive Positions of WACKER’s Divisions
Siltronic, the leading semiconductor manufacturer, pro- WACKER SILICONES is number two in the world and leads
duces silicon wafers. They are the essential raw material for the market in Europe. In the case of building-protection
virtually all semiconductor products – whether for discrete silicones, WACKER is the global market leader. Offering a
semiconductor components (transistors or rectifiers) or for wide range of properties, silicones are used in every major
microchips (microprocessors, memory chips). industry. The largest growth potential lies in Asia.

2.5 Group Structure in Terms of Managerial Responsibility

Managerial Responsibility
Structure based on decision-making responsibility and reporting lines

Executive Board

Business divisions Corporate departments Regions Group coordinators

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Group Business Fundamentals

WACKER POLYMERS is the world’s largest producer of dis- Orders

persions and dispersible polymer powders based on vinyl The terms for orders placed with WACKER vary from division
acetate-ethylene. Importantly, we are the only company in to division. Most orders received by WACKER SILICONES are
the market to have a complete supply chain for dispersions short-term, with a small number of long-term ones. Goods
and powders in Europe, the Americas and Asia. At this are usually shipped within three months of receipt of order.
division, too, we see Asia as the region with the largest At WACKER POLYMERS, business is based on contracts and
growth potential. master agreements with terms of up to one year. Around
30 percent of incoming orders are short term. WACKER
WACKER BIOSOLUTIONS is the global market leader in cyclo- POLYSILICON concludes short- and medium-term contracts,
dextrins and cysteine, and in polyvinyl acetate solid resins some of which include flexible volume-specific escalator
for gumbase. We hold a small but promising market position clauses. Siltronic usually negotiates orders with the cus-
as a producer of bacterial pharmaceutical proteins and are tomer from one quarter to the next. As a rule, we aim for
continually working to expand that position. The division fixed contracts with negotiated prices and quantities. Due
also offers fine chemicals in profitable niches. to varying order-placement procedures at the Group and
its divisions, order-level reporting is not very meaningful
Business at WACKER POLYSILICON is marked by volume and hence does not serve as an indicator in our monthly
growth and intense competition. Determining factors are reports.
the solar industry’s demand for polysilicon and market
trends in the world’s solar sector. WACKER POLYSILICON is Operational Metrics as Leading Indicators of
number two in the world in terms of production capacity. Future Developments
Our sales volume exceeded 66,000 metric tons in 2016. By referring to specific leading indicators based on oper-
ational metrics, we try to factor potential developments into
Siltronic is one of the world’s largest manufacturers of our business plans and to allocate capacities accordingly.
silicon wafers and other products for the semiconductor Since our operations are based on diverse businesses and
industry. Its customers include all the major global semi- markets, we use a number of leading indicators to gain
conductor companies, which account for over 80 percent insights into potential developments at each of our busi-
of our sales in this segment. ness divisions. As many of WACKER’s products are destined 47
for the construction industry, we deploy various analytical
tools in order to assess future growth in this segment.
Economic and Legal Factors See Table 2.7 on page 48

WACKER sells its products and services to virtually every Economic Factors Impacting Our Business
industry. Although we are not immune to economic fluctu- The main economic factors influencing WACKER’s business
ations at our individual business divisions, their impact remained unchanged in many areas. Accounting for
and onset may vary. We are able to mitigate the impact around 38.0 percent of production costs, energy and
of these fluctuations, thanks to our product portfolio and raw-material costs had the largest impact in 2016.
broad customer base.

2.6 WACKER’s Competitive Positions

Number 1 Number 2 Number 3

WACKER SILICONES Dow Corning WACKER Momentive

WACKER POLYMERS WACKER Akzo Nobel (Elotex) Dairen
(dispersible polymer powders /  (dispersible polymer powders) /  (dispersible polymer powders / 
VAE dispersions) Celanese (dispersions) dispersions)
WACKER POLYSILICON GCL-Poly WACKER OCI

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Group Business Fundamentals

Energy and Raw-Material Costs State-Regulated Incentive and Feed-In Tariff Programs
As a chemical company, we belong to an energy-intensive for Renewable Energy Sources
industry and require diverse raw materials to manufacture As one of the world’s leading suppliers of hyperpure poly-
our products. Consequently, higher energy and raw-material crystalline silicon, we are affected by regulatory changes
costs impact our cost structure. WACKER is taking steps to to incentive and feed-in tariff programs for renewable
reduce its dependence on this factor. By generating our ­energy sources. Substantially lower prices for solar modules
own power at Burghausen and Nünchritz, we are reducing and cells have greatly increased the competitive advantage
our energy-procurement needs and consequently the cost of solar energy over fossil fuels and other methods of
risk. Amendments to the regulatory framework, such as generating energy. The cost of manufacturing photovoltaic
grid charges, energy or electricity taxes or levies relating products is expected to continue declining, which will
to the German Renewable Energy Act (EEG), can negatively further reduce dependence on state-regulated incentive
affect WACKER’s energy costs both directly and indirectly – and feed-in tariff programs over the next few years. Our
e. g. through higher grid charges or fees. However, cost assumption is that, in a few years, solar energy will get by
reductions for energy-intensive companies in connection even without special incentives, particularly in combination
with the EEG levy, for example, can have a positive impact with cost-efficient storage possibilities. At the same time,
on energy costs. We continually focus on improving our WACKER will maintain its focus on improving productivity in
energy efficiency. The goal is to reduce specific energy order to preserve its competitive position. Our strong cost
consumption by half between 2007 and 2022. When procuring position, high product quality, international orientation,
raw materials, we increase price flexibility by sometimes wide customer base and multiyear supply contracts give
concluding contracts with varying terms, with more scope us a competitive edge over other manufacturers.
regarding volumes or with regular price adjustments that
reflect wholesale market prices. Legal Factors Impacting Our Business
China imposed anti-dumping and anti-subsidy tariffs on
Exchange-Rate Fluctuations polysilicon manufacturers in the USA. As things stand now,
As a rule, WACKER hedges against exchange-rate fluctua- polysilicon produced at our site in Charleston, Tennessee
tions. We hedge at least half of our dollar and yen exposures (USA ) is also affected by these tariffs. Negotiations are
48 for each subsequent year with a mix of derivative currency being conducted between China and the USA with the aim
hedging transactions and documented stop  /   loss orders. In of resolving the trade dispute regarding solar products,
determining sensitivity, we simulate a 10-percent devalua- which would also benefit WACKER. However, WACKER has
tion of the US dollar against the euro. Without hedging, an the option of taking up direct contact with China to discuss
­increase in the euro against the US dollar would have an exemption from tariffs. In May 2014, WACKER and the
negatively impacted EBITDA by around € 60 million. Chinese Ministry of Commerce (MOFCOM) signed a minimum

2.7 Leading Operational Indicators

Business Divisions Leading Operational Indicator Indicator of

WACKER SILICONES Raw-material and Our cost trends

WACKER POLYMERS energy price trends
WACKER BIOSOLUTIONS
WACKER SILICONES Orders received per month Our capacity utilization
WACKER POLYSILICON Short-, medium- and long-term contracts Our capacity utilization,
further market trends
Market research, talks with customers Increase in solar capacity by country,
our capacity utilization
SILTRONIC Data on chipmakers’ Our capacity utilization
capacity utilization
All business divisions Talks with customers Our sales trend,
our product quality
Market research Market trends, product innovations

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Group Business Fundamentals – Goals and Strategies

price agreement for exports of polysilicon produced in

Europe, which was valid until April 2016. MOFCOM, in turn,
Goals and Strategies
refrained from imposing anti-dumping and anti-subsidy
tariffs on this material. In May 2016, MOFCOM opened a
­review. MOFCOM will make a decision by April 2017, at the
latest, on whether to retain or rescind the measures. The
stipulations of the minimum price agreement will remain
unchanged until then. The measures imposed by the EU Strategy of the WACKER Group
against China are also currently under review, with an EU Our vision and five overarching strategic goals remain in
Commission decision expected in March 2017. Until then, place. Our strategy is focused on profitable growth and
the agreement regulating the import of solar modules from the goal of attaining a leading competitive position in most
Chinese solar companies applies unchanged. of our business fields, while observing the principle of
sustainable development. Our five overarching goals are:
Total of 192 Registration Dossiers Submitted
as Part of REACH –  WACKER products and solutions are our customers’
By late 2016, WACKER had submitted 192 registration dos- first choice.
siers to the European Chemicals Agency (ECHA ). For some – We want to be one of the world’s best employers.
– 
of the phase-one and phase-two dossiers, submitted in We tap new markets via product and process
2010 and 2013, ECHA required additional information, which ­innovations for tomorrow’s world.
we provided in 2016. The ICCA ( International Council of – We continuously increase our company’s value.
– 
Chemical Associations) has developed the Global Product Our responsibility as a company extends beyond
Strategy (GPS), which is a guideline on how to assess our business activities.
chemical properties and provide product safety infor­
mation. In Europe, most GPS requirements are satisfied by As part of Capital Market Day in October 2016, we pre-
REACH and by CLP (Classification, Labeling and Packaging sented our strategy for the WACKER Group until 2020. Three
of Substances and Mixtures). By the end of 2016, we had levers determine our strategy: expansion into emerging
published 75 Safety Summaries on the ICCA chemicals markets and regions; innovations; and the substitution of 49
website for the substances we have registered under competitors’ products with WACKER products. Our strategic
REACH. goals for the next five years are:

–  Expanding our production capacities, with capital

expenditures below depreciation.
– Growing faster than the chemical-industry average.
– 
Focusing even more strongly on sustainability.
– 
Achieving attractive margins throughout the
­economic cycle.
–  Increasing our cash inflow from operating activities.

Our investments will be below depreciation until 2020. In the

individual regions, we are focusing our spending on plants
for producing intermediates and downstream products
that have a lower capital intensity than full-scale plants for
upstream products.

With these new capacities, we intend to grow more strongly

than the chemical-industry average. Momentum will be
spurred by product innovations and by raising the percent-
age of specialty products in our portfolio. Our focal regions
and countries for further growth remain unchanged: Brazil,
China, India, Southeast Asia and the Middle East. We also
see opportunities for our chemical business to expand in
our established markets in Europe and the USA.

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Goals and Strategies

We are continually striving to reduce our raw-material SILTRONIC

consumption and improve the process efficiency of our Siltronic’s strategic focus is on its fastest growing business:
plants. In addition, we are developing a lot of sustainable 300 mm silicon wafers. One ongoing strategic task is to
products for renewable energy, thermal insulation and implement productivity, cost-saving and flexibility initiatives
electromobility. The purpose of these products is to lower to improve production processes and workflows. Invest-
CO 2 emissions. ments in product developments are aimed at fulfilling
the  latest design-rule specifications and implementing
Our aim is to achieve attractive margins with our products. quality-enhancing measures. The IPO of Siltronic AG on the
With chemicals, our target EBITDA margin is > 16 percent, Frankfurt Stock Exchange has enhanced the company’s
while for our polysilicon business it is > 30 percent. strategic growth options and its possibilities for raising
capital. WACKER remains Siltronic AG’s majority shareholder.
Our significantly lower capital expenditures, our continuing
efficiency and cost improvements, and our planned sales
growth will all lift cash flow. We want our shareholders
to benefit even more from our profitability. Our goal is to
distribute around half of our net income to stockholders.
Previously, WACKER aimed for a distribution ratio of at least
25 percent of net income.

Strategy at Each Business Division

WACKER’s divisions have each set their own strategic
­priorities.

2.8 Strategy at Each Business Division

50 WACKER SILICONES WACKER POLYMERS

Adding Value Expansion
Expanding business for specialty products Strengthening global presence
Innovation Substitution
Tapping new markets and applications Replacing conventional products with WACKER products
Costs Innovation
Continuously optimizing costs Developing new applications

WACKER BIOSOLUTIONS WACKER POLYSILICON

Market Share Costs
Accelerating growth with bioengineered products Enhancing cost position
Innovation Quality
Spurring product launches Maintaining quality leadership
Costs Customers
Improving the supplier structure Acquiring new customers

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Management Processes

Management Processes –  EBITDA margin (EBITDA in relation to sales). We compare

historical performance with planned performance and
with the competition, and use the result to calculate a
target EBITDA margin. We calculate the weighted divi-
sional average as our target margin for the Group.

–   ROCE or return on capital employed. ROCE is defined

Value-Based Management Is as earnings before interest and taxes (EBIT) divided by
Integral to Our Corporate Policies capital employed. Capital employed comprises non-
current assets and net current assets. ROCE clearly
Value-based management is an integral part of our indicates how profitably the capital required for busi-
­corporate policies. Its purpose is to sustainably increase ness operations is being employed. ROCE is influenced
our company’s value in the long term. In our management not only by profitability, but also by capital intensity
processes, we distinguish between performance and with regard to noncurrent and net current assets. ROCE
budget parameters. Performance parameters serve the is reviewed annually as part of our planning process
financial management of the company. They include the and is a key criterion for managing our capital expen-
EBITDA margin and ROCE. The EBITDA margin indicates how diture budget.
successful the company is compared with the competition,
while ROCE shows how efficiently the company employs its –  EBITDA (earnings before interest, taxes, depreciation
capital. Also important for management control are the and amortization). This demonstrates the operational
budget parameters EBITDA and net cash flow. In addition to performance capability of the company before cost of
these indicators, BVC ( Business Value Contribution) is a capital. We set absolute EBITDA targets for the busi-
dedicated budget parameter used in the calculation of ness divisions and take the cost of capital into account
variable compensation for Executive Board members and by using BVC to determine the internal budget target.
senior managers. We calculate BVC by deducting the cost of capital,
non-operational factors, and depreciation and amor-
In this context, value management and strategic planning tization from EBITDA. The development of BVC depends 51
complement each other. Accordingly, we align the strategic mainly on changes in EBITDA.
positioning of a business entity with its contribution to
­increasing the company’s value. As part of annual planning, –  Net cash flow (defined as the sum of cash flow from
we make fundamental decisions on capital expenditure operating activities and long-term investing activities
and innovation projects, on harnessing new markets and before securities and including additions from finance
on a variety of other projects. leases, less the change in advance payments received).
Net cash flow shows whether we can finance ongoing
The management decision-making process makes active operations and necessary investments from our own
use of key financial performance indicators. For example, operating activities. WACKER’s aim is to generate a
lower-than-expected net cash flow could result in our sustained positive net cash flow. Apart from profitabil-
­adjusting investments during the year. Being highly flexible, ity, the main factors affecting net cash flow are the
WACKER can react to both positive and negative changes. effective management of net current assets and the
level of capital expenditures.
The EBITDA trend is considered to be the most important
financial indicator for communication with capital markets. Supplementary Financial Performance Indicators
Our key financial performance indicators are supplemented
Key Financial Performance Indicators for the by additional performance indicators that provide us with
WACKER Group information on the Group’s sales and liquidity situation and
In 2016, we continued to use the same key financial perfor- debt levels.
mance indicators for value management as in previous
years. These are:

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Management Processes

These supplementary financial performance indicators Development of Key Financial Performance

include: Indicators in 2016
EBITDA margin: in 2016, the target margin was 20 percent, with
Sales: profitable growth is an important factor in increasing the Group posting an actual EBITDA margin of 20.4 percent.
the company’s value over the long term and one of the main
drivers of a positive cash flow trend.
2.10 Planned and Actual Figures
Capital expenditures: as part of our medium-term planning,
€ million Reported Forecast 2015
we set capital-expenditure priorities and an investment for 2016 2016 1
budget. Investments of overriding importance for the com-
pany are decided on by the Executive Board on the basis EBITDA margin (%) 20.4 Somewhat lower 19.8
of the Group’s strategy. Other investments are planned by Slight rise when
each business division. To this end, the individual business adjusted for
EBITDA 1,101.4 ­s pecial income  2 1,048.8
divisions regularly analyze their capacity utilization and
Substantially
anticipated capacity requirements. The respective busi- ROCE (%) 6.1 lower 8.1
ness divisions and Corporate Engineering at WACKER are Markedly more
responsible for the operational management of individual Net cash flow 400.6 positive 22.5
investment projects (project handling, deadlines, budgets,
1
March 2016 forecast
quality and safety). 2
EBITDA adjusted for special income came to € 911.2 million in 2015
and € 1,081.1 million in 2016.

Net financial debt: WACKER’s net financial debt is a supple-

mentary performance indicator that we use to monitor the
Group’s financial situation. We define it as the sum of cash EBITDA: we were expecting EBITDA – adjusted for special
and cash equivalents, noncurrent and current securities, income – to be marginally higher in 2016 compared with the
and noncurrent and current financial liabilities. prior year, and we exceeded this target. Compared with
the prior year, EBITDA exclusive of special income rose by
52 Non-Financial Performance Indicators € 169.9  million to € 1.08  billion. EBITDA inclusive of special
None of the non-financial performance indicators described income climbed € 52.6 million, from € 1.05 billion to € 1.10 bil-
in detail in the Annual Report are used universally for cor- lion. In 2016, the cost of capital before taxes was 10.1 per-
porate decision-making, although certain indicators, such cent. We did not reach our BVC target for the Group in 2016.
as the accident rate, are important in some parts of the At € – 246.7 million, the value achieved was below the prior-­
company. year level.

2.9 Non-Financial Performance Indicators Used for 2.11 ROCE and BVC
Decision-Making in Parts of the Company
€ million 2016 2015
Non-Financial Performance
Indicators

EBIT 366.2 473.4

Number of employees Corporate departments
and production Capital employed 1 6,018.0 5,875.4
Order intake Business divisions ROCE 2 (%) 6.1 8.1
New‑product rate Business divisions Pre-tax cost of capital (%) 10.1 10.4
Electricity and energy Business divisions and sites BVC 3 –246.7 –119.1
­c onsumption
Production utilization Business divisions and sites
1
Capital employed is the sum of average noncurrent assets ( less
Key environmental indicators Business divisions and sites noncurrent securities and deferred tax assets), plus inventories and
trade receivables (less trade payables). It is the variable used in
Accident rate Business divisions and sites
calculating the cost of capital.
2
Return on capital employed is the profitability ratio relating to the
capital employed.
3
BVC is calculated by adjusting EBIT for non-operational factors.

ROCE: WACKER’s ROCE in 2016 was 6.1 percent. In our forecast,

we had assumed that ROCE would be significantly lower than
in the prior year due to the increase in capital employed.

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Management Processes

Net cash flow: we forecast a markedly positive net cash flow We satisfy our capital requirements by means of operating
for 2016, given the strong decline in capital expenditures. cash flow, and short-term and long-term financing.
At € 400.6 million, net cash flow was in line with our forecast.
We ensure the Group’s ongoing solvency with rolling cash-
Two-Stage Strategic Planning flow management and sufficient contractually agreed lines
Strategic planning, which determines how we can meet of credit. Financing requirements are calculated for the
value-related and corporate goals, is conducted in two entire Group, with loans usually being concluded centrally.
stages. First, our divisions identify their market and Project-specific or regional funding is available in special
­c ompetitive positions, and their value-related strength. cases.
We then use these results to formulate recommendations
­regarding strategic positioning and planned steps. All of Financing Measures in 2016
this is supplemented by innovation and investment In 2016, WACKER repaid a loan installment of € 200 million to
­projects, and approved by the Strategy Conference. the European Investment Bank (EIB). At the same time, a
long-term financing agreement amounting to € 200 million
Operational planning in the second half of the year ad- was concluded with the EIB and will be drawn in the first
dresses strategic-planning decisions with a five-year time- quarter of 2017. In addition, WACKER took out five bilateral
line. The Executive and Supervisory Boards jointly approve loans at banks totaling US$ 250 million for three years. In
the annual plan. This forms the basis for determining basic 2016, the syndicated loan of € 200 million taken out in 2014
forecasts for the current year in early February. We monitor was extended by another year until 2021. Moreover, in
whether we are meeting our forecasts by means of monthly ­D ecember 2016, a syndicated loan of € 4 00 million due to
comparisons of planned and actual figures. The overarching expire in 2017 was prematurely refinanced in the same
framework is based on a medium-­term plan (five years). amount for five years. Neither of these syndicated loans is
currently being utilized.

2.12 Strategic and Operational Planning The Group’s financing agreements contain standard
­market credit terms and, in the case of large loans, a net
g
a debt-to-EBITDA ratio as the only financial covenant. 53
f
For all the loans that we negotiate, we structure the agree-
Dec Jan b
ing

ov
Fe ments carefully to ensure that the financial partners are
nn

treated equally ( pari passu) and that the agreements can

r ationa l pla

Mar
Sep Oct

subsequently be monitored groupwide. Some of the liabil-

S t r a te g

ities to banks are fixed-interest while others have variable

Apr
Ope

interest rates. As of December 31, 2016, WACKER had unused

ic
M
ug

ay
lines of credit ( including syndicated loans) with terms of
pla

A Jun
e Jul
nn

over one year in the amount of around € 800 million.

in
g

WACKER collaborates with a number of banks (core-bank

d c
principle), who must have an investment-grade credit rating
and a long-term business model.
a Forecasts made for d Strategy approved
current year e Strategy implemented in
b O perational planning used as operational planning Operational Control Instruments
a basis for strategic planning f   Planning Conference We control operational processes via our integrated
( incl. the latest actual and g O perational planning
­management system (IMS). This system stipulates uniform
rolling forecast figures) approved ( by Supervisory
c Strategy Conference Board ) standards throughout the Group for issues relating to
quality, environmental protection, health and safety. We
have our Group management system analyzed by an
Financing Strategy ­international certification organization in accordance with
The goal of WACKER’s financing strategy is to ensure sus- uniform standards based on ISO 9001 (quality) and ISO 14001
tainable growth and stability for the Group. This strategy (environment).
comprises both financing through our own resources and
the use of debt instruments.

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Statutory Information on Takeovers

Statutory Information on Takeovers

2.13 Information Required by Section 315 (4) of the German Commercial Code (HGB)

The following table contains information required by Section 315 (4) of the German Commercial Code (HGB):

§ 315 (4) 1 Composition of subscribed capital: Wacker Chemie AG’s subscribed capital totals 52,152,600 non-par
value voting shares. No other share classes have been issued.
The total number of shares currently includes 49,677,983 held by
external shareholders and 2,474,617 held by Wacker Chemie AG
itself. WACKER’s treasury shares were acquired by repurchasing
Wacker-Chemie GmbH shares in August 2005 when it was still a
private limited company. The Executive Board can use or sell these
treasury shares only on the following conditions: 782,300 shares
require Supervisory Board approval and a resolution by the Annual
Shareholders’ Meeting. The remaining 1,692,317 shares are subject
to Supervisory Board approval.
§ 315 (4) 2 Restrictions on voting rights or on the transfer There are no restrictions on voting rights or the transfer of shares.
of shares:
§ 315 (4) 3 Direct or indirect capital stakes: Each of the following holds a stake of over 10 percent of the
­s ubscribed capital: Dr. Alexander Wacker Familiengesellschaft mbH,
based in Munich; Blue Elephant Holding GmbH, based in Pöcking;
and Dr. Peter-Alexander Wacker, resident in Bad Wiessee and to whom
the voting shares of Blue Elephant Holding GmbH are attributable.
§ 315 (4) 4 Owners of shares with special rights: Shareholders have not been given any special rights that bestow
control powers.
54 § 315 (4) 5 Method of voting-right control in the case of Insofar as employees hold shares in Wacker Chemie AG’s capital,
employee participation: they exercise their resulting control rights directly.
§ 315 (4) 6 Statutory provisions and articles of association The provisions to appoint and dismiss Wacker Chemie AG’s Executive
regarding the appointment and dismissal of Board members are based on Section 84 et seq. of the German Stock
­executive board members and amendments to Corporation Act (AktG). Wacker Chemie AG’s Articles of Association
said articles: do not contain any further provisions in this respect. Pursuant
to Article 4 of the Articles of Association, the number of Executive
Board members is fixed by the Supervisory Board, which also
appoints an Executive Board member as President & CEO. Amendments
to the Articles of Association are covered by Sections 133 and 179
of the German Stock Corporation Act. In accordance with Section
179 (1) sent. 2 of the German Stock Corporation Act, the Supervisory
Board has been empowered to amend the Articles of Association
if only the wording thereof is affected.
§ 315 (4) 7 Authority of the executive board to issue or buy In accordance with a resolution passed at the May 8, 2015 Annual
back shares: Shareholders’ Meeting, Wacker Chemie AG’s Executive Board
was authorized – in compliance with the legal provisions set out in
Section 71 (1) no. 8 of the German Stock Corporation Act – to
acquire treasury shares totaling a maximum of 10 percent of capital
stock. No capital has been authorized for the issue of new shares.
§ 315 (4) 8 Major agreements associated with control Various agreements with joint-venture partners include change-
changes due to a takeover bid: of-control clauses, which deal with what might happen if one of
the joint-venture partners were taken over. These arrangements
comply with the usual standards for such joint-venture agreements.
In addition, several loan agreements contain change-of-control
clauses. Here, too, the clauses are typical of this type of agreement.
§ 315 (4) 9 Severance agreements with the executive board There are no severance agreements or similar with employees or
or employees in the event of a takeover bid: with Executive Board members in the event of a takeover bid
( please refer to the Report on Compensation).

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Business Report

Business Report long-term growth. According to the Asian Development

Bank ( ADB), lower demand in China slowed growth in other
Asian countries.

Sector-Specific Conditions

Economic Trends We supply products to a wide range of industries. Our

main customers are in the semiconductor, photovoltaic,
The world economy continued to grow moderately in 2016, chemical, construction, electrical and electronics sectors.
but fell short of the original full-year expectations. Ac-
cording to International Monetary Fund (IMF ) data, global WACKER’s Chemical Divisions Report
economic output grew 3.1 percent in 2016 (2015: 3.1 percent). Good Sales Trend
The chemical industry expanded at a subdued pace in 2016
In advanced economies, the reluctance of companies to and chemical-product prices declined. According to the
invest, coupled with subdued domestic demand, weighed German Chemical Industry Association ( VCI), global sector
on growth. The somewhat weaker trend in the United sales ( including pharmaceuticals) totaled € 4.7 trillion in
States, the Brexit vote in the United Kingdom and the rising 2015, with Asia accounting for just under 60 percent. The
fear of terrorist attacks worldwide also slowed the global difficult international market environment also affected
economy. German chemical companies. Amid weak international
demand, production had to be curbed in Germany at
times. Continuing low oil prices, though, helped make
2.14 GDP Trends in 2016 German producers more competitive. The weak euro also
bolstered exports. Capacity utilization at German chemical
% 0 Worldwide 3.1
plants was 83.7 percent. According to the VCI, chemical
Europe 1.5 production in Germany expanded by 0.5 percent in 2016.
But with prices substantially lower, the sector’s sales de- 55
Asia 5.7 clined by 3 percent versus the previous year to € 183 billion
(2015: € 189 billion).
China 6.7

At WACKER, the chemical divisions lifted their sales year

India 7.6 over year. The rise was mainly due to increased volumes in
all segments, albeit with prices lower in a number of prod-
Japan 0.9 uct groups. WACKER SILICONES recorded good demand
for  silicone products for electronics, consumer goods
USA 1.6 and plastics, as well as for medical technology. WACKER
­P OLYMERS achieved a slight increase in sales of disper­
Sources – worldwide: IMF; Asia: ADB; China: National Bureau of Statistics;
India: NCAER National Council of Applied Economic Research; Japan: IMF; sible polymer powders and VAE dispersions. At WACKER
USA: IMF; Europe: OECD
­B IOSOLUTIONS, pharmaceutical proteins performed par­
ticularly well.

Although low oil and commodity prices were beneficial to Construction Industry Grows in 2016
economies with strong manufacturing and consumer According to market research institute B+L Marktdaten
bases, they dampened the growth prospects of commodity-­ GmbH, the global construction industry grew by 2.1 percent
exporting countries, such as Russia and Brazil. China’s in 2016 to US$ 8.6 trillion (2015: US$ 8.4 trillion). Construction
economy also cooled off during the year, but has essen- contracts in Western Europe increased by 1.8 percent.
tially stabilized. The People’s Republic is now relying on Sales in the German construction industry reached
systematic structural changes – with more accommodative US$ 334.4 billion in real terms (2015: US$ 325.6  billion). Eastern
monetary and fiscal policies, higher domestic consumption Europe saw a marginal decline of 0.1 percent in construc-
and a stronger service sector – to ensure more sustainable tion contracts, basically due to the sluggish trend in

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Business Report

­ ussia’s construction sector. Investment spending in the

R WACKER has three business divisions that supply customers
US construction industry grew by 2.3 percent in 2016. At in the electrical and electronics industries. Siltronic posted
US$ 1.6 trillion, China remains the largest market worldwide. a slight year-over-year increase in volumes sold to semi-
After experiencing weak growth in 2015, it returned to a conductor-industry customers. WACKER POLYSILICON sup-
significantly more positive trajectory in the reporting year. plied almost 10 percent of its polysilicon volumes to
­c ustomers in the electronics industry in 2016. WACKER
­SILICONES lifted its product sales for electronics applica-
2.15 Growth Rate of Construction by Region in 2016 tions by 6 percent. We recorded sales growth in media-­
resistant potting compounds, in highly specialized silicone
% 0 Worldwide 2.1
rubber grades and silanes for the semiconductor industry,
Middle East
2.6 and in silicone gels for automotive electronics. The cable
and Africa
and insulator business also grew, with sales rising by
Asia 2.5 11 percent.

North
2.1 Photovoltaics Established as a Mainstay of
America
Global Energy Supply
Western
1.8 In the global solar industry, all signs continued to point to
Europe
growth in 2016. According to various market studies and
Eastern
Europe
–0.1 our own estimates, some 76 gigawatts (GW ) of capacity
were newly installed worldwide ( 2015: 56 GW ). That was
South
America
–2.8 about 36 percent more than the year before. As a result,
globally installed photovoltaic capacity totaled some 300 GW
Source: B+L Marktdaten GmbH. Status: November 2016
at the end of 2016. Approximately 70 percent of the new
capacity was installed in China, Japan and the USA in 2016.
Incentives and substantially lower system costs made a
WACKER POLYMERS posted another sales increase for major contribution to the expansion of PV installations.
56 construction applications. Growth in dispersible polymer
powders was fueled by the market for dry-mix mortar in
the USA, for example, and Southeast Asia. We also gener- 2.16 Installation of New PV Capacity in 2015 and 2016
ated further sales growth in Western and Central Europe.
Installation of New PV Growth in
Overall, we sold around 9,000 additional metric tons of Capacity ( MW ) 2016
dispersible polymer powders to the construction industry. 2016 2015 %

In dispersions, WACKER POLYMERS performed strongly in

the Americas. Beside adhesives and sealants, another key
Germany 1,500 1,500 –
sector for our VAE dispersions was the market for water-­
France 800 900 –11
based, environmentally compatible coatings. At WACKER
Italy 400 300 33
SILICONES, construction-application sales also grew. All
Rest of Europe 4,000 5,900 –32
three product segments – building protection, sealants
USA 14,600 7,300 100
and adhesives, and silane-modified polymers – posted
Japan 8,300 10,800 –23
further gains. In 2016, sales climbed in Europe and Asia.
China 30,000 16,500 82
Our performance was particularly strong in Southeast
India 4,200 2,100 100
Asia, India and the CIS countries.
Other regions 12,200 10,900 12
Total 76,000 56,200 35
Electrical and Electronics Industries Grow
in Emerging Markets
According to the German Electrical and Electronic Manu- Sources: PV market in 2016: Germany’s Federal Network Agency,
Commissariat Général au Développement Durable, IHS, Solar Energy
facturers’ Association ( ZVEI), the global market for the Industries Association (SEIA), RTS Corporation, WACKER’s own market
electrical and electronics industries saw further growth, research. PV market in 2015: Germany’s Federal Network Agency,
Commissariat Général au Développement Durable, IHS, RTS Corporation,
expanding 3 percent to about € 3.7 trillion in 2016 (2015: € 3.6 WACKER’s own market research

trillion). The main impetus came from China and emerging

markets, which gained around 5 percent. In Germany, the
fifth-largest market worldwide, sales advanced to some
€ 182 billion according to the ZVEI (2015: € 178 billion).

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Business Report

Despite strong global growth in new PV installations, market 2.17 Spot-Price Trends for WACKER’s Key Raw Materials
conditions in this industry remained challenging, particularly
in the second half of the year. Growth in PV installations 2014 2015 2016
was strong in the first half of the year ahead of a change in
China’s feed-in tariffs that came into effect on July 1, 2016. Silicon Metal (€ / t )

Demand was significantly lower in the months that fol- Three-year high
lowed. As a result, prices declined at every stage of the € 2 ,367
supply chain. Since mid-October, though, a slight price 3,000 Three-year low
€ 1,604
recovery has been apparent. During the year as a whole,
persistently strong price pressure nevertheless prevented 2,000
€ 2,153 € 2,191
companies in this industry from achieving any major € 1,683
­improvement in their financial situation. 1,000

0
Growing Demand for Silicon Wafers
In 2016, demand for silicon wafers for the semiconductor
Ethylene (€  / t )
industry – measured by surface area sold – was higher
than the year before. The SEMI trade association estimated Three-year high
€ 1,254
that, compared with 2015, global volumes by surface area
1,500
sold climbed by 2.9 percent. In the first quarter, demand Three-year low
€ 706
was rather subdued and came in below the prior-year
1,000
­figure. As the year progressed, though, the market clearly
€ 9 40 € 950
gained momentum, with silicon demand in the following € 8 42
500
quarters even exceeding the record levels of a year earlier.
0
Raw-Material Costs Decline Year over Year
Raw-material costs in 2016 were lower than the year before. Methanol (€ / t )
Ethylene was slightly cheaper, while the prices for silicon 57
metal and vinyl acetate monomer ( VAM) fell by over 14 per-
Three-year high
cent. The average price of methanol dropped substantially, € 3 99
600
by around 26 percent.
Three-year low
400 € 150

€ 320
200 € 276
€ 208

Vinyl Acetate Monomer (€ / t )

Three-year high
€ 1,670

2,000
Three-year low
€ 795

1,000 € 1,292
€ 1,061
€ 8 99

Annual average in each case

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Business Report

Overall Statement by the Executive Key Events Affecting Business

Board on Underlying Conditions Performance
The global economy was influenced in 2016 by the decision of Divestitures
UK voters to leave the European Union, by the presidential WACKER did not divest any business fields or product
election in the United States, and by uncertainties about business in 2016.
future trends in the Chinese economy. Global growth was
also impeded by the conflicts in the Middle East and the Investments
continued sanctions imposed on Russia by the USA and Capital expenditures were down by almost half year over
the EU. China’s economic growth of 6.7 percent was in line year, coming in at € 427.6 million (2015: € 834.0 million).
with expectations. Germany continued to be a center of
stability in Europe in 2016, and the pace of growth in other WACKER’s investing activities remained centered on the
European countries like Spain and France picked up some- construction of the new polysilicon site at Charleston,
what. In the USA, the upturn continued despite the (albeit Tennessee (USA ). Around € 100 million was invested in 2016
very slight) interest rate increases. to complete this project. Another focus of our capital
­expenditures was on plants for manufacturing downstream
WACKER’s business developed well in 2016 given the geo­ products in various regions. For example, we raised
political risks. Whereas many chemical companies recorded ­production capacity for cyclodextrins by 30 percent at our
declining sales, WACKER achieved a moderate sales site in Eddyville, Iowa (USA ). At the Burghausen site, we
­increase in 2016, as planned. This was due to the three expanded production of functional silicone fluids in sev-
chemical divisions, which succeeded in selling higher vol- eral stages. These fluids find application in the coatings,
umes. Earnings climbed even faster than sales. The positive ­p aper, textile, cosmetics and personal-care sectors.
earnings trend stemmed from our high production-capacity ­Capital spending on this expansion project amounted to
utilization, cost improvements and low raw-material prices. some € 25 million. In Freiberg, we invested in new pulling
The global solar market had another growth year. Polysilicon facilities for manufacturing monocrystals at Siltronic.
prices, though, fluctuated strongly and, on balance, were Renovation of the Alz canal in Burghausen incurred capital
58 lower, which dampened sales and earnings. After a dynamic expenditure of € 25 million.
start in the first half of 2016, business slowed somewhat in
the third quarter. Volumes recovered in the fourth quarter. We initiated further investment projects in 2016. In Jincheon,
Silicon-wafer business for the semiconductor industry was South Korea, we are moving production to a new location
particularly sluggish in the first half year, before picking up and, at the same time, expanding our capacities for silicone
in the second half. Volume gains and favorable exchange-­ sealants, specialty silicones and liquid silicone rubber. In
rate effects were countered by low market prices. Sales at Amtala, India, we are building a production plant for surfac-
Siltronic were slightly higher than in the prior year. tant silicones for industrial, agricultural and personal-­care
applications.
We lifted our sales in all regions in 2016, even though the
increases were not particularly strong in Europe and the
Americas. In Asia, growth was 3.9 percent. Business there Comparing Actual with Forecast
developed very positively in Japan, South Korea and India. Performance
At 43.3 percent, Asia again accounted for the largest share
in Group sales. During the year, WACKER specified and revised the targets
originally set at the start of the year. The revisions affected
WACKER performed well in the first weeks of the new fiscal the statements on EBITDA and net financial debt. As fore-
year prior to publication of the consolidated financial cast, WACKER grew its sales by a low single-digit percentage.
statements on February 27, 2017. At € 5.40 billion, sales were 2 percent higher year over year.
This was due to higher volumes. We projected that the
EBITDA margin would be somewhat below the 2015 level.
This did not prove to be the case. After adjustment for
special income, EBITDA was substantially higher year over
year. In 2016, we again retained advance payments and
received damages due to the termination of long-term
polysilicon supply contracts, but the amounts involved
were substantially below the prior-year level. As expected,

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Business Report

the business trend was positive at our three chemical Net financial debt of € 992.5 million at year-end was slightly
­d ivisions – WACKER SILICONES, WACKER POLYMERS and below the prior-year level.
WACKER BIOSOLUTIONS – with volume growth spurring
business there. On the whole, all three divisions increased As anticipated at the start of the year, the workforce
their sales. EBITDA was substantially above the year-earlier ­increased. As of the reporting date, WACKER had 17,205
figure. At WACKER POLYSILICON, solar-silicon prices fluc­ employees, 233 more than the year before.
tuated during the year. Even though prices were mark­
edly  lower, WACKER POLYSILICON grew its sales through The Executive and Supervisory Boards will propose a
­increased volumes. At Siltronic, sales were slightly higher dividend of € 2.00 per share for 2016 (dividend for 2015: € 2.00)
than the year before. Volumes rose marginally year over at this year’s Annual Shareholders’ Meeting.
year. Volume gains and favorable exchange-rate effects
were countered by low market prices. On balance, Deviations from Projected Expenses
­Siltronic’s EBITDA was higher year over year. Raw-material Personnel costs were slightly higher year over year, both in
costs, energy costs and exchange rates trended in line absolute terms and as a percentage of sales. This was due
with our expectations. to the increase in the workforce, which was in part attribut-
able to commissioning of the new production plant in
Projections for EBITDA Specified after First Quarter Charleston, Tennessee (USA ). We expect the ratio of per-
With the publication of the Q1 Interim Report in April 2016, sonnel costs to sales to decline slightly in the medium term
WACKER specified its projections for EBITDA. Instead of a due to productivity gains.
slight increase when adjusted for special income, the gain
was now expected to be between 5 and 10 percent year Compared with the previous year, raw-material costs
over year (2015: € 911.2 million without special income). At ­declined marginally, both in absolute terms and as a per-
€ 1.08  billion, adjusted EBITDA was 18.6 percent higher than centage of sales. A more favorable product mix and our
the year before. Net financial debt, previously expected to efficiency programs concerning the use of raw materials
be at the prior-year level, was forecast to be slightly below were positive factors in this trend. Raw-material prices
that level (2015: € 1.07 billion). All other performance indica- were lower on average over the year, which also had a
tors remained unchanged. In the Q2 Interim Report for positive influence on our raw-material costs. We expect 59
2016, we forecast that EBITDA would reach the upper end of raw-material prices to rise in the medium term, which will
our projected range of 5 to 10 percent. lift the ratio of raw-material costs to sales.

Investment spending developed as we had stated at the As we had expected, energy costs declined year over year
Annual Press Conference in March 2016 and amounted to due to more favorable procurement conditions and a lower
€ 427.6  million. regulatory cost burden.

2.18 Comparing Actual with Forecast Performance

Results Forecast Forecast Forecast Results

in 2015 March 2016 Aug. 2016 Oct. 2016 in 2016

Key Financial
Performance Indicators
EBITDA margin (%) 19.8 Somewhat lower Somewhat lower Somewhat lower 20.4
Slight increase Increase of between 5 and Increase of between 5 and
when adjusted for 10 percent when adjusted for 10 percent when adjusted for
EBITDA (€ million) 1,048.8 special income 1 special income 1 special income 1 1,101.4
ROCE (%) 8.1 Substantially lower Substantially lower Substantially lower 6.1
Net cash flow (€ million) 22.5 Markedly more positive Markedly more positive Markedly more positive 400.6

Supplementary Financial
­Performance Indicators
Sales (€ million) 5,296.2 Slight increase Slight increase Slight increase 5,404.2
Investments (€ million) 834.0 Approx. 425 Approx. 425 Approx. 425 427.6
At the Slightly below the Slightly below the
Net financial debt (€ million) 1,074.0 prior-year level prior-year level prior-year level 992.5
Depreciation (€ million) 575.4 Approx. 720 Approx. 720 Approx. 720 735.2

1
EBITDA adjusted for special income amounted to € 911.2 million in 2015 and € 1,081.1 million in 2016.

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Business Report – Earnings

Both in absolute terms and as a proportion of sales, WACKER generated the majority of its sales outside Germany.
­depreciation was substantially higher year over year due International sales came in at € 4.69 billion – after € 4.61 billion
to the start of depreciation of the polysilicon production a year earlier – representing 87 percent of total sales.
facilities at our new Charleston plant. We expect deprecia- For further information, please refer to the Regions section starting on
page 64.
tion to decline slightly in 2017 and to return to the levels of
2015 in the medium term.
Group EBITDA at € 1.10 Billion –
EBITDA Margin at 20.4 Percent
2.19 Expenses by Cost Type Group EBITDA rose 5 percent year over year and amounted
to € 1,101.4 million (2015: € 1,048.8 million). In spite of a reduction
% of sales Reported for 2015
2016 in income from advance payments retained and damages
received, WACKER posted substantially higher EBITDA in
Personnel costs 26.1 25.7 2016. In 2015, WACKER had recognized € 137.6 million in special
Raw-material costs 23.8 25.0 income from advance payments retained and damages
Energy costs 7.2 7.7 received, which had a positive effect on EBITDA. In 2016,
Depreciation 13.6 10.9 special income received in connection with terminated
contracts amounted to € 20.3 million. Adjusted for this effect,
EBITDA actually climbed 18.6 percent year over year to
€ 1,081.1 million (2015: € 911.2 million).
For further information on the business divisions, please refer to the
segment information starting on page 62.

2.20 Reconciliation of EBITDA to EBIT

Earnings
€ million 2016 2015 Change
in %

60
EBITDA 1,101.4 1,048.8 5.0
Depreciation / 
appreciation of
fixed assets –735.2 –575.4 27.8
EBIT 366.2 473.4 –22.6
Group Sales Climb 2 Percent Year over Year
to € 5.40 Billion
In 2016, the WACKER Group again increased its sales, which
came in at € 5.40 billion (2015: € 5.30 billion). This almost Higher Depreciation Reduces EBIT and Net Income
2-percent increase was driven by robust customer demand for the Year
and the associated volume growth, as well as by positive Group earnings before interest and taxes (EBIT ) totaled
exchange-rate effects. Compared with the previous year, € 366.2 million in 2016 (2015: € 473.4 million). That represented a
each business division sold more in terms of volume and decrease of 23 percent from a year earlier and corresponded
generated higher sales. The chemical divisions, in partic- to an EBIT margin of 6.8 percent (2015: 8.9 percent). This drop
ular, contributed strongly to the rise in sales by delivering was due to higher depreciation, which rose 28 percent in
substantial volume growth. In an intensely competitive 2016 to € 735.2 million (2015: € 575.4 million), as expected.
environment marked by lower prices, WACKER POLYSILICON
increased its sales by 3 percent. Siltronic slightly out-
performed prior-year sales despite lower prices.
For further information on the business divisions, please refer to the
segment information starting on page 62.

See Figure 2.22 on page 61

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Earnings

Cost of Goods Sold Rises 2.21 Reconciliation of EBIT to Net Income for the Period
6 Percent Year over Year
€ million 2016 2015 Change
At € 9 90.7 million, gross profit from sales was 12 percent in %
lower than a year earlier (2015: € 1.13 billion). The gross
margin was 18.3 percent (2015: 21.3 percent). Alongside the EBIT 366.2 473.4 –22.6
effect of higher depreciation, this decline reflected the Financial result –101.4 –66.7 52.0
start-­up costs at the new Charleston production site, which Income before
increased the Group’s cost-of-sales ratio from 79 percent income taxes 264.8 406.7 –34.9

to 82 percent. Income taxes –75.5 –164.9 –54.2

Net income
for the year 189.3 241.8 –21.7
Functional Costs Climb
Of which
Other functional costs (selling, R&D and general administra- Attributable to
tive expenses) were 5 percent higher year over year, rising Wacker Chemie AG
shareholders 179.2 246.7 –27.4
to € 652.3 million (2015: € 623.5 million). General administrative
Attributable to
expenses, in particular, were higher due to commissioning
non-controlling
of the Charleston site. interests 10.1 –4.9 n. a .
Earnings per
Other Operating Income and Expenses ­c ommon share (€ )
( basic  / d iluted ) 3.61 4.97 –27.4
In 2016, the balance of other operating income and expenses
was € 26.7 million (2015: € – 35.3 million). Income of € 20.3 million
Average number of
(2015: € 137.6 million) from advance payments retained had shares outstanding
a positive effect on the net result. A substantially reduced (weighted ) 49,677,983 49,677,983 –
net foreign-currency loss of € –17.5 million (2015: € – 69.1 million)
and the elimination of costs arising from the commissioning
of the Charleston site led to markedly lower other operating
expenses. Financial and Net Interest Result
As expected, WACKER’s financial result was weaker than 61
the year before. It amounted to € –101.4 million (2015: € – 66.7 mil-
lion). Interest income was € 6.0 million (2015: € 7.3 million),
while interest expenses were € 42.4 million (2015: € 31.8 mil-
lion). The net interest result amounted to € – 36.4 million
(2015: € – 24.5 million). Due to commissioning of the Charles-
ton production site, capitalization of construction-related
borrowing costs was significantly lower in the reporting
year. As a result, interest expenses increased year over
year to € 17.4 million.

2.22 Year-over-Year Sales Comparison

€ million

Group sales Sales-volume and Price effects Exchange-rate effects Group sales
Full-year 2015 product-mix effects Full-year 2016

301 4 5,404
5,296
–197

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Earnings

The other financial result amounted to € – 65.0 million (2015: Compared with the previous year, EBITDA outpaced sales
€ – 42.2 million). It primarily comprised interest-bearing growth, climbing 30.8 percent to € 3 61.2 million ( 2015:
components of pension provisions and other noncurrent € 276.2 million). The rise was fueled by volume growth, good
provisions. In addition, it contained gains and losses on plant utilization and high levels of cost efficiency. At
price fluctuations in financial assets and associated hedg- 18.1 percent, the EBITDA margin was markedly higher (2015:
ing instruments. The prior-year figure had included the 14.2 percent).
positive effects on financial assets of changes in exchange
rates. Investment spending rose by 8.0 percent year over year,
amounting to € 8 8.6 million (2015: € 82.0 million). The funds
Income Taxes were primarily for expanding silicone plants at the
For 2016, the Group reported tax expenses of € 75.5 mil- Burghausen site and for expansions at the Nünchritz site.
lion  (2015: € 164.9 million). The Group’s effective tax rate The division had 4,566 employees as of December 31, 2016
was 28.5 percent (2015: 40.5 percent). This positive change (Dec. 31, 2015: 4,353).
stemmed from the elimination of start-up costs for the
Charleston production site that are not recognized in the
tax accounts and from a reduction in the losses incurred 2.23 Key Data: WACKER SILICONES
at some subsidiaries.
€ million 2016 2015 2014 2013 2012

Consolidated Net Income

As a result of the effects mentioned, consolidated net Total sales 2,001.1 1,943.3 1,733.6 1,672.2 1,648.0
­income fell to € 189.3 million (2015: € 241.8 million). EBITDA 361.2 276.2 209.8 230.2 189.3
EBITDA
ROCE ­m argin (%) 18.1 14.2 12.1 13.8 11.5

The return on capital employed (ROCE) sets earnings before EBIT 280.8 194.5 128.9 151.1 106.4

interest and taxes (EBIT ) in relation to the capital employed Investments 88.6 82.0 88.5 85.4 158.8
Employees
for business activities.
(December 31,
62 number) 4,566 4,353 4,240 4,109 3,960
In the reporting year, ROCE came in at 6.1 percent (2015:
8.1 percent). This decrease was essentially due to the high
amount of capital employed coupled with lower EBIT. The
high level of capital employed stemmed from our substantial WACKER POLYMERS
capital spending on new production facilities last year. At
€ 6,018.0 million, capital employed climbed slightly in the Sales at WACKER POLYMERS rose by 1 percent in 2016 to
reporting period. € 1.195 billion (2015: € 1.186 billion). The increase was fueled
by higher volumes for dispersions and dispersible polymer
powders, which were partly offset by lower prices.
Segments
WACKER POLYMERS posted a substantial increase in sales
of dispersions, especially in the Americas, and continued
WACKER SILICONES to grow in Asia. The highest growth rate, of around 20 per-
cent, was achieved in India. Sales of dispersible polymer
At €2.00 billion in 2016, sales at WACKER SILICONES topped powders grew strongly, especially in North America and
the two-billion euro mark for the first time, after € 1.94 billion Europe.
in 2015. That was an increase of 3.0 percent. Higher vol-
umes were the main growth driver, though they were partially At € 261.0  million, EBITDA was clearly above the year-earlier
offset by somewhat lower prices. WACKER SILICONES was level (2015: € 222.2 million). This reflected the impact of much
able to increase its sales in all three of its business sec- higher volumes, good plant capacity utilization and very
tors, with sales of specialty products continuing to rise high levels of cost efficiency. The EBITDA margin improved
disproportionately. Silicones and silicone rubber – for to 21.8 percent (2015: 18.7 percent).
consumer goods, chemicals, energy and electronics
­applications, and high-value construction products – sold
­e specially well. From a regional perspective, growth was
strongest in Europe, while WACKER SILICONES posted
­further sales gains in Asia.

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Earnings

Investments decreased year over year, amounting to 2.25 Key Data: WACKER BIOSOLUTIONS
€ 37.5 million (2015: € 47.4 million). Funds were spent on the
€ million 2016 2015 2014 2013 2012
expansion of existing production facilities and on a new
pilot reactor for dispersions at the Nanjing site in China.
With its new plant, WACKER POLYMERS is developing local Total sales 206.4 197.1 176.2 158.4 157.6
R&D activities in China and expanding its product range, EBITDA 37.0 32.2 23.6 23.6 24.5
application technology and customer service there. As EBITDA
of December 31, 2016, the division had 1,484 employees, ­m argin (%) 17.9 16.3 13.4 14.9 15.5

slightly more than the year before (Dec. 31, 2015: 1,461). EBIT 25.7 21.0 13.6 17.2 17.8
Investments 9.1 6.2 8.4 10.2 19.3
Employees
(December 31,
2.24 Key Data: WACKER POLYMERS number) 510 491 484 371 357

€ million 2016 2015 2014 2013 2012

Total sales 1,194.8 1,185.5 1,064.4 978.7 1,003.1 WACKER POLYSILICON

EBITDA 261.0 222.2 149.5 147.8 147.4
EBITDA Sales at WACKER POLYSILICON climbed by 3 percent in 2016,
­m argin (%) 21.8 18.7 14.0 15.1 14.7 to € 1.1 billion (2015: € 1.06 billion). The rise was due to sub-
EBIT 223.7 184.4 118.7 112.9 110.7 stantial volume growth, despite average solar-silicon
Investments 37.5 47.4 56.3 36.8 58.8 prices being lower. Asia retained its position as the key
Employees
sales region in the reporting year.
(December 31,
number) 1,484 1,461 1,408 1,377 1,365
At € 285.9  million, EBITDA was clearly below the year-earlier
level (2015: € 402.4 million). The decline was basically caused
by lower average prices, by start-up costs at the new
WACKER BIOSOLUTIONS production site at Charleston, Tennessee (USA ), and by a 63
substantial reduction in special income from advance
The sales trend was positive at WACKER BIOSOLUTIONS, too. payments retained and damages received from customers.
Sales rose by 4.7 percent in 2016 to € 2 06.4 million (2015: The EBITDA margin was 26.1 percent (2015: 37.8 percent).
€ 197.1 million). Higher volumes essentially prompted the
increase, while lower prices had the opposite effect. Phar- In 2016, investments at WACKER POLYSILICON decreased
maceutical proteins and nutrition products performed significantly on completion of the production facilities at
­e specially well, recording double-digit growth. From a Charleston. Capital spending fell 77.6 percent to € 130.0 mil-
­regional perspective, sales growth was strongest in lion (2015: € 5 81.8 million). The number of employees rose
­Europe and Asia. to 2,490 (Dec. 31, 2015: 2,373).

EBITDA increased by 14.9 percent to € 37.0 million (2015:

€ 32.2 million), mainly due to volume growth and high pro- 2.26 Key Data: WACKER POLYSILICON
duction capacity utilization. The EBITDA margin improved
€ million 2016 2015 2014 2013 2012
to 17.9 percent (2015: 16.3 percent).

Investments increased year over year to € 9.1 million (2015: Total sales 1,095.5 1,063.6 1,049.1 924.2 1,135.8
€ 6.2 million). The funds were used to expand existing pro- EBITDA 285.9 402.4 537.0 233.9 427.5
duction facilities. In particular, capital spending focused EBITDA
on expanding the cyclodextrin plant in the United States. ­m argin (%) 26.1 37.8 51.2 25.3 37.6

In addition, WACKER BIOSOLUTIONS acquired a large-scale EBIT –117.1 162.6 305.3 0.1 200.8

fermentation plant in Spain. The aim is to meet rising Investments 130.0 581.8 334.5 290.0 698.1
Employees
customer demand for cysteine in the long term and to
(December 31,
manufacture other biosynthetic products. As of Decem- number) 2,490 2,373 2,093 2,102 2,349
ber 31, 2016, the number of employees reached 510 (Dec. 31,
2015: 491).

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Earnings

Siltronic As of December 31, 2016, the “Other” segment had 4,398

employees ( December 31, 2015: 4,400). This segment at
Siltronic’s sales in 2016 were roughly on a par with the pre- WACKER covers, for example, the management and
vious year and amounted to € 933.4 million (2015: € 931.3 mil- ­e mployees of the infrastructure units at the Burghausen
lion). Volume gains and favorable exchange-rate effects and Nünchritz sites as well as corporate functions.
were countered by lower prices. Sales of 300 mm silicon
wafers continued to rise. Asia retained its position as the
key sales region in the reporting year. Europe also saw 2.28 Divisional Shares in External Sales
sales growth.
%

3.7 0.2
EBITDA improved by 17.7 percent year over year, climbing to
€ 145.9 million (2015: € 124.0 million). Positive factors influenc- 17.1
ing EBITDA were additional cost-reduction measures, high
37.0
rates of production-capacity utilization and a decrease in € 5,404.2
currency-­hedging expenses. The EBITDA margin was 15.6 per- million
cent (2015: 13.3 percent).
20.0

Siltronic’s investments in property, plant and equipment

and in intangible assets rose in 2016, reaching € 89.5 million 22.0

(2015: € 75.1 million). That was a year-over-year increase of

19.1 percent. The invested funds were used especially for 37.0 % WACKER SILICONES 22.0 % WACKER POLYMERS
modernizing crystal-pulling facilities and for the ongoing 20.0 % WACKER POLYSILICON 17.1 % SILTRONIC
3.7 % WACKER BIOSOLUTIONS 0.2 % OTHER
automation of production. At 3,757, the number of employees
at Siltronic was lower than a year earlier (Dec. 31, 2015: 3,894).

Regions
64 2.27 Key Data: SILTRONIC
WACKER’s operations are highly international. In 2016,
€ million 2016 2015 2014 2013 2012
86.9 percent of the Group’s € 5.40 billion in sales (2015:
€ 5.30 billion) were generated by international business.
Total sales 933.4 931.3 853.4 743.0 867.9 Germany accounted for 13.1 percent.
EBITDA 145.9 124.0 114.0 26.5 0.7
EBITDA Further Sales Growth in Asia
­m argin (%) 15.6 13.3 13.4 3.6 0.1 Asia accounts for the largest portion of our business. The
EBIT 28.7 4.5 –43.5 –95.9 –92.2 main impetus in the region is the rising affluence of the
Investments 89.5 75.1 40.7 30.9 103.2 emerging economies there. The region accounted for
Employees
43.3 percent of total Group sales (2015: 42.5 percent). Sales
(December 31,
number) 3,757 3,894 4,165 3,746 3,978 in Asia reached € 2.34 billion (2015: € 2.25 billion), an increase
of 3.9 percent. Sales in the Greater China region (including
Taiwan) climbed by 2.0 percent to € 1.37 billion ( 2015:
€ 1.34  billion).
Other
Modest Growth in Europe
Sales reported under “Other” totaled € 162.6 million in 2016 In Europe, a market where WACKER has a strong position,
(2015: € 197.5 million). That was 17.7 percent less than a year sales remained virtually unchanged in the reporting year,
earlier. The mild winter of 2015 /2016 weighed on the salt rising 0.3 percent to € 1,894 million (2015: € 1,887.6 million).
business. Europe accounted for 35.0 percent of Group sales (2015:
35.6 percent).
“Other” EBITDA amounted to € 10.2 million in the year under
review (2015: € – 8.9 million), with lower currency-hedging
costs having a positive influence. “Other” EBIT amounted
to € –76.0 million (2015: € – 94.5 million).

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Earnings – Net Assets

2.29 External Sales by Customer Location

Net Assets
€ million 2016 2015 2014 2013 2012

Europe 1,894.0 1,887.6 1,794.2 1,720.8 1,776.7

The Americas 950.9 945.1 810.7 761.0 834.2
Asia 2,340.5 2,253.1 2,039.7 1,826.1 1,862.0
Other regions 218.8 210.4 181.8 171.0 162.0
WACKER’s total assets increased by close to 3 percent
Group 5,404.2 5,296.2 4,826.4 4,478.9 4,634.9
compared with December 31, 2015. Rising by € 196.2 million,
they amounted to € 7.46 billion as of December 31, 2016
(Dec. 31, 2015: € 7.26 billion). Essentially, both trade receiv-
ables and inventories grew. Lower capital spending and
Slight Increase in Sales in the Americas good operating cash flow lifted liquid assets significantly.
Sales in the Americas increased 0.6 percent to € 950.9 million On the other side of the balance sheet, provisions for
(2015: € 945.1 million). The region accounted for 17.6 percent pensions rose 30 percent as discount rates continued their
of Group sales (2015: 17.8 percent). downward trend. Advance payments received declined
substantially. This was because the agreed polysilicon
Continuing Growth in “Other” Regions volumes corresponding to these payments were delivered
Sales in the other regions of the world increased by to customers and other customer contracts were termi-
4.0 percent in 2016 to € 218.8 million (2015: € 210.4 million). nated. Group equity fell 7 percent, reflecting primarily the
More than 40 percent of these sales were in Middle Eastern increases in provisions for pensions, which are recognized
countries. The “Other” regions accounted for 4.0 percent in other comprehensive income. A year earlier, the proceeds
of Group sales (2015: 4.0 percent). received from third-party investors in the successful IPO of
Siltronic AG had increased Group equity by € 361.9 million.
See Figure 2.33 on page 66
2.30 External Sales by Group Company Location

€ million 2016 2015 2014 2013 2012

65
2.31 Trends: Assets

€ million 2016 2015 Change

Europe 4,362.5 4,466.6 4,144.3 3,927.0 4,129.7
in %
The Americas 1,319.0 892.8 769.7 742.1 817.6 Intangible assets, property,
Asia 1,317.5 1,164.5 962.3 761.6 729.7 plant and equipment,
and investment property 4,646.8 4,832.7 –3.8
Other regions 10.4 9.2 7.6 7.0 6.8
Investments in joint ventures
Consolidation –1,605.2 –1,236.9 –1,057.5 –958.8 –1,048.9 and associates accounted
Group 5,404.2 5,296.2 4,826.4 4,478.9 4,634.9 for using the equity method 11.2 21.2 –47.2
Other noncurrent assets 621.1 440.9 40.9
Noncurrent assets 5,279.1 5,294.8 –0.2
Inventories 846.3 785.2 7.8
Trade receivables 775.7 679.4 14.2
Other current assets 560.5 505.0 11.0
Current assets 2,182.5 1,969.6 10.8
Total assets 7,461.6 7,264.4 2.7

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Net Assets

Fixed Assets Decline Due to Depreciation Working Capital Rises Due to Higher Receivables
Primarily as a result of higher depreciation, fixed assets and Inventories
decreased to € 4.65 billion (Dec. 31, 2015: € 4.83 billion). Depre- Current assets grew by just under 11 percent year over year.
ciation amounted to € 735.2 million. With the Charleston site They came in at € 2.18 billion ( Dec. 31, 2015: € 1.97 billion).
coming on stream in the reporting year, capital expen­ One factor in this rise was a higher level of working capital,
ditures fell substantially. They came in at € 427.6 million reflecting an operations-driven increase in trade receivables
(2015: € 8 34.0 million). Approximately one-quarter of these and higher inventories. Exchange-rate effects lifted trade
expenditures went toward final completion of the Charleston receivables and inventories by € 18.0 million.
site. The remainder was spent predominantly on investments
at WACKER SILICONES and Siltronic. The full consolidation
of the joint venture WACKER Asahikasei Silicone led to a 2.32 Working Capital
reduction in equity-accounted investments. Changes in
€ million 2016 2015 Change
exchange rates increased the carrying amount of fixed in %
assets by € 90.3 million.
Trade receivables 775.7 679.4 14.2
Other Noncurrent Assets and Securities Inventories 846.3 785.2 7.8
Other noncurrent assets totaled € 6 21.1 million as of Trade payables –369.7 –378.3 –2.3
­December 31, 2016 (Dec. 31, 2015: € 440.9 million). That was a Working capital 1,252.3 1,086.3 15.3
rise of 41 percent year over year. WACKER invested surplus
liquidity of € 56.0 million (Dec. 31, 2015: € 3.7 million) in noncur-
rent securities. But the majority of the increase comprised
deferred tax assets, which rose € 128.5 million to € 449.9 mil-
lion, mainly due to higher actuarial losses from provisions
for pensions.

66 2.33 Asset and Capital Structure

2016 2015

Total Balance Sheet Total Balance Sheet

€ 7,461.6 million € 7,264.4 million

Fixed assets 64.0 % 34.8 % Equity Fixed assets 68.4 % 38.5 % Equity

34.3 % Provisions
27.5 % Provisions

Inventories 11.3 %
20.0 % Financial liabilities
19.5 % Financial liabilities Inventories 10.8 %
Receivables 18.5 %
Receivables 15.5 %

Liabilities  /  advance Liabilities  / advance

Cash / s ecurities 6.2 % 11.4 % payments received Cash  / securities 5.3 % 14.0 % payments received

Assets Equity and Liabilities Assets Equity and Liabilities

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Net Assets

2.34 Trends: Equity and Liabilities plans at the end of the year resulted in higher actuarial
losses, which reduced equity by € 3 56.2 million. Currency
€ million 2016 2015 Change
in % translation effects lifted equity by € 43.4 million.

Equity 2,593.2 2,795.1 –7.2 Liabilities Increase Amid Higher Pension Obligations
Noncurrent provisions 2,428.9 1,881.5 29.1 Compared with the previous year, WACKER’s liabilities
Financial liabilities 791.1 1,136.7 –30.4 ­increased by € 399.1 million or 9 percent to € 4.87 billion. This
Other noncurrent liabilities 172.7 293.5 –41.2 change was attributable especially to the provisions for
Of which advance payments pensions, which rose by € 496.1 million to € 2.11 billion. This
received 164.1 287.5 –42.9
30-percent increase reflects the lower discount rates used
Noncurrent liabilities 3,392.7 3,311.7 2.4
for defined benefit plans. These discount rates were
Financial liabilities 667.1 318.7 > 100
1.94 percent in Germany (Dec. 31, 2015: 2.75 percent) and
Trade payables 369.7 378.3 –2.3
3.92 percent in the USA ( Dec. 31, 2015: 4.2 percent). As a
Other current provisions and
­l iabilities 438.9 460.6 –4.7 result, actuarial losses rose substantially. Other noncurrent
Current liabilities 1,475.7 1,157.6 27.5 provisions increased, amounting to € 247.4 million (Dec. 31,
Liabilities 4,868.4 4,469.3 8.9 2015: € 217.0 million). Here, low interest rates had an impact
Total equity and liabilities 7,461.6 7,264.4 2.7 on provisions for jubilee benefits and for environmental
protection. Provisions for phased early retirement increased
Capital employed 6,018.0 5,875.4 2.4 due to the corresponding new contracts concluded during
the reporting year. Overall, other noncurrent liabilities were
lower at € 172.7 million (Dec. 31, 2015: € 293.5 million). This was
due to the reclassification to current liabilities of formerly
Liquidity Up 22 Percent noncurrent advance payments received.
Securities and cash and cash equivalents are a major
component of other current assets. Current securities At € 369.7 million, trade payables were roughly the same as
reached € 126.2 million at the end of 2016 ( Dec. 31, 2015: the year before (Dec. 31, 2015: € 378.3 million). Other current
€ 67.2  million), with WACKER investing liquid funds in fixed- provisions and liabilities fell 5 percent to € 4 38.9 million 67
term deposits and short-term bonds. There was a modest (Dec. 31, 2015: € 4 60.6 million). Current advance payments
decline in cash, which amounted to € 283.5 million as of the received amounted to € 106.6 million at the reporting date
balance sheet date (Dec. 31, 2015: € 310.5 million). Thus, total (Dec. 31, 2015: € 165.8 million). The change in current income
liquid assets (current and noncurrent securities, cash and tax provisions and liabilities for forward-exchange contracts
cash equivalents) increased by 22 percent year over year. was insignificant as of the balance sheet date. Personnel
liabilities, including those related to vacation, flextime and
Other current assets included income tax receivables of performance-related compensation, were slightly higher at
€ 18.5 million ( Dec. 31, 2015: € 19.0 million) and other tax the closing date.
­receivables of € 45.4 million (Dec. 31, 2015: € 41.5 million).
Financial Liabilities Remain Constant
Equity Ratio at 34.8 Percent As of the balance sheet date, noncurrent and current
Group equity fell by € 201.9 million compared with a year ­fi nancial liabilities were unchanged at € 1.46 billion. In
earlier. It amounted to € 2.59 billion as of December 31, 2016 March 2016, WACKER took out new bilateral loans totaling
(Dec. 31, 2015: € 2.79 billion). The resulting equity ratio was US$ 250 million, taking advantage of prevailing low interest
34.8 percent (Dec. 31, 2015: 38.5 percent). Retained earnings rates for refinancing. Financial liabilities totaling € 200 mil-
rose, due to the Group’s net income for the year, and lion were repaid on schedule in December 2016. The share
­declined, on the other hand, by € 9 9.4 million due to the of current financial liabilities increased because certain
dividend paid by Wacker Chemie AG. Other equity items financing arrangements previously reported as noncurrent
lowered equity, basically as a result of the adjustment to moved closer to maturity. Exchange-rate effects likewise
pension provisions that was recognized in other compre- led to an increase in financial liabilities.
hensive income. The remeasurement of defined benefit

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Net Assets – Financial Position

Unrecognized Assets and Off-Balance-Sheet corresponding tasks and responsibilities. Capital-structure

Financing Instruments management involves shaping the capital structure of the
An important asset that does not appear in our statement Group and its subsidiaries. The latter are capitalized and
of financial position is the value of the WACKER brand and financed in accordance with the principles of cost and risk
other Group trademarks. We consider the high profile and optimization. This involves taking account of restrictions
reputation of our trademarks to be a key factor influencing on the movement of capital, as well as other capital and
customer acceptance of our products and solutions. foreign-currency transfer constraints.
Moreover, there are other intangible assets that are vital
for success and have a positive impact on our business – As part of liquidity management, we continuously monitor
for example, long-standing customer relationships and cash flows from operations and financial business. WACKER
customer trust in our product- and solution-related ex- covers its resulting liquidity needs via suitable instruments,
pertise. Just as important are our employees’ skills and such as intra-Group financing through borrowings, or
­experience, and our many years of expertise, not only in through loans from local banks. We receive the necessary
R&D and project management, but also in designing outside funding from contractually agreed lines of credit
­p roducts and production- and business-process struc- denominated in various currencies and with differing
tures. In particular, our integrated production system gives ­m aturities. We invest surplus liquidity in the money and
us an edge over our rivals. Another key success factor is capital markets at an optimum risk / return rate. Cash man-
WACKER’s sales network, which has evolved over many agement centralizes procedures designed to calculate cash
years and enables the Group to market and sell its range requirements and surpluses.
of products and services locally to customers. Various
rented and leased goods (operating leases) reported on in WACKER pursues a careful financing policy that targets a
Note 15 are another item that do not appear in the statement balanced financing portfolio, a diversified maturity portfolio
of financial position, and the same applies to other self-­ and a comfortable liquidity buffer. In addition to the financ-
constructed assets. WACKER does not use any off-balance- ing instruments already mentioned, WACKER expects to be
sheet financing instruments. able to tap the bond markets and other instruments if
necessary. Our aim is to maintain our corporate financial
68 structures so that the Group’s credit rating remains – at a
minimum – in the investment-grade range.

The operations of the Group companies and the resulting

incoming payments are WACKER’s key source of liquidity. As
part of our cash-management systems, liquidity surpluses
at individual Group companies are utilized to cover the
­financing requirements of other Group companies. This
centralized system of internal transfers reduces the need
Financial Position for debt financing and our interest expense. The purpose
of managing market-price risks is to limit the effects of
fluctuations in exchange rates and interest rates on the
Group’s bottom line. That involves first determining the
Group’s overall exposure to currency risks. On the basis of
the information obtained, we can then make decisions as
Financial-Management Principles and Goals regards hedging – namely, the volume to be hedged, the
Our key financial-management goal is to maintain WACKER’s respective term of the hedge and the choice of hedging
financial strength. The central task is to sufficiently cover instrument.
the financial needs of our operations and investment proj-
ects. Financial management at WACKER comprises capital Financial Analysis
structure management, cash and liquidity management, The Group’s cash flow is a key instrument of liquidity man-
and the management of market-price risk (currencies, inter- agement. Net cash flow serves as the internal indicator for
est rates). Financial management at the Group is centrally liquidity measurement.
organized. A groupwide financial regulation sets out the

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Financial Position

Net Cash Flow 2.37 Cash Flow from Operating Activities (Gross Cash Flow)
In 2016, WACKER complied with its long-term policy of financ-
€ million 0
ing its investments essentially from its own cash flow. Net
cash flow totaled € 400.6 million in 2016 (2015: € 22.5 million), 2016 736.6

demonstrating that long-term investments are predomi-

nantly covered by cash flow from operating activities. 2015 617.2

2014 485.2

2.35 Net Cash Flow

2013 464.0
€ million 2016 2015

2012 363.2
Cash flow from operating activities
(gross cash flow) 736.6 617.2
Changes in advance payments received 183.1 238.3
Cash flow from long-term investing Cash Flow from Long-Term Investing Activities
activities before securities –516.9 –815.6
The Group’s investment projects influence cash flow from
Additions from finance leases –2.2 –17.4
long-term investing activities. In 2016, cash payments of
Net cash flow 400.6 22.5
€ 516.9 million for investments were substantially below the
prior-year figure (2015: € 815.6 million). This was due to the
completion of investment spending on the polysilicon
­facilities at the Charleston production site. Acquisitions led
Net cash flow is the sum of cash flow from operating activ- to a cash outflow of € 8.8 million relating to the purchase
ities (excluding the change in advance payments received) of large-scale fermentation facilities at the new León site
and cash flow from long-term investing activities ( before in Spain.
securities), including finance leases.

2.38 Cash Flow from Long-Term Investing Activities 69

2.36 Net Cash Flow before Securities

€ million 0
€ million 0

2016 400.6 2016 –516.9

2015 22.5 2015 –815.6

2014 215.7 2014 –497.3

2013 109.7 2013 –555.2

2012 –536.2 2012 –1,053.8

Gross Cash Flow Cash Flow from Financing Activities

Cash flow from operating activities (gross cash flow) totaled Cash flow from financing activities totaled € –135.8 million in
€ 736.6 million in 2016 (2015: € 617.2 million), up 19 percent. 2016 (2015: € 57.9 million), reflecting primarily the refinanc-
Gross cash flow was negatively impacted by lower net ing  of external financial liabilities amounting to around
­income of € 189.3 million (2015: € 241.8 million) and by higher € 250  million. WACKER took out new bilateral loans totaling
payments from working capital of € – 57.3 million, after US$ 250 million in March 2016 and repaid financial liabilities
€ – 28.3 million a year earlier. On the other hand, gross cash of € 200 million on schedule in December 2016. In the sec-
flow was supported by lower tax payments of € 79.5 million ond quarter of 2016, WACKER paid its shareholders a total
(2015: € 218.7 million) and by a smaller reduction in advance dividend of € 99.4 million. A year earlier, the proceeds from
payments received of € 183.1 million (2015: € 238.3 million). the IPO of Siltronic AG had added € 361.9 million to cash flow
Depreciation of € 735.2 million recognized in the net income from financing activities.
for the period was substantially higher than the year before
(2015: € 575.4 million).

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Financial Position

Cash and Cash Equivalents Rating

Cash and cash equivalents decreased from € 310.5 million WACKER has sufficient lines of credit with banks and does
to € 283.5 million. However, liquidity from cash and from not issue rated financing instruments such as bonds and
current and noncurrent securities rose from € 381.4 million commercial paper. Consequently, WACKER has not pub-
to € 465.7 million. lished a credit rating so far.

Net Financial Debt Down Proposal on Appropriation of Profits

WACKER defines net financial debt – which is one of its In 2016, Wacker Chemie AG posted retained profit of
­financial indicators – as the balance of gross financial debt € 1,243.8  million under German Commercial Code accounting
(current and noncurrent financial liabilities) and existing rules. The Executive and Supervisory Boards will propose
noncurrent and current liquidity, consisting of securities, a dividend of € 2.00 per share at the Annual Shareholders’
cash and cash equivalents. Net financial debt amounted to Meeting. Based on the number of shares entitled to divi-
€ 992.5 million as of December 31, 2016 (Dec. 31, 2015: € 1.07 bil- dends as of December 31, 2016, the cash dividend corre-
lion), down 8 percent year over year. sponds to a payout of € 9 9.4 million. Calculated in relation
to WACKER’s average share price in 2016, the dividend yield
High cash inflows from operating activities led to an is 2.6 percent. At the Annual Shareholders’ Meeting, the
­increase in liquidity, with financial liabilities remaining Executive and Supervisory Boards will propose treating
­unchanged. Exchange-rate effects increased net financial the amount remaining after deduction of the dividend as
debt by around € 28 million. profit carried forward.

Aside from the financial liabilities disclosed in the report on

Executive Board Statement on
net assets, WACKER has at its disposal adequate unused
loans for around € 8 00 million, with maturities of over one Business Development and
year. Our existing lines of credit provide us with enough on the Group’s Economic Position
financial scope to secure the Group’s continued growth.
The Group does not use any off-balance-sheet financing In 2016, WACKER’s operations were characterized by volume
70 instruments. growth at all five business divisions in combination with
lower prices. Advance payments retained and damages
received (in connection with terminated long-term delivery
contracts with solar-sector customers) no longer had any

2.39 Net Financial Debt

€ million

Net financial Cash flow from Cash flow from ­ Dividend paid, Exchange-rate Net financial
debt as of operating activities long-term investing Wacker Chemie AG effects, changes debt as of
Dec. 31, 2015 (gross cash flow) activities before in scope of Dec. 31, 2016
securities consolidation,
and other

736.6

–516.9
–99.4
–38.8 –992.5
–1,074.0

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Financial Position – Non-Financial Performance Indicators and Other Information

major effect on earnings. Their share in earnings declined

substantially. Overall, the Group achieved its annual fore-
Non-Financial
cast for all its key performance indicators. Performance Indicators
Chemical sales continued to rise, mainly thanks to volume and Other Information
gains. Lower prices had a contrary effect. EBITDA at the
chemical divisions grew significantly versus the year
­b efore. The rise was fueled by high capacity utilization,
cost efficiency and lower raw-material costs. At WACKER
POLYSILICON, we sold markedly more volume, although
prices were lower. The polysilicon production facilities at This section provides further information on our non-finan-
our Burghausen and Nünchritz sites ran at full capacity cial performance indicators. While not used for corporate
throughout the year. The facilities at the new site in Charles- decision-making, these indicators play a key role in WACKER’s
ton were ramped up to production levels as planned. continuing success.
­S iltronic posted marginally higher semiconductor sales
than a year earlier. Stronger volumes and positive ex-
change-rate ­e ffects made up for weaker silicon-wafer Research & Development
prices.
WACKER’s research and development activities pursue
Personnel expenses rose slightly, both in absolute terms three goals:
and as a percentage of sales. Raw-material costs edged
down, both in absolute terms and as a proportion of sales. –  We contribute to our customers’ market success
Energy costs were lower than a year earlier. As forecast, by searching for solutions that meet their needs.
depreciation rose substantially – in absolute figures and as –  We optimize our processes in order to be the
a percentage of sales. ­technology leader and to be sustainably profitable.
–  We concentrate on creating innovative products and
At € 2.59 billion, Group equity declined by € 2 01.9 million applications for new markets and on serving future 71
relative to the prior-year closing date. This was chiefly due trends, such as the increase in mobility, urbanization
to  pension-provision adjustments recognized in other and digitalization, and the rise in prosperity.
comprehensive income. The equity ratio dropped from
38.5 percent to 34.8 percent. The Group’s net financial debt
decreased, as expected. This was primarily the result of 2.40 R&D Expenses
high cash inflows from operating activities while financial
€ million 2016 2015 2014 2013 2012
liabilities remained unchanged. Net financial debt
amounted to € 992.5 million as of December 31, 2016. Capital Research and
expenditures were down by almost half year over year. At development
expenses 183.4 175.3 183.1 173.8 173.7
€ 427.6 million, they were markedly below depreciation. Net
cash flow developed as expected. Coming in at € 400.6 mil-
lion, it was considerably higher than the year before. The R&D rate – research and development spending as a
percentage of Group sales – was 3.4 percent (2015: 3.3 per-
cent). It was at the prior-year level despite the positive
sales trend, since our expenses climbed in areas such as
process engineering.

In 2016, we received about € 3.0 million from licensing agree-

ments (2015: € 4.2 million). We filed 116 patent applications
in 2016 (2015: 114). Our portfolio contains about 5,600 active
patents worldwide, as well as 1,900 patent applications
currently pending. We license very little R&D know-how
from third parties. When we collaborate with universities
on research, the results are usually made available to us
free of charge or by transfer of rights of use.

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Non-Financial Performance Indicators and Other Information

2.41 New-Product Rate (NPR)1 to projects as needed. We have conducted market launches
of new and existing products for innovative applications
% 0
under this initiative, one of these being 3D printing.
2016 17.9

Some of our research projects are subsidized by govern-

2015 18.4 ment grants. They include the OPERA (Organic Phosphor
for Efficient Remote LED Applications) project, which we
2014 22.8 completed in 2016. The objective of this EU-sponsored
project was to develop LED-based optical components
2013 22.7 that could enhance luminous efficacy by means of remote
phosphor technology (separation of the LED chip from the
2012 24.1 phosphor layer that generates the white light) and, for
­example, function as a substitute for daylight. Between
1
Percentage of sales accounted for by products launched in the last
five years 2013 and 2016, six project partners from Germany, Finland
and the Netherlands developed novel optical components
for the scattering, reflection and transmission of light.
Among our investments were new pilot reactors, in which
the production of successful product developments is
scaled up from laboratory quantities to industrial volumes. 2.43 Breakdown of R&D Expenditures
One example is the pilot reactor at WACKER POLYMERS in
13 % 
Nanjing, China. Additional investments included upgrades Basic
to laboratory facilities at our subsidiaries in China, South research
Korea and India in order to facilitate R&D carried out locally
38 %
at customer locations. 18 % 
Process and
Technology
product
development
optimization
72 2.42 Investments in R&D Facilities

€ million 0

2016 5.7 31% 

Product
development
2015 7.5

2014 7.8 Research and Development at Two Levels

WACKER conducts R&D at two levels: centrally at our Cor-
2013 5.9 porate Research & Development department and locally at
our business divisions. Corporate R&D coordinates activities
2012 8.9 on a company-wide basis and involves other departments,
such as Corporate Engineering (during process develop-
ment). We also use a management process to keep our
The development of new products and production pro- R&D projects transparent throughout the Group. We manage
cesses accounted for the majority of our R&D costs. WACKER our product and process innovations groupwide in Project
scientists are currently working on some 300 projects based System Innovation (PSI), our project management system,
on more than 30 technology platforms. WACKER operates in where we systematically evaluate customer benefit, sales
highly promising fields, ranging from energy recovery and potential, profitability and technology position.
storage, electronics, automotive engineering and construc-
tion to household, medical, health-care and cosmetics Strategic Collaboration with Customers
products to food and biotechnology. and Research Institutes
Our business divisions conduct application-driven R&D.
In 2013, we launched the New Solutions initiative, the goal They focus on product and process innovations in semi-
of which is to rapidly develop technically and commercially conductor technology, silicone and polymer chemistry, and
superior solutions for new applications. Expertise from all biotechnology, as well as on new processes for producing
over the company is consolidated groupwide and applied polycrystalline silicon. We collaborate with customers,

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Non-Financial Performance Indicators and Other Information

scientific institutions and universities to achieve successful 2.44 Employees in R&D as of December 31
research results more quickly and efficiently. In 2016, WACKER
Number 2016 2015 2014 2013 2012
worked together with more than 40 international research
institutes from three continents on some 44 research
projects. Our collaborative efforts cover topics that include Group R&D
electricity storage, process simulation and process devel- employees 1,060 1,043 1,061 987 1,008

opment. R&D ratio 1,

groupwide (%) 6.2 6.1 6.4 6.2 6.2
R&D
WACKER attaches considerable importance to fostering employees,
young scientific talent and maintaining close contacts with Germany 830 821 833 817 849
universities. In 2016, we sponsored some 170 degree theses R&D
employees,
and internships with students at over 60 universities world-
international 230 222 228 170 159
wide. In 2006, Wacker Chemie AG joined with the Technical
University of Munich ( TUM) to establish the Institute of
­S ilicon Chemistry, located on TUM’s Garching research 1
Ratio of R&D employees to total number of Group employees

campus near Munich, and has funded the institute since

then.
Alexander Wacker Innovation Award
Since 1987, we have honored outstanding research with the The Alexander Wacker Innovation Award, a € 10,000 prize
WACKER Silicone Award. Dr. Alexander Filippou, Professor bestowed annually since 2006, recognizes excellence in
of Inorganic Chemistry at the University of Bonn, Germany, categories alternating between product innovation, process
was our award recipient in 2016. We presented what is now innovation and basic research. In 2016, WACKER honored a
the 16th edition of the award to Dr. Filippou at the eighth team of four researchers in the process innovation cate-
European Silicon Days in Poznań, Poland. gory. They had developed our new 3D printing process for
manufacturing printed silicone parts. Our 3D printing
Research Work at WACKER technology, launched under the ACEO ® brand, uses the
As the center of WACKER’s R&D activities, Corporate R&D has “drop-on-demand” method, in which the printer head 73
the task of researching scientific correlations to develop ­d eposits tiny silicone droplets on a substrate. Layer by
new products and processes efficiently. Another task is to layer, the droplets become the workpiece, which ultimately
harness and develop new business fields that complement does not differ much from injection-molded parts. With the
the Group’s core competencies. Our scientists and engi- aid of water-soluble support materials, it is possible to
neers conduct basic research, develop new products and make parts with complex geometries, even those with an
processes, and improve existing processes. The lab and internal structure. Customer sectors for 3D printing include
technical staff at our R&D, applications-technology and medical technology, the automotive industry (e. g . for
production-support facilities work in our laboratories and prototypes) and the aerospace industry.
in our production and pilot plants, and also support appli-
cation trials on-site at our customers.

2.45 R&D Organization

Executive Board

Intellectual Property: licenses, patents

Head of R&D

Central R&D Technology R&D Processes: New

(Consortium für Management Portfolio management Businesses
elektrochemische Public funding management
Industrie) Higher education management
Divisional R&D: Corporate
WACKER SILICONES Engineering:
WACKER POLYMERS Process
WACKER BIOSOLUTIONS development
WACKER POLYSILICON
SILTRONIC

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Non-Financial Performance Indicators and Other Information

Siltronic Inventor Award In our silicone copolymer technology platform, we are

Siltronic AG confers its Inventor Award, also endowed with ­focused on manufacturing processes and additives for
€ 10,000, on employees who have produced technological plastics. Here, we are improving the properties of casting
innovation. The 2016 prize went to a team of two Burghausen resins and optimizing processes for the extrusion of
employees and one from the Freiberg site. They had devel- ­plastics, employing renewable raw materials such as wood
oped a new pp epitaxial wafer that is harder and exhibits as fillers, in particular.
less tension within the crystal lattice. The electronic com-
ponents manufactured from it deliver better performance. Selected Divisional Research Projects
New materials for electrical insulation and heat manage-
Selected Corporate R&D Research Topics ment to improve conductivity in electronics applications are
We have set a new research focus on the chemistry of at the focus of our research teams at WACKER SILICONES.
low-valence silicon. The Institute of Silicon Chemistry at The division is also working on electroactive silicone poly-
the Technical University of Munich is working on this topic, mers (EAP s ) for sensors and actuators. Silicones featuring
with the aim of implementing the findings in industrial enhanced adhesive strength and gentle removal offer
­applications such as catalysis in the medium to long term. better wound care and targeted delivery of actives. In con-
Our research and development work on silicon-containing sumer care, we are developing silicone particles with new
anode-active materials for lithium-ion batteries have functionalities for cosmetics applications and to achieve
­a dvanced to a stage where we now fulfill the market better hold in hair-care products.
­requirements for capacity and stability of charge-discharge
cycles in the next generation of batteries. We submit our WACKER POLYMERS focuses its research on polymers that
materials to global technology leaders for testing. allow the formulation of low-emission end products, thereby
fulfilling the requirements of the most stringent ecolabels.
We are working hard to make products that are free of
­a lkylphenol ethoxylate ( APEO) surfactants and formal­

74 2.46 Key Product Launches in 2016

Product Description Application Sector

ACEO ® Imagine Series K Industrial-scale 3D printer for Additive manufacturing of Prototyping, aerospace,
silicone rubber ­p rototypes, small series and medical and biomodeling
assemblies with complex
­g eometries
BELSIL® REG 1102 Film-forming silicone resin Skincare lotions and Cosmetics
elastomer gel sunscreens, make-up
ELASTOSIL® LR 3003 / 9 0 Silicone elastomer with high Large-scale production of Plastics
Shore hardness dimensionally stable silicone
products and hard  / s oft
composites
ELASTOSIL® LR 5040 Liquid silicone rubber with Babycare, medical technology, Plastics
substantially reduced VOC food processing
content
GENIOPLAST® for Thermoplastic silicone additives Manufacture of wood-polymer Wood processing
Wood-­P lastic Composites composites
LUMISIL® 590 & 591 High-refractive-index silicone High-performance LEDs, Manufacture of LEDs
optical components
LUMISIL® LR 7601 Highly transparent liquid silicone Optical lenses, sensors and Plastics
rubber with substantially reduced coupling elements in lighting
VOC content technology
SILPURAN ® 2122 Gelatinous silicone adhesive Adhesive plasters, Wound care
therapeutic tapes
VINNAPAS ® EP 3360 ULS VAE dispersion Environmentally compatible Paints and coatings
­i nterior paints
CAVAMAX® W6 Alphadextrin Vegetarian-grade emulsifier-­ Food
substitute for baked goods
WACKER process to Microbial manufacturing Cost-efficient production of a Pharmaceuticals
produce Spectrila ® process for biologics leukemia medication for children
VINNAPAS ® 5005 N VAE dispersible polymer powder Cost-efficient binder for Construction
dry-mix mortars

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Non-Financial Performance Indicators and Other Information

dehyde, and low in volatile organic compounds ( VOC s ). Employees

Examples include functionalized polymer dispersions for
cementitious sealing compounds and interior dispersion Slight Increase in Staff
paints, as well as polymer dispersions for use as finishes WACKER’s workforce increased by 1.4 percent in 2016. The
for mineral-based surfaces. main reason for the slight growth was the start-up of
polysilicon production in Tennessee, USA. Siltronic contin-
WACKER BIOSOLUTIONS has successfully implemented ued to carry out its productivity measures in the reporting
its  ESETEC ® 2.0 process in manufacturing an antibody period.
fragment for MedImmune, the global biologics research
and development arm of AstraZeneca. Our technology has 71 percent of WACKER’s employees work in Germany and
been found to deliver improved productivity and simplified 29 percent at international sites.
purification processes. The division’s new CANDY2GUM ®
technology enables the addition of water-based, fat-­
containing and natural ingredients such as fruit juice, 2.47 Number of Employees at December 31
­cocoa and coffee in a boiling process to produce chewy
2016 2015 2014 2013 2012
candy that turns into chewing gum during consumption.
We have also developed a 3D printing process for custom-
izable chewing gum shapes. Germany 12,138 12,251 12,366 12,322 12,635
International 5,067 4,721 4,337 3,687 3,657
WACKER POLYSILICON’s newly commissioned production Group 17,205 16,972 16,703 16,009 16,292
site in Tennessee, USA, is equipped with an energy-efficient
generation of deposition reactors delivering higher output.
Technological progress in the development of solar mod-
ules is proceeding by leaps and bounds. Our customers As a manufacturing company, WACKER has a large con­
have steadily reduced both cutting waste and wafer tingent of industrial workers (54.0 percent), roughly one-­
thicknesses. Cell efficiency is being elevated in parallel. seventh (14.3 percent) of whom are women.
The highest cell efficiencies can be achieved only with 75
hyperpure polycrystalline silicon of the kind produced by
WACKER POLYSILICON. Cell efficiency is over 18 percent for 2.48 Number of Temporary Workers at December 31
multicrystalline standard cells and around 20 percent for
2016 2015 2014 2013 2012
monocrystalline cells. High-efficiency monocrystalline
cells have efficiency levels ranging from over 20 to as
much as 25 percent. At the same time, our customers are Germany 649 358 393 286 14
continuously enhancing the efficiency of their modules, International 63 54 134 58 77
with commercial solar modules performing at efficiencies Group 712 412 527 344 91
as high as 22 percent. The energy payback time, which
is  the service life of a photovoltaic module required to
­generate the energy expended for its manufacture, varies
by geographical location from six months (in the Sahara) Personnel expenses rose 2.2 percent year over year to
to 18 months (in northern Europe). € 1,379.4 million, and included outlays for social benefits
and the company pension plan amounting to € 272.5 million
Our Siltronic division supports its customers with multi- (2015: € 279.9 million). The increase in personnel expenses
year design-rule projects aimed at achieving steady was due to the higher number of employees and the
­integration-density increases on memory chips and micro- ­increase in the standard pay scale.
processors. The quality parameters of the wafers we
­produce are flatness and absence of ever smaller surface
defects. We are thus contributing to making the sensors 2.49 Personnel Expenses
installed in cameras and other small electronic devices
€ million 2016 2015 2014 2013 2012
more compact. In addition, we are providing the basis for
higher performance in power electronics by improving the Personnel
efficiency of components such as power supply units. With expenses 1,379.4 1,350.1 1,246.9 1,133.0 1,196.8
its custom-designed development projects, Siltronic
serves many specialty applications such as electromobility
and Industry 4.0.
See Table 2.46 on page 74

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Non-Financial Performance Indicators and Other Information

In addition to their fixed base salary ( which includes topics aimed at making employees aware of the opportu-
­vacation and Christmas bonuses), WACKER employees nities and challenges associated with a diverse workforce.
usually also receive some variable compensation – a The focus in 2016 was on the company’s generational mix.
­voluntary payment to employees on both the standard and The fact is that, in years to come, different generations will
above-standard pay scales. This payment comprises a be working together some ten years longer than today,
profit-sharing amount and a personal-performance making the workforce more heterogeneous in this respect.
­c omponent. Variable compensation payments totaled This is because older employees are staying in the company
€ 69.3 million groupwide in 2016. longer owing to the increase in the retirement age just as
younger staff enter the company sooner because of the
The IG BCE labor union and chemical-industry employers Europe-wide harmonization of study programs in higher
agreed on a new 24-month collective-bargaining agree- education and, in Germany, the reduced number of school
ment in June 2016. The first stage of the agreement saw years.
the standard pay scale increase by 3 percent on Septem-
ber 1, 2016. Effective October 1, 2017, it will rise by a further In addition to this issue, diversity management at WACKER
2.3 percent. A WACKER company pension is an important is placing greater emphasis on gender and cultural back-
compensation component and is available at most of our ground. People from 69 different nations work for WACKER.
German and international sites, except for regions where At the end of 2016, 43 of the groupwide total of 196 executive
the statutory pension appears sufficient or legal provisions personnel were of non-German nationality – which cor­
are inadequate. Wacker Chemie AG’s pension fund – responds to 22 percent of the total. Overall, 17 nationalities
­Pensionskasse der Wacker Chemie VVaG – provides a were represented at the executive level.
company pension to WACKER employees in Germany. The
fund has around 17,000 members and provides pension The German statute on equal opportunity for women and
payments to some 8,200 retirees. The average pension men in management that became law on May 1, 2015, has
paid was around € 6 50 per month. WACKER pays in up to been implemented at WACKER as follows:
four times its employees’ annual pension contributions,
with the exact amount being determined by the type of Executive Board: While Wacker Chemie AG attaches con-
76 agreement. Employees can supplement their company siderable importance to diversity as regards appointments
pensions by making their own additional contributions. to the Executive Board, expertise and qualifications remain
WACKER matches supplementary contributions as provided the principal criteria for such appointments. There are no
for by the collective wage agreements. Employees in regular new appointments planned for the next available
Germany also receive an additional supplementary pension date (June 30, 2017). Under these circumstances, the target
for that portion of their salary that exceeds the pension for the proportion of women in the Executive Board for the
insurance contribution assessment ceiling. period up to June 30, 2017, is zero.

Basic and Advanced Training at High Levels Management levels below the Executive Board: WACKER
In its personnel development activities, WACKER also relies is focusing its attention on the two levels of management
on vocational training. In 2016, 174 young people began below the Executive Board as depicted in the Wacker
their training at WACKER or at the Burghausen Vocational Chemie AG organizational chart. With regard to the second
Training Center ( BBiW ). In total, the company employed reporting level, we have also decided to include only
596 trainees, roughly the same as in the prior year (597). managerial employees from the highest above-standard
At 4.7 percent, the percentage of trainees (ratio of trainees pay scale or those who are OFK executive personnel with
to Group employees in Germany) was on a par with the responsibility for managing employees.
prior year (4.7 percent). In 2016, WACKER offered jobs to the
majority of suitable trainees – 154 graduates – hiring 41 of We have also designated the period up to June 30, 2017, as
them on temporary contracts and 113 on permanent the reporting period for the two management levels below
­contracts. The BBiW also provides training for 22 partner the Executive Board. Because our numbers are based on
companies. the status quo as of June 30, 2015, we will have a two-year
period to observe developments.
Overall, WACKER invested € 7.9 million in personnel-devel-
opment measures and advanced training in 2016 (2015: Proportion of women: We aim to increase the proportion
€ 7.7  million). of women in the first level of management from 8 percent
to 10 percent. For the second level of management, we
Diversity and Inclusion in the Workforce have set a goal of raising the proportion of women from
Since joining Germany’s nationwide Diversity Charter initia- 14.5 percent to 17.5 percent.
tive in 2015, WACKER has focused every year on specific

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Non-Financial Performance Indicators and Other Information

Idea Management: Streamlining the Process Good social benefits, competitive compensation and
The ideas submitted by WACKER’s employees help it to do ­motivating tasks make WACKER an attractive employer. This
things better and stay competitive. In 2016, the number of explains our high level of employee loyalty. The average
improvement suggestions submitted was up 6 percent year length of service in Germany (permanent staff ) was 18.8 years
over year. The participation rate (number of submitters (2015: 18.4 years).
per 100 employees) and the total benefit rose as well. We
revised the idea management system in the reporting
­period, and streamlined the processes for handling ideas. 2.51 Employee Turnover Rate

% 2016 2015 2014 2013 2012

WACKER has been addressing demographic change for
many years. The average age of the Group’s workforce at
the reporting date was 43.0. Employees at non-German Germany 0.8 1.1 0.8 0.9 0.9
sites are younger than in Germany. The age structure International 10.9 14.6 13.8 11.9 30.8 1
abroad varies greatly from region to region. Staff at Asian Group 3.6 4.6 4.1 3.4 7.9
sites are comparatively young (average age: 35.6), while
staff at US locations have an average age of 44.7. Regional 1
Higher employee turnover rate due to closure of Siltronic’s production site
variations in age structure are not exclusive to WACKER; at Hikari (Japan) and the job cuts at the Portland ( USA) site.
they reflect the age structures of the populations in the
respective continent or country.
A Popular Employer Among Managers
According its own managerial employees, WACKER ranks
2.50 Idea Management among the top three most popular employers in the German
chemical and pharmaceutical industries. In the member
2016 2015 2014 2013 2012
satisfaction survey conducted every year by Germany’s
Number of Association of Chemical-Industry Executives ( VAA), WACKER
improvement placed third in the reporting period. The average score for
suggestions 7,885 7,429 7,672 9,159 8,982
Participation
all of the 24 participating companies was unchanged from 77
rate (%) 32 29 30 32 34 the year before at 3.1 (with 1 being the highest and 5 the
Total benefit lowest). With a score of 2.63, WACKER performed better
(€ million) 7.0 6.8 8.3 7.7 4.9 than average and, at the same time, made the largest jump
of any of the participating companies.

2.52 Demographic Analysis of German and International Sites in 2016

Age 15 35 55 75

Group
( 43.0 years)

5% International
( 39.8 years)
Germany
( 44.3 years)
4%

3%

2%

1%

0%

 Group    International    Germany

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Non-Financial Performance Indicators and Other Information

Sustainability Our Sustainability Report: Best in the Industry

In 2016, the Institute for Ecological Economy Research (IÖW)
Managing Sustainability and the business initiative “future e.V.” published their
Sustainability has been firmly rooted in our business pro- ranking of corporate sustainability reports. Conducted
cesses for many years. Its importance to our company is on behalf of the German Federal Ministry of Labour and
shown by the fact that we have made sustainability one of ­Social Affairs, the initiative has now evaluated the sustain-
our five strategic goals and have compiled our own Code of ability reports of the 150 largest German companies for the
Sustainability. Sustainable development means balancing ninth time. The 2013 / 2014 WACKER Sustainability Report was
economic, ecological and social factors in everything we do. ranked 11th, which represents an improvement relative to
our last ranking (2011: 14 th place). It took the top spot in the
Two voluntary global initiatives form the basis for sus- chemical  /  pharmaceutical sector.
tainable corporate management at WACKER: the chemical
industry’s Responsible Care ® initiative and the UN’s Global Analysis of Fundamental Sustainability Issues
Compact. These voluntary measures to protect the envi- Following up on the regular stakeholder surveys conducted
ronment, employees and society go beyond what is legally as part of our sustainability reporting, we also interviewed
required. We also expect our suppliers to observe the our top management on fundamental sustainability issues
principles of the UN’s Global Compact and the Responsible for the first time in 2016. The result was that compliance,
Care ® initiative, and have anchored this in our general product safety and plant safety are the top three issues as
terms of procurement. seen by the company and stakeholders.

WACKER made substantial progress on strategic sustain- Workplace and Plant Safety
ability-management projects in 2016. Operating plants and processes in a manner that poses no
risk to people or the environment is an important objective
Regional Emphasis at WACKER. To this end, we have installed a groupwide
In 2016, the regional focus of WACKER’s sustainability man- safety management system that addresses both workplace
agement activities was on Europe, where we examined and plant safety. Systematic workplace safety includes
78 environmental, health and safety aspects of individual regular evaluation of hazards and work-area monitoring.
sites, including the Stetten and Halle sites in Germany, as The first step in ensuring plant safety is to systematically
well as our silicon-metal plant in Holla, Norway. identify risks and assess them. This includes analyzing
how well we control the energy present in a process (e. g.
Group Certificate pressure, heat) and determining the effect that a single
Our Group certification program ensures that customer-­ error might have on a chain of events that could lead to the
driven specifications and our corporate standards are escape of a substance or to an accident. On completion of
­implemented at all WACKER sites. Almost all WACKER this comprehensive analysis, we specify safety measures
­production sites are included in the ISO 9001 (quality) and to prevent undesirable incidents.
ISO 14001 (environment) Group certificates. Exceptions are
Wacker Química do Brasil, the Kolkata plant belonging WACKER attaches particular importance to providing its
to Wacker Metroark Chemicals Pvt. Ltd., India, and the safety experts with ongoing training. We hold regular
Tsukuba site of Wacker Asahi Kasei Silicone Co., Ltd., training sessions on topics such as plant safety.
Tokyo, Japan. All these sites have corresponding indi­
vidual certificates. After commissioning, the new plant in Our goal for occupational safety is to reduce our group-
Charleston, USA, was also incorporated into the ISO 9001 wide accident rate (the number of workplace accidents per
Group certificate. million hours worked) to at least 1.7 by 2020. Groupwide, we
registered 3.0 workplace accidents with missed workdays
As of 2012, all German sites belonging to Wacker Chemie AG, per 1 million hours worked in the reporting period. In terms
Siltronic AG and Alzwerke GmbH have been certified to of reportable accidents (accidents with more than three
ISO 50001 (energy management systems). Wacker Biotech days of absence), WACKER’s numbers are far better than
GmbH and DRAWIN Vertriebs- GmbH were successfully the German chemical industry average. The reportable
certified to this standard in the reporting period. The accident rate in 2016 was 1.6. per 1 million hours worked,
silicone-­p roducing sites in Burghausen and Nünchritz whereas in 2015, Germany’s BG RCI (the statutory employer
( both Germany), Jandira ( Brazil ), Zhangjiagang (China) liability insurance carrier of the basic materials and chem-
and Amtala (India) are certified to the ISO 22716 standard ical industries) registered 9.4 reportable accidents per
for the cosmetics industry. 1 million hours worked in chemical companies.

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Non-Financial Performance Indicators and Other Information

2.53 Workplace Accidents Involving Permanent Staff WACKER’s Burghausen Vocational Training Center ( BBiW )
and Temporary Workers – Group and SchlaU, a Munich education initiative focusing on
Number 2016 2015 2014 2013 2012 refugees, began working together in 2016. The collaboration
aims to help young refugees living in Bavaria’s Altötting
Accidents 1 district (home to our Burghausen site) learn German, and
per 1 million
hours worked 3.0 2.6 2.8 3.8 4.7 to find them suitable training places. In this effort, WACKER
Reportable is funding the SchlaU initiative with a sum of € 200,000 over
accidents 2 six years. The BBiW, supported by SchlaU, launched a
per 1 million career orientation week for young refugees, which was
hours worked 1.6 1.0 1.2 1.4 2.1
attended by 18 adolescents. The BBiW accepted two refu-
gees as business trainees in the reporting period. Of the
1
Accidents leading to at least one day off work twelve unaccompanied refugee minors cared for in the
2
Accidents leading to over three days off work
BBiW youth guest house, six started apprenticeships with
local craftsmen.

Safe Transport of Hazardous Materials In recognition of its refugee-themed trainee project, the
WACKER ensures that its products are safely transported plant in Nünchritz, Germany, was honored with the Com-
and stored, especially if hazardous goods are involved. In panies for Tolerance award, which the “Arbeit und Leben
2016, we had inspections carried out on over 9,500 trucks. Sachsen” organization presents to companies that actively
Failure rates have been low for years now. In 2016, the rate promote integration, diversity and tolerance and take a
was about 1.3 percent for hazardous goods shipments in stand against discrimination and racism.
Germany (2015: 1.5 percent). WACKER regularly audits its
hazardous goods shippers. Through the use of standards WACKER HILFSFONDS: Helping Flood Victims
and specifications, WACKER ensures that even the sub- Parts of the Lower Bavaria region in Germany were hit by a
contractors working for our logistics providers meet our once-in-a-millennium flood in June 2016. Many individuals
stringent safety requirements. and social institutions were affected, including WACKER
employees. WACKER HILFSFONDS, the Wacker Chemie AG 79
In 2016, we recorded seven transport incidents. They include foundation for disaster aid, is assisting those affected in
incidents that did not involve hazardous goods, whether or the region. In a donation campaign organized by the relief
not they adversely impacted people or the environment. fund, WACKER HILFSFONDS raised approximately € 156,000.
With a matching contribution from the company, a total of
For high-risk products, we use packaging and tanks some € 312,000 was provided to assist the rebuilding effort.
that meet the highest quality standards – in some cases WACKER also made a separate donation of € 100,000 in
exceeding statutory requirements. emergency aid for flood victims.

Commitment to Refugees Environmental Protection

WACKER takes seriously its social responsibilities, especially WACKER attaches particular importance to integrated
in communities around our sites. Training young people in ­environmental protection, which commences with product
the natural sciences is especially important to us because development and plant planning. Our environmental pro-
we need dedicated scientists and engineers in order to tection measures often surpass statutory requirements – in
remain competitive. the spirit of the central idea behind the Responsible Care ®
initiative. WACKER constantly works on improving its pro-
2016 saw us take the helm as statewide sponsor and duction processes, with the aim of conserving resources.
­organizer of the Young Scientists competition in Bavaria One of our main tasks is to close material loops and recycle
for the tenth time. byproducts from other areas back into production, enabling
us to reduce or prevent emissions and waste.
Since 2007, we have been a supporter of “Die Arche” ( The
Ark), a Munich-based Christian charity working with some Our commitment to environmental protection is visible in
400 children and young people from socially disadvan- the awards we have won. For example, WACKER Greater
taged families, including refugee children. In the reporting China was once again presented with Shanghai’s Magnolia
period, WACKER presented its tenth annual donation of Silver Award in recognition of its contribution to the city’s
€ 100,000 to the charity’s Munich branch. sustainable development. The Safety Committee of the
Zhangjiagang Free Trade Zone recognized the safety and
environmental-protection measures of the WACKER produc-

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Non-Financial Performance Indicators and Other Information

tion site in this zone. The City of Portland presented its COD effluent burdens rose as a result of the new polysilicon
Gold Sustainability at Work Certification to Siltronic’s US production plant in Charleston ( TN, USA ).
production site in honor of its sustainability activities. It
also presented its Gold Compliance Award for the safe, The increase in AOX (adsorbable organic halogen com-
sustainable operation of the Portland wafer production pounds) was caused by discharge from a company based
facility’s wastewater treatment plant. at the Burghausen site entering WACKER’s captive sewer
system; the discharged substance did not adversely
In 2016, WACKER invested € 5.5 million in environmental ­impact the environment.
protection (2015: € 5.7 million). In the same period, environ-
mental operating costs amounted to € 81.0 million (2015: Commissioning of the Charleston site led to a 4.3-percent
€ 8 3.8  million). rise in direct emissions of carbon dioxide (Scope 1) group-
wide.
Water Consumption Tested Using the
Global Water Tool© There were two reasons for increased nitrogen oxide
We use the Global Water Tool © (GWT ) developed by the emissions (NOX): first, the new Charleston site; second, the
World Business Council for Sustainable Development legally required recording of emissions data at the Holla
( WBCSD) to analyze the annual relative water stress index site in Norway involved a new measurement method.
of the countries in which our main global production sites
are located. This assessment has been conducted since Emissions of non-methane volatile organic compounds
2012, based on analyses using the water stress index (NMVOCs ) at Burghausen fell; groupwide, they rose slightly
­d eveloped by the Water Systems Analysis Group of the as a result of higher production volumes at the sites in
University of New Hampshire, USA. This index provides Nanjing (China) and Ulsan (South Korea).
information on the relationship between water consump-
tion and the availability of renewable fresh water. The One of our environmental targets is to halve specific dust
outcome of the analysis is that our most important pro- emissions per metric ton of product groupwide between
duction sites are located in regions with a low relative 2012 and 2022. This mainly affects silicon-metal production
80 water stress index. These regions account for more than at the Holla site in Norway, where modifications were made
97 percent of our annual water use and over 90 percent of to filtration systems during the reporting year in order to
our production volume. Production sites in countries for reduce dust. Owing to this modification work, dust emis-
which no GWT-based water stress index information is sions rose temporarily during the official, four-week period
available account for less than 0.5 percent of our water of non-standard operations. If specific emissions are cal-
consumption. culated solely for normal operations in 2016, it is apparent
that the measures already taken have brought about an
As part of the Bavarian Environmental Pact, we joined improvement of some 40 percent relative to the base year
with  seven other companies from ChemDelta Bavaria of 2012.
to establish Naturnahe Alz ( Natural Alz), an association
through which we support the state of Bavaria in renatural- Our indirect CO 2 emissions from procured energy (as per
izing the Alz river and enhancing its ecosystem long-term. Greenhouse Gas Protocol Scope 2) rose to 1,855 kilotons
(kt) in the reporting period (2015: 1,544 kt). The reasons for
Environmentally Relevant Projects at the the increase were the commissioning of the Charleston site,
Production Sites and the temporary shutdown of the Burghausen power
In 2016, we cleaned up and repaired the roughly 17-kilometer plant for maintenance work. We used energy-­efficiency
Alz canal at the Burghausen site. Its water is used to gener- measures to reduce weighted specific energy consump-
ate power as well as supply cooling and process water for tion and related specific CO 2 emissions – while maintaining
the Burghausen site. To ensure that the waterway ecology a comparable product portfolio.
would not be compromised during the clean-up phase, we
used a monitoring program to control the alternative intake Measuring the Group’s corporate CO 2 footprint is an
of cooling and process water and the altered disposal of i­mportant tool for improving climate protection. That is
cooling /  process water and wastewater. We used the Salzach why we have been measuring our Scope 3 emissions since
river as an alternative source of cooling and process water. 2012 – in addition to our indirect greenhouse gas emissions
As the temperature of this water is much lower than that of from procured energy ( in accordance with Greenhouse
the Alz canal, much less water was required. Gas Protocol Scope 2), which we have been tracking since

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Non-Financial Performance Indicators and Other Information

2011. Scope 3 emissions comprise all those generated WACKER EcoWheel ®, we identify key sustainability topics
along the supply chain, e. g. by suppliers or through waste and, together with our customers, set priorities for research
disposal and the transport of products. In 2016, we once projects.
again provided this emissions data to the Carbon Disclo-
sure Project (CDP), which WACKER joined in 2007. Founded in
London in 2000, CDP is a not-for-profit organization working 2.54 Product Lifecycles
to achieve greater transparency in greenhouse gas emis-
sions. Wacker Chemie AG’s performance profile was rated B
(on a scale from A to D) in CDP’s annual sustainability ratings. 1

2
Product Stewardship 7
WACKER takes environmental, health and safety aspects Crad
l e-
into consideration at every stage of the product lifecycle.

to
-gate
In research and development projects, we examine the
3
sustainability aspects of our new products and processes,
starting with the raw materials used. We try to minimize
raw-­material consumption while selecting materials that
offer maximum ecological benefit. Our products are gen-
6 4
erally supplied to business customers for further process-
ing – not directly to end customers. Our lifecycle assess- 5
ments (LCA s ) look at the environmental impact caused
by a specific product family throughout its lifecycle – a
“­cradle-­to-gate” assessment extending from manufacturing
1 Raw materials and resources 5 End-product manufacturing
to the factory gate. They allow us to gage the sustainability
2 Production at WACKER 6 Phase of use by end
of our products and production processes, and to improve 3 Factory gate /  shipment consumer
them accordingly. Our evaluations factor in the material, 4 Production at the customer 7 Recycling / disposal
water and energy consumption of a product, as well as its 81
ecotoxicity, over the entire lifecycle. With the help of the

2.55 Environmental Indicators from 2012 to 2016

2016 2015 2014 2013 2012

Air
CO 2 emissions 1
Direct ( kt) 1,287 1,234 1,251 1,253 1,311
Indirect ( kt) 1,856 1,544 1,420 1,241 1,133
NO X nitrogen oxides (t) 2,035 1,910 1,990 2,010 2,225
Non-methane volatile organic compounds (NMVOCs) (t) 920 910 870 830 800
Total dust 2 (t) 517 389 494 658 591

Water
Water consumption (thousand m 3 ) 231,858 237,060 241,973 220,908 242,072
Chemical oxygen demand (COD) (t) 1,310 1,150 1,230 1,320 1,460
Halogenated organic hydrocarbons ( AOX ) (t) 3 2 2 2 3

Waste
Disposed of (t) 43,590 46,490 51,570 39,210 41,340
Recycled (t) 123,550 121,420 121,540 124,040 114,330
Hazardous (t) 81,110 75,520 78,330 78,910 70,910
Non-hazardous (t) 86,030 92,390 94,780 84,340 84,760

1
CO 2 emissions are measured as per the Greenhouse Gas Protocol (GHG Protocol: “A Corporate Accounting and Reporting Standard” ), published by the World
Resources Institute and World Business Council for Sustainable Development. Scope 1: direct CO 2 emissions. Scope 2: indirect emissions from the consumption
of purchased energy (converted into CO 2 equivalents for purchased electricity). For the purposes of sustainability reporting, the Group’s direct CO 2 emissions also
included intra-plant traffic emissions at our sites, emissions generated during biological wastewater treatment, and the emissions of the emergency power units
used during the shutdown of the Alz canal at the Burghausen site.
2
One of our environmental targets concerns total dust emissions. We are reporting on these emissions in the 2016 Annual Report for the first time and retroactively
to 2012, the initial year of our dust-related environmental objective.

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Non-Financial Performance Indicators and Other Information

Energy Management metal production in Holla (Norway) totaled about 1.0 million

The chemical industry is one of the most energy-intensive metric tons in the reporting period (2015: 1.1 million metric
sectors. In Germany alone, it uses around 20 percent of all tons).
the electricity consumed by industry. Wacker Chemie AG
consumes 4,103 GWh of electricity in Germany, represent-
ing approximately 0.8 percent of the country’s electricity 2.56 Electricity Supply
consumption. WACKER is continually improving the energy
%
efficiency of its processes. This enables us to remain
globally competitive while at the same time contributing to
climate protection. 55

Many chemical reactions generate heat that can be put to

29
use in other production processes. We have been using
integrated heat-recovery systems in Burghausen and
Nünchritz for years and are continually improving them. In 65

this way, we can reduce the amount of primary energy

(natural gas) consumed by our power plants. 6
71
31
To enhance energy efficiency and reduce specific energy
29
consumption (amount of energy per unit of net production
output), the Executive Board has defined energy targets for 14
WACKER Germany. Our original goal was to reduce weighted
specific energy consumption by one-third between 2007
and 2022, but we had already achieved that by 2014. We Group electricity Procured electricity,
consumption: 5,784 GWh Germany: 2,687 GWh
have now set a goal of reducing specific energy con-
71% Consumption in Germany 55% Fossil fuels 3
sumption to half of the 2007 level by the year 2022. 29 % Consumption abroad 1 31% Renewable energy 4
82 14% Nuclear energy
Electricity consumption,
Generating Energy Efficiently
Germany: 4,103 GWh
One way in which Burghausen generates electricity is by 65 % Procured electricity
using hydroelectric power. Our Norwegian site, Holla, also 29 % CHP 2
6 % Hydropower 2
generates its electricity mainly from water power.
1
Outside Germany, we purchase electricity from third parties based on
Our primary source of energy, though, is climate-friendly the local standard energy mix
2
Burghausen
natural gas. At Burghausen, our largest site, we produce 3
Coal, lignite, oil, gas; modified calculation method: since 2014, data
has been in line with Germany’s energy mix; source: BDEW (German
steam and electricity using a cogeneration system. The Association of Energy and Water Industries); status as of Nov. 2015,
highly efficient combined heat and power ( CHP) plant for the year 2014
4
Hydro, wind, solar power; modified calculation method: since 2014, data
­operates at more than 80-percent fuel efficiency, which is in line with Germany’s energy mix; source: BDEW (German Association
of Energy and Water Industries)
significantly higher than that of conventional power plants
generating electricity and heat separately.
WACKER is subject to the regulations of the EU emissions
WACKER’s German production sites accounted for 71 per- trading system because of its CHP plants at the Burghau-
cent (2015: 78 percent) of its total electricity needs. We sen and Nünchritz sites. We have covered shortfalls since
have taken energy-efficiency measures to reduce specific 2014 by buying emission allowances for facilities subject to
energy consumption even further in 2016. The Group’s power emissions trading.
plants – the hydroelectric and CHP plants in Burghausen
and the cogeneration plant in Nünchritz – produced around
1,416 GWh of electricity in 2016 (2015: 1,451 GWh). This means
that WACKER uses environmentally friendly processes to
cover roughly 25 percent of its total electricity needs itself.
Groupwide, carbon dioxide emissions from captive power
plants subject to emissions trading rules and from silicon-­

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Non-Financial Performance Indicators and Other Information

2.57 Energy Consumption Brazil to North America and Europe allowed us to source
the material at lower prices. Energy prices, especially the
GWh 2016 2015 2014 2013 2012
price of natural gas, had also declined in the previous year.
Electricity
consumption 5,784 5,147 4,926 4,521 4,519 In 2016, the European Commission approved the reduc-
Heat tions of surcharges and taxes on electricity prices granted
­c onsumption 3,947 3,520 3,571 3,709 3,734 to energy-intensive companies in Germany. This has helped
Primary
lessen regulatory uncertainties for WACKER as well.
energy use
(total ) 6,464 6,062 6,081 6,176 7,030
Of which
Natural gas 5,420 5,029 4,975 5,051 5,927 2.58 Procurement Volumes
Solid fuels 1 769 768 839 872 862 ( incl. Procurement for Capital Expenditures)
Heat € million 2016 2015 2014 2013 2012
­s upplied
by third
parties 2 258 245 242 236 223 Procurement
volumes 3,331 3,655 3,187 3,076 3,493
Fuel oil 17 20 20 17 18

1
Coal, charcoal and wood; used as reducing agents at the silicon-metal
plant in Holla, Norway
2
Steam and district heating
Technical Procurement & Logistics
The Technical Procurement & Logistics department’s invoice
volume was some 12 percent below the prior-year level due
Procurement and Logistics to lower investment spending. Delivery times were at the
prior-year level. At Technical Procurement & Logistics,
WACKER’s procurement volume decreased in 2016, primarily 10 percent of our suppliers cover 90 percent of our pro-
due to substantially lower investment spending and more curement volume.
favorable raw-material prices. Volumes are broken down 83
into raw materials and energy, and into services, materials In 2016, we signed major multi-year master agreements
and equipment. WACKER spent € 3.33 billion (2015: € 3.66 bil- in  particular segments such as logistics and technical
lion) on raw materials, other materials and services. This services. The initiative to reduce dependence on individ-
figure includes investment-project-related procurements ual suppliers continues to show measurable results and is
of € 428 million (2015: € 8 34 million). Our procurement rate – ­being expanded. Last year, our Project Procurement unit
raw materials, services and other materials as a percent- handled 15 projects at various stages of planning. The
age of sales – was 62 percent (2015: 69 percent). In 2016, we largest of these were the completion of the polysilicon
procured around 1,300 different raw materials as well as expansion project in Tennessee and the new dispersions
numerous technical goods and services for plant engineer- reactor in Kentucky (both USA).
ing and for maintenance. Our suppliers number about 11,500
(10,500 at Technical Procurement & Logistics and 1,000 at Systematic review of supplier risks is an important tool
Raw Materials & Energy). used by WACKER for properly evaluating our supplier
­relationships. Reviews are conducted using analyses
Energy and Raw-Material Procurement Volumes from rating agencies, our own supplier assessments and,
Slightly Below Prior-Year Level increasingly, direct contact with our partners. Technical
At € 1.64 billion, the amount spent by the Group to procure Procurement evaluated about 350 suppliers for 2016.
energy and raw materials was down 5.2 percent (2015:
€ 1.73 billion). While the volumes procured rose by a mid- In Germany, which remains our largest procurement mar-
single-digit percentage over 2015, average procurement ket, we work with some 6,500 suppliers. The average length
prices for raw materials and energy decreased by more of business relationships between Technical Procurement &
than 10 percent year over year. The drop in the oil price Logistics and its suppliers is ten years. About 300 com­
also had the effect of reducing the prices we paid for panies attended the 2016 Supplier and Logistics Day in
our raw materials ethylene, acetic acid and vinyl acetate Burghausen.
monomer in 2016. The increase in exports of silicon from

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Non-Financial Performance Indicators and Other Information

Shipping Volumes Up 2.60 Key Start-Ups

Shipping volumes rose year over year. The Group’s largest
Location Projects Year
logistics hub, Burghausen, increased its shipping volume
by about 3 percent to around 825,000 metric tons (2015:
800,000 metric tons). The number of truckloads and overseas Charleston Polysilicon 2016
containers rose slightly, to 43,000 and 14,400, respectively. production plant
Eddyville Expansion of 2016
­c yclodextrin capacity
WACKER is a member of the Together for Sustainability pro-
Burghausen HTV silicone 2016
curement initiative. The goal of this initiative is to establish a ­c ompounds
standardized, global program for responsible procurement Freiberg Silicon rods in 2016
of goods and services in the chemical industry and to raise ­c rystal-pulling facilities
the ecological and social standards of suppliers.

Production Priorities in Productivity

High productivity throughout the supply chain is a key to
Year-over-Year Increase in Production Output WACKER’s success. The Wacker Operating System ( WOS)
In 2016, production output increased compared with the program helps us to boost productivity along the entire
previous year. WACKER POLYSILICON sold higher volumes supply chain. Our goal is to continue reducing specific
than ever before. Our chemical divisions also reported in- operating costs every year. In 2016, we implemented more
creased volumes, and high plant utilization of over 80 per- than 700 projects in operational business and our corporate
cent. There were no major facility shutdowns. Production departments. Some 500 of these concerned operations,
costs were up 8.6 percent. At € 472 million, maintenance with the corporate departments accounting for about 200.
costs were above the prior-year level. WOS focuses on improving raw-material yields and specific
energy consumption. We are working on a new approach
to reduce specific production costs for 20 product groups
84 2.59 Plant Utilization in 2016 in the chemical divisions.
% Plant
Utilization During the year under review, our WOS ACADEMY (founded
Rate
in 2009) held seven training courses at which almost 100
employees were trained in the application of new pro-
WACKER SILICONES 98
ductivity methods, such as Six Sigma. In addition to these
WACKER POLYMERS 85
courses, we carried out projects aimed at reducing specific
WACKER POLYSILICON 100
costs.
SILTRONIC 95

Sales and Marketing

Investments in new production facilities amounted to Sales of WACKER Products Rise

€ 427.6 million in the reporting year (2015: € 8 34.0 million). Overall sales of our products were higher in 2016, mainly
Most of this amount was spent on completing the new due to higher volumes.
polysilicon production site in Tennessee, USA.
Our business is characterized by high repeat-purchase
Corporate Engineering is responsible for implementing rates. 100 percent of Siltronic’s 2016 product sales were
all investment projects at WACKER. transacted with customers we had supplied in 2015. At
WACKER POLYMERS, the repeat-purchase rate was 97 per-
cent ( by sales), and the rate at WACKER SILICONES was
somewhat over 90 percent. The repeat-purchase rate at
WACKER POLYSILICON is not meaningful, since there are
customers who have completely withdrawn from the solar
business.

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Non-Financial Performance Indicators and Other Information

WACKER customers can be categorized in three groups: Attendance at 71 Tradeshows Worldwide

global key accounts, customers, and distributors. Global WACKER’s tradeshow presence remained at a high level in
key accounts are customers of special strategic signifi- 2016. We had our own booth at a total of 71 tradeshows
cance for WACKER and those generating high sales levels. (2015: 86). The most important tradeshow in 2016 was “K” in
WACKER currently has 40 global key accounts, with which Düsseldorf, the world’s largest plastics tradeshow, where
we generated around 25 percent of our 2016 revenue in the we introduced new products and applications from
chemical divisions (WACKER SILICONES, WACKER POLYMERS WACKER SILICONES. We regularly analyze the qualitative and
and WACKER BIOSOLUTIONS). Over 55 percent of our chem- quantitative success of our tradeshow communications,
ical-related revenue was from our approximately 8,000 with 26 shows reviewed in 2016 (2015: 30).
other active customer relationships and around 20 percent
from distributors.
2.62 Tradeshows
Sales and Distribution Network Expanded
Number
Our chemical divisions’ distribution business grew moder-
4
ately in 2016. Our distributors have increased in number to 5
around 350 as we have expanded our network in Asia. The
5
number of cross-regional distributor groups (5) remained 27
constant. Our 50 most important distributors generated 5 Total
around 75 percent of distribution sales. A key element in 71
strengthening WACKER’s branding and effectively promot-
8
ing sales of our products is marketing communications. In
2016, we spent € 14.8 million (2015: € 14.8 million) on market-
ing communications. 17

27 Asia 5 Middle East

17 Europe 5 Russia
2.61 Breakdown of Marketing Costs 8 USA 4 South America
5 Africa
%
85
4
11

38
14
€ 14.8
million

33

38 % PR work 11% Other

33 % Tradeshows 4 % Advertising
14 % Product communications

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Management Report of Wacker Chemie AG

Management Report provided on the WACKER Group as a whole. The general

business conditions of Wacker Chemie AG principally
of Wacker Chemie AG correspond to those of the Group and are stated in the
Business Report.
(Additional Information as per the
German Commercial Code)
The annual financial statements of Wacker Chemie AG were
prepared in accordance with the German Commercial Code
(HGB) and the German Stock Corporation Act ( AktG ). These
statements differ substantially from the IFRS figures in ­relation
to fixed assets, depreciation and amortization, provisions
for pensions, and deferred taxes. As regards EBITDA, there
The management report of Wacker Chemie AG and the are only slight differences between IFRS and HGB figures.
Group management report for fiscal 2016 are combined
in accordance with the German Commercial Code (HGB) Earnings Performance of Wacker Chemie AG
Section 315 (3) in connection with Section 298 (3). The an- as per the German Commercial Code
nual financial statements of Wacker Chemie AG, prepared In 2016, Wacker Chemie AG’s earnings performance was
in accordance with the German Commercial Code (HGB), influenced by a decline in the operating result. While oper-
and the combined management report are published ating performance edged up year over year, the operating
­s imultaneously in the “Elektronischer Bundesanzeiger” result decreased, mainly due to higher material costs.
(the electronic version of Germany’s Federal Gazette).

As required by German law, the combined management 2.63 Statement of Income

report includes a separate section covering all mandatory
€ million 2016 2015
reporting elements pertaining to Wacker Chemie AG. Further
to our report on the WACKER Group, we explain develop-
ments at Wacker Chemie AG. Sales 3,651.2 3,587.2
86 Changes in inventories –18.1 14.0
Wacker Chemie AG is the parent company of the WACKER Other capitalized self-
Group and is headquartered in Munich, Germany. The par- constructed assets 22.4 22.6

ent company operates through four business divisions – Operating performance 3,655.5 3,623.8

WACKER SILICONES, WACKER POLYMERS, WACKER BIOSOLUTIONS

Other operating income 230.4 307.4
and WACKER POLYSILICON – which generate a substantial
Cost of materials –1,788.4 –1,503.5
portion of the Group’s sales. As of the reporting date,
Personnel expenses –872.4 –825.4
Wacker Chemie AG held a direct and indirect stake of
Depreciation and amortization –296.5 –312.1
57.8 percent in Siltronic AG. Wacker Chemie AG’s directly
Other operating expenses –748.6 –739.1
and indirectly held subsidiaries and investments located in
Operating result 180.0 551.1
Germany and abroad have a strong influence on its busi-
ness. Wacker Chemie AG has a total of 59 subsidiaries, Result from investments in
joint ventures and associated companies, and also pro- joint ventures and associates 27.1 71.5
vides corporate functions to the Group. Wacker Chemie Net interest income 2.5 –104.7
AG’s Executive Board exercises key leadership functions Other financial result –1.2 –2.3
for the Group as a whole, which include determining the Financial result 28.4 –35.5
Group’s strategy, allocating resources (such as funds for
Income before taxes 208.4 515.6
investment), and bearing responsibility for managing ex-
ecutive personnel and corporate finances. It also oversees
Income taxes –87.0 –179.8
communication with important target groups, especially
Net income 121.4 335.8
capital markets and shareholders.
Profit carried forward from
Key performance indicators used in the management the previous year 1,221.8 960.5
­decision-making process are applied in all of the Group’s Dividends paid –99.4 –74.5
business divisions. Corporate goals for the divisions are Retained profit 1,243.8 1,221.8
defined and reported on a groupwide basis. Even though
EBITDA* 476.5 863.2
Wacker Chemie AG is an independent entity, no separate
key performance indicators are defined or reported for it.
For more information, please refer to the respective details * EBITDA is the operating result before depreciation, amortization and
write-ups of fixed assets.

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Management Report of Wacker Chemie AG

Wacker Chemie AG’s sales rose by 2 percent to € 3.65 billion Income from the reversal of provisions led to an increase of
(2015: € 3.59  billion). WACKER SILICONES increased its sales € 11.6 million in the other operating result (2015: € 5.2 million).
by 4 percent to € 1.50 billion (2015: € 1.44 billion). Sales slowed
somewhat at WACKER POLYMERS, declining 1 percent to The operating result came in at € 180.0 million (2015: € 551.1 mil-
€ 731.4  million (2015: € 739.5  million). WACKER BIOSOLUTIONS lion). The WACKER SILICONES and WACKER POLYMERS chemical
lifted its sales to € 138.7 million (2015: € 136.5 million), a rise of divisions enhanced their contribution to earnings. WACKER
2 percent. Due to volume growth, WACKER POLYSILICON in- BIOSOLUTIONS’ positive result in 2016 was almost unchanged
creased sales by 3 percent to € 1.10 billion (2015: € 1.07 billion) over the prior year. WACKER POLYSILICON was impacted for
amid lower polysilicon prices. In total, Wacker Chemie AG’s the first time by material costs for the procurement of
operating performance rose by € 31.7 million to € 3.65 billion. polysilicon from the subsidiary Wacker Polysilicon North
America L.L.C. under a manufacturing contract. In addition,
The cost of materials rose to € 1.79 billion in 2016 (2015: income of € 20.3 million from advanced payments retained
€ 1.50 billion) and contains high procurement costs for and damages received in connection with terminated
polysilicon purchased from Wacker Polysilicon North contracts was lower than in the previous year (2015:
America L.L.C., a subsidiary, under a manufacturing con- € 137.6  million).
tract. The facilities at the new polysilicon production site
in Tennessee were successfully commissioned early in the At € 27.1 million, the result from investments in joint ventures
year and ramped up to planned production volumes by and associates was below the prior-year level (2015:
year-end. Wacker Chemie AG’s procurement price includes € 71.5 million) due to lower income from subsidiaries under
the start-up costs incurred at the beginning of the year and profit-and-loss transfer agreements. Aside from income
the idle-capacity expenses relating to the production from such agreements, the figure includes dividend pay-
ramp-up. Price trends for raw materials were a positive ments totaling € 3 8.0 million, after € 81.7 million in the prior
factor, as the average purchasing price for all key raw year. In 2015, the profit transferred from Dritte Venture
materials fell year over year. The largest price declines GmbH had contained income from the sale of shares in
were for silicon metal and vinyl acetate monomer. In addi- connection with the Siltronic AG IPO.
tion, outlays for energy were down. Overall, the material-­
to-sales ratio rose to 48.9 percent (2015: 41.5 percent). The net interest result improved by € 107.2 million to 87
€ 2.5 million (2015: € –104.7 million). This was mainly due to
Personnel expenses increased by 6 percent to € 872.4 million first-time use of the 10-year average interest rate in line
(2015: € 825.4 million), developing almost in line with sales. with the German central bank’s interest regulation. As a
The reasons for this rise were collective bargaining agree- result, the discount rate used for pension obligations rose
ments and non-recurring expenses to secure the future slightly year over year. This is why interest expenses from
financing of the Wacker Pensionskasse VVaG pension fund. provisions for pensions were only € 13.7 million in 2016 (2015:
Wacker Chemie AG had 9,539 employees as of December 31, € 91.0 million). Interest expenses for financial liabilities were
2016 (Dec. 31, 2015: 9,519). At 23.9 percent, the employee-­ slightly lower year over year, as was interest income from
expense ratio remained at about the same level year over securities and fixed-term deposits. On the other hand, in-
year (2015: 22.7 percent). terest income from the financing of subsidiaries increased
following adjustments to contract terms and conditions.
Depreciation and amortization decreased by 5 percent to These factors caused income before taxes to decrease to
€ 296.5 million (2015: € 312.1 million). € 208.4 million (2015: € 515.6 million) and net income to decline
from € 335.8 million to € 121.4 million.
The other operating result, consisting of other operating
income less other operating expenses, declined by Income tax expenses amounted to € 8 7.0 million (2015:
€ 8 6.5 million to € – 518.2 million (2015: € – 431.7 million). This € 179.8 million) and comprised current taxes paid by Wacker
decrease was largely due to a reduction in income from Chemie AG as well as taxes paid for those domestic sub-
advance payments retained and damages received in sidiaries with which it has profit-and-loss transfer agree-
connection with terminated polysilicon contracts, which ments.
totaled € 20.3 million in fiscal 2016 (2015: € 137.6 million). Other
operating expenses included – in addition to exchange-rate
effects – selling expenses, maintenance, other contractor
work, rents, servicing costs, R&D costs and costs assumed
on behalf of subsidiaries. The foreign currency result im-
proved, and amounted to € – 8.6 million (2015: € – 21.1 million).

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Management Report of Wacker Chemie AG

Net income came to € 121.4 million. Retained profit for 2.64 Statement of Financial Position
2016 – calculated as the profit carried forward from the
€ million 2016 2015
prior year less € 9 9.4 million in dividends paid – totaled
€ 1.24 billion (2015: € 1.22 billion). Assets
Intangible assets 9.8 9.5

Net Assets and Financial Position of Wacker Chemie AG Property, plant and equipment 1,135.6 1,288.7

as per the German Commercial Code Financial assets 2,715.6 1,995.4

Wacker Chemie AG’s total assets came to € 5.15 billion Fixed assets 3,861.0 3,293.6

(Dec. 31, 2015: € 5.14 billion). The individual balance-sheet Inventories 424.8 428.3

items did not develop uniformly. Trade receivables 414.0 357.7

Other receivables and
other assets 361.7 920.6
In 2016, fixed assets increased to € 3.86 billion (Dec. 31, 2015:
Receivables and other assets 775.7 1,278.3
€ 3.29 billion), with property, plant and equipment, on the
Securities and fixed-term
one hand, and financial assets, on the other, following ­d eposits  – 20.0
different paths. Property, plant and equipment decreased Cash on hand and demand
year over year, as depreciation in the amount of € 291.9 mil- deposits 88.7 118.1
lion ( Dec. 31, 2015: € 3 07.8 million) exceeded investment 88.7 138.1
spending of € 141.7 million ( Dec. 31, 2015: € 135.2 million). Current assets 1,289.2 1,844.7
­Financial assets grew from € 2.00 billion to € 2.72 billion. This Accruals and deferrals 4.6 3.8
item contains a € 6 00 million loan to Wacker Chemical Total assets 5,154.8 5,142.1
Corporation, a subsidiary, to replace the previous short-
term financing for the new production site in Charleston, Equity and Liabilities
Subscribed capital 260.8 260.8
Tennessee. In addition, Wacker Chemie AG’s stake in a
Less nominal value of
closed-end securities fund was increased in 2016. The fund
­t reasury shares –12.4 –12.4
assets came to € 106.4 million as of the reporting date
Issued capital 248.4 248.4
(Dec. 31, 2015: € 6.4 million). The ratio of fixed assets to total
Capital reserves 157.4 157.4
88 assets was 75 percent, compared with 64 percent in the
Other retained earnings 1,000.0 1,000.0
prior year.
Retained profit 1,243.8 1,221.8
Equity 2,649.6 2,627.6
The level of inventories remained almost constant year Provisions for pensions and
over year at € 424.8 million (Dec. 31, 2015: € 428.3 million). On ­s imilar obligations 705.8 693.6
the other hand, trade receivables rose from € 357.7 million Other provisions 413.5 328.8
to € 414.0 million. Provisions 1,119.3 1,022.4
Financial liabilities 647.0 855.3
Other receivables and other assets fell by 60 percent to Trade payables 184.2 148.0
€ 361.7 million as of the closing date (Dec. 31, 2015: € 920.6 mil- Other liabilities 516.5 450.0
lion). They included significantly lower receivables from Liabilities 1,347.7 1,453.3
affiliated companies amounting to € 296.6 million (Dec. 31, Accruals and deferrals 38.2 38.8
2015: € 868.1 million), chiefly due to the long-term financing Total equity and liabilities 5,154.8 5,142.1
for the production site in Charleston, Tennessee.

The fixed-term deposits amounting to € 20 million and with

maturities of more than three months that had been made
in the preceding year matured in 2016. Wacker Chemie AG’s
cash on hand and demand deposits came to € 88.7 million
as of December 31, 2016 (Dec. 31, 2015: € 118.1 million).

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Management Report of Wacker Chemie AG

Equity amounted to € 2.65 billion as of the reporting date Accruals and deferrals amounted to € 3 8.2 million as of
( Dec. 31, 2015: € 2.63 billion), corresponding to an equity year-end 2016 (Dec. 31, 2015: € 38.8 million) and mainly con-
ratio of 51.4 percent (Dec. 31, 2015: 51.1 percent). At Wacker cerned a payment by Siltronic AG to Wacker Chemie AG in
Chemie AG’s annual shareholders’ meeting, a resolution return for the transfer of employees to the latter.
was passed to distribute a dividend of € 9 9.4 million from
the profit carried forward from 2015. The remaining retained Cash flow from operating activities improved to € 520.7 mil-
profit of € 1,122.4 million was carried forward. Retained lion (2015: € 501.3 million), chiefly due to higher liabilities in
profit as of December 31, 2016 totaled € 1,243.8 million and connection with contract manufacturing. Lower net income
primarily comprised the current net income of € 121.4 million for the year had the opposite effect. In addition, higher
for 2016 and the non-distributed profit carried forward from non-cash expenses incurred to increase provisions had
the preceding year. a  positive impact in the reporting year. As expected,
­a dvance payments received for polysilicon deliveries
Provisions for pensions and similar obligations rose by a ­declined by € –161.1 million in line with the deliveries made
slight € 12.2 million to € 705.8 million (Dec. 31, 2015: € 693.6 mil- and the advance payments retained in connection with
lion). 2016 was the first year in which discounting was terminated contracts.
based on the average market interest rate over the past ten
fiscal years. Other provisions increased by € 8 4.7 million At € – 223.8 million, Wacker Chemie AG’s cash outflow from
to € 413.5 million in 2016 ( Dec. 31, 2015: € 328.8 million) and investing activities was somewhat higher (2015: € –182.1 mil-
primarily comprised provisions for taxes, personnel and lion). Cash not immediately needed was used to increase
environmental protection. The main reasons for this in- the closed-end fund, which led to a cash outflow of
crease were to secure future financing of the Pensions­ € 100.0 million. In contrast, the cash inflow from the sale of
kasse der Wacker Chemie VVaG pension fund and to securities equaled € 2 0 million. Funds also went toward
­e stablish a provision relating to the contract manufactur- ongoing investments in property, plant and equipment. At
ing of polysilicon. Tax provisions, in particular, also rose. € 137.0 million, these were somewhat lower year over year
Overall, provisions accounted for 22 percent of total equity (2015: € 144.6 million).
and ­liabilities, following 20 percent in the prior year.
Net cash flow – defined as the sum of cash flow from 89
As of the reporting date, financial liabilities amounted to ­operating activities excluding the change in advance pay-
€ 6 47.0 million ( Dec. 31, 2015: € 8 55.3 million), down 24 per- ments received and cash flow from long-term investing
cent. This decrease was chiefly due to the repayment of activities ( before securities) – rose substantially again in
bank loans. As of the reporting date, bank loans raised the year under review, coming in at € 5 37.9 million (2015:
amounted to € 5 45.2 million ( Dec. 31, 2015: € 756.1 million). € 352.9  million).
Liabilities due to affiliated companies rose by € 2.6 million
to € 9 8.3 million as of the reporting date ( Dec. 31, 2015: Cash flow from financing activities totaled € – 326.3 million
€ 9 5.7 million). Overall, the share of financial liabilities in (2015: € – 304.9 million). In 2016, the available funds were
total equity and liabilities declined to 13 percent (Dec. 31, used to reduce liabilities to banks by € 200.0 million (2015:
2015: 17 percent). € 150.0 million). The amount of intra-Group financing rose
only slightly. The dividend for fiscal 2015 led to a cash
Trade payables increased by € 36.2 million year over year to outflow of € – 99.4 million.
€ 184.2 million (Dec. 31, 2015: € 148.0 million). As of the report-
ing date, other liabilities amounted to € 516.5 million (Dec. 31, Liquidity – defined as the sum of securities in current
2015: € 450.0 million). This rise was primarily due to as-yet ­assets, shares in closed-end investment funds, and cash
unpaid obligations relating to a polysilicon manufacturing on hand and demand deposits – increased slightly, from
contract with the subsidiary Wacker Polysilicon North € 144.5 million to € 195.1 million as of December 31, 2016. Net
America, L.L.C. The decline in advance payments received financial debt – which is the balance of liquidity as defined
under polysilicon contracts had the opposite effect. above and liabilities to financial institutions – fell sub­
stantially due to investment in the closed-end fund and
the continued repayment of liabilities to banks. Here, the
­improved net cash flow had a particularly positive impact.
At year-end 2016, net financial debt amounted to € 350.1 mil-
lion (2015: € 611.6 million).

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Management Report of Wacker Chemie AG – Risk Management Report

Risks and Opportunities

Wacker Chemie AG’s business performance is subject to
Risk Management Report
the same risks and opportunities as the WACKER Group. Description and Statement Relating to Risk and
Wacker Chemie AG’s exposure to the risks associated with Compliance Management
its subsidiaries and investments depends on the size of its
stakes in the respective entities. The measurement of joint
ventures and associates is affected in particular by the
risks specified in the Risk Management Report. Through
our subsidiaries and holdings, we could face impairments
arising from legal or contractual contingencies (especially Integrated Approach to Risk and
financing). These contingencies are explained in the Notes Compliance Management
to the financial statements of Wacker Chemie AG. As the
parent company of the WACKER Group, Wacker Chemie AG Risk and compliance management is an integral part of
is integrated in the groupwide risk management system. corporate management at WACKER. As a globally active
For further details, see pages 165 to 166 of this Annual Report. The descrip- company, WACKER is exposed to numerous risks directly
tion of the internal control system for Wacker Chemie AG, as mandated by attributable to our operational activities. Starting from an
Section 289 ( 5 ) of the German Commercial Code ( HGB ), can be found in the
section on the Internal Control System ( ICS) and the Internal Control System
acceptable level of overall risk, the Executive Board
for Accounting starting on page 93. ­decides which risks we should take to utilize opportunities
available to the company. The goal of risk management at
Outlook WACKER is to identify risks as early as possible, evaluate
WACKER’s main planning assumptions relate to raw-material them adequately, and take appropriate steps to reduce
costs, energy costs, personnel expenses and exchange them. We define risks as internal and external events that
rates. For 2017, we anticipate euro exchange rates of US$ 1.10 may have a negative effect on the attainment of our targets
and ¥ 120. Wacker Chemie AG’s expectations for business and forecasts. Compared with the previous year, we made
performance are essentially the same as those for WACKER, no fundamental changes to the existing risk management
which are explained in full in the Group’s Outlook section. system in 2016. The scope of consolidation for risk reporting
90 Please refer to pages 106 to 114 of this Annual Report. purposes comprises all WACKER majority shareholdings.

We are assuming that sales will rise slightly versus the As a specialty-chemical and semiconductor company, we
prior year and EBITDA will be at the prior-year level. We have a particular responsibility to ensure plant safety and
expect Wacker Chemie AG to post a positive result for the to protect health and the environment. All our production
period that will be below the level of 2016. sites have coordinators who manage plant and workplace
safety, alongside health and environmental protection. Our
Publication risk management complies with legal requirements and is
The annual financial statements of Wacker Chemie AG a component in all our decisions and business processes.
have been submitted to the publisher of the “Elektronischer The Executive and Supervisory Boards are regularly
Bundesanzeiger” (the electronic version of Germany’s ­informed about the current risk status in the Group and at
Federal Gazette) and can be viewed on the website of each business division.
the German register of companies. KPMG AG Wirtschafts-
prüfungsgesellschaft, Munich, audited the annual financial WACKER follows the “Three Lines of Defense” model to
statements and issued an unqualified audit certificate for ­effectively manage corporate risks and ensure compliance
them. The statement of financial position and the state- with legal provisions and the ethical principles of corporate
ment of income are the main documents published here. management.
Wacker Chemie AG’s annual financial statements are
published together with those of the WACKER Group. The The first line of defense is centered on operational man-
annual financial statements can be obtained from Wacker agement, which involves coordinating, monitoring and
Chemie AG, Hanns-Seidel-Platz 4, 81737 München, Germany. managing the risks that arise.
They can also be accessed online at:
www.wacker.com

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Risk Management Report

It also includes the establishment of functioning internal Risk Management

control systems within the individual operational units. WACKER focuses on identifying, evaluating, managing and
monitoring risks as part of a transparent risk management
The second line of defense is formed by risk and compli- and control system for all company processes. The system
ance management. Risk management systematically tracks is based on a defined risk strategy and an efficient report-
the main risks associated with the operational units and ing procedure. It involves the Executive Board regularly
provides the Executive Board with corresponding reports. reviewing and enhancing our risk strategy, particularly with
Compliance management ensures that the ethical princi- regard to our groupwide processes for strategic planning
ples of corporate management are observed. It identifies and reporting. The Supervisory Board’s Audit Committee
the relevant legal requirements and amendments, forwards receives regular briefings on existing risks from the Execu-
them to all affected corporate units and holds courses on tive Board.
compliance for employees.
All corporate areas are integrated into the risk management
The third line of defense is provided by the internal auditing system, which consists of three intermeshed aspects:
department, which acts as an independent monitoring
body for the Executive Board. This department conducts –  Division-specific risk management and
audits at regular intervals to review the risk management early-warning systems
in place at the various corporate units and to check – Groupwide risk coverage
– 
whether the internal control systems run by the operational Groupwide risk mapping
units are effective. Auditing also liaises with Compliance
Management, for example if anti-corruption investigations The CFO has overall responsibility for the effectiveness and
are held or related measures are taken. appropriateness of the risk management systems.

2.65 “Three Lines of Defense” Model

Supervisory Board
91

Executive Board

Auditors
First line of defense Second line of defense Third line of defense

Internal control systems Risk management Corporate Auditing

Operational management Compliance management

Direct coordination Policy on identifying Audits
and monitoring specific risks
Training courses

Risk management Risk monitoring

Number of risks

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Risk Management Report

Risk Management Structures and Tools Assessment, Quantification and Management of Risks
This groupwide system draws on existing organizational We analyze each identified risk’s probability of occurrence
and reporting structures, supplemented by additional and potential effects on earnings. Corporate Controlling
­elements: compiles a monthly report to inform the Executive Board
of current and expected business developments and
–  The risk management manual: this contains the sys- their associated risks. We evaluate and balance risks and
tem’s principles and processes. It explains reportable ­opportunities at regular meetings with our divisions.
levels of risks and how risks are to be covered and
mapped. Corporate Controlling ensures that our risk management
standards are implemented and that our risk management
–  The risk management regulation: this stipulates group- process is enhanced. It not only records all substantial
wide reporting requirements, including when a specific risks groupwide, but also evaluates them systematically
committee must be informed. according to uniform criteria. Major risks and those endan-
gering the continued existence of the company are com-
–  The risk management coordinator: this coordinator is municated immediately via ad-hoc reporting. Because the
responsible for the risk management system and is divisions are responsible for their own profit and loss, this
supported by local risk coordinators. process is closely interwoven with operational controlling.
Individual divisional risks are identified and evaluated on a
–  The risk list: this records each specific risk facing our monthly basis. Operational risk management is thus firmly
divisions and other corporate sectors. Reporting is anchored in the divisions. At the same time, Corporate
mandatory for individual risks where the effect on ­Finance and Insurance, Corporate Accounting & Tax, Raw
earnings would exceed € 5 million. Materials & Energy, Technical Procurement & Logistics,
Corporate ­E ngineering, and Legal are involved in risk
Risk Identification controlling at the Group level.
WACKER identifies risks at two levels: for the individual
­divisions, and at a Group level. We employ various instru- Financial risks are managed by Corporate Finance and
92 ments to ascertain and identify risks. These include order Insurance, which is responsible for all measures relating to
intake development, market and competition analyses, exchange-rate and interest-rate hedging transactions and
customer talks and ongoing observation and analysis of ensuring adequate Group liquidity. The operational frame-
the economic environment. work is set out in detailed specifications and regulations
covering, for example, separation of trading and settlement
functions. Corporate Accounting & Tax monitors receiv-
ables management vis-à-vis customers.

2.66 Risk Management System

Supervisory and Executive Boards

Risk identification: all business Risk management

divisions and corporate departments basis

Risk monitoring: Risk coverage: Control of the risk Risk list Risk Risk
internal control legal management management management
system, Corporate and insurance process: manual regulation
Controlling functions Corporate Auditing

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Risk Management Report

Internal Control System (ICS) Additionally, organizational workflows are defined in our
and Internal Control System for Accounting accounting and organizational regulations, and in book-­
Our internal control system (ICS) is an integral component entry instructions. A groupwide calendar of deadlines
of our risk management system. guarantees the complete and timely processing of financial
statements. Corporate Accounting monitors compliance
Our internal accounting control system is aimed at ensuring with reporting obligations and deadlines. By separating
consistent compliance with statutory requirements, gen- financial functions between accounting, statement analysis
erally accepted accounting principles and International and strategy, we ensure that potential errors are identified
Financial Reporting Standards ( IFRS) – the goal being to prior to finalization of the statements and that accounting
avoid misstatements in Group accounting and external standards are complied with.
reporting.
Our subsidiaries ensure that all regulations are imple-
In addition to the ICS principles already mentioned, we mented in their local regions. Corporate Accounting assists
perform assessments and analyses to help identify and them and monitors the process. Additionally, country-­
minimize any risks that may directly influence financial re- specific accounting standards exist that must be complied
porting. We continually monitor changes in accounting with. The reported data is verified both by automatic system
standards and provide the employees handling them with validation, and by reports and analyses. Data is checked
regular and comprehensive training. We enlist external for plausibility and then consolidated. We safeguard the
experts to reduce the risk of accounting misstatements in effectiveness of controls not only by gathering feedback
complex and challenging issues, such as pensions. from employees involved, but also by continually monitor-
ing key financial indicators in our monthly management
Our internal accounting control system is designed to ensure reports and in system-based test runs. Moreover, regular
that our accountants process every business transaction external audits are carried out, and there are external
promptly, uniformly and correctly and that reliable data on ­reviews at year-end and for each quarter.
the Group’s earnings, net assets and financial position are
available at all times. Our approach here complies with On a quarterly basis, managers at our divisions, corporate
statutory provisions, accounting standards and internal departments and subsidiaries confirm for their areas that 93
accounting rules. A key accounting regulation is the all key issues for quarterly and annual financial statements
­accounting manual in effect groupwide and available on have been reported.
the WACKER intranet. It specifies binding rules for group-
wide accounting and assessment. The Group regulation The Supervisory Board is also integrated into the internal
on accounting contains uniform stipulations for the control system through the Audit Committee. In particular,
­organizational responsibility of accounting-related topics. the Audit Committee monitors the accounting process, the

2.67 Basis of Our Internal Control System (ICS)

Separation Dual-control policy Job rotation

of functions

Systematically structured
Regulations and control measures within
work instructions business processes

Complying with Preventing Assuring the functionality

legislation and financial losses 1 and efficiency of
WACKER regulations business processes

1
Possible financial losses due to the intentional or inadvertent misconduct of our employees or third parties.

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Risk Management Report

effectiveness of the internal-control and risk-management as it had been in 2015. For example, a dedicated campaign
systems, and auditing procedures. Moreover, it reviews was launched to raise employee awareness of the risks of
the documents for Wacker Chemie AG’s separate financial cybercrime. In 2016, no major infringements of compliance
statements and the WACKER Group’s annual and quarterly were identified that were subject to the previously men-
financial statements and the combined management tioned reporting threshold, where the effect on earnings
­report for these statements, and discusses them with the would exceed € 5 million.
Executive Board and the auditors.
Internal Auditing
We protect all financial systems from misuse with user-­ The third line of defense is provided by WACKER’s Corporate
authorization systems, data-release policies and access Auditing department, which acts as an independent
restrictions. Information Technology, a corporate depart- ­monitoring body for the Executive Board. This department
ment, carries out regular system backups and maintenance shares responsibility for effective internal control systems
measures to minimize both the risk of data loss and of a throughout the various operational processes and systems.
breakdown of accounting-related IT systems. However, When setting up an internal control system, the operational
even with adequate and functioning systems in place, we units must apply certain principles, such as a policy of dual
cannot guarantee that the internal control system will be control. These principles are defined in an internationally
100-percent effective. valid regulation that explains them in more detail for critical
functions.
Compliance Management
WACKER’s ethical principles of corporate management go On behalf of the Executive Board, Corporate Auditing there-
above and beyond the legal requirements. The compliance fore mainly performs regular, process-specific reviews of all
management department is responsible for ensuring relevant functions and corporate units, placing its focus on
that these principles and all related legal provisions are internal control systems. Audit topics are selected using a
­observed throughout the company. Training courses on risk-driven approach. This takes account of risk manage-
compliance raise employees’ awareness of the relevant ment reporting, as well as the reports and information
risks and convey binding rules of behavior for daily work provided by the corporate departments, business divisions
94 routines. These aspects are covered by WACKER’s com- and larger joint ventures / associates. The Executive Board
pliance regulation. Employees are instructed to inform supplements and approves the auditing schedule, which is
their supervisors, the compliance officers, the employee discussed by the Audit Committee as well. If necessary,
council or their designated HR contacts if they notice any the schedule is flexibly adjusted during the year to take
violations. account of changes in underlying conditions.

The Group’s compliance officers are responsible for im- In 2016, auditing focused on adherence to environmental
plementing these rules and regulations, and are on hand legislation in the USA, as well as on sales commissions and
to advise employees on all matters relating to compliance. discounting, including how they are treated in accounting.
The WACKER Group has 23 compliance officers around the Whenever cross-functional business-process audits were
world: in Germany, the USA, China, Taiwan, Japan, India, conducted at subsidiaries, the checks included aspects of
South Korea, Brazil, Mexico, Singapore, Russia, Norway plant safety, such as whether safety training or technical
and the United Arab Emirates. Compliance issues arising inspections were held. During the reporting period, no major
in countries not listed here are handled in Germany by complaints about the proper functioning of the control
the Chief Compliance Officer. systems came to light as regards the previously mentioned
reporting threshold, where the effect on earnings would
Prevention is a key aspect of the work of compliance offi- exceed € 5 million.
cers. They train, inform and advise employees and man-
agement on, for example, anti-corruption strategies and Any process-optimization measures derived from the
measures. In 2016, all the compliance officers met in ­Munich ­audits are implemented and systematically monitored by
to discuss how to harmonize WACKER’s global ­approach to the auditing department. It provides the Executive Board
combating legal infringements. The prevention of cyber- and Audit Committee with regular reports on the results
crime was a further point of focus in the reporting period, and implementation status of the various measures.

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External Controls 2.68 Probability and Possible Impact of Our Risks in 2017
When auditing our annual financial statements, the external
Risk  / C ategory Probability Possible
auditor examines our early-warning system for detecting Impact
risks. The auditor then reports to the Executive and Super-
Overall economic risks Unlikely Medium
visory Boards.
Sales-market risks
Chemicals Unlikely Medium
Polysilicon Possible High
Central Risk Areas Siltronic Possible Medium
Procurement-market risks Possible Medium
Defining the Probability and Impact of Risk Occurrence Market-trend risks Unlikely Low
We have defined categories for describing the probability Investment risks Unlikely Low
that risks we identify will occur. They provide a framework Production and environmental risks Unlikely Medium
for understanding our assessment of individual areas of risk. Financial risks
The categories define the range of probability as follows: Credit risks Unlikely Low
Currency-exchange and
­i nterest-rate risks Possible Medium
– Unlikely: under 25 percent
Liquidity risks Unlikely Low
– 
Possible: 25 – 75  percent
Pensions Possible Medium
– 
Likely: over 75 percent
Legal risks Unlikely Low
Regulatory risks
We also use categories to describe how the occurrence Energy transition in Germany Possible Low
of the risks listed might impact the Group’s earnings, net Polysilicon trade restrictions Possible High
assets and financial position. We assess the possible New regulations for production
­effect on earnings using the net method, i. e. after taking processes and products Likely Low
appropriate countermeasures, such as establishing pro- IT risks Unlikely Medium
visions or hedging. The following categories define the Personnel-related risks Unlikely Low
ranges: External risks Unlikely Low
95
– Low: up to € 25 million
– 
Medium: up to € 100 million
– 
High: over € 100 million Overall Economic Risks
Scenario: Economic slowdown.
The following table shows our estimation of the probability
of risks and of how risk occurrence might impact the Impact on WACKER: Production-capacity utilization drops,
Group’s earnings, net assets and financial position. The specific manufacturing costs rise, and the Group’s sales
statements refer to the forecast period, thus to fiscal 2017. and earnings decline.

Measures: We counter this risk by continuously monitoring

economic trends in our key sales markets. Should the
economy start slowing, we take early precautions to adjust
production capacities, resources and inventories flexibly
to customer demand. In such a case, we concentrate
­capacity utilization on production locations with the best
cost position, for example, and temporarily shut down
some production facilities. To counter an economic slow-
down, we also use the instrument of short-time work and
do not extend temporary employment contracts.

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Evaluation and Risk Assessment: Analysts expect global business fields. By cooperating closely with customers,
economic growth to continue in 2017. Risks to momentum we aim to quickly open the way to novel applications, thus
stem from ongoing geopolitical crises and from increased fostering long-term customer loyalty.
political uncertainty in Europe and the USA. An unexpected
slowdown in China could hamper global growth, as could Evaluation and Risk Assessment: We expect overcapacity-­
possible turbulence on international financial markets. related risks for our products to remain the same in 2017. At
WACKER POLYMERS, we see overcapacity for dispersions
Our chemical business supplies a large number of custom- and dispersible polymer powders in Asia. Nevertheless,
ers from a broad range of industrial sectors worldwide. we expect plant utilization to be strong despite this over-
This enables us, as experience has shown, to at least capacity. WACKER SILICONES faces overcapacity for siloxane
partially compensate for temporary weaknesses in some production in China and for certain segments (such as
sectors and sales regions. liquid silicone rubber) – which could reduce plant utilization.
Price pressure on some of our chemical divisions’ products
In our polysilicon business, future developments are de- will persist in 2017.
termined by the regulatory framework for solar-power use
and for international trade in photovoltaic systems and It is unlikely that individual areas of our chemical business
solar silicon. Additionally, the situation is influenced by will experience overcapacity and, consequently, price
economic trends. pressure. We have already taken account of this possibility
in our planning and forecasts. Any potential impacts on
In Siltronic’s semiconductor-wafer business, volume and Group earnings beyond that would be of medium scale.
price trends depend essentially on two factors. First: on
the trend in consumer and industrial demand for electronic Scenario 2: Polysilicon overcapacity and price risks, difficult
equipment – for example, computers, smartphones and market conditions due to a rollback of government incentive
tablet PC s . Second: on the balance between global programs, the tight financial situation of many customers
­p roduction capacities and semiconductor-manufacturer and the expiration of long-term supply contracts.
­demand. Both factors are closely interlinked.
96 Impact on WACKER: There will be volume risks if excessive
We presently see no specific signs that economic trends and hurried cuts to government solar incentives negatively
will diverge substantially from the experts’ forecasts. impact the photovoltaic market. The expiration of long-term
Given the risks mentioned, however, we cannot completely contracts increases the risk to capacity-utilization rates.
rule out the possibility that the global economy in 2017 Overcapacity could lead to intense price competition, ex-
could fall short of current projections. Should the world erting pressure on margins. Both factors could result in
economy prove weaker than currently forecast, this would declining sales and earnings.
have a medium impact on WACKER’s earnings.
Measures: We counter these risks by continuously im-
Sales-Market Risks proving our cost positions and by optimizing our product
Scenario 1: Chemical-segment overcapacity. and customer portfolio in line with market developments.
We counter customers’ liquidity problems by demanding
Impact on WACKER: Price and volume pressures on our collateral.
products.
Evaluation and Risk Assessment: In all probability, the
Measures: WACKER minimizes this risk in various ways. For consolidation process in the solar industry will continue in
example, we align production with demand and perform 2017. As long as this trend persists and global production
quantity controls to ensure appropriate plant-utilization capacities exceed market demand, polysilicon prices are
rates. Our approach also includes structured price man- likely to remain at their current low levels. Our planning
agement, process optimization and intense development and forecasts anticipate the continuation of this situation.
of growth markets. Importantly, a key ongoing goal is to Should solar-silicon demand clearly exceed supply, this
increase the share of cyclically resilient product groups in would presumably benefit earnings at WACKER POLYSILICON.
our portfolio and to rank among the global leaders in all our Conversely, a slump in demand for WACKER’s solar silicon

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would probably have a high impact on earnings in this Evaluation and Risk Assessment: WACKER has positioned
business. We consider there to be a possible risk of falling itself in energy and raw-material procurement in such a
prices. way that we can effectively manage the risks inherent in
both economic upturns and downturns. If the world econ-
Scenario 3: Cyclical fluctuations and intense competition omy weakens markedly, our contracts for key raw materials
on the semiconductor market. allow us to adjust our purchase volumes flexibly and to
benefit – wherever possible – from price decreases through
Impact on WACKER: Volumes and prices decline. escalator clauses. If the world economy grows, we have
volume guarantees. As a result, we do not see any major
Measures: Siltronic is reducing these risks by increasing risks affecting the supply of our raw materials. Prices
flexibility in production operations and implementing could, of course, markedly increase in such situations. But
­s ystematic cost management. Siltronic aligns its own experience has shown that we would then have the possi-
­c apacity with market trends and continuously improves bility of at least partially compensating for these additional
the efficiency of production and business processes to costs with higher selling prices for our own products.
optimize its cost basis. Prices for crude oil and coal are currently rising. If this
trend should continue long term, our raw-material and
Evaluation and Risk Assessment: Siltronic currently energy costs could increase as a result.
­expects volumes in 2017 to be higher than last year. This
scenario forms the basis for our planning and forecasts. WACKER uses a number of highly specialized raw materials
We consider it possible that volumes and prices will for which there are only a few suppliers. If these suppliers
­diverge substantially from our expectations. If volumes were to cease deliveries, this could limit our production.
came in considerably below our current estimates, this We minimize this risk by taking appropriate measures (e. g.
would have a medium impact on Siltronic’s earnings. backup suppliers, safety stocks, change of products).

Procurement-Market Risks Under current legal provisions in Germany, energy-intensive

Scenario: Higher raw-material and energy prices, bottle- companies or corporate units are required to pay only part
necks in the supply of certain raw materials and customs of the EEG ( Renewable Energy Act) levy. WACKER also 97
risks. profits from this exemption in certain sectors of the Group.
Any restriction on the rules for exemption would consider-
Impact on WACKER: Earnings dampened by higher raw-­ ably reduce the competitiveness of these individual corpo-
material and energy prices. Any supply bottlenecks could rate units. In general, the electricity price trend (wholesale
lead to longer customer delivery times and volume losses. prices, grid fees, capacity market) will continue to depend
strongly on how German and European policy shapes the
Measures: On an annual basis – and if necessary, ad hoc – future development of the energy transition.
we prepare systematic procurement plans for ­s trategic
raw materials and energy, which also include an evaluation Overall, we currently consider it possible that raw-material
of the procurement risk. Whenever possible, we take cor- and energy prices will continue to increase over the longer
responding measures to counter any procurement risks term. Should this happen, it would probably have a medium
deemed significant. Examples of such measures i­nclude impact on the Group’s earnings trend.
long-term supply contracts with partners, structured pro-
curement from multiple suppliers under contracts with
various maturities, expansion of our supplier base, and
higher safety stocks. In select cases, we have also achieved
partial backward integration and produce strategic raw
materials ourselves. Our silicon-metal production site in
Holla (Norway), for example, has substantially ­reduced our
dependency on external suppliers.

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Market-Trend Risks is assessed using comparative studies that look at other

Scenario: An incorrect projection of market trends, and lack plant projects, including those of competitors. Investments
of customer acceptance for newly developed products. are approved in stages only. Intensive project-budget
management helps prevent or minimize delays.
Impact on WACKER: Misjudgment of future market trends
could impact our market strength and earnings position. Evaluation and Risk Assessment: At our new site in
New product developments that fail to meet market needs Charleston, Tennessee (USA ), we completed commission-
could negatively impact our sales and earnings. ing of production facilities on schedule during the reporting
period. This marks the end of our capital-intensive invest-
Measures: WACKER works closely with its customers and, ments in large-scale plants for upstream products. This
therefore, has reliable information for developing new year, and during the next three years, we will meet rising
products and applications. At the same time, we monitor customer demand mainly through cost-effective expansions
the market and our competitors very closely, hold customer to existing plants and will strengthen our capacities for
and supplier interviews, and regularly attend tradeshows downstream products. Capital expenditures will be below
that are important to WACKER. In individual cases, we depreciation in 2017. We currently consider the risk of
commission market research. We minimize risks arising ­investment spending exceeding our expectations to be
from our development work by carrying out certain projects low. Even if the risk did materialize, we would expect the
together with customers. In R&D, WACKER cooperates with impact on our earnings, net assets and financial position to
universities and scientific institutions with the aim of be low.
r eflecting the latest trends in its technological and
­
­product-development activities. Production and Environmental Risks
Scenario: Risks relating to the production, storage, filling
Evaluation and Risk Assessment: WACKER has many and transport of raw materials, products and waste.
years of market experience and can update its detailed
planning as soon as market developments change. We Impact on WACKER: Potential personal injury, property
consider the risk of misjudging market trends, or not react- damage and environmental impairment; production down-
98 ing to them appropriately, to be low. If this should, never- times and operational interruptions; and the obligation to
theless, occur in individual application fields, the impact pay damages.
on our earnings trend would probably be low.
Measures: WACKER coordinates its operational processes
Investment Risks through its integrated management system ( IMS ). The
Scenario: Bad investments, higher-than-expected invest- system regulates workflows and responsibilities, attaching
ment costs, postponed plant start-ups, deterioration of equal importance to productivity, quality, the environment,
original market projections, and assumption of risks from and health and safety. Our IMS is based on legal regula-
investments in joint ventures and associates. tions, and on national and international standards, such as
Responsible Care ® and the Global Compact, which go far
Impact on WACKER: Bad investments lead to idle-capacity beyond legally prescribed standards. We monitor mainte-
expenses and /or impairments of assets and investments, nance extensively and regularly perform inspections to
which can have major effects on earnings. Higher invest- ensure the highest possible level of operational safety at
ment costs mean higher cash outflows and, in the future, our production sites. We conduct thorough safety and risk
higher depreciation expenses in our operating ­result. analyses, from the design stage through to commissioning,
Postponed start-ups expose us to the risk of being unable to ensure our plants’ safety. We regularly hold seminars
to fulfill supply contracts and, thus, of posting lower sales on plant and workplace safety and explosion protection.
and earnings. ­Every WACKER site has its emergency response plan to
regulate cooperation between internal and external emer-
Measures: WACKER has numerous measures in place for gency response teams, and with the authorities. When we
countering investment risks. We check the completeness work with logistics providers, we ensure that hazardous-­
and plausibility of plans for new projects with an investment goods transport vehicles are always checked prior to
volume exceeding € 3.0 million. The Group’s corporate de- loading. Any faults are systematically recorded and tracked.
partments are involved in this check. Economic feasibility

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Evaluation and Risk Assessment: Risks stemming from checks to the evaluation of historical data from our busi-
the production, storage, filling and transport of raw mate- ness relationship to date ( particularly payment behavior).
rials, products and waste can never be completely ruled We limit default risks by means of credit insurance, advance
out. Yet even though it is generally possible for such risks payments and bank guarantees. We prevent counterparty
to materialize, we currently consider a serious loss event risk vis-à-vis banks and contractual partners by carefully
to be unlikely. Should such an event occur, though, it could selecting these partners. We conduct cash investments
have a medium impact on WACKER’s earnings. and derivative dealings with banks that usually have a
minimum rating of A– from Standard & Poor’s or a compa-
Financial Risks rable rating agency. Investment activities are additionally
WACKER is exposed to financial risks from ongoing oper- subject to maximum investment and term limits. In excep-
ations and financing. Such risks include credit, market-­ tional cases, investments or derivative dealings may be
price, financing and liquidity risks. They are managed by conducted with banks of lower creditworthiness within
the individual WACKER departments responsible for them. specified limits and terms.
We employ primary and derivative financial instruments
to cover and control the financial needs and risks neces- Evaluation and Risk Assessment: We consider it unlikely
sitated by our operations. Such financial instruments are that credit risks stemming from customer business will
not permitted, however, unless they are based on actual or occur. We assume that our risk concentration with regard
planned operational activities. The Notes to the Consoli- to bank failures is low, thanks to our approach to counter-
dated Financial Statements provide extensive information party risk. If credit risks stemming from customer business
about risk hedging using derivative financial instruments. or from a bank failure did unexpectedly occur, their impact
For further details, see pages 165 to 166 of the Notes section. on WACKER’s earnings would probably be low.

Currency-Exchange and Interest-Rate Risks

2.69 Controlling Financial Risks Scenario: Fluctuations in exchange rates and interest rates.
Risk Corporate Department
Responsible Impact on WACKER: Effect on earnings, liquidity, and finan-
cial investments and financial liabilities. 99
Credit risks Corporate Finance and
Insurance, Corporate Measures: Currency risks primarily arise from exchange-­
Accounting and Tax
rate fluctuations for receivables, liabilities, and cash and
Currency-exchange and Corporate Finance and
interest-rate risks Insurance cash equivalents, and financial liabilities not held in euros.
Liquidity risks Corporate Finance and The currency risk is of particular importance with respect
Insurance to the US dollar, Japanese yen, Singapore dollar and Chinese
renminbi. WACKER hedges any net exposure above a certain
level by using derivative financial instruments. The use of
Credit Risks such instruments is governed by WACKER’s foreign exchange
Scenario: Customers or business partners fail to meet management directive. We work with forward-exchange
their payment obligations. contracts, foreign-exchange swaps and currency-option
contracts. Foreign exchange hedging is carried out mainly
Impact on WACKER: Losses on trade receivables, and for the US dollar, Japanese yen and Singapore dollar. We
failure of banks to fulfill their obligations to WACKER (loan also counter exchange-rate risks through our non-euro-
disbursements, repayment of deposits and compensatory zone production sites.
payments arising from derivatives transactions).
Interest-rate risks arise due to a change in market rates.
Measures: We use a variety of instruments to reduce the Since it affects future interest payments for variable-rate
risk of any loss on receivables. Depending on the nature of loans and investments, such a change has a direct influ-
the product or service provided and the amount involved, ence on the Group’s liquidity and financial assets. When
we may demand collateral, including retention of title. Other exposure is identified, interest-rate hedging is performed.
preventive measures range from references and credit The use of derivative financial instruments is governed by

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internal regulations that separate trading and settlement Impact on WACKER: A rise in pension obligations, a decline
functions, and is subject to strict controls within the entire in plan assets, and a possible injection of financial re-
processing procedure. We continually monitor the effec- sources into the pension fund or into the plan assets will
tiveness of any measures taken. affect the financial position and earnings of the Group.
Over and above the pension plan, there are defined-­benefit
Evaluation and Risk Assessment: We hedge part of our pension plans in the form of direct commitments. Addition-
US dollar, yen and Singapore dollar business. The possible ally, employees have the option of converting part of their
burden or income from exchange-rate fluctuations is remuneration into direct benefit commitments. The greater
­partially cushioned by hedging measures. From today’s life expectancy of pension-fund beneficiaries, adjustments
perspective, we consider it possible that exchange-rate to pay and pensions, and the discount factor (used in
and interest-rate changes in 2017 will substantially differ calculating the net present value of a final capital amount)
from our planning assumptions. We believe that this would also impact WACKER’s equity and earnings to a substantial
have a medium impact on Group earnings. degree.

Liquidity Risks Measures: A large portion of WACKER’s pension guarantees

Scenario: Lack of funds for payments, and tougher access are covered by the Wacker Chemie VVaG pension fund, by
to credit markets. pension-related funds and special-purpose assets, and by
insurance plans. To ensure a sufficient rate of return and
Impact on WACKER: Higher financing costs, and modifi- to limit investment risks, the fund diversifies its investment
cations to further investment projects. portfolio among various asset classes and regions. In
managing its assets and liabilities, the pension fund
Measures: Liquidity risk is managed centrally at WACKER. controls and optimizes all asset items to attain the required
Our Corporate Finance and Insurance department employs return within specified risk limits. As one of the fund’s
efficient systems for both cash management and rolling sponsoring entities, WACKER makes payments to it (when
liquidity planning. In order to counter financing risks, necessary ), thereby ensuring sufficient coverage for
WACKER holds adequate long-term, contractually agreed ­pension obligations. We periodically adjust the calculation
100 lines of credit, and has set aside sufficient liquidity. We parameters of the other defined-benefit pension commit-
invest liquid funds only in issuers or banks that have a ments (e. g. life expectancy).
credit rating within the sound investment-grade range. The
investment of liquid funds is, moreover, subject to limits Evaluation and Risk Assessment: Pension-fund benefi-
that we have defined. By means of cash pooling, liquid funds ciaries are living longer, and capital-market interest rates
are passed on internally within the Group as required. have steadily declined in recent years. The rate of return
will probably be insufficient to fulfill pension obligations
Evaluation and Risk Assessment: WACKER’s liquidity in the long term. In 2016, our contribution rate remained
­increased in 2016 compared with the previous year due unchanged. WACKER expects that it will have to make
to  much lower investment spending. Liquidity totaled special payments to the Wacker Chemie VVaG pension
€ 465.7 million at the reporting date. At the same time, there fund in 2017. In this case, we would expect this to have a
were unused lines of credit with terms of over one year low impact on the WACKER Group’s cash flow. We consider
totaling some € 800 million. We consider the occurrence of it possible that we will have to make further payments to
financing and liquidity risks to be unlikely. At the moment, the pension fund and fund assets, and that pension ex-
we see no risks relating to financial-covenant infringements. penses and payments will rise in the future. This would
If financial or liquidity bottlenecks did occur, their impact have a medium impact on WACKER’s earnings, net assets
on Group earnings would be low. If unused lines of credit and financial position.
were tapped, net financial debt would rise. See further details starting on page 148 of the Notes section.

Pensions
Scenario: Greater life expectancy of those entitled to a
pension, pay and pension adjustments, falling discount
factors, significant changes in the composition of the
­invested fund assets and capital-market interest rates
(environment of low interest rates).

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Legal Risks Renewable Energy Act, special compensation rules for

Scenario: Diverse legal risks related to tax, trademarks, energy-intensive companies, the grid charge, self-generated
patents, competition, antitrust proceedings, the environ- electricity, EU investigation into state aid procedures, state
ment, labor and contracts could arise from our inter­ aid rules, the German Federal Government’s white paper,
national business. legislation on combined heat and power generation, and
capacity mechanisms).
Impact on WACKER: Drawn-out legal disputes, which could
impact our company’s operations, image and reputation, Impact on WACKER: Additional costs due to rising govern-
and which could be costly. ment levies on the cost of electricity procurement.

Measures: We limit legal risks with centralized contract Measures: We continually monitor regulatory activity in
management and legal review by our legal department. If Germany and in the EU. Whenever we anticipate changes
necessary, we also seek highly qualified and specialized in the current legal situation, we try to introduce our view-
external legal advice. point into legislative procedures through discussions with
policymakers and by participating in trade associations.
Our Intellectual Property department protects and moni- In addition, we search for, and take advantage of, market
tors patents, trademarks and licenses. Before initiating opportunities arising from renewable energy (e. g. industrial
R&D projects, we conduct searches to determine whether demand-response management).
existing third-party patents and intellectual property rights
could prevent us from marketing any newly developed Evaluation and Risk Assessment: In 2016, the Bundestag
products, technologies or processes. approved an amendment of the German Renewable Energy
Act and, at the start of 2017, this amendment came into
We limit risks arising from possible legal infringements by force. Moreover, the German government and the EU
means of compliance programs. WACKER’s Code of Conduct Commission have reached agreement on the rules regard-
defines and stipulates binding rules of behavior for all ing self-generated electricity, combined heat and power
employees. Through training programs, WACKER enhances plants, and sheddable loads. On the whole, these decisions
awareness of these issues and attempts to prevent repu- do not cause any substantial increase in WACKER’s burden 101
tation-related risks. beyond the previous level. We consider it possible in
principle that other legal provisions relating to energy pol-
Evaluation and Risk Assessment: Due to the varied nature icy, for example grid charges, might be amended in 2017.
of our business activities in all major regions of the globe, Such amendments, though, would likely have a low impact
the occurrence of legal risks is always conceivable in on WACKER’s earnings this year. We expect the regulatory
principle. We currently do not foresee any legal disputes, environment surrounding the energy transition to remain in
patent infringements or other legal risks that could signifi- flux for the next few years.
cantly influence our business, but consider the occurrence
of such risks as unlikely in principle. Should such an indi- Polysilicon Trade Restrictions
vidual case occur, we would expect its impact on WACKER Scenario: Anti-dumping proceedings have been com-
Group earnings to be low. pleted by the Chinese Ministry of Commerce against
polysilicon imports from the USA. The anti-dumping pro-
Regulatory Risks ceedings of the EU against Chinese solar companies have
Energy Transition in Germany been reviewed and extended. Until April 2017, sales of
Scenario: The transition in Germany to 80 percent renew- WACKER polysilicon in China comply with the terms of an
able energy in the electricity sector by 2050 (known as the amicable agreement reached with MOFCOM. The arrange-
“Energiewende” or energy transition) creates a regulatory ments between WACKER and the Chinese government ­expire
environment that will probably be marked by constant after that date, and China imposes stricter measures.
legislative amendments in Berlin and Brussels (the German

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Impact on WACKER: Negative impact on the company’s Impact on WACKER: Additional investments in production
earnings, net assets and financial position; influence on facilities and revenue losses in individual application fields.
sales volumes; impact on long-term customer relations.
Measures: WACKER continually monitors the regulatory
Measures: Our aim in numerous discussions with policy- environment surrounding its products and production
makers in the USA and China is to avoid punitive tariffs processes so that it can react promptly to impending
(US  tariffs on Chinese solar modules and cells, and changes. This is why we have begun to technologically
­Chinese tariffs on polysilicon from the USA) and hence the enhance individual silicone production plants in prepara-
imposition of such tariffs on WACKER’s US-made polysili- tion for possible regulatory changes.
con. According to Chinese anti-dumping laws, we can also
apply to have the tariffs individually reviewed and their Evaluation and Risk Assessment: It is always possible
level set. This is because WACKER did not, in fact, import that new legal regulations will make it necessary to modify
any polysilicon from the USA to China during the investiga- our product portfolio or production processes. We consider
tion ­period of the anti-dumping proceedings. We will apply it likely that new legal provisions will require additional
for a “New Shipper Review.” We are also trying to convince ­investment in our production facilities or changes to our
the Chinese government to withdraw, as of April 2017, product portfolio. Should such changes occur, the impact
measures directed against European polysilicon imports. on WACKER’s earnings would be low, at most.

Evaluation and Risk Assessment: The tariffs on polysilicon IT Risks

imports from the USA to China will remain in effect until Scenario: Attacks, system errors and unauthorized access
January 2019. From our point of view, it is not foreseeable to IT systems and networks, threatening data security.
whether these tariffs will be withdrawn or continued after
January 2019. If, after concluding its ongoing investigations Impact on WACKER: Negative impact on the company’s
in March 2017, the European Union extends its trade earnings, net assets and financial position, on production
­restrictions on Chinese solar modules and the existing processes and on workflows; loss of know-how.
minimum-­price agreement, we expect the Chinese author-
102 ities, on completion of their own investigations in April 2017, Measures: We continually monitor our use of information
to extend their restrictions on polysilicon from Europe. In technology and do everything we can to ensure that
this case, we assume that our previous minimum-price IT-supported business processes function reliably. Our
agreement for polysilicon made in Europe and exported to IT-security and risk-management specialists are respon-
China will continue unchanged. However, we cannot entirely sible for handling hazards in a cost-efficient way. Their work
rule out the risk for our German-made polysilicon of an is based on standards such as ISO 27001. Using risk analyses,
adverse amendment to our minimum-price agreement with we define the requirements for all systems, including pro-
China if trade relations between the European Union and duction-related ones, in terms of the availability, integrity
China were to worsen. Should this happen, we consider it and confidentiality of data. These requirements serve as a
possible that WACKER might be affected by trade barriers basis for taking measures. We check at regular intervals
and punitive tariffs. In this instance, the impact on earn- whether they have been implemented and complied with.
ings in 2017 would probably be high. We reach service level agreements (SLA s ) with our business
divisions, corporate departments and regional organiza-
New Regulations for Production Processes and Products tions, and continually monitor compliance with those
Scenario: The production and use of chemical substances agreements. For our central ERP systems ( Enterprise
will be more strictly regulated due to new legal regulations. ­Resource Planning), we set – and achieved – an availability
New legal provisions necessitate changes in WACKER’s goal of 99.5 percent for 2016. ERP is based on designing our
production processes. systems for maximum availability, with an associated
backup and recovery procedure. We have taken appropri-
ate precautions to cover emergency situations (business
continuity management).

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Combined Management Report – Risk Management Report

We minimize project-related IT risks with the help of a Impact on WACKER: A lack of technical and managerial
uniform project and quality-management method. It e
­ nsures employees could dampen our continued growth and cause
that changes are integrated into our system landscape in us to lose of our technological edge.
a controlled manner. Safety demands are identified and
taken into consideration right from the planning stage. Measures: We counter these risks through personnel-­
Before new IT solutions are rolled out, we ensure that policy measures. These particularly include our Talent
­d evelopment and security requirements have been ob- Management Process and the development plans derived
served. Systematic enterprise-architecture management from it. In addition, we offer a wide variety of training pro-
reduces complexity and risks. grams, good social benefits and performance-oriented
compensation. We also offer our employees in Germany a
As part of the risk management process, we log and wide range of working-time models and arrangements to
evaluate any operations-related risks that arise and initiate better balance career demands with the different phases
countermeasures. We also optimize IT service management of life.
processes on an ongoing basis. We use state-of-the-art
hardware and software solutions to counter network WACKER has a detailed, groupwide successor-planning
downtime, data loss or manipulation, and unauthorized process in place for all key positions in the company,
access to our network and systems. We use efficient ­including all positions held by executive personnel. For
software security programs to protect ourselves against every upper management position, we observe up to three
malware. We have set up an international security team, candidates to assess their potential and performance. In
which addresses problems involving data and system successor planning, WACKER distinguishes between short-
confidentiality, integrity and availability by means of orga- term needs (up to two years) and medium-term needs (two
nizational and technical measures and awareness and to four years). In addition, WACKER has appointed deputies
training programs. Information events and training on IT for executive personnel in the event of a lengthy absence
security ensure that our employees have the necessary or illness.
skills to heighten information security at the company. In
addition, we regularly conduct comprehensive safety Evaluation and Risk Assessment: Demographic change
­reviews of the solutions and business partners used at will increase the risk of not being able to find sufficiently 103
domestic and international sites to prevent the risk of qualified personnel for technical and managerial positions
­attacks on our information systems. in the medium to long term. For 2017, we consider the risks
to our personnel needs to be low. Should these risks occur,
Evaluation and Risk Assessment: We can never com- the impact on Group earnings would probably be low.
pletely rule out system errors and attacks on our IT
­systems and networks. The scope and variety of attack External Risks
scenarios are on the rise worldwide. A long-term failure of Scenario: Pandemic, natural disaster, war or civil war.
IT systems or a major loss of data can considerably impair
WACKER’s operations. Thanks to our precautionary mea- Impact on WACKER: Impairment of our entrepreneurial
sures, we consider the occurrence of such events to be capacity to act, production downtimes, loss of trade
unlikely. However, if one of our IT systems experienced ­receivables, impact on sales and earnings.
downtime, a service disruption or a hacker attack affecting
a significant number of users or lasting a longer period of Measures: WACKER is a global operation with production
time, there would be a medium impact on Group earnings. facilities and technical centers in Europe, the Americas
and Asia, and some 50 sales offices worldwide. Possible
Personnel-Related Risks pandemics, natural disasters and acts of war in individual
Scenario: Demographic change, lack of qualified technical countries or regions where we are active represent a
and managerial employees, and problems in filling execu- ­potential risk to our business and production operations,
tive positions. product sales and fixed assets and, therefore, to our
earnings, net assets and financial position. Our managerial
entities and our sites have worked out and publicized

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 Combined Management Report – Risk Management Report

plans and measures to minimize the effects of a pandemic Strategic opportunities of vital importance – such as strat-
on the health of our employees and on our business egy adjustments, potential acquisitions, collaborations
­processes. A standardized and coordinated approach is and partnerships – are handled at the Executive Board
ensured by a pandemic preparedness plan. The financial level. Such opportunities are incorporated into WACKER’s
impact of damage to our production plants due to natural annual strategy-development and planning process, with
disasters is partly covered by insurance. Since WACKER current issues being discussed at regularly scheduled
has production sites on various continents, we can ensure Executive Board meetings. For these issues, we normally
manufacturing and delivery capability to some degree use various scenarios to develop risk-opportunity profiles
even if individual plants should fail. before making decisions.

Evaluation and Risk Assessment: Risks from pandemics, WACKER has identified a whole range of opportunities for
natural disasters, and acts of war or civil war can never be advancing the Group’s success over the next few years.
ruled out entirely. In our view, it is unlikely that WACKER
could be affected by risks from pandemics, natural disas- Overall Economic Opportunities
ters, and acts of war or civil war. Our preparedness plan Despite the challenges facing the global economy, WACKER
and our internationally distributed production sites and sees good opportunities for continuing to grow at a faster
sales offices help to limit the impact of local or regional pace than world chemical production, especially in emerg-
damage on our business processes. As a result, we ing markets and sales regions. Our focus here is on Brazil,
­estimate that, even if such events occurred, the impact on China, India and the Middle East. As previously, we expect
WACKER’s earnings would be low. the highest growth rates to be in China, India and South-
east Asia. To seize such opportunities, we are steadily
expanding our presence in these markets. Our technical
Opportunities Report competence centers and the WACKER ACADEMY are pivotal in
achieving WACKER’s high standard of service and customer
Opportunity Management System proximity.
WACKER’s opportunity management system remained
104 ­unchanged from the previous year. It is a divisional and
Group-level instrument. We identify operational oppor- 2.71 Overview of Business Opportunities
tunities and leverage them in our business divisions, which
possess the detailed product and market expertise Overall economic opportunities
­required. We continuously use market observation and Growth in Asia and other emerging markets

analysis tools to obtain a well-structured analysis of

Sector-specific opportunities
­m arket, industry and competitor data, for instance. In Extensive product portfolio for future global trends
­addition, we hold customer interviews to evaluate future Urbanization, resource and energy efficiency, mobility, rising
opportunities. The monitoring process – how WACKER affluence and digitalization
seizes opportunities – is based on key indicators (such as
rolling forecasts and current-status reporting). Strategic opportunities
Cost-effective expansion of capacities for downstream products
Higher cash flows due to lower capital expenditures

2.70 Opportunity Management System

Performance-related opportunities
Higher plant productivity
Opportunity Management System Extension of existing, and establishment of new, technical
competence centers in the regions
Adapting products to regional requirements
Seizing operational Seizing strategic
opportunities through opportunities at a
our divisions Group level

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Combined Management Report – Risk Management Report

Sector-Specific Opportunities WACKER BIOSOLUTIONS primarily expects growth oppor-

Our extensive product portfolio in particular offers sector-­ tunities in its bioengineered products, which include
specific opportunities by placing us in an excellent position pharmaceutical proteins, cyclodextrins and cysteine. With
to leverage global megatrends. They include advancing fermenter capacities ranging from 300 to 1,500 liters for the
urbanization, the trend toward conserving natural resources contract manufacturing of pharmaceutical proteins, we
and energy, the increasing global demand for mobility, and believe that we are well-equipped to cover our customers’
the growing need for products that enhance the quality of life. entire supply-chain needs, from clinical testing through to
These trends remain as important as ever to our business. supplying the market. In the field of cyclodextrins and
cysteine, we are developing new applications (e. g. for low-
Rising affluence in emerging countries, particularly in Asia, fat salad dressings), thereby creating additional demand
coupled with ever more stringent market and customer for our products.
requirements, are fueling demand for products incorpo-
rating high-quality silicones. WACKER wants to benefit from
this development and bolster the proportion of highly 2.72 Sales Volumes: Opportunities and Risks
profitable specialty silicones in its portfolio compared with
Risks Opportunities
standard products. Our main points of focus are automotive
applications, cosmetics, personal care, health, medicine, Weaker economic growth Sales growth driven by
electronics and clothing. We intend to support growth in in China and the emerging products for cosmetics and
markets personal care, health,
these areas by launching innovative products and technol- electronics and construction
ogies for wound dressings, cosmetics, textile care, plastics Ongoing geopolitical crises Strong growth in
processing, the electronics sector, and 3D printing. and increased political photovoltaics
uncertainty in Europe and
the USA
We see good growth prospects for WACKER SILICONES in
the electrical and electronics markets, especially in the
field of automotive electronics. Growth is being driven by
digitalization, connectivity and electromobility. For exam- Energy remains a key megatrend, with the photovoltaic
ple, electronic automotive assistance systems – which are industry playing a major part here. The competitiveness of 105
vital for autonomous driving – are playing an ever more the solar industry versus other energy sources continues
important role. According to Semicast Research, the to spur demand for solar installations. All around the globe,
global market for driver-assistance systems in vehicles will the use of renewable energy is increasing. We see growth
grow by almost 13 percent annually until 2022. Silicone gels potential mainly in China, India and the USA. As a hyper-
and silicone encapsulants reliably protect the necessary pure-polysilicon producer, and a cost and quality leader,
sensors and electronic components. WACKER POLYSILICON will benefit from this megatrend.

WACKER POLYMERS, too, has potential for growth amid the Strategic Opportunities
rising affluence in emerging economies, the increase in The expansion of our upstream-product capacities in
urbanization, and the trend toward conserving natural ­r ecent years offers WACKER opportunities for further
­r esources and reducing carbon dioxide emissions. The growth at its business divisions. Our focus until 2020 will
move away from conventional building materials and now be on meeting rising customer demand, mainly
construction methods to higher-quality systems will con- through cost-effective expansions to existing plants, and
tinue. A key aspect here is the use of dispersible polymer on strengthening our capacities for downstream products
powders for modifying cement and gypsum mortars. in global growth regions. At our Jincheon site in South
Through the addition of these polymer powders, mortar Korea, for example, we are currently building new silicone
mixtures are easier to process, can be applied more thinly production facilities to supply the construction, electronics
and their properties can be substantially improved, too. and automotive industries. In the USA, we are setting up a
But, so far, some 80 percent of dry-mix mortars used in new research center for silicones in Ann Arbor, Michigan,
the  building sector are not modified. In many regions, which will strengthen our development expertise in North
construction experts have only just started to appreciate America. The new pilot reactor for VAE dispersions at the
the benefits of polymer-modified dry-mix mortars. In par- Nanjing polymer site in China enables us to expand our
ticular, we are working on specialty polymer binders for offering for product developments, application technology
gypsum-based materials for the rapidly growing drywall and customer services. As planned, we completed com-
market. WACKER POLYMERS also sees further potential in its missioning of the production facilities at our polysilicon
material-substitution business. site in Charleston, Tennessee in 2016. As a result, we can

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Risk Management Report – Outlook

participate in the continuing growth of the photovoltaic

market. We expect our much lower capital-expenditure
Outlook
level to markedly lift net cash flow in this and the coming
years.

Performance-Related Opportunities
WACKER has a number of opportunities for improving its
cost structures, processes and productivity. At WACKER Underlying Economic Conditions
POLYSILICON and Siltronic, we are continuing to implement
our cost roadmaps. In the chemical divisions, we are Economists agree that the world economy is on track
­creating further cost-cutting potential with our productivity for moderate growth. But the projections involve major
and efficiency program – the Wacker Operating System. uncertainties, since the risks are still high that global
Our various cost-cutting levers include the specific costs growth could be weaker than expected in 2017. The upturn
for auxiliaries, productivity advances on the manufacturing in advanced economies remains subdued, with growth
side, and a broader choice of suppliers for securing more dampened by restrained capital spending and sluggish
attractive purchasing terms. domestic demand. Low inflation in many countries is also
hampering growth, and the continued expansionary mon-
etary policy of major central banks is providing only limited
Executive Board Evaluation impetus.
of Overall Risk
The Executive Board bases its estimate of the overall risk 2.73 GDP Trends in 2017
situation on the risk management system in place. The
% 0 Worldwide 3.4
system compiles all risks identified by our divisions, cor-
porate departments and regional entities, and is regularly Europe 1.6

reviewed by the Executive Board and handled by the Audit

106 Committee. Essentially, it was the risk affecting pensions Asia 5.7

that rose during 2016. Due to ­currently rising prices for

crude oil and coal, procurement-­market risks are higher China 6.3

compared with the previous year. The timely commission-

ing of the production facilities at the Charleston site meant India 7.8

investment risks decreased during the reporting year. In

our view, the overall risk is roughly the same as a year Japan 1.0

earlier.
USA 2.3

As of this report’s publication date, the Executive Board

Sources – worldwide: IMF; Asia: ADB; China: ADB; India: ADB;
does not see any individual or aggregate risk that could Japan: OECD; USA: OECD; Europe: OECD

endanger WACKER’s future in any material way. Market risks

do still exist in the photovoltaic industry, which is dominated
by overcapacity, low prices and intra-sector consolidation. According to the International Monetary Fund, global
Thanks to our extensive product portfolio and our sound growth will pick up somewhat in 2017 relative to last
regional footing, though, we see good opportunities for year. The IMF expects world GDP to expand by 3.4 percent
expanding our leading market positions and achieving (2016: 3.1 percent). In its view, emerging markets will make
further growth. We remain confident that WACKER is strate- the biggest contribution to growth in 2017, with a gain of
gically and financially so well positioned that we can take 4.6 percent. Advanced economies will increase their eco-
advantage of any opportunities that arise. nomic output by 1.8 percent. In China, the risk of an abrupt
decline in growth has eased in the near term, since stimu-
lus measures are slowly gaining traction. Experts agree
that the expansion in China and emerging Asian countries
will continue to lose momentum in the next few years,
­although overall growth rates will remain high. In the euro-
zone, growth seems to be continuing at a moderate pace,
despite uncertainty about the shape of the British exit from
the European Union. In the USA, GDP is also ­expected to
increase in 2017.

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Combined Management Report – Outlook

Given the latest economic projections, our scenario is for Global Construction Industry to Remain on
the global economy to advance noticeably in 2017, and we Growth Trajectory
anticipate a similar growth trend in 2018. According to research institute B + L Marktdaten GmbH, the
construction industry will continue expanding over the
next few years. On average, construction volume should
Sector-Specific Conditions climb by about 1.7 percent annually through 2019, with Asia
being the main growth driver. B + L anticipates that the
We expect economic trends in the sectors relevant to our construction industry in Europe and North America will
business to be largely positive in 2017. continue growing, albeit at a slower pace than in Asia. In
South America, on the other hand, the construction market
Chemical Industry Expected to Grow Slightly in 2017 is stagnating.
After a mixed year in 2016, the German Chemical Industry
Association ( VCI) predicts that chemical-sector momentum
will remain weak in 2017. According to the VCI, global 2.74 Construction-Industry Growth Rates by Region,
­chemical production will rise only 0.5 percent, while total 2017 to 2019

sales will grow 1 percent. Growth in Germany’s chemical % 0 Worldwide 1.7

sector will continue to be export-driven. Based on VCI
Asia 2.4
projections, however, the difficult economic environment
will hamper upward momentum. Middle East
1.9
and Africa
WACKER’s chemical divisions anticipate growth opportuni- Eastern
1.7
ties primarily in the BRIC countries and other emerging Europe
markets. Increasing emerging-economy affluence will North
1.2
­enable us to further boost our sales in China and India, for America
example, and in Southeast Asia. WACKER’s portfolio has Western
0.9
many value-added products that address the needs of Europe
new customer groups. South
107
0.2
America

Source: B + L Marktdaten GmbH

2.75 WACKER’s Key Customer Sectors

Sectors Trends in 2016 Trends in 2017

Chemicals Weak growth Weak growth

Construction Growth Growth
Energy and electrical Growth Growth
Photovoltaics Growth, continuing market overcapacity Slight growth, continuing market
and ongoing consolidation overcapacity and ongoing consolidation
Semiconductors Slight growth Growth

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 Combined Management Report – Outlook

In the coming years, renovation, energy-efficiency and most important market worldwide. According to market
sustainability projects will continue to offer WACKER good researchers at IHS, other countries likely to add large
growth opportunities. At WACKER POLYMERS, we expect our amounts of capacity include the USA, India and Japan.
construction-sector sales to climb in every region during Regions with high growth potential include Central and
2017. The main growth drivers, according to our projections, South America, Southeast Asia, the Middle East and
will be low-emission interior paints and dry-mix mortars. ­Africa. WACKER’s own market research indicates that the
At WACKER SILICONES, the percentage of high-value, photovoltaic market will see further growth in 2017. Newly
­specialty products in our construction-industry portfolio installed PV capacity is likely to reach between 75 and
should continue rising. Growth prospects are good 85 gigawatts (GW ).
for ­hybrid polymers (for formulating high-performance
­a dhesives and sealants) and for silicone sealants sold
under our own brand. 2.76 Photovoltaic-Market Trend in 2017

Installation of New PV Capacity ( MW )

Electrical and Electronics Industries Anticipate
2017 2016
Moderate Growth in 2017
Lower Range Upper Range
The electrical and electronics industries expect global
market volumes to expand by 3 to 4 percent in 2017.
­According to the ZVEI (German Electrical and Electronic Germany 1,500 1,700 1,500
Manufacturers’ Association), this growth will be fueled France 1,000 1,200 800
primarily by Asia, with slight gains anticipated in Europe Italy 400 500 400
and the USA. In the German electrical and electronics Rest of Europe 4,000 4,500 4,000
sectors, the ZVEI forecast is for growth of 2 percent in 2017. USA 12,000 14,000 14,600
WACKER expects good growth opportunities from silicone Japan 7,500 8,000 8,300
gels and silicone encapsulants for electronic components China 24,000 27,000 30,000
and from customized silicones for the automotive industry, India 8,500 9,500 4,200
e. g. for driver-assistance systems, sensors and optical Other regions 16,100 18,600 12,200
108 displays. Total 75,000 85,000 76,000

Photovoltaic Market Growth to Continue in 2017 Sources: PV market in 2017: IHS, RTS Corporation, WACKER’s own
Amid Challenging Conditions market research; PV market in 2016: Germany’s Federal Network Agency,
Commissariat Général au Développement Durable, IHS, Solar Energy
Conditions will remain challenging in the photovoltaic Industries Association (SEIA), RTS Corporation, WACKER’s own market
research
­industry in 2017. Market uncertainty stems mainly from the
low profitability levels of many solar companies, from
production overcapacity and from low prices. Both solar
module costs and global prices for solar modules fell in the Demand for Semiconductor Wafers Likely to Rise in 2017
course of 2016, in some cases by as much as 30 percent, Market researchers at IHS Markit Technology expect
making photovoltaics even more competitive compared silicon-­wafer demand by surface area sold to increase by
with other energy sources in all regions of the world. In 5.1 percent in 2017. The main factor fueling this trend is
December 2015, 190 countries attending the Paris Climate semiconductor-market expansion. IHS Markit Technology
Conference agreed to measures aimed at keeping global anticipates that the silicon-based semiconductor market
warming well below 2 ° C, ideally at only 1.5 ° C. The majority will post sales growth of 4.8 percent in 2017.
of the countries taking part in the conference have since
signed the agreement. Photovoltaics (PV ) have a crucial
role to play in achieving the agreed climate targets as they Group Strategy for the Next Two Years
can reduce specific carbon emissions by a substantial
margin compared with fossil fuels. As a result of these Three levers will continue to determine WACKER’s business
political parameters and the increased competitiveness of strategy in the coming years: expansion into emerging
photovoltaics, new markets for PV technology will open up markets and regions; innovations; and the substitution of
and this segment of the global renewables market will competitors’ products with WACKER products. Our focal
continue to grow. In 2017, China will remain the largest and regions for further growth remain unchanged: Brazil, China,

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Outlook

India, Southeast Asia and the Middle East. Of these, China developed specialty dispersions for hydrophobic coatings
offers the greatest potential. We continue to expect good that provide kitchens, bathrooms and foundations with
growth opportunities for our products in India. In addition, reliable protection against moisture. Researchers at
we see chemical-business growth potential for our estab- Markets­a ndMarkets estimate that the global market for
lished markets in Europe and the Americas. Further details waterproofing admixtures for construction applications
about strategy can be found in the Goals and Strategies will grow by some 8 percent on average to reach around
section of this report. US$ 3.8 billion by 2020.

WACKER’s international presence will increase in the coming Global demand is also increasing for environmentally
years, supported by regional expansion projects in our compatible, water-based paints and coatings. According
various markets. We will transfer even more operational to Mordor Intelligence, the global coatings industry will
responsibility to the regions. Our aim is to tailor our prod- expand by an average of 5 percent a year to reach a pro-
ucts even better to local requirements. To this end, we will jected value of around US$ 179 billion by 2021. We intend to
broaden the international scope of our R&D activities. We enhance our market position in this area with our specialty
are also systematically extending our network of technical dispersions for functional exterior applications.
competence centers and WACKER ACADEMY sites.
WACKER SILICONES will intensify its activities in additive
manufacturing with silicones, a field we entered in 2014.
The WACKER Group’s Prospects WACKER’s proprietary 3D printing process, which adds
­s ilicone droplets layer by layer to make printed parts,
Our expectations are based on the assumption that the ­d elivers great precision and design freedom. Under our
global economy will grow in 2017. The strongest impetus ACEO ® brand, we offer extensive consultation and support
will come from Asia and the USA, while Europe will see services in the field of 3D printing with silicones. ACEO ®
subdued growth. developers are cooperating closely with universities and
research institutes so that we can reinforce our expertise
Our capital expenditures in 2017 will focus on plants for and achieve our goal of becoming the market leader for
manufacturing intermediates and downstream products. this technology. Experts anticipate annual growth rates of 109
WACKER’s priority is to grow its business organically. In our over 30 percent for the 3D market. Other business areas
opinion, the applications and markets that we are address- that are highly promising include our precision silicone
ing will continue to offer good growth potential. Capital films. They pave the way for such developments as mem-
expenditures in 2017 will remain well below the level of branes and wearable sensors for textiles, which can be
depreciation. They will also come in below depreciation used, for example, to depict the wearer’s movements
in 2018. ­virtually, for medical and therapeutic purposes.

WACKER SILICONES is constructing a new pyrogenic-silica According to experts, the wound-dressing market is
plant at our Charleston site in the USA, and a multifunctional ­p rojected to grow by 6 percent a year through 2021. In
facility for silicones at Jandira, Brazil. WACKER POLYMERS is ­response to this demand, WACKER has developed specialty
investing in a reactor for VAE dispersions at Burghausen, silicone gels. For large or chronic wounds, the medical
Germany. In Spain, WACKER BIOSOLUTIONS has acquired a sector is increasingly turning to silicone-coated wound
large-scale fermentation plant for producing fermentation-­ dressings. In cosmetics and personal care, we are devel-
generated cysteine. At Siltronic, investments are focused oping new silicone additives. Activities in Asian markets
on fulfilling the latest design-rule specifications in 300 mm are focusing on silicone elastomer gels for formulating
technology. skincare products and make-up. In China and India, we
are expanding our portfolio of silicone fluids and emulsions
Future Products and Services for shampoos and conditioners. Asia and the Middle East
WACKER POLYMERS will continue to intensify its activities are the main growth drivers for cosmetics and personal-­
in polymeric binders for sophisticated coating and con- care products. Asia has already become the world’s
struction applications. In particular, global demand is rising ­largest market, with the value of goods sold exceeding
for functional additives that are used in water-repellent € 100  billion.
construction materials and impregnating agents. We have

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 Combined Management Report – Outlook

In the construction sector, we are focusing, for example, production-related service department. The emphasis is
on new anti-graffiti coatings and on adapting our products on key projects that have a high economic benefit and a
to local requirements so as to further enhance our presence strong impact on costs.
in regional markets. Silane-modified hybrid polymers are
becoming increasingly important as a technological plat-
form for formulating construction sealants and adhesives, 2.77 Facility Start-Ups in 2017
highly durable industrial adhesives, coatings, and water-
Location Projects Year
proofing membranes. We also anticipate growth momentum
from our silicone additives for producing wood-plastic
composites. According to MarketsandMarkets, global Burghausen Dispersions reactor 2017
demand for such hybrid plastics will expand by 12 percent Burghausen Logistics expansion 2017
annually through 2021. Growth will come mainly from the for vinyl acetate
monomer ( VAM)
construction and automotive industries.
Adrian, Michigan, USA Discontinuous 2017
emulsion plant
Wacker Biotech has developed a reliable, state-of-the-art Brazil Multifunctional 2017
process that will enable medac, a pharmaceutical-industry facility for silicones
customer, to produce its Spectrila ® biopharmaceutical in
a  safe, cost-efficient manner to supply the market. The
medication is used for treating acute lymphocytic leukemia In 2017, maintenance costs will amount to about € 475 million.
( ALL ), the most common form of leukemia in children. In
combination with other drugs, Spectrila® can achieve a cure Procurement and Logistics
rate of 90 percent in children. Studies by Research and Energy and raw-material procurement remains a significant
Markets indicate that the biologics market will grow by an factor influencing WACKER’s profitability. Our energy and
average of 7 percent a year to reach about US$ 250  billion raw-material costs account for over one-third of the cost
by 2020. of goods sold. WACKER anticipates that the average prices
of our key raw materials will be higher in 2017 than last year.
110 The market for functional foods and dietary supplements In the first half of 2016, prices on the energy spot markets
also offers opportunities. Market research institute Mordor and other raw-material markets bottomed out. Since then,
Intelligence projects that growth rates for foods with health prices have been rising in these markets, which in turn has
benefits will average 7.5 percent a year. WACKER BIOSOLUTIONS significantly affected the prices of many of our raw materials.
intends to benefit from this growth, for example with its During the remainder of 2017, crude-oil price trends could
nature-identical hydroxytyrosol for cardiovascular health, also influence the pricing of key WACKER raw materials,
its fermentation-generated cysteine for vegetarian-grade such as ethylene and methanol. Due to Europe’s high de-
meat flavors and its cyclodextrins for egg-free baked goods. pendence on imported raw materials, anti-dumping tariffs
may also have a negative impact on WACKER’s raw-material
Research & Development costs.
The Group’s research and development work remains
­focused on key strategic projects. WACKER intends to spend We assume that electricity prices will remain stable year
11 percent of its R&D budget on these projects in 2017 (2016: over year, while prices for natural gas will be higher. Overall
15 percent). Our R&D work will prioritize the highly promising energy costs will be higher in 2017 than last year.
fields of energy, consumer care, biotechnology, construction
applications and semiconductors, with particular emphasis Our raw-material and energy supplies are largely secured
on energy storage and renewable energy generation. for 2017. The markets in which we source our raw materials
are sufficiently liquid, making bottlenecks unlikely. At
Production Technical Procurement & Logistics, we are establishing a
Over the next two years, WACKER will bring additional globally standardized supplier-management methodology.
production capacity on stream. The groupwide Wacker The aim here is to focus on the key partners in our supplier
Operating System ( WOS) program is focused on enhancing portfolio so that we can work together with them to increase
the productivity of manufacturing facilities and of every their performance capabilities for WACKER.

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Outlook

On the logistics side, we are exploring the potential for 2.78 WACKER’s Environmental Targets through 2022
digitalizing the logistics chain, running pilot applications at
Region Key Environmental Base Year Targets for
our central warehouses and cooperating closely with our Indicator 2022 (%)
logistics partners.
WACKER Weighted 2007 –50
Sales and Marketing ­G ermany ­s pecific energy
consumption
WACKER POLYMERS will open a new technical competence (amount of
center in Indonesia in 2017. An additional sales office will be energy per unit
opened in Hanoi, Vietnam, while our sales office in the of net production
output)
Philippines will be enlarged. In the Middle East, we are
WACKER Specific carbon 2012 –15
systematically expanding our sales activities in cooperation ­G ermany dioxide emissions
with our distributors. The most important tradeshow in ( per metric ton of
2017 is the European Coatings Show, which takes place in net production)
Group Specific dust 2012 –50
Nuremberg this April.
emissions
( per metric ton
Employees of product)
We expect employee numbers to edge up in 2017. Prudent Group Specific 2012 –25
­e missions of
personnel planning will remain a priority.
relevant VOCs
(volatile organic
Sustainability compounds;
per metric ton
We will continue improving WACKER’s energy efficiency.
of product)
By setting quantifiable environmental targets, we intend
to  lower the environmental impact of our production
­activities.
Outlook for 2017
The regional focus of WACKER’s sustainability management
activities will be on Asia in 2017, where we will examine WACKER’s main planning assumptions relate to raw-material 111
environmental, health and safety aspects at individual and energy costs, personnel expenses and exchange rates.
sites. In 2018, the regional focus will be on the Americas. For 2017, we anticipate euro exchange rates of US$ 1.10 and
¥ 120.
As regards occupational safety, our groupwide target is to
lower WACKER’s accident rate (the number of workplace Performance Indicators and Value-Based Management
accidents per million hours worked) to 1.7 or lower by 2020. WACKER’s key financial performance indicators are un-
changed compared with last year.
We are preparing another 110 substance dossiers for the
third stage of REACH, which runs until mid-2018. Volume Growth to Support Group Sales in 2017
WACKER anticipates volume growth at every division in
In 2017, WACKER will publish its Sustainability Report for 2017. Our planning assumes rising prices for silicon wafers.
2015 – 2016. ­Average prices for polysilicon will be below last year’s
level. Group sales are expected to climb by a mid-single-
digit percentage amid continued low prices in our polysilicon
business.

Economic uncertainties could cause the actual performance

of the WACKER Group and its divisions to diverge from our
assumptions, either positively or negatively.

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Outlook

From today’s perspective, WACKER’s chemical divisions will year. If current market conditions continue during the year,
generate sales growth. We expect polysilicon sales to be on there will be additional opportunities for the EBITDA trend.
a par with last year. Siltronic will grow its sales substantially. With an effective tax rate of 30 percent, Group net income
should come in at last year’s level.
Compared with 2017, sales should continue growing in
2018  – provided that the world economy remains on its ROCE: ROCE will be on a par with last year (2016: 6.1 percent).
growth path, as economic research institutes predict, and
there are no unforeseen slumps in WACKER’s key regions Net cash flow: we expect net cash flow in 2017 to be clearly
and industries. positive and comparable with last year.

Outlook for Key Performance Indicators Outlook for Supplementary Performance Indicators
at the Group Level at the Group Level
From today’s perspective, the key performance indicators Capital expenditures: at about € 450 million in 2017, capital
at the Group level will develop as follows. expenditures will edge up compared with last year, but
remain well below depreciation. Depreciation will be around
EBITDA margin and EBITDA: the EBITDA margin is projected € 720 million in 2017, slightly below last year’s level. Capital-­
to be slightly below last year’s figure. On balance, prices expenditure projects include the construction of a new
will be lower in our business fields and raw-material prices plant for pyrogenic silica at our Charleston site in the USA.
will be higher, both of which will weigh on the EBITDA The anticipated cash flow from operating activities is likely
­margin. EBITDA – on a comparable basis, i. e. adjusted to to fully cover investment spending.
exclude solar-sector special income from damages
­received and from terminated contractual and delivery Net financial debt: net financial debt will decrease further,
relationships with customers – will be on a par with last to considerably below last year’s level (2016: € 992.5 million).

2.79 Outlook for 2017

112 Reported for Outlook for
2016 2017

Key Financial Performance Indicators

EBITDA margin (%) 20.4 Slightly below last year’s level
At last year’s level, on a comparable basis
EBITDA (€ million) 1,101.4 1 without special income
ROCE (%) 6.1 At last year’s level

Net cash flow (€ million) 400.6 At last year’s level

Supplementary Financial Performance Indicators

Sales (€ million) 5,404.2 Mid-single-digit percentage increase
Capital expenditures (€ million) 427.6 Around 450
Net financial debt (€ million) 992.5 Substantially lower than last year

Depreciation (€ million) 735.2 Around 720

1
EBITDA exclusive of special income amounted to € 1,081.1 million in 2016.

Wacker Chemie AG – Annual Report 2016

Combined Management Report – Outlook

Divisional Sales and EBITDA Trends Future Dividends

At WACKER SILICONES, we expect to achieve a mid-single- WACKER wants its shareholders to gain more from its
digit percentage increase in sales in 2017 relative to last year. profitability. The goal is to distribute around half of the
Sales growth will be fueled by every WACKER SILICONES company’s net income to shareholders. Previously, WACKER
business sector. We expect sales to increase in all regions. aimed for a distribution ratio of at least 25 percent of net
We want to continue increasing the share of specialty income. In the future, about 50 percent of net income
products in overall sales and keep capacity utilization should go to shareholders, provided the business situation
high. With some raw-material prices rising, EBITDA should permits and the corporate bodies responsible agree.
be slightly higher year over year.
Financing
At WACKER POLYMERS, our forecast is for a mid-single-digit The main aspects of our financing policy remain valid.
percentage increase in sales compared with last year, with We are confident that we have a strong financial profile
both dispersions and dispersible polymer powders con- with a sensible capital structure and healthy maturities
tributing to this growth. We expect last year’s strong growth for our debt. As of December 31, 2016, WACKER had at its
trend, especially in the Americas, to continue. EBITDA is ­disposal unused lines of credit with residual maturities of
anticipated to be substantially lower year over year due to over one year totaling some € 800 million.
much higher raw-material prices, with the EBITDA margin
exceeding the 16 percent targeted for WACKER’s chemical Executive Board Statement on Overall Business
­divisions. Expectations
The economic and political risks for 2017 have not changed
At WACKER BIOSOLUTIONS, our projection is for a low- in any material way compared with last year. As yet, we
single-­d igit percentage increase in sales in 2017, with cannot conclusively assess what economic policy the
pharmaceuticals and agrochemicals providing the main United States is likely to pursue under the Trump admin-
impetus for growth. ­Integration costs for the new site in istration. Overall, however, there has been a discernible
Spain will impact EBITDA in 2017, which will be substantially increase in trade protectionism worldwide, which could
lower than last year. hamper global growth. WACKER nevertheless expects the
world economy to continue growing in 2017. 113
We expect polysilicon volumes to continue growing in
2017 and estimate that the photovoltaics market will keep We anticipate that the prices of the raw materials we
expanding as well. Despite volume growth, we do not expect use for production will increase in 2017. Group sales are
sales to exceed last year’s level, given that average prices ­expected to climb by a mid-single-digit percentage amid
are likely to be lower than they were last year. EBITDA – continued low prices in our polysilicon business. Our
adjusted to exclude special income from advance payments chemical divisions are likely to increase their sales. We
retained and damages received from customers – is expect sales at WACKER POLYSILICON to be on a par with
­expected to be somewhat higher than last year. last year. Siltronic will grow its sales substantially. EBITDA
on a comparable basis is anticipated to be the same as
At Siltronic, we are projecting a high-single-digit percent- last year, while the EBITDA margin will decline slightly year
age increase in sales, mainly spurred by volume gains and over year.
higher sales prices. We expect capacity utilization to be
high for 200 mm and 300 mm wafer business. We also At around € 4 50 million, capital expenditures will be on a
forecast a substantial year-over-year increase in EBITDA par with last year. Depreciation will be slightly below last
due to rising volumes and prices, to measures taken to year’s level, at € 720 million. We expect net cash flow to be
optimize costs and to a year-over-year decline in currency-­ clearly positive and of a similar magnitude to last year. Net
hedging costs. financial debt will decline substantially and Group net in-
come is expected to be roughly unchanged over last year.

Wacker Chemie AG – Annual Report 2016

 Combined Management Report – Outlook

WACKER has outstanding products, which are in demand

from customers from all over the world. Our technological
and innovative strength and our presence in key markets
offer us a firm foundation for reinforcing and expanding
our market positions.

We see good opportunities in 2017 to achieve further sales

gains and to reach the same level of adjusted EBITDA as
last year despite rising raw-material prices. Our strategy
puts us in an excellent position to continue on this growth
trajectory beyond 2017.

As of the date on which these financial statements were

prepared, no changes had been made to our forecast.

114

Wacker Chemie AG – Annual Report 2016

115 – 189
Consolidated
Financial Statements

Consolidated Financial Statements

Silicones are found in countless

consumer products – ranging
from lamps and irons to cars.
C–
Consolidated
Financial Statements
Statement of Income 117
Statement of Comprehensive Income 118
Statement of Financial Position 119
Statement of Cash Flows 120
Statement of Changes in Equity 121
Reconciliation of Other Equity Items 122
Segment Information by Division 123
Segment Information by Region 124
Notes of the WACKER Group 125
Supervisory Board 176
Executive Board 177
Corporate Governance Report and
Declaration on Corporate Management 178
Declaration by the Executive Board
on Accounting Methods and Auditing 188
Auditors’ Report 189

Further Information
Multiyear Overview 190
Financial Glossary / Chemical Glossary 192
List of Tables and Figures 194
Index 195
 Consolidated Financial Statements – Statement of Income

3.1
Statement of Income
January 1 to December 31

€ million Notes 2016 2015

Sales 01 5,404.2 5,296.2

Cost of goods sold –4,413.5 –4,167.1
Gross profit from sales 990.7 1,129.1

Selling expenses –321.6 –314.2

Research and development expenses –183.4 –175.3
General administrative expenses –147.3 –134.0
Other operating income 01 194.3 377.4
Other operating expenses 01 –167.6 –412.7
Operating result 365.1 470.3

Result from investments in joint ventures and associates 02 0.2 3.3

Other investment income 02 0.9 –0.2
EBIT (earnings before interest and taxes) 366.2 473.4

Interest income 02 6.0 7.3

Interest expenses 02 –42.4 –31.8
Other financial result 02 –65.0 –42.2
Financial result –101.4 –66.7

Income before income taxes 264.8 406.7

117
Income taxes 03 –75.5 –164.9
Net income for the year 189.3 241.8

Of which
Attributable to Wacker Chemie AG shareholders 179.2 246.7
Attributable to non-controlling interests 10 10.1 –4.9

Earnings per common share (€ ) ( basic / d iluted ) 17 3.61 4.97

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Statement of Comprehensive Income

3.2
Statement of Comprehensive Income
January 1 to December 31

€ million 2016 2015

Before Deferred Before Deferred
taxes taxes taxes taxes

Net income for the year 189.3 241.8

Items not reclassified to the statement of income

Remeasurement of defined benefit plans –460.0 103.8 –356.2 214.1 –47.7 166.4
Sum of items not reclassified
to the statement of income –460.0 103.8 –356.2 214.1 –47.7 166.4

Items reclassified to the statement of income

Difference from foreign currency translation adjustment 43.1 – 43.1 141.6 – 141.6
Of which recognized in profit and loss 2.2 – 2.2 – – –
Changes in fair values of securities available for sale 0.3 – 0.3 –0.8 0.1 –0.7
Of which recognized in profit and loss – – – 0.3 – 0.3
Changes in fair values of derivative financial
­instruments (cash flow hedge) 7.6 0.3 7.9 15.8 –2.3 13.5
Of which recognized in profit and loss –21.1 0.3 –20.8 69.4 –6.1 63.3
Effects of net investments in foreign operations 1.1 – 1.1 – – –
Of which recognized in profit and loss – – – – – –
Sum of items reclassified to the statement of income 52.1 0.3 52.4 156.6 –2.2 154.4

Income and expenses recognized in equity –407.9 104.1 –303.8 370.7 –49.9 320.8
Of which
118 Attributable to Wacker Chemie AG shareholders –372.7 104.1 –268.6 326.4 –49.9 276.5
Attributable to non-controlling interests –35.2 – –35.2 44.3 – 44.3

Total income and expenses reported in the fiscal year –114.5 562.6
Of which
Attributable to Wacker Chemie AG shareholders –89.4 523.2
Attributable to non-controlling interests –25.1 39.4

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Statement of Financial Position

3.3
Statement of Financial Position
As of December 31

€ million Notes Dec. 31, 2016 Dec. 31, 2015

Assets
Intangible assets 04 50.4 32.1
Property, plant and equipment 04 4,594.9 4,799.1
Investment property 05 1.5 1.5
Investments in joint ventures and associates accounted for using the equity method 06 11.2 21.2
Securities 09 56.0 3.7
Other financial assets 08 111.5 111.4
Other receivables and other assets 08 3.7 4.3
Income tax receivables 08 – 0.1
Deferred tax assets 03 449.9 321.4
Noncurrent assets 5,279.1 5,294.8

Inventories 07 846.3 785.2

Trade receivables 08 775.7 679.4
Other financial assets 08 65.1 49.9
Other receivables and other assets 08 67.2 58.4
Income tax receivables 08 18.5 19.0
Securities and fixed-term deposits held to maturity 09 126.2 67.2
Cash and cash equivalents 09 283.5 310.5
Current assets 2,182.5 1,969.6

Total assets 7,461.6 7,264.4

119
Equity and Liabilities
Subscribed capital of Wacker Chemie AG 260.8 260.8
Capital reserves of Wacker Chemie AG 157.4 157.4
Treasury shares –45.1 –45.1
Retained earnings 2,488.7 2,408.9
Other equity items –482.4 –213.8
Equity attributable to Wacker Chemie AG shareholders 2,379.4 2,568.2
Non-controlling interests 213.8 226.9
Equity 10 2,593.2 2,795.1

Provisions for pensions 11 2,107.8 1,611.7

Other provisions 12 247.4 217.0
Income tax provisions 12 73.7 52.8
Financial liabilities 13 791.1 1,136.7
Other financial liabilities 14 2.3 2.6
Other liabilities 14 164.2 287.5
Deferred tax liabilities 03 6.2 3.4
Noncurrent liabilities 3,392.7 3,311.7

Other provisions 12 95.0 88.2

Income tax provisions 12 26.8 27.0
Financial liabilities 13 667.1 318.7
Trade payables 14 369.7 378.3
Other financial liabilities 14 61.8 47.5
Income tax liabilities 14 0.8 0.3
Other liabilities 14 254.5 297.6
Current liabilities 1,475.7 1,157.6

Liabilities 4,868.4 4,469.3

Total equity and liabilities 7,461.6 7,264.4

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Statement of Cash Flows

3.4
Statement of Cash Flows
January 1 to December 31

€ million Notes 2016 2015

Net income for the year 189.3 241.8

Depreciation and impairments /  w rite-ups of fixed assets 735.2 575.4
Result from disposal of fixed assets –4.0 –0.2
Other non-cash expenses and income –20.8 –39.1
Result from equity accounting –0.2 –3.3
Net interest result 36.4 24.5
Interest paid –40.7 –30.4
Interest received 6.5 15.1
Income tax expense 75.5 164.9
Taxes paid –79.5 –218.7
Dividends received 4.1 4.3
Changes in inventories –53.3 –40.3
Changes in trade receivables –85.5 16.9
Changes in non-financial assets –6.5 8.1
Changes in financial assets –13.9 49.7
Changes in provisions 70.5 84.7
Changes in non-financial liabilities 11.9 10.3
Changes in financial liabilities 94.7 –8.2
Changes in advance payments received –183.1 –238.3
Cash flow from operating activities (gross cash flow) 19 736.6 617.2
120
Investments in intangible assets, property, plant and equipment, and investment property –514.4 –820.7
Proceeds from the disposal of intangible assets, and property, plant and equipment 6.3 5.1
Cash receipts and payments for acquisitions –8.8 –
Cash flow from long-term investing activities before securities –516.9 –815.6
Cash receipts from the disposal of securities and fixed-term deposits 171.9 342.3
Payments for the acquisition of securities and fixed-term deposits – 284.9 –218.1
Cash flow from investing activities 19 –629.9 –691.4

Dividends paid –99.4 –74.5

Dividends paid to non-controlling interests –1.3 –1.4
Cash receipts from the change in ownership interests in Siltronic AG – 361.9
Bank loans raised 255.9 99.8
Bank loans repaid –285.8 –319.5
Other financial liabilities repaid –5.2 –8.4
Cash flow from financing activities 19 –135.8 57.9
Changes due to exchange-rate fluctuations 2.1 0.9
Changes in cash and cash equivalents 09 –27.0 –15.4
At the beginning of the year 310.5 325.9
At the end of the year 283.5 310.5

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Statement of Changes in Equity

3.5
Statement of Changes in Equity
January 1 to December 31

€ million Subscribed Capital Treasury Retained Other Total Non- Total

capital reserves shares earnings equity controlling
items interests

Jan. 1, 2015 260.8 157.4 –45.1 2,152.9 –603.6 1,922.4 24.1 1,946.5
Net income for the year – – – 246.7 – 246.7 –4.9 241.8
Dividends paid – – – –74.5 – –74.5 –1.4 –75.9
Change in ownership
interests in Siltronic AG – – – 83.8 113.3 197.1 164.8 361.9
Income and expenses
recognized in equity – – – – 276.5 276.5 44.3 320.8
Dec. 31, 2015 260.8 157.4 –45.1 2,408.9 –213.8 2,568.2 226.9 2,795.1

Jan. 1, 2016 260.8 157.4 –45.1 2,408.9 –213.8 2,568.2 226.9 2,795.1
Net income for the year – – – 179.2 – 179.2 10.1 189.3
Dividends paid – – – –99.4 – –99.4 –1.3 –100.7
Income and expenses
recognized in equity – – – – –268.6 –268.6 –35.2 –303.8
Scope of consolidation /
other – – – – – – 13.3 13.3
Dec. 31, 2016 260.8 157.4 –45.1 2,488.7 –482.4 2,379.4 213.8 2,593.2

121

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Reconciliation of Other Equity Items

3.6
Reconciliation of Other Equity Items
January 1 to December 31

€ million Changes in Difference Changes in Remeasure- Effects of Total

fair values of from foreign fair values ment of net invest-
securities currency of derivative ­d efined ments in
available for translation financial ­b enefit plans ­f oreign
sale adjustment instruments operations
(cash flow
hedge)

Attributable to Wacker Chemie AG shareholders

Jan. 1, 2015 0.5 70.5 –28.5 –646.1 – –603.6
Changes recognized in equity –0.7 – –48.6 131.9 – 82.6
Reclassification to the statement of income – – 52.0 – – 52.0
Change in ownership interests in Siltronic AG 0.3 9.3 15.6 88.1 – 113.3
Changes in exchange rates – 141.9 – – – 141.9
Dec. 31, 2015 0.1 221.7 –9.5 –426.1 – –213.8

Jan. 1, 2016 0.1 221.7 –9.5 –426.1 – –213.8

Changes recognized in equity – – –8.1 –318.0 0.6 –325.5
Reclassification to the statement of income – 2.2 12.4 – – 14.6
Changes in exchange rates – 42.3 – – – 42.3
Dec. 31, 2016 0.1 266.2 –5.2 –744.1 0.6 –482.4

Attributable to minority shareholders

Jan. 1, 2015 – –1.2 – – – –1.2

122 Changes recognized in equity 0.3 – –1.2 34.5 – 33.6

Reclassification to the statement of income –0.3 – 11.3 – – 11.0
Change in ownership interests in Siltronic AG –0.3 –9.3 –15.6 –88.1 – –113.3
Changes in exchange rates – –0.3 – – – –0.3
Dec. 31, 2015 –0.3 –10.8 –5.5 –53.6 – –70.2

Jan. 1, 2016 –0.3 –10.8 –5.5 –53.6 – –70.2

Changes recognized in equity 0.3 – –4.8 –38.2 0.5 –42.2
Reclassification to the statement of income – – 8.4 – – 8.4
Changes in exchange rates – –1.4 – – – –1.4
Dec. 31, 2016 – –12.2 –1.9 –91.8 0.5 –105.4

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Segment Information by Division

3.7
Segment Information by Division
January 1 to December 31

€ million Silicones Polymers Biosolutions Polysilicon Siltronic Other Consoli­ Group

dation

2016
External sales 2,001.0 1,176.4 206.4 1,008.7 928.3 83.4 – 5,404.2
Internal sales 0.1 18.4 – 86.8 5.1 79.2 –189.6 –
Total sales 2,001.1 1,194.8 206.4 1,095.5 933.4 162.6 –189.6 5,404.2

EBIT 280.8 223.7 25.7 –117.1 28.7 –76.0 0.4 366.2

Depreciation and impairments,
and write-ups 80.4 37.3 11.3 403.0 117.2 86.2 –0.2 735.2
EBITDA 361.2 261.0 37.0 285.9 145.9 10.2 0.2 1,101.4

EBIT includes:
Impairment of fixed assets – – – –2.5 –0.9 – – –3.4
Result from investments in joint
­ventures and associates 0.2 – – – – – – 0.2

Asset additions 1 88.6 37.5 9.1 130.0 89.5 72.9 – 427.6

Change in the scope of consolidation 26.1 – 11.2 – – – – 37.3
Total asset additions 114.7 37.5 20.3 130.0 89.5 72.9 – 464.9

Assets (Dec. 31) 1,379.8 580.2 151.9 3,018.1 1,034.4 1,326.9 –29.7 7,461.6
Liabilities (Dec. 31) 851.8 291.2 70.9 1,168.1 631.4 1,879.5 –24.5 4,868.4
Net assets (Dec. 31) 528.0 289.0 81.0 1,850.0 403.0 –552.6 –5.2 2,593.2
Investments in joint ventures and asso-
ciates included in net assets (Dec. 31) 11.2 – – – – – – 11.2 123
Research and development expenses 37.9 17.5 6.2 16.9 66.5 41.4 –3.0 183.4
Employees (Dec. 31) 4,566 1,484 510 2,490 3,757 4,398 – 17,205
Employees (average) 4,468 1,480 508 2,448 3,811 4,403 – 17,118

2015
External sales 1,942.8 1,162.5 197.1 978.9 923.8 91.1 – 5,296.2
Internal sales 0.5 23.0 – 84.7 7.5 106.4 –222.1 –
Total sales 1,943.3 1,185.5 197.1 1,063.6 931.3 197.5 –222.1 5,296.2

EBIT 194.5 184.4 21.0 162.6 4.5 –94.5 0.9 473.4

Depreciation and impairments,
and write-ups 81.7 37.8 11.2 239.8 119.5 85.6 –0.2 575.4
EBITDA 276.2 222.2 32.2 402.4 124.0 –8.9 0.7 1,048.8

EBIT includes:
Income from investments in joint
­ventures and associates 3.3 – – – – – – 3.3

Asset additions 1 82.0 47.4 6.2 581.8 75.1 41.5 – 834.0

Asset additions 82.0 47.4 6.2 581.8 75.1 41.5 – 834.0

Assets (Dec. 31) 1,309.3 589.9 149.3 3,132.0 1,016.1 1,096.3 –28.5 7,264.4
Liabilities (Dec. 31) 749.0 281.1 67.0 1,392.0 543.5 1,451.5 –14.8 4,469.3
Net assets (Dec. 31) 560.3 308.8 82.3 1,740.0 472.6 –355.2 –13.7 2,795.1
Investments in joint ventures and asso-
ciates included in net assets (Dec. 31) 21.2 – – – – – – 21.2

Research and development expenses 35.8 14.8 6.1 15.3 64.3 42.8 –3.8 175.3
Employees (Dec. 31) 4,353 1,461 491 2,373 3,894 4,400 – 16,972
Employees (average) 4,348 1,442 491 2,278 4,004 4,374 – 16,937

1
Intangible assets; property, plant and equipment; investment property
The segment information by division is an integral part of the Notes to the Consolidated Financial Statements. For explanations of the key indicators, see Note 20.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Segment Information by Region

3.8
Segment Information by Region
January 1 to December 31

€ million Germany Rest of The Asia Other Consoli­ Group

Europe Americas regions dation

2016
External sales by customer location 710.8 1,183.2 950.9 2,340.5 218.8 – 5,404.2
External sales by Group company
location 4,241.1 121.4 1,319.0 1,317.5 10.4 –1,605.2 5,404.2

Additions to property, plant and

­e quipment 1 245.5 9.8 138.6 33.6 0.1 – 427.6
Change in the scope of consolidation – 11.2 – 26.1 – – 37.3
Total asset additions 245.5 21.0 138.6 59.7 0.1 – 464.9

Assets (Dec. 31) 6,118.7 1,676.8 3,169.6 1,185.8 6.6 –4,695.9 7,461.6

Liabilities (Dec. 31) 3,888.3 194.9 1,689.5 822.8 2.9 –1,730.0 4,868.4
Net assets (Dec. 31) 2,230.4 1,481.9 1,480.1 363.0 3.7 –2,965.9 2,593.2

Noncurrent assets 2 1,573.5 62.3 2,484.4 557.5 3.0 –19.1 4,661.6

Research and development expenses 168.4 – 11.7 18.3 – –15.0 183.4
Employees (Dec. 31) 12,138 387 2,013 2,608 59 – 17,205

2015
External sales by customer location 684.9 1,202.7 945.1 2,253.1 210.4 – 5,296.2
External sales by Group company
124 location 4,332.6 134.0 892.8 1,164.5 9.2 –1,236.9 5,296.2

Asset additions 1 193.5 11.1 587.8 41.5 0.1 – 834.0

Asset additions 193.5 11.1 587.8 41.5 0.1 – 834.0

Assets (Dec. 31) 6,119.2 1,650.5 2,826.1 1,108.2 5.9 –4,445.5 7,264.4

Liabilities (Dec. 31) 3,550.2 182.5 1,436.2 825.6 2.0 –1,527.2 4,469.3
Net assets (Dec. 31) 2,569.0 1,468.0 1,389.9 282.6 3.9 –2,918.3 2,795.1

Noncurrent assets 2 1,712.5 43.6 2,483.3 610.4 3.1 5.4 4,858.3

Research and development expenses 150.9 – 12.4 14.2 – –2.2 175.3
Employees (Dec. 31) 12,251 390 1,830 2,448 53 – 16,972

1
Intangible assets; property, plant and equipment; investment property
2
Noncurrent assets as per IFRS 8 (excluding financial instruments, deferred tax assets and benefits after termination of the employment relationship)
The segment information by region is an integral part of the Notes to the Consolidated Financial Statements. For explanations of the key indicators, see Note 20.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Notes of the Section 315 a (1) of the German Commercial Code (HGB).
The interpretations of the International Financial Reporting
WACKER Group Interpretations Committee (IFRIC) that are applicable to the
current fiscal year have also been applied.

The fiscal year corresponds to the calendar year. Assets

and liabilities are reported in the statement of financial
position in line with their maturities. The Group classifies
Accounting Principles and Methods assets and liabilities as current if it expects to realize or
The WACKER Group ( WACKER) is a global chemical company settle them within 12 months of the reporting date. The
with core activities in the fields of silicone and polymer chem- statement of income is prepared using the cost-of-sales
istry, specialty and fine chemistry, polysilicon production and method. To improve the clarity of presentation, various
semiconductor technologies. The activities of the individual items in the statement of income and the statement of
segments are explained in the management ­report. The ­financial position have been combined. These items are
Group’s parent company, Wacker Chemie AG, is a listed shown and explained separately in the Notes.
company under the laws of the Federal Republic of Germany
and headquartered in Munich, Germany (entered in Munich’s The Group’s functional currency is the euro. All amounts
commercial register under HRB 159705). Its registered office are shown in millions of euros (€ million) unless otherwise
is at Hanns-Seidel-Platz 4, 81737 München, Germany. stated. There may be slight deviations in the additions as
all amounts have been rounded up to the nearest whole
The consolidated financial statements, the combined number after the decimal point.
management report and any other documents subject to
disclosure requirements are submitted to the publisher Material events occurring after the balance sheet date
of the online German Federal Bulletin and published on are described in detail in the Supplementary Report. The
WACKER’s website. KPMG AG Wirtschaftsprüfungsgesell­ Executive Board of Wacker Chemie AG authorized the
schaft audited the consolidated financial statements and consolidated financial statements on February 27, 2017.
the combined management report, and issued an unqual- They will be submitted to and approved by the Supervisory 125
ified audit opinion for them. Board at its meeting on March 7, 2017.
www.wacker.com/annual-report

New Accounting Standards

Wacker Chemie AG and its subsidiaries are included in the The new or revised accounting standards applied for the first
consolidated financial statements of Dr. Alexander Wacker time in these consolidated financial statements concern:
Familiengesellschaft mbH, Munich. The consolidated finan-
cial statements of Dr. Alexander Wacker Familiengesellschaft, –  Annual improvements to IFRS s
Munich are disclosed to the publisher of the online German (2010 – 2012 cycle and 2012 – 2014 cycle)
Federal Bulletin. – Amendments to IAS 1 (Disclosure Initiative)
– 
Amendments to IFRS 11 (Accounting for Acquisitions
The Executive Board and Supervisory Board of Wacker of Interests in Joint Operations)
Chemie AG submitted the declaration concerning the Ger-
man Corporate Governance Code required by Section 161 These did not, however, have a substantial impact on
of the German Stock Corporation Act ( AktG ) and made it WACKER’s earnings, net assets or financial position, nor
accessible to the shareholders on WACKER’s website. any substantial impact on the presentation of its financial
www.wacker.com/corporate-governance statements. Other standards and interpretations to be
applied for the first time are not applicable due to the
The Executive Board and Supervisory Board of Siltronic AG ­absence of relevant circumstances.
submitted the declaration concerning the German Corporate
Governance Code r­ equired by Section 161 of the German Accounting Standards  /  Interpretations
Stock Corporation Act ( AktG ) and made it accessible to Not Applied Prematurely
the shareholders on Siltronic’s website. The International Accounting Standards Board (IASB) has
www.siltronic.com/int /en/investor_relations/corporate_governance/­ published the following standards, interpretations, and
corporate_governance_1.jsp changes to existing standards the application of which is not
yet mandatory and which WACKER is not applying earlier
Wacker Chemie AG’s consolidated financial statements than required. Only those standards that are relevant to
have been prepared in accordance with the International WACKER are mentioned. WACKER continually evaluates ev-
Financial Reporting Standards (IFRS), as applicable in the ery new standard to determine its impact on the consoli-
European Union ( EU), and the supplementary rules in dated financial statements.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Accounting Standards Published by the IASB, But Not Yet Applied

Standard / Publication Mandatory Endorsed Anticipated Impact on WACKER

Interpretation by IASB from by EU

IFRS 14 Regulatory Jan. 30, Jan. 1, Not to be None

Deferral 2014 2016 adopted
Accounts into
EU law
Amendments Recognition Jan. 19, Jan. 1, Expected The amendments provide clarification concerning the recognition
to IAS 12 of Deferred 2016 2017 in Q2 2017 of deferred tax assets for measurement differences in relation to debt
Tax Assets instruments classified as available for sale. Further, the amendments
for ­Unrealised illustrate how to estimate future taxable profit, which serves as e
­ vidence
Losses of the value of deferred tax assets for loss carry­forwards. This change
does not have any impact on WACKER’s earnings, net assets or
financial position.
Amendments Statement Jan. 29, Jan. 1, Expected The Notes should include a reconciliation – between the opening and
to IAS 7 of Cash 2016 2017 in Q2 2017 closing balances for liabilities arising from financing activities – that
Flows – discloses cash and non-cash changes. The disclosures in the Notes
­D isclosure will be expanded to include this reconciliation.
Initiative
IFRS 9 Financial July 24, Jan. 1, Nov. 22, The revised version of IFRS 9 introduces a single approach to the
Instruments 2014 2018 2016 classification and measurement of financial assets. This approach is
driven by cash flow characteristics and the business model in line
with which the assets are managed. Further, the standard p ­ rovides a
new impairment model that is based on expected credit losses. IFRS 9
also introduces new rules for hedge accounting with enhanced ­f ocus
on an entity’s risk management activities, especially with regard to
managing non-financial risks. WACKER is currently examining the
impact of applying IFRS 9 to its consolidated financial statements.
We expect any impact on earnings, net assets and financial position to
be insignificant in scope. Our disclosure obligations will increase.
126 IFRS 15 Revenue May 28, Jan. 1, Sept. 22, IFRS 15 sets out that an entity shall recognize revenue whenever the
from 2014 2018 2016 customer obtains control of, and can draw an economic benefit from,
­C ontracts the promised goods and services. The transfer of significant risks and
with rewards of ownership is no longer of primary importance, as was still
­C ustomers the case under the old IAS 18 “Revenue” rules. Revenue must be
recognized in an amount that reflects the consideration to which an
entity expects to be entitled. The new model provides a five-step
framework for recognizing revenue, which first identifies the contract
with a customer and the performance obligations it entails, and then
determines and allocates the transaction price. The revenue must be
recognized for each individual performance obligation when the
­c ustomer obtains control of the good or service. WACKER is currently
looking into the impact of the new standard. Its effects cannot be
determined at present. The new standard will result in broader
­d isclosure details in WACKER’s financial statements.
Amendments Clarification April 12, Jan. 1, Q2 2017 None
to IFRS 15 of IFRS 15 2016 2018

Amendments Classification June 20, Jan. 1, 2nd half None

to IFRS 2 and Measure- 2016 2018 of 2017
ment of
Share-based
Payment
Transactions
Amendment Application Sept. 12, Jan. 1, 2017 None
to IFRS 4 of IFRS 9 in 2016 2018
conjunction
with IFRS 4

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Standard / Publication Mandatory Endorsed Anticipated Impact on WACKER

Interpretation by IASB from by EU

IFRS 16 – Lease Jan. 13, Jan. 1, 2nd half The new standard requires all lease arrangements held by the lessee
Leases accounting 2016 2019 of 2017 to be recognized as finance transactions. A lease arrangement gives
the lessee control over the use of an asset for a period of time in exchange
for a consideration. Under the new definition, a leasing arrangement
embedded in a supply contract for goods (IFRIC 4) should no longer
be treated as a finance lease. In the future, a right-of-use is to be
capitalized and the corresponding obligation posted as a liability.
Straight-line depreciation of the right-of-use asset and application of
the effective interest method to the liability result in depreciation and
interest expense. In the Notes, WACKER currently reports operating
lease obligations totaling € 185 million. As yet, we have not evaluated
the impact of the new standard. Under the new standard, disclosures
will be more extensive in the Notes to WACKER’s financial statements.
Amendments Sale or Sept. 11, Postponed Post- None
to IFRS 10 ­C ontribution 2014 poned –
and IAS 28 of Assets awaiting
between an IASB
Investor and exposure
Its Associate draft
or Joint
­Venture
Amendments Transfers of Dec. 8, Jan. 1, 2nd half None
to IAS 40 Investment 2016 2018 of 2017
Property
Annual Annual Dec. 8, Jan. 1, 2nd half None
improve- improve- 2016 2017 / of 2017
ments ments to Jan. 1,
IFRS 2018
­S tandards
(2014 – 2016)
IFRIC 22 Foreign Dec. 8, Jan. 1, 2nd half The interpretation determines the exchange rate to be used on ­initial 127
­C urrency 2016 2018 of 2017 recognition of a foreign currency transaction in an entity’s functional
Transactions currency when the entity pays or receives consideration in advance
and Advance for the related asset, expense or income (or parts thereof ). WACKER
Consideration makes investment-related advance payments to a minor extent only.
The advance payments received for polysilicon deliveries were all
denominated in euros. Other advance payments are made on only a
minor scale. As yet, we have not evaluated the clarification’s impact.
We expect only a marginal change in earnings, net assets and finan-
cial position.

Scope of Consolidation exists when voting rights are equally balanced, except
The consolidated financial statements include the financial if other (contractual) rights result in control by one share-
statements of Wacker Chemie AG and all companies over holder. Currently, no companies are included in the con-
which Wacker Chemie AG has direct or indirect control as solidated financial statements on a proportionate basis.
defined in IFRS 10, or can exercise common control as
­defined in IFRS 11. Depending on their structure, companies Associated companies in which Wacker Chemie AG can
over which Wacker Chemie AG can exercise common exercise significant influence as defined in IAS 28 are like-
control are included in the consolidated financial state- wise accounted for using the equity method. Significant
ments either proportionately (line-by-line) or accounted for influence is presumed if Wacker Chemie AG directly or indi-
using the equity method. In the absence of other limiting rectly holds 20 percent of the voting rights in the invest-
contractual agreements, holding a majority of the voting ment, unless it can be clearly demonstrated that this is not
rights usually leads to control. Common control generally the case.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Structured entities are also consolidated in the manner A total of 60 companies were included in the consolidated
described in IFRS 10 if the economic substance of the rela- financial statements as of December 31, 2016 (Dec. 31, 2015:
tionship indicates the existence of control. WACKER includes 57 companies). Compared with December 31, 2015, the
one structured entity in its consolidated financial state- scope of consolidation changed as follows:
ments. This is a special trust to which Wacker Chemie AG
has contributed funds. This trust fund was established
exclusively for WACKER, and all shares in the fund are held Change in the Scope of Consolidation
by WACKER. Contractual provisions of this fund qualify it as
%
a structured entity as defined in IFRS 10.
Disposals /  m ergers of fully consolidated
Companies in which Wacker Chemie AG has a shareholding ­s ubsidiaries
Siltronic Asia Pte. Ltd., Singapore
of less than 20 percent or does not exercise significant (merged into Siltronic Singapore Pte. Ltd.,
influence are shown as other investments under noncurrent ­S ingapore, as of Jan. 1, 2016) 100
financial assets. Wacker Chemicals Trading (Shanghai ) Co. Ltd.,
China ( liquidation as of May 31, 2016) 100

As it had no substantial impact on the Group’s earnings,

net assets or financial position, the W.E.L.T. Reisebüro Additions of fully consolidated subsidiaries
Wacker-Chemie Zehnte Venture GmbH, Germany
GmbH subsidiary was not consolidated. In 2015, both its
(Feb. 1, 2016) 100
sales and its total assets were below € 0.5 million.
Wacker-Chemie Elfte Venture GmbH, Germany
(Feb. 1, 2016) 100
A detailed list of the companies included in the consoli- Wacker-Chemie Zwölfte Venture GmbH, Germany
dated financial statements and of Wacker Chemie AG’s (Feb. 1, 2016) 100
entire shareholdings is shown in the Breakdown of Share- PT. Wacker Chemicals Indonesia, Indonesia
(Oct. 1, 2016) 100
holdings in accordance with Sections 285 and 313 of the
Wacker Biosolutions León, S. L . U., León, Spain
German Commercial Code. (Dec. 15, 2016) 100
See Note 21 to the Consolidated Financial Statements

128 Reclassification of companies consolidated

using the equity method as fully consolidated
companies
Composition of the Group
Wacker Asahikasei Silicone Co. Ltd., Japan
Number 2016 2015 (Oct. 1, 2016) 50

Fully consolidated subsidiaries

( incl. parent company) 57 53
Germany 17 14
WACKER Biosolutions León S. L. U., León, Spain acquired
International 40 39
large-scale fermentation lines from Antibioticos de León
by means of an asset deal in December 2016. The purchase
Companies consolidated using
the equity method 2 3 price for the facilities amounted to a low double-digit
Germany – – million euro figure, which was capitalized in property, plant
International 2 3 and equipment.

Non-consolidated affiliated On October 1, 2016, WACKER took control of Wacker

companies 1 1 ­Asahikasei Silicone Co. Ltd., Tokyo, Japan by contractually
Germany 1 1 agreeing a purchase option to acquire an additional stake
International – – in the company. Due to the vested purchase option, exer-
cisable at any time, WACKER has the right to increase its
Total 60 57 share from 50 percent to 51 percent. Previously accounted
Germany 18 15 for using the equity method, WACKER now recognizes this
International 42 42 joint venture as a subsidiary in accordance with IFRS 10.
The effect of the change in the scope of consolidation on
Structured entities 1 1 the Group’s earnings, net assets and financial position is
Germany 1 1 presented in the Acquisitions and Majority Takeovers in
International – – Fiscal 2016 section of the Notes.
See p. 130 of the Notes

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Legal, contractual or regulatory restrictions and protective For each acquisition, the individual option exists of mea-
rights concerning non-controlling interests can limit the suring any shares not acquired either at fair value or at the
Group in its ability to retain access to assets, transfer proportionate share of the fair value of the acquiree’s net
these to or from other companies unhindered within the assets. These non-controlling interests are recognized in
Group, and to settle Group debts. The distribution of the statement of financial position under the line item of
­dividends can be limited by the prioritization of retirement the same name.
of shareholder loans. At the reporting date, there were no
significant restrictions due to protective rights to the Costs associated with the business combination are
­benefit of non-controlling interests. For more information, ­recognized as expenses, insofar as these do not concern
please refer to the Notes (Equity /  Non-Controlling Interests / costs of issuing debt instruments or equity securities.
Capital Structure Management).
See Note 10 Goodwill is the acquisition-date value resulting from the
surplus of acquisition costs, from any existing non-con-
In certain countries, regulatory requirements or local trolling interests and from the fair value of any previously
­c orporate-law stipulations can limit the Group’s ability held equity interests in excess of the acquiree’s net assets
to transfer assets to or from other companies within the measured at fair value. Negative differences are recog-
Group. Cash and cash equivalents are subject to local nized in profit or loss immediately after undertaking an
foreign-exchange restrictions in some Asian and South additional review of the purchase price allocation.
American countries. Capital may be exported from such
countries only with prior approval from government Investments accounted for using the equity method are
­authorities and by means of capital measures (dividends, initially measured at cost when the acquisition is made.
capital reductions). There are no other significant limita- If  the cost exceeds the pro rata share of equity, the
tions on assets utility within the Group. ­difference (goodwill ) is included in the carrying amount
of the investment. The carrying amount has to be tested
Consolidation Methods for possible impairment losses as of the balance sheet
The consolidated financial statements are based on the date. If the cost is lower than the share of equity at the time
separate financial statements of Wacker Chemie AG and of acquisition, this difference is included in the carrying 129
its  consolidated subsidiaries, joint arrangements and amount and recorded in the statement of income as
structured entities. The balance sheet date for all of these ­income from investments in joint ventures and associates.
companies is December 31. The carrying amounts for these companies are increased
or decreased annually to reflect their pro rata earnings,
All key reporting data of these companies was audited by dividend payouts or other changes in equity. If there is any
independent auditors prior to inclusion in the consolidated indication that the value of the investment has been per-
financial statements. manently reduced, an impairment is recognized in profit or
loss. Long-term interests that, in substance, form part of
Business combinations are recognized by applying the the investor’s net investment in the entity are included in
purchase method as defined in IFRS 3. The acquisition cost the statement of changes in equity.
is shown as the sum of fair values at the date of purchase of
the assets transferred, of the liabilities ­incurred or assumed, Interim results, sales, expenses, income, receivables and
and of any equity instruments issued in exchange for con- liabilities between the consolidated companies, as well as
trol of the acquiree. In addition, it contains the fair values pro rata profits and losses resulting from transactions with
of assets and liabilities arising from contingent consider- associated companies, are eliminated. For those consoli-
ation arrangements. Assets, liabilities and contingent dation entries affecting income, the income tax effect is
­liabilities identified as part of the acqui­sition during initial taken into account and deferred taxes are included.
consolidation are measured at fair value as of the acqui-
sition date.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Estimates and Assumptions Used in Acquisitions The carrying amount of the stake previously accounted
and Consolidation for  using the equity method totaled € 6.6 million as of
The determination of the fair values of the acquired assets ­O ctober 1, 2016. A business valuation carried out by an
and liabilities requires certain estimates and assumptions, external expert using an actuarial model resulted in a
especially concerning the acquired intangible assets and positive value adjustment of this stake in the amount of
property, plant and equipment, as well as the liabilities € 9.9 million. The valuation was based on the company’s
assumed and the useful lives of the acquired intangible cash flow planning. Remeasurement as part of the deemed
assets, property, plant and equipment. disposal of the previously held equity interests and
currency-­translation effects previously recognized within
Measurement is based to a large extent on anticipated other comprehensive income resulted in other operating
cash flows. If actual cash flows vary from those used in income of € 10.0 million.
calculating fair values, this may affect future net income.
The purchase price allocation was concluded on Decem-
For significant business combinations, the purchase price ber 31, 2016. At the acquisition date, the fair value of the
allocation is carried out with assistance from independent acquired assets totaled € 4 8.7 million, with € 23.2 million in
third-party valuation specialists. The valuations are based noncurrent assets and € 25.5 million in current assets. The fair
on information available at the acquisition date. value of the acquired liabilities amounted to € 22.2 million,
with € 11.1 million in noncurrent liabilities and € 11.1 million in
Various judgments can be made whenever it is necessary current liabilities. The transaction resulted in a small amount
to evaluate whether control, common control or significant of goodwill of € 3.2 million.
influence exists for entities in which WACKER holds less
than 100 percent of the voting rights. Primarily in cases Full consolidation had no substantial impact on the Group’s
where WACKER holds 50 percent of the voting rights, it must sales and earnings. In Q4 2016, AWS posted sales of
be assessed whether there are additional contractual € 12.9  million, EBITDA of € 0.9 million and net income for the
rights or, in particular, factual circumstances that could year of € 0.7 million. The acquired receivables had a fair value
result in WACKER having the right to make decisions of € 7.8 million and solely comprised trade receivables. The
130 ­regarding the potential subsidiary, or whether common fair value corresponded to the gross value of the receiv-
control exists. ables. Asahikasei’s non-controlling interest amounted to
€ 13.2 million as of October 1, 2016.
Changes to the contractual agreements or factual circum-
stances are monitored and assessed in terms of their Foreign Currency Translation
possible impact on the evaluation of whether control or In the Group companies’ separate financial statements, all
common control exists. of the receivables and liabilities in foreign currencies are
translated at the rate prevailing on the balance sheet
Acquisitions and Majority Takeovers in Fiscal 2016 date, regardless of whether or not they have been hedged.
On October 1, 2016, WACKER and Asahikasei Corporation Forward contracts that, from an economic point of view,
signed an agreement for the purchase of a call option for an are used for hedging are reported at fair value. The result-
additional 1 percent of the shares in the subsidiary Wacker ing translation differences are recognized in profit or loss
Asahikasei Silicone Co. Ltd., Japan ( AWS) at a value of one or, if cash flow hedges are in place, recognized directly in
Japanese yen. Up until that point in time, both shareholders equity under other equity items.
had held 50 percent in the company and operated it as a
joint venture. Due to this call-option agreement and the The financial statements of consolidated companies that
resulting potential voting rights, WACKER is deemed under are prepared in foreign currencies are translated on the
IFRS 10 to have assumed control over this company, which basis of the functional currency principle using the modi-
had previously been accounted for using the equity method. fied reporting date rate method, in which balances are
The company was fully included in WACKER’s consolidated translated from the functional currency to the reporting
financial statements as of October 1, 2016. AWS produces currency using the average rates of exchange prevailing on
various silicone products for Asian markets, in particular the balance sheet date, while income statement amounts
for Japan. The call option secures WACKER the possibility are translated using the average exchange rates of the
of acquiring control of the company in order to exert period. As the Group’s subsidiaries conduct their business
greater influence on its future growth. from an autonomous financial, economic and organiza-

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

tional point of view, their functional currencies are basically any translation difference is reclassified from equity to
identical to the respective local currency. Any net gains or profit or loss.
losses arising from the translation of equity are recognized
directly in equity under other equity items. Translation The exchange rates between the most important curren-
differences resulting from divergent exchange rates in the cies reported in these financial statements and the euro
statement of income are likewise included there. If Group were as follows:
companies are removed from the scope of consolidation,

ISO code Exchange rate as of Average exchange rate

Dec. 31, 2016 Dec. 31, 2015 2016 2015

US dollar USD 1.05 1.09 1.11 1.11

Japanese yen JPY 123.15 131.41 120.08 134.27
Singapore dollar SGD 1.52 1.54 1.53 1.52
Chinese renminbi CNY 7.31 7.09 7.35 6.97

Estimates and Assumptions Used in Preparing period and allocation of future cash inflows derived from
Consolidated Financial Statements the ­investments made, as well as future technical ad-
The preparation of the consolidated financial statements vancements and ongoing replacement and development
in compliance with IFRS necessitates assumptions and cycles.
estimates affecting the amounts and the reporting of the
recognized assets and debts, income and expenses, and Impairment tests are performed for assets if specific
contingent liabilities. These assumptions and estimates ­indicators point toward a possible impairment loss or
comply with the conditions and appraisals prevailing on ­reversal of an impairment loss. In the case of a possible 131
the balance sheet date. In this regard, they also impact the impairment, an estimate must be made of the recoverable
amount of income and expenses reported on for the fiscal amount of the affected asset that corresponds to the
years in question. The assumptions on which the estimates higher of either the fair value less costs to sell or the value in
are based relate primarily to the uniform determination of use. When determining the recoverable amount during the
useful lives throughout the Group, the ascertainment of impairment test, it is necessary to make estimates based
fair values of financial instruments, the recognition and on share prices, on prices of comparable transactions, or
measurement of provisions, the realizability of future tax on the net present value method or other valuation methods
benefits, and determination of discounted cash flows or combinations thereof. That, in turn, calls for estimates
made in connection with impairment tests and purchase and assessments by management. To ascertain the value
price allocations. in use, the discounted future cash flows of the affected
asset must be determined. The estimate of the discounted
In individual cases, the actual values may differ from the future cash flows contains significant assumptions such
assumptions and estimates that were made. Changes in as, in particular, those regarding future selling prices and
value are recognized as soon as they become apparent sales volumes, costs, and discount rates. Although WACKER
and affect the net results for the period when the change is assuming that the estimates of the relevant expected
occurred and, if applicable, in future reporting periods. useful lives and of discounted future cash flows, as well as
the assumptions regarding the general economic condi-
Intangible Assets and Property, Plant and Equipment / tions and the development of the economic sectors are
Investments in Associates Accounted for Using reasonable, a change in the assumptions or circumstances
the Equity Method might necessitate a change in the analysis. This could result
The expected useful life of intangible assets and of property, in significant deviations from the figures posted, which
plant and equipment, together with their amortization / may lead to additional impairments or reversals of impair-
depreciation schedules, are based on past experience, ment losses.
plans and estimates. This includes estimates of the See Note 04

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Financial Instruments The pension-obligation amount is determined by discount-

Financial instruments are recognized at fair value, while ing the WACKER-specific, expected future cash flows. The
other assets and liabilities are disclosed at fair value in the discount rate is derived from the yield curve of high-grade,
notes to the financial statements. Calculation of the fair fixed-interest corporate bonds with maturities matching
value of financial instruments may require making exten- the pension obligations, as calculated at the balance sheet
sive estimates. The level of estimates is determined by the date. The bonds are all denominated in the same currency
extent to which non-observable input parameters are as their underlying pension obligations and have a rating
taken into account. When calculating fair value, WACKER of at least AA from one of the three major rating agencies.
strives to include as many observable input parameters as In Germany, the basis is a bond portfolio determined as of
possible and to keep the use of non-observable factors to the closing date using Bloomberg and with a maturity that
a minimum. If the fair value cannot be reliably determined, nearly matches the maturity of the pension obligation.
the carrying amount is taken as an approximate value to
determine fair value. Provisions for uncertain tax positions are established when-
ever the probability of their occurrence exceeds 50 percent.
In accordance with IFRS 13, financial instruments that are WACKER reassesses contributions to provisions for uncertain
measured or recognized at fair value in the consolidated tax positions annually, based on past experience.
financial statements must be measured and classified
according to the fair value hierarchy. This hierarchy consists Deferred Taxes
of three levels, to which the input parameters are assigned At the end of each reporting period, the Group assesses
in accordance with the extent to which they are observable whether the probability of future tax benefits being realized
during the corresponding measurement process. is sufficient to recognize deferred tax assets. Among
See Note 18 other things, this requires that management evaluate the
tax benefits resulting from currently available tax strategies
Provisions and future taxable income, as well as taking additional
Significant risks inherent in environmental protection pro- positive and negative factors into account. In the case of
visions and in provisions for damages and onerous contracts companies that have posted tax losses in the past, deferred
132 are possible changes in future cost /  b enefit estimates, tax assets are capitalized only in exceptional cases if
changes in the likelihood of their utilization, and enhanced substantial indications of their realization exist.
statutory rules concerning the elimination and prevention of
environmental damage. Changes in the discount rate also Accounting and Valuation Methods
lead to changes when determining noncurrent provisions. The financial statements of Wacker Chemie AG and its
The current environment of low interest rates leads to German and international subsidiaries are prepared in
­increases in the carrying amount of noncurrent provisions. accordance with uniform accounting and valuation prin-
See Note 12 ciples.

Pensions and similar obligations are accounted for in The accounting methods correspond to those used for the
­accordance with actuarial valuations, which are based on last consolidated financial statements as of the end of the
statistical and other factors in order to anticipate future previous fiscal year. They have been supplemented by new
events. The factors include the discount rate, expected accounting standards to be applied for the first time in the
salary and pension increases, the mortality rate and rate reporting year. The Group’s consolidated financial state-
increases for preventive healthcare. If market and eco- ments are based on acquisition and production costs
nomic conditions change, these assumptions could vary (historical costs), with the exception of the items reflected
considerably from actual developments, consequently at fair value, such as available-for-sale financial assets,
leading to major changes in pension and similar obligations, derivatives, and plan assets within the scope of pension
as well as the associated future expenses. In particular, obligations.
the current environment of low interest rates had an impact
on the carrying amount of pension provisions.
See Note 11

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Sales Income Taxes

Sales encompass the fair value of the consideration or This item includes current income taxes as well as deferred
receivable for the goods and services that were sold taxes. Current income taxes are calculated based on the
within the scope of ordinary activities. These are reported respective national tax results and regulations applicable
net of VAT and other taxes incurred in connection with in the reporting year. These taxes also contain adjustment
sales and without discounts and price reductions. Sales amounts for any incurred tax payments or tax ­refunds from
revenues are recognized when the goods and services outstanding tax returns and from tax audits from prior years.
owed have been delivered and the main opportunities and Discretion must be exercised when ­determining income tax
risks of ownership have passed to the purchaser. Usually, provisions. WACKER determines appropriate provisions for
this takes place when the goods are transferred to the expected risks from tax audits (uncertain tax positions).
customer or as stipulated in the agreed transport condi-
tions. Sales from services are recognized once services Deferred tax assets and liabilities are recognized for
are rendered. Sales are not reported if there are risks ­temporary differences between tax bases and carrying
­attached to the receipt of the consideration. Provisions are amounts, and for consolidation measures recognized in
recognized for risks from returns of finished goods and the statement of income. The deferred tax assets include
merchandise, warranties and other complaints using tax relief entitlements resulting from the anticipated use of
the principle of individual evaluation. Information on the existing loss carryforwards in future years, the realization
­development of sales by division and region is provided in of which is assured with sufficient probability. Deferred
the section on segment reporting. WACKER does not conduct taxes are determined on the basis of the tax rates which,
any business that requires recognizing sales as long-term under current law, are applicable or anticipated in the
production contracts. ­individual countries when they are realized. The deferred
tax assets and liabilities are netted out only to the extent
Functional Costs possible under the same tax authority. Deferred tax assets
Cost of goods sold shows the costs of the products, and liabilities are recognized in the statement of income.
merchandise and services sold. In addition to directly In cases where profits or losses are recognized directly in
­a ttributable costs, such as material costs, personnel equity, the deferred tax asset or liability is likewise posted
­expenses and energy costs, it includes indirect costs under other equity items. 133
­including depreciation and inventory writedowns. This item
also includes the cost of outward freight. Selling expenses Intangible Assets
include costs incurred by the sales organization and Pursuant to IAS 38, acquired and internally generated
the cost of advertising, market research, and application ­intangible assets are capitalized if it is probable that a
support on customers’ premises. This item also includes ­future economic benefit can be associated with the use of
commission expenses. General administrative expenses the asset and the costs of the asset can be determined
include the pro rata payroll and material costs of corporate reliably. They are measured at cost and, if their useful lives
control functions, human resources, accounting and infor- can be determined, amortized on a straight-line basis. The
mation technology, unless they have been charged as an useful life is taken to be between three and 15 years unless
internal service to other cost centers and thus, in certain otherwise indicated, e. g. by the life of a patent. The useful
circumstances, to other functional areas. life is reviewed annually and, if necessary, revised to
­correspond to new expectations. Amortization of intangible
Research and Development Expenses assets is allocated to the functional areas that use the
Research and development expenses include costs assets. Intangible assets with indefinite useful lives undergo
­incurred in the development of products and processes. an annual impairment test. At present, no intangible assets
Research costs in the narrow sense are recognized as with indefinite useful lives have been capitalized.
expenses when they are incurred, and are not capitalized.
Development costs are capitalized only if all the prescribed
recognition criteria have been met, the research phase can
be separated clearly from the development phase, and the
costs incurred can be allocated to the individual project
phases without any overlaps. Additionally, there must be
sufficient certainty that future cash inflows will take place.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Goodwill is not amortized. Existing goodwill undergoes an Property, plant and equipment also includes assets relating
annual impairment test. If the impairment test indicates a to leasing transactions. Items of property, plant and equip-
recoverable amount that is lower than the carrying amount, ment financed by means of finance leases are recognized
the goodwill is reduced to its recoverable amount and an at fair value at their time of addition, unless the present
impairment loss is recognized. Furthermore, the intrinsic values of the minimum lease payments are lower. The
value is examined when events or circumstances indicate ­a ssets are depreciated on a straight-line basis over the
possible impairment. Impairments of goodwill are pre- expected useful life or the contractual term, if shorter. The
sented under other operating expenses. obligations resulting from future lease payments are
­recognized under financial liabilities. The lease installments
Property, Plant and Equipment to be paid are split up into a redemption component and
Property, plant and equipment is capitalized at cost and an interest component, in accordance with the effective
depreciated on a straight-line basis over its expected interest method.
economic life. The useful life is reviewed annually and, if
necessary, revised to correspond to new expectations. In Depreciation of property, plant and equipment is generally
addition to the purchase price, acquisition costs include based on the following useful lives:
incidental acquisition costs as well as any costs incurred
in the demolition, dismantling, and /or removal of the asset
In years Useful life
in question from its site and in the restoration of that site.
Any reductions in the price of acquisition reduce the
­acquisition costs. The cost of internally generated assets Production buildings 10 to 40
includes all costs directly attributable to the production Other buildings and similar rights 10 to 30
process as well as an appropriate portion of the pro­ Technical equipment and machinery 6 to 12
duction-related overheads. Financing costs that were Motor vehicles 4 to 10
­incurred in connection with particular, qualifying assets Factory and office equipment 3 to 12
and which can be attributed directly or indirectly to them
are capitalized as part of acquisition or production costs
134 until the assets are used for the first time. The impairment is tested when relevant events or changes
in circumstances indicate that it might no longer be possi-
Day-to-day maintenance and repair costs are expensed as ble to realize the net carrying amount of intangible assets,
incurred. Costs for replacing parts or carrying out major and property, plant and equipment. At the end of every
overhauls of property, plant and equipment are capitalized reporting period, WACKER checks whether there are trig-
if future economic benefits are likely accrue to the Group gering events for recognizing (or reversing) impairments.
and if the costs can be measured reliably. An impairment loss is then recognized in the amount by
which the carrying amount exceeds the recoverable amount.
Grants from third parties reduce acquisition and production The recoverable amount is the higher of either the fair
costs. Unless otherwise indicated, these grants (investment value less costs to sell or the value in use. The value in use
subsidies) are provided by government bodies. Income results from the present value of the estimated future cash
grants for which there are no future expenses are recog- flows from the use of the asset. In order to assess this value,
nized as income. Until the funds have been received, pre-tax interest rates are used that have been adjusted to
grants are recognized as separate assets. reflect the segment-specific risk. In order to determine the
cash flow, assets are combined at the lowest level for
If property, plant and equipment is permanently shut down, which cash inflows can be identified separately (cash-­
sold or given up, the acquisition or production costs are generating units). If the reasons for recognizing impairments
derecognized, along with the corresponding accumulated no longer exist, impairment losses are reversed as required.
depreciation. Any resulting gain or loss from the difference The revised amount cannot exceed the carrying amount
between the sale proceeds and the residual carrying amount that would have been determined had no impairment loss
is recognized under other operating income or expenses. been recognized. Impairments are reported under other
operating expenses and reversals of impairment losses
under other operating income.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Investment Property Additionally, an impairment test is carried out in the pres-

Like property, plant and equipment, investment property ence of corresponding indications and, where necessary,
is measured in accordance with the cost model. It consists an impairment is recognized. The recoverable amount
of land and buildings that are held to earn rental income or is determined in accordance with IAS 36 regulations. Im-
for capital appreciation. The fair value of this property is pairment losses are reported in the result from investments
regularly measured through external property valuations. in joint ventures and associates.

Leases Financial Instruments

Leasing transactions are classified either as finance leases Financial assets and liabilities are recognized in the
or as operating leases. Assets used under an operating ­consolidated financial statements when WACKER becomes
lease are not capitalized. Lease payments to be made are a contracting party to the financial instrument. They are
recognized in profit or loss in the period in which they fall derecognized when the contractual rights or liabilities are
due. A finance lease is a leasing arrangement in which fulfilled or rescinded or when they expire.
essentially all of the risks and rewards inherent in the
ownership of the property are transferred to the lessee. In the case of regular way purchases or sales, however,
Assets used under a finance lease are recognized at the the settlement date – i. e. the date on which the asset is
present value of the minimum lease payments. Leasing delivered to or by WACKER – is relevant for initial recogni-
contracts can be embedded within other contracts. If there tion and derecognition. In general, financial assets and
is a separation obligation for an embedded leasing ­financial liabilities are not netted. A net amount is presented
­arrangement in accordance with IFRS rules, the contractual in the statement of financial position if, and only if, the
components are separated, and recognized and measured entity currently has a right to net the recognized amounts
according to the respective rules. and intends to settle on a net basis. Where financial
­instruments are combined, borrowed capital and equity
Investments, Associated Companies and components are separated and shown separately by the
Joint Ventures issuer.
Shares in non-consolidated affiliated companies and in-
vestments are measured at cost, unless divergent market Financial instruments are measured at fair value on initial 135
values are available. Changes in market values are posted recognition. The transaction costs directly attributable to
to the statement of income upon realization through the acquisition must be taken into account for all financial
­disposal or if the market value falls below the acquisition assets and liabilities not subsequently measured at fair
cost. Loans are measured at amortized cost, except for value through profit or loss. The fair values recognized
non-interest-bearing and low-interest loans, which are in the statement of financial position generally correspond
recognized at their present value. to the market prices of the financial assets and liabilities.
If these are not directly available, they must be calculated
Investments in joint ventures and associates are accounted using standard valuation models on the basis of current
for using the equity method, with the carrying amount market parameters.
generally reflecting the Group’s pro rata share of equity.
Pro rata net results are posted to the consolidated income Financial assets at WACKER comprise, in particular, cash
statement, and the carrying amount is increased or and cash equivalents, trade receivables, loans granted and
­decreased accordingly. Any changes in equity recognized other receivables, held-to-maturity financial investments,
directly in the investee’s equity are also recognized directly and primary and derivative financial assets held for trad-
in equity in the consolidated financial statements. Dividends ing. Financial liabilities must generally be settled using
paid by joint ventures and associates reduce their equity cash or another financial asset. Financial liabilities include,
and, therefore, reduce the carrying amount without affect- in particular, the Group’s own bonds and other securitized
ing profit. If a joint venture or associate faces losses that liabilities, trade payables, liabilities to banks, finance lease
have exhausted its equity, no further losses are taken into payables, promissory notes (German Schuldscheine) and
account unless there are noncurrent unsecured receiv- derivative financial liabilities.
ables against the company, or the Group has entered into
additional obligations or made payments for the company.
The carrying amount is not increased until the loss carry-
forward has been compensated for and the equity is
positive again.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

WACKER makes no use of its option to measure financial factors, and the duration and extent of the drop in value
assets and liabilities at fair value through profit or loss on below acquisition costs. Impairments affecting a debt
initial recognition (fair value option). ­instrument are reversed in subsequent periods, provided
that the reasons for the impairment no longer apply. When
The manner in which financial assets and liabilities are the financial instruments are disposed of, the cumulative
subsequently measured depends on how a financial instru- gains and losses recognized in equity are included in the
ment is classified into the following categories pursuant to statement of income.
IAS 39: financial instruments can be “held for trading” or
“held to maturity” and assigned to the “available for sale” Primary financial liabilities are subsequently measured at
or “loans and receivables” category. amortized cost using the effective interest method.

Financial instruments held for trading are measured at fair Derivative Financial Instruments
value through profit or loss. This category also includes all Derivative financial instruments are used for hedging pur-
derivative financial instruments that do not qualify for hedge poses with the sole aim of reducing the Group’s exposure
accounting. to foreign-currency exchange rates, interest rates, and
commodity price risks arising from operating activities and
If it is both intended and, in economic terms, to be expected the resultant financing requirements. Derivative financial
with sufficient certainty that a financial instrument will be instruments are recognized as of the trade date. They are
held to maturity, the instrument in question is measured at always recognized at fair value, irrespective of the purpose
amortized cost using the effective interest method. or intention for which they were concluded. Positive fair
Held-to-maturity financial investments include current and values are recognized as receivables and negative fair
noncurrent securities, and components of items reported values as liabilities. Differences resulting from fair value
under other financial assets. measurement are recognized in profit or loss.

Loans and receivables are non-derivative financial assets Where derivative financial instruments are used to hedge
that are not quoted in an active market. They are measured risks stemming from future payment flows and items in the
136 at amortized cost using the effective interest method. This statement of financial position, WACKER applies hedge
category comprises trade receivables, the receivables accounting in accordance with the requirements of IAS 39.
and  loans included in other financial assets, fixed-term Changes in the market values of financial instruments used
deposits and cash and cash equivalents. to hedge risks stemming from payment flows (cash flow
hedges) are recognized in other equity items, taking
All other primary financial assets, if they are not loans and ­d eferred taxes into account, until the hedged item has
receivables, must be classified as available for sale and been realized. The profit contribution of the hedging trans-
are reported at fair value if it can be determined reliably. action is recognized in the statement of income under
Basically, these assets comprise equity instruments, and other operating income and expenses when the hedged
also debt instruments not being held to maturity. Unreal- item is realized. If such a derivative is sold or the hedging
ized gains and losses are recorded taking account of relationship is discontinued, the change in its value con-
­deferred taxes and are recognized in other equity items tinues to be reported under other equity items until the
with no effect on income. If equity instruments have no underlying transaction occurs. Ineffective parts of the
price quoted on an active market and if their fair value hedging transaction are immediately recognized in profit
cannot be determined reliably, they are measured at cost. or loss. Fair value hedges of recognized assets or liabilities
and /or unrecognized fixed contractual obligations entail
If the fair value of available-for-sale financial assets falls the recognition in profit or loss of market value changes for
below the acquisition costs or there are objective signs both the hedged item and the financial derivative (as the
that an asset’s value has been impaired, the cumulative hedging instrument). At the moment, WACKER does not
loss recognized directly in equity is reversed and shown in hedge any net investments in foreign operations.
the statement of income. The company bases its assess-
ment of possible impairments on all available information,
such as market conditions and prices, investment-specific

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Contracts concluded in order to receive or deliver non-­ If payment of a receivable is no longer expected under the
financial goods for the Group’s own use are not accounted factual and legal circumstances, the gross receivable is
for as derivatives, but treated as pending transactions. derecognized and any valuation allowances made are
r eversed. Expenses from valuation allowances and
­
Currency hedges, e.g. for planned sales, are recognized derecognition are reported under other operating ex-
under other operating income and expenses, while interest penses. Changes in income tax receivables are posted
rate hedges are recognized in net interest income. Foreign under ­income taxes in the statement of income. Non­
exchange derivatives concluded to hedge financial liabili- current ­receivables that are non-interest-bearing or low-­
ties assumed in foreign currencies are posted under other interest-bearing are discounted. WACKER is not a contractor
financial result. Changes in the fair value of raw-material for long-term production orders.
hedges are recognized under cost of goods sold.
Cash and cash equivalents comprise cash in hand, demand
Inventories deposits, and financial assets that can be converted into
Inventories are measured at cost using the average cost cash at any time and are subject to only slight fluctuations
method. Lower net realizable values or prices as of the in value and have a residual term of up to three months.
reporting date are taken into account by writing down They are measured at amortized cost, which is equivalent
­inventories to the fair value less costs to sell. The cost to their nominal values.
of goods sold includes directly attributable costs, appro-
priate portions of indirect material and labor costs, and Provisions for Pensions and Similar Obligations
straight-line depreciation. Due to the relatively short-term Defined-benefit pension commitments are measured in
nature of the production processes, financing costs are accordance with the projected unit credit method. This meth­-
not included. For production-related reasons specific to od takes account not only of pensions and entitlements to
the chemical industry, unfinished and finished goods are future pensions known as of the balance sheet date, but
reported ­together. Raw materials and supplies also include also of estimated increases in salaries and ­p ensions.
spare parts for the day-to-day maintenance of production Moreover, the measurement is based on actuarial valuations
facilities. The latter are likewise measured according to and takes account of biometric and financial calculation
their periods of storage and potential usability. principles. The fair value of the plan assets is subtracted 137
from the present value of the pension obligations (defined
Emissions certificates allotted free of charge are measured benefit obligation, DBO), resulting in either a net liability or
at a nominal value of zero. Emissions allowances acquired net assets of the defined benefit plans. The prior year’s
against payment are carried at cost. If the fair value is underlying DBO assumptions are used to determine the
lower as of the reporting date, the carrying amount is current service cost. The net interest cost in the fiscal year
­reduced accordingly. Utilization is determined via the is determined by applying the discount rate set at the
running average value of certificates, whether they were ­beginning of the year to the net liability calculated at the
allotted free of charge or acquired against payment, and same time. The net interest from the net pension liability is
recognized pro rata as expenses under cost of goods sold the difference between the calculated interest income
on the basis of the quarterly emissions. from plan assets and the interest expense from the defined
benefit obligation.
Financial Assets and Income Tax Receivables
Trade receivables and other financial and non-financial
assets, including income taxes paid (but excluding finan-
cial derivatives), are recognized at amortized cost. Risks
are taken into account by means of appropriate valuation
allowances in separate valuation-allowance accounts.
Valuation allowances for uninsured receivables – or for the
deductible in the case of insured receivables – are made
whenever collection of such receivables is assessed to be
no longer probable according to information available.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Remeasurements comprise actuarial gains and losses the  discounted present value as of the reporting date.
stemming from the difference between the estimate at the The discount rate applied is the market interest rate for
start of the period and actual developments during the risk-free investments with terms corresponding to the
period – or a newer estimate on the balance sheet date – in ­residual term of the obligation to be settled. Expected
relation to probable mortality rates, retirement and salary ­refunds, provided that they are sufficiently secure or legally
trends and discount rates. They are recognized immedi- enforceable, are not offset against provisions. Instead,
ately in other comprehensive income. Similarly, differences they are capitalized as separate assets if their realization
between the interest income from plan assets calculated is virtually certain.
at the start of the period and the actual income from plan
assets determined at the end of the period are recognized Provisions for restructuring costs are recognized if a de-
in other comprehensive income. tailed formal plan for restructuring has been drawn up and
conveyed to the affected parties. Provisions for contingent
If the present value of a defined benefit obligation changes losses arising from onerous contracts are recognized if the
due to a plan modification or curtailment, WACKER recog- expected benefits to be derived from a contract are lower
nizes the resultant effect as past service cost. This is im- than the unavoidable costs of meeting the contractual
mediately recognized through profit or loss when it occurs. obligations. Provisions for environmental protection are
The profits and losses resulting from settlement are also recognized if the future cash outflows for complying with
recognized immediately in the statement of income when environmental legislation or for cleanup measures are
settlement takes place. Administrative expenses that are likely, the costs can be estimated with sufficient accuracy
not related to the management of plan assets are also and no future acquired benefit can be expected from the
recognized through profit or loss when incurred. measures.

The expense from current and past service cost is allocated If an amended estimate results in a reduction in the scope
to the costs of the functional areas concerned. The net of the obligations, a proportion of the provision is reversed
interest is posted under other financial result. and the earnings are allocated to the functional area origi-
nally charged with the expense when the provision was set
138 Provisions for phased early retirement and anniversaries aside.
are measured and set aside in accordance with actuarial
appraisals. Owing to their structure, provisions for phased Financial Liabilities and Other Financial Liabilities
early retirement also constitute other noncurrent employee On initial recognition, primary financial liabilities are
benefits in accordance with IAS 19 since they are linked to ­measured at fair value less any transaction costs incurred.
the rendering of future service. WACKER uses only a block They are subsequently measured at amortized cost using
model when structuring phased-early-retirement agree- the effective interest method. Derivative financial instru-
ments. The corresponding provisions are recognized pro ments are recognized at fair value. Liabilities from finance
rata over the service period of the claim during the work lease agreements are shown as financial liabilities at the
phase. present value of the future lease installments.

Provisions Contingent Liabilities

Provisions are recognized in the statement of financial Contingent liabilities are potential obligations toward third
position for present legal or constructive obligations parties or existing obligations for which an outflow of
­toward third parties if an outflow of resources to settle ­resources is unlikely or the amount of the obligation cannot
these obligations is probable and its amount can be be estimated with sufficient certainty. Contingent liabilities
­estimated reliably. The amounts recognized are based on are not recognized in the statement of financial position.
the estimated amounts that will be required to cover the
Group’s future payment obligations, identifiable risks and
contingencies. Noncurrent provisions are measured at

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Changes in Accounting and Valuation Methods The increase in valuation allowances of inventories results
There were no changes in accounting and valuation methods from writing down the high production costs incurred during
in 2016. the start-up phase of the polysilicon facilities in Charleston,
Tennessee.
01 Sales /  Cost of Goods Sold /  Other Operating Income / 
Other Operating Expenses Income from the termination of long-term supply contracts
and from the retention of advance payments relates in both
2016 and 2015 to advance payments retained and damages
€ million 2016 2015
received from terminated or restructured contracts with
Sales polysilicon customers.
Proceeds from deliveries of
­p roducts and merchandise 5,347.6 5,239.1
Other operating expenses of the prior year mainly com-
Proceeds from other services 56.6 57.1
prise uncapitalized costs relating to the construction of
Total 5,404.2 5,296.2
polysilicon facilities in Charleston.

Cost of goods sold –4,413.5 –4,167.1

02 Income from Investments in Joint Ventures
Cost of goods sold includes
the following reversals (+) /  and Associates /  O ther Investment Income / 
recognitions (–) of valuation Net Interest Income /  O ther Financial Results
­a llowances of inventories –21.5 1.6

€ million 2016 2015

Other operating income
Income from currency ­transactions 99.8 196.2
Income from reversal of provisions 9.0 3.5
Result from investments in
Insurance compensation 6.0 2.7 joint ventures and associates 0.2 3.3
Income from reversal of valuation Of which share of income
allowances for receivables 1.1 1.7 from joint ventures 3.2 4.2
Income from disposal of property, Of which share of income
plant and equipment and from associated companies –3.0 –0.9 139
­f inancial assets 6.6 3.3
Income from the appreciation
of noncurrent assets – 0.5 Other investment result
Other investment expenses / 
Income from incentives / g rants 1.8 2.6
investment income 0.9 –0.2
Income from changes in the
Total 0.9 –0.2
scope of consolidation 10.0 –
Income from the termination
of long-term supply contracts Net interest result
and damages received 20.3 137.6 Interest income 6.0 7.3
Other operating income 39.7 29.3 Of which from available-
for-sale financial instruments 0.4 0.4
Total 194.3 377.4
Of which from financial
­instruments, loans and
Other operating expenses ­r eceivables 5.6 6.7
Losses from currency transactions –117.3 –265.3
Losses from valuation
Interest expenses –42.4 –31.8
­a llowances for receivables –0.3 –0.5
Of which from financial liabilities
Losses from disposal of assets –2.6 –3.1
(excluding finance leases) –39.0 –29.8
Losses from impairment
Total –36.4 –24.5
of fixed assets –3.4 –0.1
Other operating expenses –44.0 –143.7
Other financial result
Total –167.6 –412.7
Interest effect of interest-bearing
provisions  /   l iabilities –50.0 –47.9
Other financial expenses  /   i ncome –15.0 5.7
Total –65.0 –42.2

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

The income from investments in joint ventures and associ- Income taxes include current tax expenses from earlier
ates relates mainly to companies in China. This income years of € 0.1 million, after € 0.3 million in the prior year, and
includes not only the attributable net results for the year, but deferred tax income from earlier years of € 17.1 million, after
also the effects of the elimination of attributable intergroup € 0.0 million in the prior year.
profits and losses, and of other Group adjustments.
€ million 2016 2015
Borrowing costs of € 1.2 million were capitalized in the
­reporting period, after € 18.6 million a year earlier, resulting
in a corresponding improvement in the net interest result. Current taxes, Germany –89.5 –181.2
The average borrowing interest rate applied by the Group Current taxes, international –11.7 –21.0
in the reporting year was 2.6 percent, compared with Current taxes –101.2 –202.2
3.0 percent the year before.
Deferred taxes, Germany 24.4 29.9
The interest effect of interest-bearing provisions includes Deferred taxes, international 1.3 7.4
net interest expenses from the accumulation of interest Deferred taxes 25.7 37.3
on pension obligations and calculated returns from plan Income taxes –75.5 –164.9
assets totaling € 44.0 million, versus € 41.5 million in the prior
year, and interest expenses and interest income from the Derivation of the effective
tax rate
accumulation and discounting of provisions of € 6.0 million,
Income before taxes 264.8 406.7
versus € 6.5 million in the previous year.
Income tax rate for
Wacker ­C hemie AG (%) 28.0 28.0
Other financial income and expenses primarily result from Expected tax expenses –74.2 –113.9
exchange-rate and interest-rate effects in connection with
financial transactions and their hedging. Tax rate divergences 1.9 10.6
Tax effect of non-tax-deductible
03 Income Taxes expenses –31.8 –18.1
140 This item comprises income taxes paid or owed in the Tax effect of tax-free income 5.8 5.2
­individual countries and deferred taxes. In Germany, Taxes relating to other periods
(current earnings) 17.1 –0.3
alongside a corporate tax of 15.0 percent (15.0 percent a
Effects of loss carryforwards
year earlier), there is a solidarity surcharge of 5.5 percent, and temporary differences 6.4 –46.5
after 5.5 percent a year earlier. Trade income tax of 12.2 per- Group profit from investments
cent (12.2 percent in the prior year) must also be paid. It in joint ventures and associates – 0.8
varies depending on the municipality in which a company Other differences –0.7 –2.7
is located. Total income tax –75.5 –164.9

Deferred taxes of German companies are therefore mea- Effective tax rate (%) 28.5 40.5
sured based on a total tax rate ( including solidarity
­surcharge) of 28.0 percent (28.0 percent a year earlier). The
current taxes of foreign subsidiaries are determined
­a ccording to domestic tax laws and rates valid in the Due to the utilization of previously unrecognized temporary
country in which the respective company is based. As in differences and previously unrecognized tax losses from
the prior year, the respective income tax rates for foreign earlier periods, the actual income tax expense was reduced
companies applicable in each country ranged from by € 11.7 million, after € 2.1 million in the prior year.
10.0 percent to 39.0 percent.

Accrued income taxes on undistributed profits of subsid-

iaries were recognized only if distribution is planned. The
amount of € 425.0 million is available for distribution, com-
pared with € 323.5 million in the prior year.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Allocation of Deferred Taxes

€ million 2016 2015

Deferred tax Deferred tax Deferred tax Deferred tax
assets liabilities assets liabilities

Intangible assets 11.1 4.2 12.6 –

Property, plant and equipment 58.2 38.6 38.2 36.8
Financial investments 0.8 – – 3.5
Financial and non-financial assets 16.3 4.0 14.7 0.5
Provisions for pensions 350.2 0.4 243.4 –
Other provisions 24.9 1.9 33.0 –
Financial and non-financial liabilities 25.9 – 12.3 –
Loss carryforwards 5.4 – 4.6 –
Setting off for companies with group taxation –5.5 –5.5 –5.5 –5.5
Total 487.3 43.6 353.3 35.3

Setoffs –37.4 –37.4 –31.9 –31.9

Amount recorded in Statement of Financial Position 449.9 6.2 321.4 3.4

The changes in deferred tax assets and liabilities of The loss carryforwards generated totaled € 326.3 million,
€ 25.7 million were recognized as income in profit or loss after € 378.9 million in the previous year. Of this amount,
(versus € 37.3 million a year earlier ), while € 104.1 million € 304.7 million (€ 360.4 million in the prior year) are expected
(€ – 49.9 million a year earlier) was recognized directly in to be non-­realizable, which is why no deferred tax assets
equity. This mainly consists of deferred tax assets from were r­ecognized. If they had been recognized, however, 141
variations in actuarial gains and losses resulting from they would have amounted to € 85.3 million (€ 100.9 million in
pension provisions. Changes in the scope of consolidation the prior year). Of the loss carryforwards that are not real-
resulted in deferred tax liabilities of € 4.1 million that were izable for tax purposes, the amount of € 169.7 million
recognized in equity. The existing tax loss carryforwards (€ 139.3 million in the prior year) is unlimited as to time and
can be ­utilized as follows: amount. As of December 31, 2016, no deferred tax assets
were recognized for tax-deductible temporary differences
of € 668.9 million (€ 712.1 million the year before). The change
€ million 2016 2015
mainly concerns parts of the  actuarial losses from the
measurement of pension obligations r­ ecognized in other
Within 1 year 87.2 78.0 equity items in equity and temporary differences in prop-
Within 2 years 49.2 90.6 erty, plant and equipment.
Within 3 years 16.8 50.8
Within 4 years 1.1 17.3
Within 5 years or later 172.0 142.2
Total 326.3 378.9

Of which loss carryforwards

not expected to be realizable –304.7 –360.4

Of which loss carryforwards

expected to be realizable 21.6 18.5

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

04 Intangible Assets and Property, Plant and Equipment

€ million Intangible Land, Technical Other Assets under Property, * O f which
assets buildings and equipment equipment, construction plant and assets from
similar rights and factory and equipment finance
machinery  * office leases
equipment

2016
Balance as of Jan. 1, 2016 179.9 2,059.0 8,886.6 677.4 1,322.6 12,945.6 98.1
Additions 3.5 20.3 116.3 25.2 262.3 424.1 2.2
Disposals –11.9 –0.4 –44.5 –21.4 – –66.3 –
Transfers 15.1 138.5 1,230.5 3.0 –1,387.1 –15.1 –
Changes in the scope of consolidation 18.0 8.3 21.6 6.1 – 36.0 0.2
Other changes – – – – – – –
Exchange-rate differences 0.7 40.0 126.0 1.2 –23.8 143.4 0.7
Gross carrying amount as of
Dec. 31, 2016 205.3 2,265.7 10,336.5 691.5 174.0 13,467.7 101.2
Cumulative depreciation and
­i mpairments –154.9 –1,166.2 –7,122.1 –584.3 –0.2 –8,872.8 –67.3
Of which from changes in the
scope of consolidation – –3.6 –8.0 –5.1 – –16.7 –
Carrying amount as of Dec. 31, 2016 50.4 1,099.5 3,214.4 107.2 173.8 4,594.9 33.9
Depreciation and impairments /  
write-ups in fiscal year –14.6 –78.5 –603.3 –38.8 – –720.6 –7.1

2015
Balance as of Jan. 1, 2015 166.4 1,691.3 7,828.5 642.7 1,670.0 11,832.5 79.1
Additions 3.4 6.6 106.7 20.7 696.6 830.6 21.8
142 Disposals –0.4 –6.9 –57.4 –15.6 –0.9 –80.8 –2.8
Transfers 7.9 310.3 878.4 25.6 –1,219.3 –5.0 –
Exchange-rate differences 2.6 57.7 130.4 4.0 176.2 368.3 –
Gross carrying amount as of
Dec. 31, 2015 179.9 2,059.0 8,886.6 677.4 1,322.6 12,945.6 98.1
Cumulative depreciation and
­i mpairments –147.8 –1,066.2 –6,520.2 –560.0 –0.1 –8,146.5 –60.0
Carrying amount as of Dec. 31, 2015 32.1 992.8 2,366.4 117.4 1,322.5 4,799.1 38.1
Depreciation and impairments /  
write-ups in fiscal year –13.2 –63.2 –459.2 –39.6 – –562.0 –6.4

Intangible assets include industrial property rights, similar equipment of € 33.9 million (€ 38.1 million in the prior year) on
rights, software and other assets acquired against payment. the basis of an embedded finance lease. Due to the struc-
Business acquisitions result in technologies, customer ture of the underlying contracts, economic ownership is
bases and order backlogs acquired against payment, attributable to WACKER.
which are amortized over a period of 3 to 9 years.
05 Investment Property
The acquisition costs of fixed assets were reduced by Wacker Chemie AG owns real estate at its production site in
­investment grants totaling € 4 82.2 million, compared with Cologne, Germany. This comprises land and infrastructure
€ 481.4 million in the previous year. facilities (for energy, waste water, etc.). The land is rented
out or leased on a long-term basis. These properties and
In the reporting year, borrowing costs of € 1.2 million (versus the associated infrastructure in Cologne are operated,
€ 18.6 million in the prior year) were capitalized as part of maintained and looked after by third parties, who charge
the acquisition and production costs of qualifying assets. any costs incurred directly to the tenants or leaseholders.
The average financing cost rate was 2.6 percent, compared WACKER has undertaken to carry out future maintenance
with 3.0 percent in the previous year. Property, plant and measures to the extent necessary in the next few years.
equipment also includes technical machinery and other

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

The rent and lease income is included in the following The following table shows the reporting-period change in
schedule. the total carrying amount of investments accounted for
using the equity method:
€ million 2016 2015

Joint Ventures
Historical cost* 10.5 11.7 Accounted for Using the Equity Method
Cumulative depreciation* –9.0 –10.2 € million 2016 2015
Carrying amount as of
Dec. 31, 2016 1.5 1.5 Carrying amount of the
­investments in accordance
with the equity method
Fair value 14.0 14.0
At the beginning of the year 18.0 16.6
Income from rent /  operating leases 0.8 0.8 Share of profit /  l oss for
Costs –0.1 –0.2 the period 3.2 4.2
Share of change in other equity 0.7 1.4
Overall result of the companies 3.9 5.6
* Disposal of acquisition costs and depreciation of € 1.2 million.
Dividends –4.1 –4.2
Change in the scope of
­c onsolidation –6.6 –
The fair value is based on an opinion of an external expert
At the end of the year 11.2 18.0
and is updated periodically, most recently in 2014.

From an economic standpoint, the only option open to a

potential buyer would be to discontinue current operations
and tear down the existing buildings to make the land Associated Companies
available for a new use. The fair value was therefore deter- Accounted for Using the Equity Method

mined using the market value based on potential proceeds € million 2016 2015
from liquidation of the plant. This measurement took into 143
account the current market situation and thus current Carrying amount of the
­investments in accordance
prices. The fair value of investment property is allocated to with the equity method
Level 2 in the fair value hierarchy. The residual carrying At the beginning of the year 3.2 3.9
amount relates to the land. Share of loss for the period –3.0 –0.9
Share of change in other equity –0.2 0.2
The valuation process has not been changed since the Overall result of the companies –3.2 –0.7
previous valuation date. At the end of the year – 3.2

06 Investments in Joint Ventures and Associates

Accounted for Using the Equity Method
The Group applies the equity method to account for joint
ventures and associates. Their impact on the Group’s
earnings, net assets and financial position is not significant.
If shareholders have made loans to joint ventures or asso-
ciates, repayment of these loans takes precedence over
the distribution of dividends.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

The following shows the key figures for companies Deviations between the share of net income and the result
­account­ed for using the equity method. from investments in joint ventures and associates, and
between the share of equity and the carrying amount of
investments in joint ventures and associates accounted for
using the equity method, are primarily the result of fair-
value adjustments and consolidation measures.

€ million 2016 2015

Total Attributable Total Attributable
to WACKER to WACKER

Key Figures for Joint Ventures

Profit or loss from continuing operations 6.4 3.2 8.4 4.2
Other comprehensive income 1.4 0.7 2.8 1.4
Overall result 7.8 3.9 11.2 5.6

Key Figures for Associated Companies

Profit or loss from continuing operations –15.1 –3.8 –3.7 –0.9
Other comprehensive income –0.8 –0.2 1.1 0.2
Overall result –15.9 –4.0 –2.6 –0.7

07 Inventories Cost of goods sold includes costs for inventories recog-

nized as expenses totaling € 4.4 billion, after € 4.2 billion
a  year earlier. Valuation allowances recognized in the
€ million 2016 2015
­reporting period as expenses amounted to € 21.5 million,
144 compared with € –1.6 million the year before.
Raw materials and supplies 278.3 231.2
Unfinished and finished products,
merchandise 566.8 551.9

Services not charged 1.2 2.1

Total 846.3 785.2

Of which recorded at net

­r ealizable value if lower 104.6 111.8

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

08 Financial and Non-Financial Assets /  Receivables

€ million 2016 2015

Total Of which Of which Total Of which Of which
noncurrent current noncurrent current

Trade receivables 775.7 – 775.7 679.4 – 679.4

Investments 11.1 11.1 – 11.1 11.1 –

Loans 96.4 96.4 – 99.9 99.9 –
Receivables from associated companies 0.9 – 0.9 1.0 – 1.0
Loan and interest receivables 1.4 – 1.4 0.2 – 0.2
Derivative financial instruments 6.1 2.0 4.1 12.6 0.2 12.4
Receivables from suppliers 6.2 – 6.2 6.6 – 6.6
Deposits 2.9 1.4 1.5 1.4 0.1 1.3
Restricted cash and cash equivalents 0.4 – 0.4 3.8 – 3.8
Sundry financial assets 51.2 0.6 50.6 24.7 0.1 24.6
Other financial assets 176.6 111.5 65.1 161.3 111.4 49.9

Accruals and deferrals 10.1 1.7 8.4 10.1 1.0 9.1

Plan assets 0.4 – 0.4 0.4 – 0.4
Other tax receivables 46.1 0.7 45.4 44.2 2.7 41.5
Sundry non-financial assets 14.3 1.3 13.0 8.0 0.6 7.4
Other non-financial assets 70.9 3.7 67.2 62.7 4.3 58.4

Income tax receivables 18.5 – 18.5 19.1 0.1 19.0

145

Receivables are shown at amortized cost, which corre- Changes in Past-Due Trade Receivables
sponds to their market value. Adequate valuation allow- € million 2016 2015
ances are set up to cover default risks, to the extent that
these are not covered by insurance, bank guarantees or
advance payments received. Receivables that are neither
past due nor written down 634.5 551.3

Valuation allowances and past-due debts developed as

follows: Receivables that are past due
but not written down:
up to 30 days past due 134.0 121.9
31 to 45 days past due 3.3 2.2
Changes in valuation allowances for trade receivables over 45 days past due 3.5 3.5
€ million 2016 2015 Total 140.8 127.6

Written-down receivables 0.4 0.5

As of Jan. 1 5.6 5.1
Utilization –2.2 –2.7
Carrying amount 775.7 679.4
(+) Additions  /  ( –) reversals 0.2 2.8
Exchange-rate differences 0.1 0.4
As of Dec. 31 3.7 5.6

No valuation allowances were recognized for other financial

assets in either the period under review or the prior year.
There was no significant credit risk as of December 31, 2016.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Valuation allowances are set up for identifiable credit risks In the course of the IPO in April 2006, the number of shares
and exchange-rate fluctuations. We continuously monitor outstanding increased due to the sale of some shares
the creditworthiness of our debtors to assess the intrinsic previously held as treasury shares. The following table
value of the corresponding receivables and, where appro- shows the development in the year under review and in the
priate, we take out credit default insurance. In addition, prior year:
customers make advance payments and provide bank
guarantees. The maximum default risk is equal to the
Units 2016 2015
carrying amount of the uninsured receivables. No loans or
receivables were renegotiated to prevent an overdue debt Shares outstanding at the start
or possible valuation allowances. Based on past experi- of the fiscal year 49,677,983 49,677,983
ence and on the conditions prevailing as of the reporting Shares outstanding at the end
date, there are no restrictions with regard to credit quality. of the fiscal year 49,677,983 49,677,983

The additions and reversals in the valuation allowances for Treasury shares in portfolio 2,474,617 2,474,617

receivables in the reporting period mainly relate to Wacker Total shares 52,152,600 52,152,600

Chemie AG.

09 Cash and Cash Equivalents /  Securities

For more information on Wacker Chemie AG’s shareholder
structure, please refer to the note concerning Related
€ million 2016 2015
Party Disclosures.
Securities and fixed-term See Note 22

­d eposits held to maturity 1 182.2 70.9

Of which current 126.2 67.2 Capital reserves include the amounts generated with the
Of which noncurrent 56.0 3.7 issue of shares above their nominal values in previous
years, as well as other contributions made to equity.
Cash and cash equivalents
146 Cash equivalents 113.8 94.2 Retained earnings include the amounts of accrued reserves
Demand deposits, cash on hand 169.7 216.3 generated at Wacker Chemie AG in previous fiscal years,
Total 283.5 310.5 transfers from the Group’s earnings for the year, the earn-
ings of the consolidated companies less amounts due to
1
The securities mainly consist of bonds from various issuers which are non-­controlling interests, changes to consolidated items
predominantly classified as “available for sale.” affecting income, and changes in the scope of consolida-
tion. The proceeds of the Siltronic IPO added € 83.8 million
to retained earnings in 2015.
Demand deposits and cash on hand are shown at their
nominal amounts. Cash equivalents comprise fixed-term Other equity items include the differences arising from the
deposits and commercial paper (from issuers with first- currency translation of the financial statements of foreign
class credit standing) classified as “held to maturity.” None subsidiaries using reporting currencies other than the
of WACKER’s cash funds are subject to currency export euro, and the effects of the valuation of financial instru-
restrictions. ments and pensions – recognized directly in equity.

10 Equity /  Non-Controlling Interests / 
Capital Structure Management
The subscribed capital (capital stock) of Wacker Chemie AG
amounts to € 260,763,000 and comprises 52,152,600 no-par-
value shares (total). This corresponds to a notional par value
of € 5 per share. All of the shares are common shares – no
other share classes have been issued. At the reporting
date, no capital had been authorized for the issue of new
shares. The Executive Board was authorized – in compliance
with the provisions of Section 71 (1) no. 8 of the German
Stock Corporation Act – to acquire treasury shares totaling
a maximum of 10 percent of capital stock.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

The net result attributable to non-controlling interests is Within the WACKER Group, Siltronic AG is an important
made up of the following profits and losses: subsidiary with non-controlling interests:

€ million 2016 2015

Significant Non-Controlling Interests

Company’s name and registered 2016 2015

Profits 10.1 7.2 office: Siltronic AG, Munich,
Losses – –12.1 ­G ermany, and its subsidiaries
Net result attributable to
non-controlling interests 10.1 –4.9 Proportion of non-controlling
interests (%) 42.17 42.17
Proportion of the voting rights (%) 42.17 42.17
Total non-controlling interests
(shares) 12,650,000 12,650,000
Non-controlling interests in equity primarily comprised the Dividends paid to non-controlling
following companies: interests (€ ) – –

Non-Controlling Interests
The following table lists condensed financial information
€ million 2016 2015
on the Siltronic sub-group:
Wacker Asahikasei Silicone
Co. Ltd., Tokyo, Japan 12.4 –
Condensed Financial Information on Siltronic AG and its
Wacker Metroark Chemicals Subsidiaries 1:
Pvt. Ltd., Parganas, India 25.2 21.4
Wacker Chemicals Fumed Silica € million 2016 2015
( ZJG) Holding Co. Private Ltd.,
Singapore 1 10.8 9.0
Siltronic AG, Munich, Germany 1 165.4 196.5 Current assets 502.7 461.7 147
Total 213.8 226.9 Noncurrent assets 531.7 554.3

1
Including subsidiaries
Current liabilities 151.6 147.5
Noncurrent liabilities 479.9 395.9

The voting rights of non-controlling interests correspond Sales 933.4 931.3

to their equity share. Profit or loss from continuing
operations 11.2 -18.2
As part of its prior-year IPO, Siltronic AG placed 12.65 million Other comprehensive income -80.7 62.4
shares with investors, consisting of 5 million new shares Total -69.5 44.2
issued through a capital increase at Siltronic and 7.65 mil-
lion shares originally held by WACKER. At the same time, Cash flow from operating activities 115.6 96.1
WACKER’s stake in Siltronic AG was reduced from 100 percent Cash flow from investing activities -135.5 -98.7
to 57.8 percent. Of which investments in
­intangible assets and in p
­ roperty,
plant and equipment -96.7 -58.9
Cash flow from financing activities – -32.2

1
Consolidated sub-group financial statements of the Siltronic Group in
accordance with IFRS

For further information on individual companies, please

refer to the Breakdown of Shareholdings.
See Note 21

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Information on Capital Management The company pension plan makes a distinction between
The goal of the WACKER Group’s capital management pol- defined contribution and defined benefit plans. Defined
icy is to ensure that the company remains a going concern contribution plans lead to no further obligation for the
in the long term and to generate an appropriate return on company beyond paying contributions into special-­
capital employed for the company’s shareholders. The purpose funds. WACKER has both defined-contribution and
capital management instruments employed to achieve this defined-benefit plans, which are financed in part by Pen-
goal include dividend payments and stock buybacks. sionskasse der Wacker Chemie VVaG or by funds. Pension
obligations result from defined benefit plans in the form of
In managing its capital, Wacker Chemie AG complies with entitlements to future pensions and ongoing payments for
the legal stipulations on capital maintenance. The company’s eligible active and former employees of the WACKER Group
Articles of Association do not stipulate any capital require- and their surviving dependents. The various pension plans
ments. No special capital terminology is used. The Group’s basically ensure employees either a life-long pension on
policy on dividends is generally oriented toward distributing the basis of their average salary during employment at
about 50 percent of Group net income to shareholders, WACKER (career average plan) or lump-sum payments.
provided the business situation permits and the commit-
tees responsible agree. The Group maintains the following retirement benefit plans:

Above and beyond this, WACKER actively manages its debt Retirement Benefits Supplied by the Company
capital with the aim of achieving a balanced financing Pension Fund
portfolio, a diversified maturities profile and sufficient Employees at Wacker Chemie AG and other German Group
­liquidity reserves. In addition, our corporate financial companies are granted a basic pension model via Pensions­
structures are designed to keep WACKER’s credit rating – at kasse der Wacker Chemie VVaG , a legally independent
a minimum – in the investment-grade range. In accordance German pension fund. The pension fund is financed by
with our policy of value-based management, net financial member and company contributions. The payments com-
debt functions as a supplementary financial performance prise old-age, disability and surviving dependents’ benefits.
indicator.
148 See Management Processes and Net Assets sections of the Group The pension fund is a small mutual insurance company
­m anagement report. within the meaning of Section 210 of the German Insurance
Supervision Act and is regulated by Section 233 (1) of this
As of the balance sheet date, the WACKER Group’s capital act. It is thus subject to the regulations that apply to German
structure was as follows: insurers and is monitored by the Federal Financial Super-
visory Authority ( BaFin). There are statutory minimum
­financing obligations.
Capital Structure

Employees who joined the pension plan before the end

€ million 2016 2015
of 2004 receive guaranteed payments based on a defined-­
Equity attributable to Wacker benefit amount, which is to be taken into consideration in
Chemie AG shareholders 2,379.4 2,568.2 determining pension obligations. The pension payment is
Share of total capital (%) 62.0 63.8 the same regardless both of the employee’s age when
paying contributions and of the interest generated from
Noncurrent financial liabilities 791.1 1,136.7 assets. A new basic-pension model applies for employees
Current financial liabilities 667.1 318.7 who joined the pension fund after 2004. Under that model,
Total 1,458.2 1,455.4 the benefits are based on guaranteed interest rates and the
Share of total capital (%) 38.0 36.2 benefit amount depends on the age at which the employee
Total capital 3,837.6 4,023.6 pays contributions. Annual profit distributions can increase
the future payment. In addition, employees in Germany
may make voluntary payments to the “PK+” supplementary
­insurance fund of Pensionskasse der Wacker Chemie VVaG.
11 Provisions for Pensions Primarily, contributions in connection with retirement ben-
For WACKER Group employees, there are various post-­ efit plans governed by the collective bargaining agreements
employment pension plans, which depend on the legal, concerning one-off payments and retirement benefits, and
economic and fiscal conditions prevailing in the respective “Working Life and Demography” are paid into the voluntary
countries. These pension plans generally take account of supplementary insurance fund.
the employees’ length of service and salary levels.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

In fiscal 2016, accounting treatment of the plans for 7 percent or 6 percent interest may be drawn in the form of
­employees in Germany who joined the company after 2004 either a pension or a lump sum. Plans bearing 5 percent
was changed. Up until fiscal 2015, WACKER treated these interest are paid out exclusively in lump-sum form. Since
plans as defined contribution plans. Since interest rates 2015, management employees have been able to contribute
remained at very low levels, WACKER reassessed the plans a portion of their salary to an employee-financed pension
in 2016 because the probability of their being utilized had plan with a variable interest rate. The variable interest rate
risen and recognized them as defined benefit plans. As a is linked to the five-year running yield on German bearer
consequence of this change, the present value of the bonds and amounts to at least 2.5 percent and at most
­defined benefit obligation rose by € 143.1 million in 2016 and 5 percent. Disbursement is as a lump sum only. Pension
was recognized in other comprehensive income. At the commitments made before or on December 31, 2000 are
same time, additions to plan assets in the amount of measured ( in accordance with the projected unit credit
€ 138.6 million were recognized in other comprehensive method ) at the present value of years’ service to date or
­income. These effects are shown under the line items years served to retirement, whereas any commitments
“Gains  /  losses from changes in experience-based assump- made on or after January 1, 2001 are measured at the
tions” and “Gains  /  losses from plan assets without amounts present value of the defined benefit obligation or at the
already recognized in interest income” in the table “Changes equivalent of the accumulated capital.
in the Net Liability of Defined Benefit Obligations.”
Pension entitlements in Germany are protected against
Direct Commitments of the WACKER Group insolvency by the pension guarantee fund ( Pensions­
In addition to the pension fund commitments, employees sicherungsverein a. G.). This insolvency insurance is capped.
in Germany receive direct commitments in the form of an There are no statutory minimum financing obligations.
additional pension. The additional pension insures that
part of an employee’s salary that exceeds the pension Pension Commitments outside of Germany
­insurance contribution assessment ceiling. Employees Various pension plans are available for employees of foreign
who joined the company before the end of 2004 – and their subsidiaries, subject to the statutory provisions applicable
surviving dependents – receive a pension. The amount of in the respective countries. With the exception of the US
that pension depends on the average salary earned during pension plans, these pension plans are not material to the 149
the period of employment with WACKER (career average Group.
plan). For employees who joined the plan as of 2005, a
certain percentage of the salary exceeding the pension In the US, defined benefit plans exist for employees of
insurance contribution assessment ceiling is paid in. This ­S iltronic Corporation, Portland, and Wacker Chemicals
capital accrues interest. The benefits may be paid out as Corporation, Adrian. However, both plans were closed
a life-long pension or, in the case of commitments made for  new applications effective after December 31, 2003,
from 2005 onward, as a lump sum. Employees and their and defined benefits are carried only for legacy policies.
surviving dependents are eligible to receive benefits. ­Retirement benefits are paid out from age 65 in the form of
­E mployee entitlements are included when ­m easuring a monthly pension and are based on the last average
pension obligations, regardless of whether the employees ­s alary paid. Special rules apply to early retirement as of
joined the company before the end of 2004 or after the age 55 depending on the employee’s years of service. In
beginning of 2005. view of their pension-like character, obligations relating to
medical care for retired employees and severance pay-
Executive Board members are granted individual pension ments are likewise included under pension provisions.
commitments. For more information on Executive Board New employees in the USA are offered only defined con-
member pension plans, please refer to the Compensation tribution plans.
Report.
See page 183 The present value of defined benefit plans may be recon-
ciled with the provisions recognized in the balance sheet
Employees in Germany with salaries above the standard as follows:
pay scale may pay into an employee-financed pension
plan (deferred compensation). This plan affords employees
the option of converting part of their future salary claims
into equivalent pension capital. Pension capital accrues
interest according to the date the pension plan was
­entered into (commitment) at either 7 percent (1996 – 2001),
6 percent (2002 – 2010) or 5 percent (2011 – 2013). Plans bearing

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Net Liability of Defined Benefit Obligations

€ million Dec. 31, 2016 Dec. 31, 2015

Germany International Total Germany International Total

Present value of the at least partially fund-financed

defined benefit obligations 2,806.7 234.1 3,040.8 2,230.2 222.8 2,453.0
Fair value of plan assets –1,917.3 –177.3 –2,094.6 –1,660.5 –160.4 –1,820.9
Funded status 889.4 56.8 946.2 569.7 62.4 632.1
Present value of unfunded defined benefit obligations 1,141.7 19.9 1,161.6 963.4 16.2 979.6
Provisions for pensions and similar obligations 2,031.1 76.7 2,107.8 1,533.1 78.6 1,611.7

Changes in the Net Liability of Defined Benefit Obligations

€ million Present value Market value Total

of pension of plan
plan assets
obligations

As of January 1, 2015 3,500.3 –1,742.1 1,758.2

Current service cost 87.5 – 87.5
Interest expense  /  i ncome 85.1 –43.6 41.5
Administrative expenses paid from plan assets – 0.7 0.7
Past service cost / e ffects of settlements and curtailments 1.4 – 1.4

Remeasurements
Gains (–) /  l osses (+) from plan assets without amounts already recognized in interest income – –23.3 –23.3
150 Gains (–) /  l osses (+) from changes in demographic assumptions –3.5 – –3.5
Gains (–) /  l osses (+) from changes in financial assumptions –283.3 – –283.3
Gains (–) /  l osses (+) from changes in experience-based assumptions 95.7 – 95.7
Effects of exchange-rate differences 24.5 –16.3 8.2
Contributions by
Employer – –44.2 –44.2
Pension plan beneficiaries 10.3 –10.3 –
Pension payments –85.4 58.2 –27.2
As of December 31, 2015 3,432.6 –1,820.9 1,611.7

Current service cost 75.9 – 75.9

Interest expense  /  i ncome 96.6 –52.5 44.1
Administrative expenses paid from plan assets – 0.8 0.8
Past service cost 0.4 – 0.4
Effects of settlements –12.7 11.8 –0.9

Remeasurements
Gains (–) /  l osses (+) from plan assets without amounts already recognized in interest income – –215.2 –215.2
Gains (–) /  l osses (+) from changes in demographic assumptions –0.1 – –0.1
Gains (–) /  l osses (+) from changes in financial assumptions 545.6 – 545.6
Gains (–) /  l osses (+) from changes in experience-based assumptions 130.7 – 130.7
Effects of exchange-rate differences 9.1 –5.9 3.2
Contributions by
Employer – –61.5 –61.5
Pension plan beneficiaries 11.2 –11.2 –
Pension payments –89.0 60.0 –29.0
Change in the scope of consolidation 2.1 – 2.1
As of December 31, 2016 4,202.4 –2,094.6 2,107.8

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Assumptions Heubeck values and 85 percent for women, which takes

The pension obligations are calculated by taking account into account in particular the recognized connection
of company-specific and country-specific biometric calcu- ­between life expectancy and the amount of pension paid
lation principles and parameters. The calculations are ( “Influence of socio-economic status” ). In the USA, the
based on actuarial valuations that factor in the following gender-specific RP-2014 mortality tables ( Scale SoA
parameters: ­MP-2014) are used for both pensioners and pension bene-
ficiaries. The RP-2014 mortality table was extrapolated
back to the year 2007 and a modified version of the MP-2014
% 2016 2015
table was used as a basis for future periods.
Actuarial Assumptions
Germany The discount rates and salary increase rates used in
Discount rate 1.94 2.75
­calculating the pension obligation were determined in line
Salary growth rate 2.5 2.5
with the general economic situation and by applying
Pension growth rate 1
­uniform standards. The discount rate is based on a yield
Basic and supplementary
­p ension 1.8 / 1.0 1.8 /1.0 curve that is derived from the yields of country-specific,
Deferred compensation 2.5 / 1.0 2.5 /1.0 high-grade, fixed-interest corporate bonds with maturities
corresponding to the pension obligations. The discount
USA rate takes account of the WACKER-specific, expected future
Discount rate 3.92 4.2 cash flows for these obligations.
Salary growth rate 3.0 2.0 /3.0
Sensitivity Analysis
The following sensitivity analysis involves an adjustment of
1
Varies according to the date on which the employee joined the company
and/or the effective date of the different plan generations. only one assumption – i. e. the other assumptions remain
unchanged from the original valuation, so that the sensi-
tivity of each individual assumption can be observed in
Life expectancy calculations in Germany are based on isolation. As a consequence, possible correlation effects
Prof. Klaus Heubeck’s modified 1998 guideline tables. The between the individual assumptions cannot be taken into 151
pension fund portfolio (basic pension model) is based on consideration.
the official mortality tables (reduction of male mortality to
75 percent of the guideline table value, and 85 percent for The following table shows the possible changes in the
females). The portfolio for other pension commitments is present value of pension obligations resulting from changes
based on a reduction of male mortality to 60 percent of the in the basic actuarial assumptions.

Sensitivity Analysis

Dec. 31, 2016 Dec. 31, 2015

Effect on defined benefit obligation Effect on defined benefit obligation
Defined benefit Change (%) Defined benefit Change (%)
obligation in obligation in
€ million € million

Present value of pension obligations as of the reporting date 4,202.4 3,432.6

Present value of pension obligations if
the discount rate increases by 0.5 percentage points 3,820.4 –9.1 3,154.7 –8.1
the discount rate decreases by 0.5 percentage points 4,643.1 10.5 3,750.3 9.3
salaries increase by 0.5 percentage points 4,242.1 0.9 3,465.8 1.0
salaries decrease by 0.5 percentage points 4,163.2 –0.9 3,399.6 –1.0
future pension increases are 0.25 percentage points higher 4,330.4 3.0 3,526.0 2.7
future pension increases are 0.25 percentage points lower 4,080.9 –2.9 3,343.3 –2.6
life expectancy goes up by one year 4,363.9 3.8 3,553.3 3.5

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Composition of Plan Assets is retained for liquidity purposes. The investment strategy
Pensionskasse der Wacker Chemie VVaG invests plan follows the investment guideline provided by the executive
assets in accordance with statutory requirements and the board of the pension fund.
terms of its by-laws. The company pension fund invests
nearly half of its assets in equity funds and fixed-income The plan assets of pension funds set up in the US are
funds. The other half is invested directly in promissory ­invested mainly in stocks and funds in accordance with
notes (German Schuldscheine), real estate, real estate the applicable investment rules. The composition of plan
mortgages and private equity. The remaining part of assets assets for the Group is shown in the following table:

Composition of Plan Assets

€ million Dec. 31, 2016 Dec. 31, 2015

Market No listing in Total Market No listing in Total
prices listed an active prices listed an active
in an active market in an active market
market market

Real estate – 347.1 347.1 – 274.5 274.5

Loans  /  f ixed-interest securities 734.3 425.8 1,160.1 664.4 438.6 1,103.0
Shares  / f unds 274.8 178.7 453.5 246.0 138.9 384.9
Cash and cash equivalents – 133.9 133.9 – 58.5 58.5
Total 1,009.1 1,085.5 2,094.6 910.4 910.5 1,820.9

The WACKER Group was utilizing € 84.2 million of plan assets In addition to actuarial risks, the defined benefit plans
152 for its own purposes as of December 31, 2016, compared used in the US are also subject to market-price fluctuation
with € 80.2 million in the prior year. The assets in question risks because plan assets are invested in stocks and funds.
comprised the real estate used by Wacker Chemie AG for
its headquarters in Munich. Applicable statutes and by-laws require WACKER to reduce
under-funding of pension plans by increasing the amount
Risks of company contributions in cash.
In addition to the usual actuarial risks, the risk inherent
in  the defined benefit obligation relates in particular to Risks arise in particular in connection with the life expec-
­financial risks in connection with plan assets. In Germany, tancy of the beneficiaries, the interest rate guarantee, and
substantial amounts of the defined benefit obligation are the salary and pension growth rates. The interest rate
administered by the pension fund. As part of an annual guarantee risk is regularly monitored as part of the risk
asset-liability study, the current and future relationships management process. It constitutes a major focus of the
between the portfolio structure and obligations are company pension fund when determining the long-term
­analyzed and projections made. The result is the long-term interest ­requirements and how to fulfill them. Interest rate
return required of the pension fund, on the basis of which guarantee risks also affect the deferred compensation
the pension fund defines a strategic target portfolio. This plans.
leads to an annual review and coordination of the required
return, company contributions of sponsoring entities and
strategic asset allocation.

All capital investments are exposed to market price fluc-

tuation risks. These risks may comprise shifts in interest
rates, share prices or exchange rates. WACKER aims to limit
losses to a pre-defined amount using overlay management.
In some cases, derivatives are used for hedging purposes.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Pension Plan Financing Composition of Pension Expenses

In 2016, benefits in the amount of € 78.9 million (€ 75.1 million
€ million 2016 2015
a year earlier) were paid under pension plans in Germany
and € 10.1 million (€ 10.3 million a year earlier) under pension Current service cost from
defined benefit plans –75.9 –87.5
plans outside of Germany. WACKER anticipates that
Past service cost / e ffects of
­pension payments will reach approximately € 95 million in
­s ettlements and curtailments 0.5 –1.4
the coming fiscal year. Current employer contributions to Administrative expenses for
plan assets will amount to around € 45 million in 2017. The defined benefit plans paid from
weighted duration of pension obligations as of Decem- plan assets –0.8 –0.7
ber 31, 2016 was 20.7 years in Germany (versus 18.4 years in Net interest expense for defined
benefit plans –44.1 –41.5
the prior year) and 14.7 years in the US (versus 14.2 years).
Defined contribution plan expenses –9.7 –9.7
Other pension expenses –1.9 –3.2
Contributions to state pensions –65.7 –64.0
Expected Pension Payments Due
Total –197.6 –208.0
€ million Dec. 31, 2016 Dec. 31, 2015

Less than a year –95.4 –92.0

One to two years –100.2 –95.3
Two to three years –107.1 –98.4
Three to four years –113.2 –105.0
Four to five years –119.1 –110.3

12 Other Provisions  /  Tax Provisions

153
€ million 2016 2015
Total Of which Of which Total Of which Of which
noncurrent current noncurrent current

Personnel 124.9 117.1 7.8 105.1 98.2 6.9

Sales  /  p urchasing 70.9 31.5 39.4 60.7 22.9 37.8
Environmental protection 85.3 80.7 4.6 79.9 79.3 0.6
Sundry 61.3 18.1 43.2 59.5 16.6 42.9
Other provisions 342.4 247.4 95.0 305.2 217.0 88.2

Income tax provisions 100.5 73.7 26.8 79.8 52.8 27.0

Provisions for Personnel Sales  /  Purchasing Provisions

These include obligations for anniversary payments and These provisions cover warranty and product-liability
funeral expenses as well as provisions for early-retirement ­obligations, as well as discounts, cash bonuses and other
and phased-early-retirement plans. There is a continuous price reductions still to be granted, commissions payable
reduction of noncurrent provisions for anniversary pay- to sales agents, and contingent losses from contractual
ments and of provisions for phased-early-retirement plans. agreements. The major portion of the provisions will
Interest-rate effects increased anniversary-payment ­probably be used for payouts over the next three years.
­provisions; provisions for phased-early-retirement plans
increased due to newly concluded agreements with
­employees still working for the company.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Provisions for Environmental Protection Income Tax Provisions

Provisions for environmental protection are created for These contain amounts for current income tax obligations
anticipated obligations regarding contaminated-site reme- as well as for risks from tax audits and legal action. The
diation, water pollution control, recultivation of landfills, the existing noncurrent tax provisions will largely be utilized
clean-up of contaminated storage and production sites, over the next two to four years.
and similar environmental measures. These provisions
also include environmental protection charges likely to be Depending on the situation in the individual countries, in-
­imposed by government bodies. The additions are mainly terest rates of up to 10 percent were used to determine the
attributable to the adjustments made to the actuarial provisions; in the prior year these interest rates ranged up
­interest rate. The noncurrent provisions for environmental to 9 percent. These provisions were primarily ones associ-
protection are likely to be utilized within a period of ated with purchasing, environmental provisions, provisions
25 years. for phased-early-retirement plans and anniversary-pay-
ment provisions.
Sundry Provisions
These provisions are formed for a multiplicity of identifi-
able individual risks and contingencies (e. g. damages,
reimbursement claims, legal expenses).

Other Provisions /  I ncome Tax Provisions

€ million Jan. 1, 2016 Utilization Reversal Addition Interest Exchange- Other * Dec. 31, 2016
effect  / e ffect rate
of change in differences
interest

Personnel 105.1 –36.9 –0.2 67.8 1.7 –0.1 –12.5 124.9

Sales  /   p urchasing 60.7 –13.3 –2.0 22.5 3.3 –0.3 – 70.9
154 Environmental protection 79.9 –8.1 –2.9 11.8 4.4 0.2 – 85.3
Sundry 59.5 –5.0 –8.4 13.1 – 2.1 – 61.3
Other provisions 305.2 –63.3 –13.5 115.2 9.4 1.9 –12.5 342.4

Income tax provisions 79.8 –21.3 –2.8 44.2 – 0.6 – 100.5

* Includes the change in plan assets for phased-early-retirement commitments.

13 Financial Liabilities

€ million 2016 2015

Total Of which Of which Total Of which Of which
noncurrent current noncurrent current

Liabilities to banks 990.8 339.6 651.2 1,000.2 700.1 300.1

Liabilities from lease obligations 36.1 32.0 4.1 39.1 33.2 5.9
Other financial liabilities 431.3 419.5 11.8 416.1 403.4 12.7
Financial liabilities 1,458.2 791.1 667.1 1,455.4 1,136.7 318.7

In 2016, WACKER took out new bank loans for an amount lion) falling due in 2018 was repaid ahead of schedule
totaling US$ 250  million (€ 237.6  million) and KRW (Korean won) in 2016.
23.3 million (€ 18.4 million). A maturing, euro-denominated
investment loan of € 200 million was repaid on schedule and In 2015, the company made a scheduled repayment of
ongoing scheduled repayments of a further investment € 150 million on a promissory note (German Schuldschein).
loan were made in the amount of € 16 million. A renminbi-­ In addition, around € 5 0 million was repaid on renminbi-­
denominated investment loan of CNY 252.8 million (€ 34.6 mil- denominated loans.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

No collateral exists for the financial liabilities, nor are they were granted on condition that particular covenants be
secured through liens or similar rights. Some of the liabilities complied with.
to banks have fixed interest rates and others have variable
interest rates. Moreover, some of the liabilities to banks The liabilities to banks comprise the following:

€ million 2016 2015

Currency Carrying Of which Maturity Currency Carrying Of which Maturity
amount with variable amount with variable
€ million interest € million interest
rates rates

Investment loan – – – – EUR 200.0 200.0 2016

Investment loan EUR 200.0 – 2017 EUR 200.0 – 2017
Investment loan CNY – – 2018 CNY 35.6 35.6 2018
Investment loan EUR 64.0 64.0 2020 EUR 80.0 80.0 2020
Promissory notes
( ­G erman Schuldscheine) EUR 150.0 39.0 2017 EUR 150.0 39.0 2017
Bank loan JPY 81.2 40.6 2017 JPY 76.1 38.0 2017
Bank loan BRL 7.3 – 2017 BRL 5.8 – 2017
Bank loan KRW 18.4 18.4 2017 KRW – – 2017
Bank loan CNY 109.5 – 2017 CNY 112.8 – 2017
Bank loan EUR 50.0 – 2018 EUR 50.0 – 2018
Bank loan JPY 4.0 – 2018 JPY – – 2018
Bank loan USD 237.6 237.6 2019 USD – – 2019
Operating loan CNY 66.5 66.5 2017 CNY – – 2017
155
Operating loan CNY – – – CNY 89.9 89.9 –
Operating loan JPY 1.8 1.8 2017 JPY – – 2017
Other 0.5 – –
Total 990.8 1,000.2
Fair value 996.0 1,012.5

Other financial liabilities comprise the following:

€ million 2016 2015

Currency Carrying Of which Maturity Currency Carrying Of which Maturity
amount with variable amount with variable
€ million interest € million interest
rates rates

Private placement
(1st installment) USD 66.3 – 2018 USD 63.9 – 2018
Private placement
(2nd installment) USD 123.2 – 2020 USD 118.5 – 2020
Private placement
(3rd installment) USD 189.5 – 2023 USD 182.4 – 2023
Minority-shareholder loans SGD 40.4 – Indefinite SGD 38.6 – Indefinite
Sundry other financial
­l iabilities 11.9 – 12.7 –
Total 431.3 416.1
Fair value 423.5 409.2

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

The carrying amounts of the current financial liabilities

correspond to the repayment amounts. With the exception
of the euro-denominated investment loan in the amount of
€ 6 4 million, all the loans fall due on maturity.

The following table shows the future redemption and inter-

est payments for the bank liabilities and other financial
­liabilities.

€ million 2017 2018 2019 2020 2021 Indefinite

to 2023 maturity

Redemption 663.0 136.6 253.6 139.6 188.9 40.4

Interest 31.9 20.2 15.1 10.9 23.2 1.6 p.a.

There are also unused long-term lines of credit amounting

to € 801.1 million (€ 602.8 million a year earlier), where all the
conditions for their utilization have been met.

As of the reporting date, the future minimum lease pay-

ments under finance lease agreements amount to:

€ million 2016 2015

Nominal Interest Present Nominal Interest Present
value value value value

156
Minimum lease payment within a year 7.1 3.0 4.1 9.1 3.2 5.9
Minimum lease payment between one and five years 25.2 11.0 14.2 25.7 10.3 15.4
Minimum lease payment over five years 32.9 15.1 17.8 35.3 17.5 17.8
Total 65.2 29.1 36.1 70.1 31.0 39.1

There are no conditional lease payments from finance The lease agreements serve to simplify the procurement
leases. and financing of operating materials and fixed assets. The
long-term commitment that they involve, however, leads to
Wacker Chemie AG has capitalized a finance lease for the a constant future outflow of cash from which the company
leased CCGT (combined-cycle gas turbine) power station cannot extract itself.
at its Burghausen site. The lease for the power station is
due to expire in 2019 at the latest. WACKER has the right to
acquire the power station at a price oriented to book val-
ues in accordance with German commercial law. If WACKER
acquires this power station, it may not be sold to a third
party for five years.

WACKER also has leasing agreements for several technical

facilities that qualify as finance leases and were capitalized
accordingly. Here, too, the Group in some cases has rights
of preemption and lease rollover options.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

14 Financial and Non-Financial Liabilities

€ million 2016 2015

Total Of which Of which Total Of which Of which
noncurrent current noncurrent current

Trade payables 369.7 – 369.7 378.3 – 378.3

Liabilities due to associated companies – – – 0.3 – 0.3

Derivative financial instruments 28.7 2.3 26.4 28.3 2.6 25.7
Sundry financial liabilities 35.4 – 35.4 21.5 – 21.5
Other financial liabilities 64.1 2.3 61.8 50.1 2.6 47.5

Payables relating to social security 5.9 – 5.9 3.0 – 3.0

Payroll liabilities 7.9 – 7.9 5.6 – 5.6
Variable compensation 72.9 – 72.9 75.5 – 75.5
Other personnel liabilities 30.0 – 30.0 28.1 – 28.1
Other tax liabilities 23.0 – 23.0 16.9 – 16.9
Accruals and deferrals 1.6 – 1.6 1.1 – 1.1
Advance payments received (third parties) 270.7 164.1 106.6 453.3 287.5 165.8
Sundry liabilities 6.7 0.1 6.6 1.6 – 1.6
Other non-financial liabilities 418.7 164.2 254.5 585.1 287.5 297.6

Income tax liabilities 0.8 – 0.8 0.3 – 0.3

157
In addition to those tax amounts for which Group com- 15 Contingencies, Other Financial Obligations
panies are liable, tax liabilities include taxes paid for the and Other Risks
account of third parties. Contingent Liabilities
The values assigned to contingent liabilities correspond to
Payables relating to social security refer in particular to the extent of liability that exists on the reporting date. At
social-insurance contributions that have yet to be paid. WACKER, contingent liabilities primarily concern incurred
guarantees totaling € 0.5 million, versus € 0.6 million in the
The other payroll liabilities include, in particular, vacation prior year. It is unlikely that the guarantees will be utilized.
and flextime credits, as well other HR-related liabilities.
Other Financial Obligations and Other Risks
The advance payments received relate primarily to future
deliveries of semiconductor wafers and polysilicon.
€ million 2016 2015

No collateral exists for other liabilities, nor are they ­secured Obligations from rent and
through liens or similar rights. ­o perating leases
Due within one year 49.7 38.2
Due between one and five years 82.8 64.6
Due after five years or more 52.4 35.7
Total 184.9 138.5

Lease payments occasioned

by operating leases 49.6 44.1

Total expected minimum lease

payments from subtenancies 4.6 2.9

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

The Group leases property, plant and equipment, motor 16 Other Disclosures
vehicles and IT equipment by way of rental agreements
and operating leases. These leases generally have terms
€ million 2016 2015
of between three and five years. Tenancy agreements for
office space, property, plant and equipment, etc. have
considerably longer terms. Due to regulatory require- Cost of materials –2,233.5 –2,276.6
ments, the Group is also leasing the land on which its
production facilities in Singapore were built. Personnel expenses
Wages and salaries –1,106.9 –1,070.2

€ million 2016 2015

Social benefits and financial
aid funds –184.7 –177.4
Obligations from orders for
planned investment projects State pension contributions 65.7 64.0
(commitments) 121.3 205.0 Social security contributions –119.0 –113.4

Pension expenses –87.8 –102.5

Contributions to state pensions –65.7 –64.0
Obligations from orders for planned investment projects
Pension expenses –153.5 –166.5
(commitments) amount to € 121.3 million, after € 205.0 million
Total personnel expenses –1,379.4 –1,350.1
in the prior year, and concern the operating segments.

The Group ensures capacity utilization at its joint venture

company with Dow Corning via long-term purchasing Social benefits relate mainly to the employer’s share of
commitments of some € 9 0.0 million annually, versus social insurance contributions and to employers’ liability
€ 100 million in the prior year. The contractually agreed insurance association contributions. The pension ex-
transfer prices led to creation of a provision for onerous penses consist mainly of contributions to state pensions
contracts, included in other provisions. and allocations to pension provisions. Related interest is
158 shown in the financial result. The expenses incurred in
As regards raw-material supplies, WACKER has entered into transfers to external pension funds and pension plans are
long-term agreements to purchase strategic raw materials, likewise included in pension expenses.
electricity and gas. Accordingly, in net terms the company
had other financial obligations arising from major minimum
€ million 2016 2015
purchasing obligations in the amount of € 1.32 billion in the
reporting period, after € 1.58 billion the year before. The Expenses for auditors’ fees
agreements have terms of between one and seven years. Audit 1.0 1.3

The Group has an obligation to accept delivery in the Other attestation services 0.1 0.4

amount of € 8.9 million (€ 13.6 million a year earlier) to take Total 1.1 1.7

back stock from consignment warehouses.

The Group receives government incentives and allowances

for investing activities. These incentives are granted on Auditors’ fees in the amount of € 1.1 million (versus € 1.7 million
condition that a certain number of jobs be created or a year earlier) were paid to KPMG AG Wirtschaftsprüfungs-
maintained at certain sites. If these contractual commit- gesellschaft, of which € 1.0 million (€ 1.3 million a year
ments are not fulfilled, any funding received must be paid ­e arlier) was for ­financial statement auditing services and
back either in full or in part. The period for which the Group € 0.1 million (€ 0.4 million a year earlier) for other attestation
has to fulfill its contractual commitments is limited. services.

WACKER is occasionally involved in legal or arbitration

proceedings as well as official investigations and actions.
Pending proceedings can have a negative impact on
WACKER’s earnings, net assets or financial position. At the
present time, WACKER does not expect any significant
negative effects from pending proceedings.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

17 Earnings per Share /  D ividend 18 Financial Instruments

The following table shows a presentation of financial
­a ssets and liabilities by measurement categories and
2016 2015
classes. Also presented are liabilities from finance leases
Average number of outstanding and derivatives that qualify for hedge accounting even
common shares (units) 49,677,983 49,677,983 though they do not belong to any of the IAS 39 measure-
Number of common shares ment categories. WACKER has not pledged any financial
­o utstanding at the end of the
year (units) 49,677,983 49,677,983 assets as security.

Dividend per dividend-bearing The fair value of financial instruments measured at amor-
common share (€ ) 2.00 2.00 tized cost is determined by means of discounting, taking
into account market-participant interest rates that are
Net result for the year after ­a dequate to the inherent risk and correspond to the
non-controlling interests
­relevant maturity. For reasons of immateriality, the carrying
(€ ­m illion) 179.2 246.7
amount of current balance-sheet items is the same as
Earnings due to common shares
(€ million) 179.2 246.7 their fair value.
Earnings per common share
(average, € ) 3.61 4.97
Earnings per common share
(as of reporting date, € ) 3.61 4.97

The diluted earnings per share are identical to the basic

earnings in both the year under review and the previous
year.

In the absence of relevant circumstances, earnings per 159

share relating to results from continuing or discontinued
operations are not reported.

The dividend distribution for 2015 amounted to € 99.4 million,

or € 2.00 per dividend-bearing share. No allocations to retained
earnings were made at Wacker Chemie AG for fiscal 2015.

The Executive Board of Wacker Chemie AG has proposed

a dividend of € 2.00 for 2016. The proposed dividend relates
solely to dividend-bearing shares, i. e. excluding treasury
shares. The acceptance or rejection of this proposal is
incumbent on the Annual Shareholders’ Meeting of Wacker
Chemie AG. Subject to acceptance of the proposal, an
amount of € 99,355,966.00 will be distributed on the 49,677,983
no-par-value shares that are not held by the company.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Financial Assets and Liabilities by Measurement Category and Class as of Dec. 31, 2016

€ million
Measurement Measurement
pursuant to pursuant to
IAS 39 IAS 17
Balance ( Amortized ) Fair value Fair value ( Amortized ) Fair value
sheet cost through through other cost Dec. 31, 2016
carrying profit or loss comprehen-
amount sive income
Dec. 31, 2016

Trade receivables 775.7 775.7 – – – 775.7

Loans and receivables – 775.7 – – – 775.7
Other financial assets 176.6 170.5 2.9 3.2 – 165.5
Loans and receivables – 159.4 – – – 159.4
Available-for-sale financial assets 1 – 11.1 – – – –
Derivatives that do not qualify for hedge accounting – – 2.9 – – 2.9
Derivatives that qualify for hedge accounting – – – 3.2 – 3.2
Securities and fixed-term deposits 182.2 78.9 – 103.3 – 182.2
Loans and receivables – 78.9 – – – 78.9
Available-for-sale securities – – – 103.3 – 103.3
Cash and cash equivalents 283.5 283.5 – – – 283.5
Loans and receivables – 283.5 – – – 283.5
Total financial assets 1,418.0 – – – – 1,406.9

Of which pursuant to IAS 39 measurement categories:

Loans and receivables 1,104.8 1,104.8 – – – 1,104.8
Held-to-maturity securities 192.7 192.7 – – – 192.7
160 Available-for-sale financial assets 114.4 11.1 – 103.3 – 103.3
Derivatives that do not qualify for hedge accounting 2.9 – 2.9 – – 2.9
Derivatives that qualify for hedge accounting 3.2 – – 3.2 – 3.2

Financial liabilities (excluding finance leases) 1,422.1 1,422.1 – – – 1,419.5

Measured at amortized cost – 1,422.1 – – – 1,419.5
Liabilities from finance leases 36.1 – – – 36.1 36.1
Trade payables 369.7 369.7 – – – 369.7
Measured at amortized cost – 369.7 – – – 369.7
Other financial liabilities 64.1 35.4 17.4 11.3 – 64.1
Measured at amortized cost – 35.4 – – – 35.4
Derivatives that do not qualify for hedge accounting – – 4.3 – – 4.3
Derivatives that qualify for hedge accounting – – 13.1 11.3 – 24.4
Total financial liabilities 1,892.0 – – – – 1,889.4

Of which pursuant to IAS 39 measurement categories:

Measured at amortized cost 1,827.2 1,827.2 – – – 1,824.6
Derivatives that do not qualify for hedge accounting 4.3 – 4.3 – – 4.3
Derivatives that qualify for hedge accounting 24.4 – 13.1 11.3 – 24.4

1
This item contains available-for-sale financial assets the market values of which cannot be calculated reliably and which have been recognized at cost.
It is ­r ecognized in the statement of financial position under noncurrent financial assets.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Financial Assets and Liabilities by Measurement Category and Class as of Dec. 31, 2015

€ million
Measurement Measurement
pursuant to pursuant to
IAS 39 IAS 17
Balance ( Amortized ) Fair value Fair value ( Amortized ) Fair value
sheet cost through profit through other cost Dec. 31, 2015
carrying or loss comprehen-
amount sive income
Dec. 31, 2015

Trade receivables 679.4 679.4 – – – 679.4

Loans and receivables – 679.4 – – – 679.4
Other financial assets 161.3 148.7 12.1 0.5 – 150.2
Loans and receivables – 137.6 – – – 137.6
Available-for-sale financial assets 1 – 11.1 – – – –
Derivatives that do not qualify for hedge accounting – – 11.2 – – 11.2
Derivatives that qualify for hedge accounting – – 0.9 0.5 – 1.4
Securities and fixed-term deposits 70.9 64.6 – 6.3 – 70.9
Loans and receivables – 64.6 – – – 64.6
Available-for-sale securities – – – 6.3 – 6.3
Cash and cash equivalents 310.5 310.5 – – – 310.5
Loans and receivables – 310.5 – – – 310.5
Total financial assets 1,222.1 – – – – 1,211.0

Of which pursuant to IAS 39 measurement categories:

Loans and receivables 1,033.3 1,033.3 – – – 1,033.3
Held-to-maturity securities 158.8 158.8 – – – 158.8
Available-for-sale financial assets 17.4 11.1 – 6.3 – 6.3 161
Derivatives that do not qualify for hedge accounting 11.2 – 11.2 – – 11.2
Derivatives that qualify for hedge accounting 1.4 – 0.9 0.5 – 1.4

Financial liabilities (excluding finance leases) 1,416.3 1,416.3 – – – 1,421.7

Measured at amortized cost – 1,416.3 – – – 1,421.7
Liabilities from finance leases 39.1 – – – 39.1 39.1
Trade payables 378.3 378.3 – – – 378.3
Measured at amortized cost – 378.3 – – – 378.3
Other financial liabilities 50.1 21.8 16.0 12.3 – 50.1
Measured at amortized cost – 21.8 – – – 21.8
Derivatives that do not qualify for hedge accounting – – 15.9 – – 15.9
Derivatives that qualify for hedge accounting – – 0.1 12.3 – 12.4
Total financial liabilities 1,883.8 – – – – 1,889.2

Of which pursuant to IAS 39 measurement categories:

Measured at amortized cost 1,816.4 1,816.4 – – – 1,821.8
Derivatives that do not qualify for hedge accounting 15.9 – 15.9 – – 15.9
Derivatives that qualify for hedge accounting 12.4 – 0.1 12.3 – 12.4

1
This item contains available-for-sale financial assets the market values of which cannot be calculated reliably and which have been recognized at cost.
It is ­r ecognized in the statement of financial position under noncurrent financial assets.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

The loans and receivables reported include trade receiv- The category “Available-for-sale financial assets” includes
ables, other loans and fixed-term deposits as well as cash interest income from fixed-interest securities.
and cash equivalents. Cash and cash equivalents in foreign
currency are measured at the conversion rate prevailing on The category “Held-to-maturity financial assets” mainly
the reporting date. Their carrying amounts correspond to comprises fixed-term deposits with terms of up to one
their fair values. The fair value of the loans corresponds to year that are posted under securities.
their present value, i. e. the present value of the expected
future cash flows. Discounting is carried out on the basis The gains and losses from changes in the fair value of
of the interest rates valid on the reporting date. foreign-currency exchange rates, interest rates and com-
modity derivatives that do not fulfill the requirements of
Available-for-sale financial assets include securities and IAS 39 for hedge accounting are posted in the category
investments in joint ventures and associates. Investments “Assets  /  liabilities classified as at fair value through profit
in joint ventures and associates are measured at cost, as or loss.” The effects of fair value hedge accounting are
no observable prices on active markets are available. also reported here.

The carrying amounts of trade payables and other financial The interest income from financial assets that are not
liabilities correspond to their fair values. The fair values recognized at fair value through profit or loss amounted to
of financial liabilities constitute the present value of the € 5.6 million, compared with the prior-year figure of € 6.9 million.
­expected future cash flows. Discounting is carried out on This interest income mainly results from demand deposits
the basis of the interest rates valid on the reporting date. and loans as well as from held-to-maturity securities.
All other financial liabilities are valued at cost as no
­observable prices for them are available. The interest expense from financial liabilities that are not
recognized at fair value through profit or loss amounts to
The following table shows the net gains and losses from € 42.4 million, versus € 31.8 million in the prior year. These
financial instruments. interest expenses are mainly due to financial liabilities.

162 € million 2016 2015

The net losses in the category “Financial liabilities mea-
sured at amortized cost” primarily consist of interest ex-
Net gains  /  l osses from financial penses on bank liabilities and other financial liabilities, as
instruments well as net losses  / gains from foreign currency translation.
Loans and receivables 17.9 29.5
Available-for-sale financial assets 1.3 0.7
Neither in the year under review nor in the previous year
Assets /  l iabilities classified as at
fair value through profit or loss –15.9 7.5 were there any reclassifications of financial assets between
Financial liabilities at amortized those recognized at amortized cost and those recognized
cost –46.3 –66.0 at market value or vice versa.
Total –43.0 –28.3
The financial assets and liabilities measured at fair value in
the financial statements were allocated to one of three
The net result of the category “Loans and receivables” was categories in accordance with the fair value hierarchy
primarily due to net losses  /  gains from foreign currency described in IFRS 13. Allocation to these categories reveals
translation, interest income from financial assets, demand which of the fair values reported were settled through
deposits and valuation allowances. market transactions and the extent to which the measure-
ment was based on models in the absence of observable
market transactions.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

The following are the levels of the hierarchy. Level 3

Financial instruments measured using valuation methods
Level 1 not based on observable parameters, the fair value of
Financial instruments measured using quoted prices which cannot be determined using observable market data
in active markets, the fair value of which can be derived and which require application of different valuation meth-
directly from prices in active liquid markets and for which ods. The financial instruments belonging to this category
the financial instrument observable in the market is repre- have a value component that is not market-observable and
sentative of the financial instrument being measured. has a major impact on fair value. These include over-the-
These include fixed-interest securities traded in liquid counter derivatives and unquoted equity instruments.
markets.
The following table shows the categories in the fair value
Level 2 hierarchy to which the financial assets and liabilities mea-
Financial instruments measured using valuation methods sured at fair value in the statement of financial position are
based on observable market data, the fair value of which allocated. The table also shows financial assets and liabili-
can be determined using similar financial instruments ties measured at cost in the statement of financial position.
traded in active markets or using valuation methods all of Their fair values are given in the Notes:
whose parameters are observable. These include hedging
and non-hedging derivative financial instruments, loans
and financial liabilities.

Fair Value Hierarchy

€ million Fair value hierarchy Total

Level 1 Level 2 Level 3
As of December 31, 2016
Financial assets measured at fair value
Fair value through profit or loss 163
Derivatives that do not qualify for hedge accounting – 2.9 – 2.9
Fair value through other comprehensive income  /  t hrough profit or loss
Derivatives that qualify for hedge accounting – 3.2 – 3.2
Available-for-sale securities and fixed-term deposits 103.3 – – 103.3
Total 103.3 6.1 – 109.4

Financial assets measured at amortized cost

Loans and receivables
Loans – 96.4 – 96.4
Total – 96.4 – 96.4

Financial liabilities measured at fair value

Fair value through profit or loss
Derivatives that do not qualify for hedge accounting – 4.3 – 4.3
Fair value through other comprehensive income  /  t hrough profit or loss
Derivatives that qualify for hedge accounting – 24.4 – 24.4
Total – 28.7 – 28.7

Financial liabilities measured at amortized cost

Financial liabilities
Measured at amortized cost – 1,419.5 – 1,419.5
Total – 1,419.5 – 1,419.5

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Fair Value Hierarchy

€ million Fair value hierarchy Total

Level 1 Level 2 Level 3
As of December 31, 2015
Financial assets measured at fair value
Fair value through profit or loss
Derivatives that do not qualify for hedge accounting – 11.2 – 11.2
Fair value through other comprehensive income  /  t hrough profit or loss
Derivatives that qualify for hedge accounting – 1.4 – 1.4
Available-for-sale securities and fixed-term deposits 6.3 – – 6.3
Total 6.3 12.6 – 18.9

Financial assets measured at amortized cost

Loans and receivables
Loans – 99.9 – 99.9
Total – 99.9 – 99.9

Financial liabilities measured at fair value

Fair value through profit or loss
Derivatives that do not qualify for hedge accounting – 15.9 – 15.9
Fair value through other comprehensive income  /  t hrough profit or loss
Derivatives that qualify for hedge accounting – 12.4 – 12.4
Total – 28.3 – 28.3

Financial liabilities measured at amortized cost

Financial liabilities
Measured at amortized cost – 1,421.7 – 1,421.7
Total – 1,421.7 – 1,421.7

164
WACKER regularly reviews whether its financial instruments Loans and financial liabilities are measured at amortized
are still appropriately allocated to the fair-value-hierarchy cost. However, the fair values must be provided in the Notes.
levels. As was the case in the previous year, no reclassifi-
cations were carried out within the fair value hierarchy in The fair value of the loans corresponds to the present value
2016. of expected future cash flows. Application of the discounted
cash flow method using market interest rates means that
In the period under review, WACKER measured only finan- the carrying amount of the loans corresponds to their fair
cial assets and liabilities at fair value. The market values value.
were calculated using market information available on the
reporting date and based on counterparties’ quoted prices The fair value of financial liabilities is determined using the
or via appropriate valuation methodologies (discounted net present value method and is based on standard market
cash-flow or well-established actuarial methodologies, interest rates.
such as the par method).
It was not possible to calculate the fair value of the equity
Derivative financial instruments and available-for-sale instruments that WACKER measures at amortized cost as
­financial assets are recognized at fair value and are thus no stock market prices or market values are available. The
subject to a recurring fair-value assessment. instruments in question are shares in unlisted companies
for which there was no indication of a lasting impairment
The fair value of derivative financial instruments is calcu- on the reporting date and the fair value of which cannot
lated based on market data such as exchange rates or reliably be determined. WACKER had no intention of selling
yield curves in accordance with market-specific valuation any of the shares reported as of December 31, 2016.
methodologies. The calculation of the fair value contains our
own and the counterparty’s default risk, using maturity-­
matching and market-observable CD S values. The fair
value of available-for-sale financial assets can be derived
from prices listed in active markets.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

The unilateral call option held by WACKER for the pur- documents. No collateral exists for financial instruments.
chase of 1 percent of the shares in the subsidiary WACKER Receivables from major customers are not so high as to
­Asahikasei Silicones Co. Ltd., Japan is recognized at cost represent an extraordinary concentration of risks. Default
as of December 31, 2016. risks are accounted for by valuation allowances, taking
advance payments received into account.
WACKER does not currently have any financial instruments
measured at fair value that are allocated to Level 3 of the Liquidity Risk
fair value hierarchy. A liquidity risk means that a company may not be able to
meet its existing or future financial obligations due to inad-
No changes were made to the valuation methodology equate funds. To ensure uninterrupted solvency and finan-
compared with the previous year. cial flexibility, the Group holds long-term lines of credit
at financial institutions of high credit standing and liquid
Management of Financial Risks funds based on multiyear financial planning and rolling
In the normal course of business, WACKER is exposed to ­liquidity planning.
credit, liquidity, and market risks from financial instruments.
The aim of financial risk management is to limit risks from To limit liquidity risk, WACKER keeps liquid reserves in the
operations and the resultant financing requirements by form of current investments and unused lines of credit.
using certain derivative and non-derivative hedging instru- WACKER has also concluded agreements with a number of
ments. banks for long-term syndicated loans and bilateral loans.

The risks connected with the procurement, financing and For information on the maturity analysis for non-derivative
selling of WACKER’s products and services are described in financial liabilities, please refer to the note on Financial
detail in the management report. WACKER counters financial Liabilities.
risks via the risk management system it has in place. That See Note 13

system is monitored by the Supervisory Board. The funda-

mental purpose of the risk management system is to Market Risks
identify, analyze, coordinate, monitor and communicate Market risks refer to the risk that fair values or future cash 165
risks in a timely manner. The Executive Board receives flows of a primary or derivative financial instrument could
regular analyses on the extent of those risks. The analyses fluctuate due to changing risk factors.
focus on market risks, in particular on the potential impact
of raw-material price risks, foreign-currency exchange Foreign Exchange Risk
risks, and interest rate risks on EBITDA and interest result. The potential currency exposure to be hedged with deriv-
ative financial instruments is determined on the basis of
Credit Risk (Risk of Default) major foreign-currency income and expenditure. The
In terms of financial instruments, the Group is exposed to greatest risk is posed by the US dollar. US-dollar income is
a default risk should a contractual party fail to fulfill its taken to mean all sales invoiced in US dollars, while all
commitments. The maximum risk is therefore the amount purchases in US dollars as well as site costs incurred in US
of the respective financial instrument’s positive fair value. dollars are reported under US-dollar expenditure. The
To limit the risk of default, particularly for investments of evaluation of potential risks includes not only direct
securities and cash, transactions are conducted only US-dollar income and expenditure, but also the indirect
within defined limits and with partners of very high credit US-dollar impact of WACKER’s main raw materials (methanol
standing. To make efficient risk management possible, the and natural gas). The US dollar is the only relevant risk
market risks within the Group are controlled centrally. The variable for the sensitivity analysis in accordance with
conclusion and handling of transactions comply with inter- IFRS  7, since the largest share of foreign-currency cash
nal credit-risk principles and are subject to monitoring flows is in US dollars. By comparison, increases in the euro
procedures that take account of the separation of duties. exchange rate against the renminbi (CNY ) and yen (JPY )
As for operations, outstanding receivables and default have a minor impact. In determining sensitivity, we simu-
risks are continually monitored and hedged with trade late a 10-percent US-dollar devaluation against the euro,
credit insurance, advance payments and bank guarantees. taking as a starting point the exchange rate used in the
Customer credit ratings and limits are based on generally forecast. Such a devaluation would have had an effect on
available information from rating agencies and internal EBITDA of €–58 million as of December 31, 2016 and of

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

€ – 60 million as of December 31, 2015. The effect from cash- Derivative Financial Instruments
flow-hedge designated items would have increased equity Financial risks are also hedged using derivative financial
before income taxes by € 15.3 million, versus € 29.4 million a instruments. The raw-material price risks that WACKER
year earlier. The Group’s currency exposure amounted to hedges against result principally from ongoing energy
€ 5 82 million as of December 31, 2016, after € 595 million in procurement. Electricity-supply price hedging takes
the prior year. place via contractual stipulations, for which the “own-use
exemption” rules of IAS 39 can essentially be used. These
Interest Rate Risk contracts, which are concluded for the purpose of receiving
The interest rate risk results mainly from financial liabilities or delivering non-financial goods according to WACKER’s
and interest-bearing investments. The Executive Board own needs, are not recognized as derivatives, but rather
determines the mix of fixed- and variable-interest financial as pending transactions.
debt. Interest rate derivatives are concluded as required,
taking account of the given structure. Depending on In those cases where WACKER hedges against currency
whether the instrument in question has a fixed or variable risks, it uses derivative financial instruments, in particular
interest rate, the interest rate risks are measured on the currency forward exchange contracts, currency options
basis of either market-value sensitivity or cash-flow sensi- and foreign exchange swaps. Derivatives are used only if
tivity. As financial liabilities and fixed-interest investments they are backed by positions, cash deposits and funding,
are measured at amortized cost, they are, in accordance or scheduled transactions arising from operations. The
with IFRS 7, not subject to any interest-rate risk. Available- scheduled transactions also include anticipated, but not
for-sale securities are recognized at fair value. Due to their yet invoiced, sales in foreign currencies.
short maturities, they are not subject to a significant risk of
changes in interest rates. Hedge accounting is not used Foreign exchange hedging is carried out particularly for
for any of the interest rate derivatives. Changes in market the US dollar, Japanese yen and Singapore dollar. Potential
interest rates have an impact on the net interest income interest rate hedges are based on the maturities of the
generated by variable-interest financial instruments and underlying transactions.
are thus included in the calculation of earnings-related
166 sensitivity. Changes in the market interest rates of interest Operational hedging in the foreign exchange area relates
rate derivatives affect the financial result, and are conse- to the receivables and liabilities already recognized, and
quently included in any earnings-related sensitivity analysis. generally covers time horizons of between two and three
If the market interest rate on December 31, 2016 had been months. The time horizon for strategic hedging is between
100 base points lower (December 31, 2015: lower), the interest three and a maximum of 21 months. The hedged cash
result would have been € 0.4 million (€ 1.4 million) lower flows influence the statement of income at the time when
(lower). sales are realized. The cash inflows are usually recorded
shortly afterward, depending on the payment deadline.
Raw‑Material Price Risk As well as receivables from and liabilities to third parties,
In general, the company is faced with the risk that its ­intercompany financial receivables and liabilities are
supplies of raw materials may be inadequate and that hedged.
­potential increases in raw-material prices could threaten
its results. These risks are covered by long-term contracts. The fair values refer to the repurchase values (redemption
Cash flow hedge accounting is used only to a minor degree values) of the financial derivatives as of the balance sheet
for long-term energy needs in Norway. This item is recog- date and are calculated using recognized actuarial methods.
nized in profit or loss under the cost of goods sold.
The derivatives are recognized at their fair values, irre-
spective of their stated purpose. They are reported in the
statement of financial position under other financial assets
or other financial liabilities. Where permissible, cash flow
hedge accounting is carried out for the strategic hedging
of currency exchange risks from future foreign exchange
positions. Depending on the nature of the underlying
transaction, they are posted in the statement of income
either under the operating result or, if financial liabilities
are being hedged, under interest result or other financial
result.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

For strategic hedging purposes, graduated hedging ratios The purpose of fair value hedges is to hedge against
of between 50 and 30 percent are used in relation to the changes in the fair value of financial assets and liabilities
expected net exposure in US dollars. The expected net that come about because of fluctuations in the value of
exposure for 2017 is about 50 percent hedged, with the currencies (foreign currency swap). If the hedge is effective,
expected additional net exposure for semiconductor the carrying amount of the corresponding underlying
business for 2018 being around 15 percent hedged. The transaction is amended to reflect the changes in the fair
average hedging ratio for operational hedging in US dollars value of the hedged risks. At year end, WACKER recognized
is around 50 percent. income of € 5.1 million from the valuation of the hedging
instrument under fair value hedges, versus income of
In fiscal 2016, the accumulated income and expenses re- € 7.3 million in the prior year. At the same time, an expense
corded directly in equity included a pre-tax result from of € – 5.1 million was realized on the underlying transaction,
cash flow hedges amounting to € 7.6 million, compared with versus an expense of € –7.3 million a year earlier. Both
€ 15.8 million in the prior year. During 2016, € – 21.1 million was amounts were recognized in the financial result. In the
reclassified to the statement of income, after € 69.7 million case of another fair value hedge, a loss of € 3.2 million from
in the prior year. In the result for the period, no gains measurement of the hedge and a gain of € 3.2 million from
or  losses from hedge accounting ineffectiveness were measurement of the underlying transaction were recog-
­recorded, as the hedging relationships were almost nized under other operating expenses.
­entirely effective.

€ million Dec. 31, 2016 Dec. 31, 2015

Nominal Market Nominal Market
values values values values

Foreign exchange derivatives 1,637.2 –21.8 1,826.5 –12.7

Other derivatives 15.0 –0.8 17.3 –3.0
Total 1,652.2 –22.6 1,843.8 –15.7
167
Market values of derivative financial instruments used for hedge accounting –21.1 –11.3

The foreign exchange derivatives mainly comprise forward The following table contains information on the netting of
exchange contracts, foreign exchange options and foreign financial assets and liabilities in the consolidated state-
exchange swaps amounting to US$ 610.8  million, ¥ 33.1  billion, ment of financial position.
SG$ 70.7 million and € 687.0 million, versus US$ 1,309.5  million,
¥ 28.0 billion, SG$ 4 69.7  million and CHF 10.5 million a year
earlier. Derivatives with market values of € – 22.4 million are
due in 2017, and € 0.5 million expire in 2018.

Other derivatives involve electricity futures traded on the

Norwegian market for a nominal amount of € 15.0 million,
after € 17.3 million in the prior year. The electricity futures
are used to limit the risk of rising spot-market prices for
energy via structured price setting on the electricity mar-
ket. The hedged amount represents up to 90 percent of
the Holla (Norway) site’s future silicon-production power
needs not covered by long-term supply contracts. The
futures have maturities of between one and four years.
Derivatives with maturities up until 2020 were concluded.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Financial Assets /  L iabilities Subject to Netting Agreements, Enforceable Global Netting Agreements and Similar Agreements

€ million Dec. 31, 2016 Dec. 31, 2015

Derivatives Derivatives Derivatives Derivatives
with a with a with a with a
positive negative positive negative
market value market value market value market value

I
Gross amounts of recognized financial assets  /  l iabilities 7.4 –29.9 12.7 –28.4
II
Gross amounts of recognized financial assets  /  l iabilities netted out
in the ­b alance sheet –1.3 1.3 –0.1 0.1
I + I I
Net amounts of financial assets  /  l iabilities presented in the balance sheet 6.1 –28.6 12.6 –28.3

Related amounts not netted out in the balance sheet

Financial instruments –5.0 5.0 –6.1 6.1
Cash collateral received  /  p aid – – – –

Net amount 1.1 –23.6 6.5 –22.2

In addition to the financial instruments complying with Construction-related borrowing costs that have to be
the provisions on netting pursuant to IAS 32, the table also capitalized were deducted from the interest payments
includes those financial instruments that are subject to recognized in cash flow from operating activities. These
netting agreements or master netting agreements but may construction-related borrowing costs increased capital
not be netted pursuant to IAS 32. expenditure included in cash flow from investing activities
by € 1.2 million, versus € 18.6 million in the prior year.
168 As a part of strategic hedging activities, WACKER closes
out forward-exchange contracts prior to maturity by In the case of cash flow from investing activities, the actual
means of offsetting transactions. The strategic forward-­ outflows of funds are recognized. As a result, it is also not
exchange contract and the corresponding offsetting possible to reconcile these figures with the additions to
­forward-exchange transaction are recognized as a net investments in the consolidated statement of financial
amount in accordance with IAS 32 criteria. In addition, position. If subsidiaries or business activities are acquired
general offsetting agreements, which apply only in cases of or sold, the effects of these transactions are shown as
insolvency, have been concluded with a number of banks. separate items in the statement of cash flows. Investment in
securities falling due in more than three months is reported
The net amount shows the amount of financial assets or separately under cash flow from investing activities because,
liabilities that, despite netting and global netting agree- in economic terms, these transactions are considered an
ments, is not received or must be paid in the event of element of liquidity.
­insolvency.
The Group is financed mainly by bank loans granted in the
19 Notes to the Statement of Cash Flows form of loan commitments. Within the defined approval
Cash flow from operating activities is calculated using the limits for loan commitments, our utilization of credit may
indirect method, which adjusts the relevant changes in be subject to considerable fluctuations both within a given
statement-of-financial-position items for any exchange-­ year and over several years. The raising and repayment of
rate effects and effects of changes in the scope of consol- loans in foreign currencies are translated at the exchange
idation. This means that changes to the relevant statement-­ rate prevailing as of the time of transaction, with the result
of-financial-position items cannot be reconciled with the that here, too, it is not possible to reconcile all the inflows
corresponding values based on the published consol­ and outflows with the changes in financial liabilities in the
idated statements of financial position. statement of financial position.

Please see the Notes for more details on the composition

of funds made up of cash and cash equivalents.
See Note 09

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

20 Explanatory Notes on Segment Reporting As a rule, the assets reported for the segments encom-
The Group’s segment reporting is in line with the internal pass all of their assets. Loans, cash and cash equivalents,
organizational and reporting structure. WACKER reports on and deferred tax assets, however, are allocated to the
five operating segments (Silicones, Polymers, Biosolutions, “Other” segment.
Polysilicon and Siltronic), which are organized and man-
aged autonomously on the basis of the type of products The liabilities shown for the segments represent all of their
they offer and their different risk and income structures. liabilities – except deferred tax liabilities, which are shown
Business segments are not combined. Any activities or under “Other.” The Group’s financial liabilities are allocated
results not assigned to an operating segment are shown to individual segments in proportion to the segment ­assets.
under “Other.” Foreign currency gains or losses pertaining Provisions for pensions are allocated in accordance with
to the Siltronic operating segment are recognized directly Group HR ratios. The advance payments received are allo-
in that operating segment because an assignment in cated directly to the individual segments.
­S iltronic’s sub-group financial statements is possible.
Foreign currency gains or losses pertaining to the chemical Non-cash expenses and income are divided up between
divisions and the Polysilicon operating segment are shown the individual segments as follows:
under “Other.”

Items in the statement of financial position and statement Other Non-Cash Expenses (+) and Income ( – )
of income are assigned to the operating segments in accor-
€ million 2016 2015
dance with the commercial power of disposition. Assets
used jointly by several segments are generally shown under
“Other” if they cannot be assigned clearly to a particular SILICONES –1.4 1.5
segment. A similar approach is adopted for borrowed funds. POLYMERS –2.4 0.9
For the geographical regions, the assets and liabilities are BIOSOLUTIONS 0.8 0.1
assigned in accordance with where the respective Group POLYSILICON 15.1 4.3
company’s site is located. Sales are classified in accordance SILTRONIC 2.9 –9.7
with both the customer’s location and the respective Group Other –35.8 –36.2 169
company’s site. Total –20.8 –39.1

WACKER measures the segments’ success using the segment

profitability variable EBITDA. EBITDA is calculated by adjust-
ing EBIT for depreciation and amortization, impairments, The decline in both advance payments received for poly-
and write-ups. EBIT consists of the gross profit from sales, silicon deliveries and advance payments retained due to
selling and general administrative expenses, research and the termination of polysilicon contracts amounted to
development expenses, and other operating income and € 161.1 million, compared with € 214.4 million in the prior year.
expenses including income from investments in joint ven- In the Siltronic segment, advance payments received
tures and associates and other income from investments. ­decreased by € 20.1 million, versus € 23.9 million in the prior
year. The Biosolutions segment accounted for € 1.9 million
Asset additions, depreciation, amortization and write-ups of this decrease.
refer to intangible assets, to property, plant and equipment,
to investment property and to financial assets. Internal sales Important valuation changes not recognized through profit
show the sales that are generated between the segments. or loss include changes in the market value of derivative
They are settled mainly on the basis of market prices or financial instruments (cash flow hedging) and changes in
planned cost of sales. Segment information is based on value from the remeasurement of defined benefit pension
the same presentation and accounting methods used plans.
for  the consolidated financial statements. Receivables
and liabilities, provisions, income, expenses, and results Of the changes in the market value of derivative financial
between the segments are eliminated in the course of instruments from cash flow hedging, € 5.0 million (versus
consolidation. € 13.5 million a year earlier) is attributable to the Siltronic
segment and € – 1.9 million (versus € 8.9 million) to “Other.”

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

The changes in value due to the remeasurement of defined The reconciliation of the segments’ aggregate results with
benefit plans are allocated to the segments as follows: the net income for the year is shown in the following list:

€ million 2016 2015

Reconciliation of Segment Results (EBIT)

€ million 2016 2015

SILICONES –93.6 41.8
POLYMERS –35.4 15.3 Operating result of reporting
BIOSOLUTIONS –9.2 3.7 segments 365.8 472.5
POLYSILICON –63.8 28.2 Consolidation 0.4 0.9
SILTRONIC –90.5 47.3 Group EBIT 366.2 473.4
Other –167.4 77.8 Financial result –101.4 –66.7
Income before taxes 264.8 406.7
Income taxes –75.5 –164.9
In addition to Germany, the USA and China are the only Net income for the year 189.3 241.8
countries in which WACKER generates significant sales
from a Group viewpoint. Measured in relation to the head-
quarters of the selling unit, sales amounted to € 756.8 mil-
lion in the USA – after € 732.9 million in the previous year –
and € 4 06.3 million in China, after € 419.5 million the year
before. Measured by customer location in the USA and
China, the respective sales generated were € 773.7 million
(€ 754.1 million in the prior year ) and € 1,016.0 million
(€ 1,013.8 million in the prior year). WACKER has no major
customer whose sales it is obliged to report.

170
21 Breakdown of Shareholdings
Unless otherwise stated, the following figures for interna-
tional subsidiaries were calculated in accordance with IFRS.

Serial number Activity Identi­ Equity Net income Capital Held by

fier * in € ’000 for the year share in % serial
in € ’000 number 1

Affiliated Companies
Germany
1 Alzwerke GmbH, Munich Other a), b) 7,160 – 100.00 0
2 DRAWIN Vertriebs-GmbH, Hohenbrunn Silicones a), b) 5,016 – 100.00 0
3 W.E.L.T. Reisebüro GmbH, Munich 2 Other 191 75 100.00 0
4 Wacker-Chemie Versicherungsvermittlung GmbH,
Munich Other a), b) 26 – 100.00 0
5 Wacker-Chemie Beteiligungsfinanzierungs GmbH,
Munich – 29 –1 100.00 0
6 Wacker Polysilicon Geschäftsführungs GmbH,
Nünchritz – 27 – 100.00 0
7 Wacker-Chemie Erste Venture GmbH, Munich – 80 – 100.00 0
8 Wacker-Chemie Zweite Venture GmbH, Munich – 35 –1 100.00 0
9 Wacker-Chemie Dritte Venture GmbH, Munich Holding a), b) 387,727 – 100.00 0
10 Wacker-Chemie Sechste Venture GmbH, Munich – 27 – 100.00 0
11 Wacker Biotech GmbH, Jena Biosolutions a), b) 290 – 100.00 0
12 Wacker-Chemie Siebte Venture GmbH, Munich – 25 – 100.00 0
13 Wacker-Chemie Achte Venture GmbH, Munich – a), b) 2,753 – 100.00 0
14 Siltronic AG, Munich Siltronic 503,044 –22,716 49.50 9
8.33 0
15 Wacker-Chemie Zehnte Venture GmbH, Munich – 25 – 100.00 0
16 Wacker-Chemie Elfte Venture GmbH, Munich – 25 – 100.00 0
17 Wacker-Chemie Zwölfte Venture GmbH, Munich – 25 – 100.00 0

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Serial number Activity Identi­ Equity Net income Capital Held by

fier * in € ’000 for the year share in % serial
in € ’000 number 1

Rest of Europe
Wacker Chemicals Finance B. V.,
18 
Krommenie, Netherlands Holding 1,373,006 3,156 100.00 0
19 Wacker-Chemicals Ltd., Sales and
Egham, Surrey, Great Britain ­d istribution 792 717 100.00 0
20 Wacker-Chemie Italia S.  r.  L ., Sales and
San Donato Milanese, Italy ­d istribution 2,599 1,009 100.00 0
21 Wacker-Chemie Benelux B. V., Sales and
Krommenie, Netherlands ­d istribution 498 480 100.00 18
22 Wacker Chimie S. A . S ., Sales and
Lyon, France ­d istribution 460 225 100.00 0
23 Wacker-Kemi AB, Sales and
Solna, Sweden ­d istribution 580 526 100.00 0
24 Wacker Química Ibérica, S.A., Sales and
Barcelona, Spain ­d istribution 530 392 100.00 0
25 S iltronic Holding International B. V.,
Krommenie, ­N etherlands Holding 331,173 11,815 100.00 14
26 Wacker-Chemie S.  r.  o., Sales and
Prague, Czech Republic ­d istribution 3,290 255 100.00 0
27 Wacker-Chemie Polska Sp. z o. o., Sales and
Warsaw, Poland ­d istribution 503 377 100.00 0
28 Wacker-Chemie Hungária Kft., Sales and
Budapest, Hungary ­d istribution 532 343 100.00 0
29 O OO Wacker Chemie RUS, Sales and
Moscow, Russia ­d istribution 1,027 226 100.00 0
30 Wacker Chemicals Norway AS, Holla, Norway Silicones 46,423 2,668 100.00 18
31 Wacker Kimya Tic. Ltd. Sti., Sales and
Istanbul, Turkey ­d istribution 137 78 100.00 18
32 Wacker Biosolutions León, S. L . U.,
171
León, Spain Biosolutions 1 –2 100.00 18

The Americas
33 Wacker Química do Brasil Ltda., Silicones,
São Paulo, Brazil Polymers 27,665 1,150 100.00 0
34 Wacker Mexicana S. A . de C. V., Sales and
Mexico, D. F., Mexico ­d istribution 1,184 635 100.00 0
35 Wacker Chemical Corp., Silicones,
Adrian, Michigan, Polymers,
USA Biosolutions 1,513,610 34,251 100.00 18
36 Wacker Polysilicon North America, LLC,
Cleveland, Tennessee, USA Polysilicon 1,110,510 –7,761 100.00 35
37 Siltronic Corp., Portland,
Oregon, USA Siltronic 11,924 5,106 100.00 25
38 Wacker Colombia S.A.S., Sales and
Bogotá, Colombia ­d istribution 192 175 100.00 18

Asia
39 Wacker Asahikasei Silicone Co. Ltd.,
Tokyo, Japan Silicones 25,016 2,985 50.00 5 0
40 Wacker Chemicals (South Asia) Pte. Ltd., Sales and
Singapore ­d istribution 2,120 618 100.00 0
41 Wacker Chemicals Hong Kong Ltd., Sales and
Hong Kong, China ­d istribution 3,495 767 100.00 0
42 Wacker Metroark Chemicals Pvt. Ltd.,
Parganas, India Silicones 51,363 9,662 51.00 0
43 Wacker Chemicals Korea Inc., Seoul, Silicones,
South Korea Polymers 42,413 8,952 100.00 18
44 Wacker Chemicals East Asia Ltd., Sales and
Tokyo, Japan ­d istribution 122 105 100.00 0

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Serial number Activity Identi­ Equity Net income Capital Held by

fier * in € ’000 for the year share in % serial
in € ’000 number 1

45 Wacker Chemicals Fumed Silica ( ZJG) Holding Co.

­Private Ltd., Singapore Holding 47,982 –18 51.00 0
46 Wacker Chemicals Fumed Silica ( ZJG) Co. Ltd.,
­Z hangjiagang, China Silicones 21,881 4,100 100.00 45
47 Wacker Chemicals ( Zhangjiagang) Co. Ltd.,
­Z hangjiagang, China Silicones 54,269 4,844 100.00 49
48 Wacker Polymer Systems ( WUXI) Co. Ltd.,
Wuxi, China Biosolutions 2,540 –122 100.00 49
49 Wacker Chemicals (China) Company Ltd. (Holding), Sales and
Shanghai, China ­d istribution 138,705 13,202 100.00 0
50 Wacker Chemicals (Nanjing) Co. Ltd., Polymers,
Nanjing, China Biosolutions 54,640 1,557 100.00 49
51 Wacker Chemicals India Ltd., Sales and
Mumbai, India ­d istribution 4,324 190 100.00 18
52 P T. Wacker Chemicals Indonesia, Silicones,
Tangerang, Polymers,
Indonesia Biosolutions 147 –42 99.00 18
1.00 2
53 Siltronic Singapore Pte. Ltd., Singapore Siltronic 171,371 43,418 100.00 25
54 Siltronic Japan Corp., Hikari, Japan Siltronic –7,506 –292 100.00 25
55 Siltronic Silicon Wafer Pte. Ltd., Singapore Siltronic –39,510 –9,778 77.70 25

Other Regions
56 Wacker Chemicals Australia Pty. Ltd., Sales and
Melbourne, Australia ­d istribution 671 319 100.00 0
57 Wacker Chemicals Middle East Ltd., Sales and
Dubai, UAE ­d istribution 3,020 –89 100.00 0
172
Joint Ventures   /  A ssociated Companies  3
58 Dow Corning ( ZJG) Holding Co. Private Ltd., Singapore Silicones 342,311 –15,143 25.00 0
59 Wacker Dymatic (Shunde) Co. Ltd., Guangdong, China Silicones 22,530 5,247 50.00 49

Special-Purpose Entity
60 WMM-Universal-Fonds, Germany – 105,514 –92 100.00 4 0

* Identifier:
a)
Wacker Chemie AG has either directly or indirectly concluded profit and loss transfer agreements with these entities.
b)
The shareholders of Wacker Chemie AG have agreed not to disclose the financial statements of these entities (Section 264 (3) of the German Commercial Code).
1
Serial number 0: Wacker Chemie AG
2
Prior-year figures
3
Only direct holdings in the relevant parent company are listed
4
Share of special assets; as per IFRS
5
Control on the basis of potential voting rights

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

22 Related Party Disclosures Apart from that, WACKER Group companies have not con-
IAS 24 stipulates that a person or company which controls, ducted any material transactions with members of Wacker
or is controlled by, Wacker Chemie AG must be disclosed Chemie AG’s Executive or Supervisory Boards or with any
unless the person or company is already included in Wacker other key management personnel or with companies of
Chemie AG’s consolidated financial statements as a con- which these persons are members of executive or super-
solidated company. A shareholder is deemed to have visory bodies. The same applies to close relatives of the
control if the shareholder has more than half of the voting aforementioned persons.
rights in Wacker Chemie AG or, by virtue of provisions in
the Articles of Association or contractual arrangements, Wacker Chemie AG’s pension fund is also considered a
has the possibility of controlling the financial and business related party pursuant to IAS 24. Provision of services takes
policy of the WACKER Group’s Executive Board. place between the two entities in the area of company
pension plan benefits. WACKER makes payments to plan
In the year under review, the WACKER Group was affected assets to cover pension obligations. Wacker Chemie AG
by the disclosure obligations under IAS 24 in respect of also rents the headquarters building and the land on which
the  business relations with Wacker Chemie AG’s major it stands from a subsidiary of Pensionskasse der Wacker
shareholders and its Executive and Supervisory Board Chemie VVaG. Overall, expenditures amounted to € 44.8 mil-
members. The principles of IAS 24 also apply to all trans- lion ( prior year: € 4 5.3 million). Receivables amounted to
actions with non-consolidated subsidiaries, associated € 48.0 million after € 0.5 million in the prior year, while liabilities
companies and joint ventures, since Wacker Chemie AG came to € 0.5 million versus € 0.0 million in the prior year.
exercises significant influence over them.
On June 22, 2015, Capital Research and Management Com-
Dr. Alexander Wacker Familiengesellschaft mbH, Munich, pany, Inc., Los Angeles, USA (a subsidiary of Capital Group
informed Wacker Chemie AG on June 7, 2006, that it holds Companies, Inc. Los Angeles, USA ) reported holding
over 50 percent of the voting shares in Wacker Chemie AG. 3.07 percent, thereby exceeding the 3-percent threshold of
Blue Elephant Holding GmbH, Pöcking, informed Wacker voting shares in Wacker Chemie AG.
Chemie AG on April 12, 2006, that it holds over 10 percent of
the voting shares in Wacker Chemie AG. Further detailed information has been published in the 173
German register of companies.
The WACKER Group is controlled by its majority share- www.unternehmensregister.de

holder, Dr. Alexander Wacker Familiengesellschaft mbH,

which holds over 50 percent of the voting shares in Wacker Business with joint ventures and associates, the pension
Chemie AG. fund, and non-consolidated subsidiaries is conducted
under conditions that are customary between outside third
Provision of services between Wacker Chemie AG and its parties (arm’s length transactions). Contractually agreed
majority shareholder, Dr. Alexander Wacker Familien­ transfer-price formulas have been defined for joint-venture
gesellschaft  mbH, as well as with the shareholders of and associated-company product shipments.
Dr. Alexander Wacker Familiengesellschaft mbH and their
close family members, is of subordinate importance, and
concerns the renting of office space and exchange of
services. None of these services is of significant business
scope. The provision of services takes place at standard
market terms.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Notes of the WACKER Group

Related Party Disclosures

€ million 2016 2015

Income Expenses Receivables Liabilities Income Expenses Receivables Liabilities

Associated companies 7.8 125.8 3.6 15.0 9.5 144.9 3.2 8.7
Joint ventures 24.4 1.1 0.9 0.1 31.5 1.4 5.4 0.5

Transactions with joint ventures and associates relate to

such supplies and services as arise during the normal
course of business (for example in connection with sales
revenue, license revenue and administrative expense allo-
cations). Joint ventures and associates submitted invoices
for material purchases and commissions. Any guarantees
or other security pledges are reported under Other Financial
Obligations.
See Note 15

In addition, there is a loan to an associated company totaling

€ 96.4 million (€ 99.9 million in the prior year).

Information Regarding Compensation for

the Supervisory and Executive Boards:
174

Compensation for the Executive and Supervisory Boards

€ Fixed Variable Pension Total

compensation compensation expenses 1

Executive Board compensation 2016 2,611,723 4,866,125 1,177,876 8,655,724

Executive Board compensation 2015 2,629,052 3,681,166 2,174,835 8,485,053

Pension commitments for active members of the Executive Board 2016 27,587,433
Pension commitments for active members of the Executive Board 2015 22,692,191

Compensation for former members of the

Executive Board and their surviving dependents 2016 2,383,467
Compensation for former members of the
Executive Board and their surviving dependents 2015 1,922,900

Pension commitments for former members

of the Executive Board and their surviving dependents 2016 39,163,469
Pension commitments for former members
of the Executive Board and their surviving dependents 2015 36,718,229

Supervisory Board compensation 2016 2,165,000 – – 2,165,000

Supervisory Board compensation 2015 1,716,973 – – 1,716,973

1
The compensation for retirement benefits is based on service cost. Interest expense amounted to € 6 24,036, after € 5 85,079 in the prior year.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Notes of the WACKER Group

Dr. Rauhut retired on October 31, 2015 after his employ-

ment contract expired as scheduled. Before expiry of his
­e mployment contract, Dr. Rauhut had received all com-
pensation due him under the provisions of this contract.
He will receive the agreed competitive-restriction compen-
sation, which will total € 6 36,548 for the 12 months following
his departure. € 106,091 of that total amount was paid to him
in 2015 and is included under compensation for former
members of the Executive Board and their surviving
­dependents.

Detailed information about Executive Board compensation

is contained in the compensation report, which forms part
of the management report. German commercial law (HGB)
requires the inclusion of this information in the notes to the
consolidated financial statements.

Other business relations with members of the Supervisory

and Executive Boards comprise the purchase and sale of
shares in Wacker Chemie AG. Such transactions take place
on customary market terms and conditions. These trans-
actions were published both in the German register of
companies and on the Wacker Chemie AG website.
www.wacker.com/directors-dealings

The members of Wacker Chemie AG’s Supervisory Board

and Executive Board are listed on the following pages. 175
23 Events after the Balance Sheet Date
On February 20, 2017, Pensionskasse der Wacker Chemie
VVaG informed WACKER that the pension fund’s technical
business plan had been changed. In this context, it re-
quested a special payment of € 4 8 million for the Group
companies covered by the pension fund.

Munich, February 27, 2017

Wacker Chemie AG

Rudolf Staudigl Christian Hartel

Tobias Ohler Auguste Willems

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Supervisory Board

Supervisory Board

Dr. Peter-Alexander Wacker 1, 2, 3 Matthias Biebl

Chairman Munich
Attorney and in-house lawyer
Bad Wiessee UniCredit Bank AG
Former President & CEO
of Wacker Chemie AG, businessman
Dagmar Burghart *, 4
Chairman of the Supervisory Board
Kirchdorf
Blue Elephant Energy AG (since April 15, 2016)
Team Leader of Retirement Benefits
Chairman of the Administrative Council and Board of Trustees Service Center, Wacker Chemie AG
ifo Institute – Leibniz-Institut für Wirtschaftsforschung
Deputy Chairwoman of the Supervisory Board
an der Universität München e. V.
Pensionskasse der Wacker Chemie VVaG
(until April 30, 2016)
Anton Eisenacker *, 1, 2, 3, 4
Deputy Chairman
Konrad Kammergruber *, 4
(until December 31, 2016)
Burghausen
Perach
Director of Infrastructure Services, Wacker Chemie AG
Member of Employee Council, Burghausen Plant,
Wacker Chemie AG
Eduard-Harald Klein*, 1,  4
Neuötting
Manfred Köppl * , 1, 2, 3, 4
Chairman of the Group and General Employee
Deputy Chairman
Councils of Wacker Chemie AG
(since January 1, 2017)
176 Kirchdorf
Member of Employee Council, Burghausen Plant,
Franz-Josef Kortüm 1, 2, 3
Wacker Chemie AG
Munich
Former Chairman of the Executive Board of Webasto SE
Peter Áldozó *, 4 Deputy Chairman of the Supervisory Board
Burghausen Webasto SE
Deputy Chairman of the Group Employee
Chairman of the Advisory Council
Council of Wacker Chemie AG
Brose Fahrzeugteile GmbH & Co. KG
Member of the Board of Directors
Dr. Andreas H. Biagosch Autoliv Inc., USA
Munich
Managing Director of Impacting l GmbH & Co. KG
and Impact GmbH Seppel Kraus *, 4
Olching
Member of the Board of Directors
Regional head of the IG BCE labor union, Bavaria
Ashok Leyland, Chennai, India
Hinduja Leyland Finance, Chennai, India Member of the Supervisory Board
Novartis Deutschland GmbH
Member of the Supervisory Board
Hexal AG
Aixtron SE
Gerresheimer AG
Member of the Advisory Board
Lürssen Werft GmbH & Co. KG
Hansgeorg Schuster *, 4
Member of the Southern Regional Advisory Council
(since January 1, 2017)
Commerzbank AG
Braunau am Inn, Austria
Member of General Employee Council of Siltronic AG  * *
Dr. Gregor Biebl
Munich
Harald Sikorski *, 4
Undersecretary
Munich
Bavarian State Ministry of Finance,
District Chairman of the IG BCE labor union, Altötting
Regional Development and Regional Identity
Member of the Supervisory Board
Siltronic AG  * *

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Supervisory Board – Executive Board

Executive Board

Dr. Thomas Strüngmann Dr. Rudolf Staudigl

Tegernsee President & CEO
Co-Managing Director of ATHOS Service GmbH
WACKER POLYSILICON
Executive Personnel
Corporate Development
Dr. Susanne Weiss
Corporate Communications
Munich
Investor Relations
Attorney and a partner in the law firm
Corporate Auditing
Weiss Walter Fischer-Zernin
Legal
Chairwoman of the Supervisory Board Compliance
ROFA INDUSTRIAL AUTOMATION AG Retirement Benefits
(since July 1, 2016)
Member of the Supervisory Board
Porr AG, Austria Chairman of the Supervisory Board
Schattdecor AG Pensionskasse der Wacker Chemie VVaG
UBM Development AG, Austria
Deputy Chairman of the Supervisory Board
Chairwoman of the Advisory Council Groz-Beckert KG
Alu-Sommer GmbH, Austria
Member of the Advisory Council, Bavaria
Wirtschaftlicher Verband der Stadt und
Deutsche Bank AG
des Landkreises Rosenheim e. V.

Dr. Christian Hartel
Prof. Ernst-Ludwig Winnacker
Munich WACKER POLYMERS
Professor emeritus of Biochemistry Human Resources (Personnel Director)
at LMU Munich Corporate Engineering 177
Region: Asia
Member of the Supervisory Board
Bayer AG (until April 29, 2016)
MediGene AG (until August 11, 2016)
Dr. Tobias Ohler
SILTRONIC
Corporate Accounting and Tax
Corporate Controlling
Corporate Finance and Insurance
Information Technology
Technical Procurement & Logistics
Raw Materials & Energy
Region: The Americas
Chairman of the Supervisory Board
Siltronic AG  * *
Member of the Supervisory Board
Pensionskasse der Wacker Chemie VVaG

Auguste Willems
WACKER SILICONES
WACKER BIOSOLUTIONS
Sales & Distribution
Corporate Research & Development
Intellectual Property
* Employee representative
** Affiliated company Site Management
1
Mediation Committee (Chairman: Dr. Peter-Alexander Wacker) Corporate Security
2
Executive Committee (Chairman: Dr. Peter-Alexander Wacker) Environment, Health, Safety
3
Audit Committee (Chairman: Franz-Josef Kortüm)
4
T hese employee representatives are subject to the rules of the
Product Stewardship
German Trade Union Confederation (DGB) and of the German Regions: Europe, Middle East
Association of Employed Academics and Executives in the
Chemical Industry (VAA) concerning the transfer of supervisory Member of the Bavarian State Branch Advisory Committee
board compensation. TÜV Süd AG

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

Corporate Governance strategy. However, beyond this contribution, the super­

visory board’s abilities are limited in terms of influencing
Report and Declaration on the implementation of corporate strategy or operations.
The same applies to measures taken to avert damage or
Corporate Management loss to the company. Furthermore, since our Supervisory
Board members receive only a relatively small amount for
reimbursement of expenses compared to our Executive
Board compensation, we do not deem the agreement of a
deductible reasonable for members of our Supervisory
Board.
Corporate governance is an important part of a company’s
success and of responsible corporate management and b) F
 ormation of a Nomination Committee
supervision. Wacker Chemie AG attaches great importance within the ­Supervisory Board
to the rules of proper corporate governance. In this report, The supervisory board is required to establish a nomination
the Executive Board provides details – also on behalf committee that is exclusively composed of shareholder
of the Supervisory Board – on corporate governance in representatives and whose task it is to make recommen-
accordance with Item 3.10 of the German Corporate dations to the supervisory board with regard to candidates
Governance Code (the Code) as well as Section 289a (1) suitable for proposal to the annual shareholders’ meeting.
and Section 315 (5) of the German Commercial Code (HGB). We do not comply with this recommendation because, in
view of our shareholder structure, we do not believe that
Declaration of Conformity and Corporate Governance the formation of such a committee is appropriate. Due to
Reporting the majority situation, nominations to the Supervisory
In 2016, the Executive Board and the Supervisory Board Board must be agreed with the majority shareholder in any
dealt intensively with the company’s corporate governance case, so that an additional nomination committee would
and the recommendations of the Code in its currently valid not serve to increase efficiency.
version published on May 5, 2015. The Executive and
178 ­Supervisory Boards resolved in December 2016 to issue c) A nnouncement to Shareholders of Proposed
the following Declaration of Conformity. The Declaration of Candidates for the Chair of the Supervisory Board
Conformity has since been made permanently available According to this recommendation, shareholders shall be
to the general public on the company’s website. informed of any candidates for the supervisory board chair
even though, as a rule, the supervisory board has not yet
Declaration of Conformity 2016 Issued by the Executive been appointed. Under German law, the supervisory board
Board and Supervisory Board of Wacker Chemie AG chair must be elected by, and from among, the supervisory
1. General Declaration Pursuant to Section 161 board members. There is no legal requirement to announce
of the German Stock Corporation Act the candidates for the chair from among a yet-to-be-­
The Executive Board and the Supervisory Board of Wacker appointed group of supervisory board members. Further-
Chemie AG issued their most recent declaration of conformity more, this would result in a de facto predetermination,
pursuant to Section 161 of the German Stock Corporation which is also not provided for under German law. For these
Act in December 2015. Since that time, Wacker Chemie AG reasons, we do not comply with this recommendation.
has complied with the recommendations of the German
Corporate Governance Code (the Code) as amended on d) Defining Concrete Objectives Regarding the Number
May 5, 2015, with the exceptions listed in the following, and of Independent Members of the Supervisory Board
will continue to comply with the recommendations of the The Supervisory Board of Wacker Chemie AG, as it is
Code in said version, with the following exceptions. composed at present, meets the requirements of the Code
regarding an adequate number of independent members.
2. Exceptions The Supervisory Board will continue to ensure in future
a) D&O Insurance Deductible for elections that it recommends to the shareholders a n
­ umber
Supervisory Board Members of independent candidates it considers to be appropriate.
German law and a company’s articles of association set Additionally defining a concrete objective in this regard
clear limits in regard to the supervisory board’s ability to would not only limit the choice of suitable candidates for
exert influence on the business activities of a stock cor- the Supervisory Board, but also restrict the shareholders’
poration. Pursuant to Section 76 (1) of the German Stock right to elect those Supervisory Board members whom
Corporation Act, the executive board has direct respon- they consider to be the most suitable. For these reasons,
sibility for managing the corporation. The super­visory board we do not comply with this recommendation.
is instrumental in defining the main features of corporate

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

e) T
 erm Limit for Length of Service on the Annual Shareholders’ Meeting
Supervisory Board The Annual Shareholders’ Meeting provides an efficient
According to this recommendation, the supervisory board and inclusive forum for informing shareholders about the
should determine a general term limit for the length of company’s situation. Even before the Annual Shareholders’
service on the board. A generally applicable term limit of Meeting begins, shareholders receive important information
this sort is not required in our opinion, as we consider an about the previous fiscal year in the Annual Report. The
individual analysis of the respective supervisory board agenda items are described and the conditions of atten-
members to be more effective. This particularly applies dance explained in the invitation to the Annual Share-
since the Code provides for self-inspection of the super­ holders’ Meeting. The notice of the Annual Shareholders’
visory board and its members anyway as part of the regular Meeting – together with all legally prescribed reports and
examination of efficiency. Furthermore, a general term limit documents, including the Annual Report (of which the
would restrict the majority shareholder’s freedom to consolidated financial statements and the combined
choose representatives on the Supervisory Board at its management report form part) – as well as the annual
own discretion in fulfillment of its corporate responsibility. ­financial statements of Wacker Chemie AG are also available
on the company’s website. After the Annual Shareholders’
f ) T ime Limit Placed on Applications for the Judicial Meeting, we publish the attendance figures and the results
Appointment of a Supervisory Board Member of the votes on the internet. All these communication
According to this recommendation, applications for the measures contribute to the regular exchange of information
judicial appointment of a supervisory board member shall with our shareholders. WACKER helps its shareholders
be limited in time up to the next annual shareholders’ ­exercise their voting rights by giving them the option of
meeting. We do not comply with this recommendation. casting their vote either in person or by proxy. Proxies
Proposals for candidates to be appointed by the court are are  available to exercise shareholders’ voting rights as
agreed with the majority shareholder beforehand anyway. ­instructed and can also be contacted during the Annual
In view of the majority situation, the election of this same Shareholders’ Meeting.
candidate at the next Annual Shareholders’ Meeting would
merely constitute a confirmation of his  / her appointment, Working Methods of the Executive and
which we consider to be superfluous. Supervisory Boards 179
Wacker Chemie AG has a dual management system as
Corporate Governance Reporting prescribed by the German Stock Corporation Act. It con-
Shareholders and Annual Shareholders’ Meeting sists of the Executive Board, which manages the company,
Transparent Information for Shareholders and the Public and the Supervisory Board, which supervises and advises
WACKER’s aim is to inform all of the company’s target the Executive Board in its management of the company.
groups – shareholders, shareholder representatives, These two bodies are kept strictly separate from one
­analysts and the media – as well as the interested general ­a nother with regard to both their membership and their
public promptly and without preference. We regularly spheres of competence. The Executive and Supervisory
publicize important company dates in a financial calendar Boards collaborate closely, however, to ensure WACKER’s
published in our Annual Report, in the interim reports and sustainable long-term success.
on our website. Capital market participants are in close
contact with our Investor Relations team. We inform inves- Executive Board
tors and analysts about the current and future development The Executive Board currently consists of four members.
of business in telephone conferences held whenever a The Executive Board bears direct responsibility for
quarterly report is published. We regularly attend road- ­managing the company and represents Wacker Chemie AG
shows and investors’ conferences. Once a year, we organize in all dealings with third parties. The Executive Board’s
an event for analysts. Important presentations are available actions and decisions are driven by the company’s interest
on the internet, as well as all press releases and ad-hoc and the aim to sustainably increase the Group’s value.
disclosures in both German and English, the online version With this goal in mind, the Executive Board determines the
of the Annual Report, all interim reports and the Sustain- WACKER Group’s strategic alignment. It then steers and
ability Report. Further information is provided by our online monitors this by allocating funds, resources and capac-
customer magazine, media library and Podcast Center. ities, and by supporting and overseeing the operating
www.wacker.com units. The Executive Board also ensures compliance with
legal requirements and an appropriate risk management
system and control.

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 Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

While the members of the Executive Board bear joint WACKER has always placed importance on having highly
­responsibility for managing the company, each individual qualified individuals sit on its Supervisory Board. In com-
member is directly responsible for managing his / h er pliance with the recommendation made in Item 5.4.1 of
­respective unit. All Executive Board decisions require a the German Corporate Governance Code as amended on
simple majority. In the case of a tie of votes, the president & May 26, 2010, WACKER’s Supervisory Board resolved in
CEO has the deciding vote. However, he  / she does not have December 2010 to set itself concrete objectives in respect
the right to veto Executive Board resolutions. of its composition. These include the qualifications, inter-
national experience and gender of Supervisory Board
Close Collaboration between the Executive Board members, and the prevention of conflicts of interest.
and the Supervisory Board ­Accordingly, the profile of requirements and targets is
The Executive Board and the Supervisory Board work as follows:
­together closely to promote the interests of the company.
Their common goal is the sustainable growth of the –  International scope: an appropriate number of Super-
­company and the enhancement of its value. The Executive visory Board members – however, at least one – should
Board reports to the Supervisory Board and the Audit have international experience.
Committee regularly, promptly and comprehensively on
all relevant issues of strategy, planning, business develop- –  Prevention and handling of conflicts of interest: the
ment, risk exposure, risk management and compliance. Supervisory Board’s Rules of Procedure already con-
Also in the period between meetings, the Supervisory Board tain extensive provisions on members’ conflicts of
chairman maintains contact with the Executive Board, in ­interest. In addition, the Supervisory Board actively
particular with the president & CEO, consulting with that strives to prevent such conflicts of interest and also
body on the above-mentioned issues. The Executive Board takes this goal into consideration when making rec-
explains any deviations from approved business plans and ommendations to the Annual Shareholders’ Meeting.
objectives to the Supervisory Board and gives reasons for
these deviations. –  Diversity and gender representation: the objective set
in December 2010 to increase the number of female
180 The Rules of Procedure for Wacker Chemie AG’s Executive members to at least two – one shareholder and one
Board stipulate that certain measures require the consent employee representative – was achieved in 2013.
of the Supervisory Board before their implementation. Please see the subsequent item Supporting the
These include approving the annual budget ( including ­Participation of Women in Executive Positions as per
­financial and investment planning), acquiring and disposing Section 76 (4) and Section 111 (5) of the German Stock
of shares in companies, establishing new production or Corporation Act for our measures to meet the require-
business units or suspending existing ones, and concluding ments of the Act on Equal Participation of Women
sizable long-term loan agreements. and Men in Executive Positions in the Private and the
Public Sector, which came into effect on May 1, 2015.
Supervisory Board According to this act, the Supervisory Board is to be
The Supervisory Board appoints, oversees and advises composed of at least 30 percent female members and
the Executive Board and is directly involved in any at least 30 percent male members.
­decisions of crucial importance to WACKER. Fundamental
decisions on the company’s development require Super­ The Supervisory Board’s Rules of Procedure already define
visory Board approval. an age limit. The Supervisory Board does not comply with
the recommendation made in Item 5.4.1 of the German
Supervisory Board Composition Corporate Governance Code as amended on May 5, 2015,
The Supervisory Board comprises 16 members. In com- to set a general term limit for the length of service of its
pliance with the German Co-Determination Act ( MitbestG ), members. The reasons for this decision are given in the
it has an equal number of shareholder and employee Declaration of Conformity of December 2016.
­representatives. Shareholder representatives are elected
by the Annual Shareholders’ Meeting and employee rep- As members of the Supervisory Board cannot simulta-
resentatives by the employees, as stipulated by the neously sit on the Executive Board, this structure ensures
­German Co-Determination Act. As a rule, the term of office a high degree of independence in monitoring the Executive
is about five years. Board. Since the Supervisory Board believes that it com-
prises an adequate number of independent members, it
does not comply with the additional recommendation
made in Item 5.4.2 of the German Corporate Governance

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Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

Code as amended on May 5, 2015, to name a specific target related issues. The members of this committee in fiscal
number of independent members. The reasons for this 2016 were Franz-Josef Kortüm (as chairman), Dr. Peter-­
decision are given in the Declaration of Conformity of Alexander Wacker and Anton Eisenacker. Following Anton
­December  2016. Eisenacker’s departure at year-end, Manfred Köppl was
elected to the Audit Committee as a new member effective
The Supervisory Board will take into account the objectives January 1, 2017.
it has set when making its nomination proposals to the
Annual Shareholders’ Meeting. The composition of the The Group also has a statutory Mediation Committee, the
Supervisory Board complies with the objectives set in tasks of which are stipulated by German law. In 2016, this
December 2010. The age limit provision is also complied committee consisted of Dr. Peter-Alexander Wacker (as
with. chairman), Anton Eisenacker, Franz-Josef Kortüm and
Manfred Köppl. Since January 1, 2017, the committee has
Committees Increase the Supervisory Board’s Efficiency comprised Dr. Peter-Alexander Wacker, Manfred Köppl,
The Supervisory Board has constituted three professionally Franz-Josef Kortüm and Eduard-Harald Klein.
qualified committees to help it perform its duties optimally.
The work of those committees is reported on regularly at Key Corporate Management Practices
Supervisory Board meetings. Compliance as a Key Managerial Duty of the
Executive Board
The Executive Committee prepares the Supervisory Board’s At WACKER, managerial and monitoring duties include
personnel decisions, especially the appointment and dis- ­e nsuring that the company complies with legal require-
missal of Executive Board members and the nomination of ments and that employees observe internal company
the president & CEO. In addition, it negotiates contracts with regulations. WACKER’s compliance management system is
Executive Board members and develops a compensation regularly reviewed and adapted.
system that the full Supervisory Board then uses as a basis
for determining the compensation for Executive Board These tasks are the responsibility of the compliance
members. In fiscal 2016, the Executive Committee con- ­m anagement department. The company has appointed
sisted of the Chairman of the Supervisory Board, Dr. Peter-­ and trained compliance officers in Germany, the USA, 181
Alexander Wacker, and Supervisory Board members Anton China, Japan, India, South Korea, Brazil, Mexico, Norway,
Eisenacker and Franz-Josef Kortüm. Effective January 1, Singapore, Russia, the United Arab Emirates and Taiwan,
2017, the new Deputy Chairman of the Supervisory Board, who hold regular training courses to inform employees of
Manfred Köppl, succeeded Anton Eisenacker on the key legal provisions and internal regulations. They also serve
­E xecutive Committee in accordance with the Rules of as contacts whenever employees have questions or need
Procedure. Mr. Eisenacker had in turn left the Supervisory advice, information and training relating to compliance.
Board as of December 31, 2016 as its Deputy Chairman.
Principles of Corporate Ethics
The Audit Committee does the groundwork for the Super- Beside our vision and goals, our ethical principles form the
visory Board’s decision on the adoption of the annual third pillar of WACKER’s corporate policy guidelines. These
­financial statements and the approval of the consolidated principles – embedded in five separate codes – govern
financial statements. To this end, the committee is obliged how the company goals should be achieved. A set of rules
to pre-audit the annual financial statements, the consoli- consisting of regulations and instructions supplement the
dated financial statements, the combined management codes.
report and the proposal on appropriation of profits. In
­addition, it discusses and examines the half-yearly financial –  Code of Conduct: this contains our principles for deal-
reports and the quarterly figures. The Audit Committee ing with business partners and third parties. It also
gives the Supervisory Board a well-founded recommen- governs the handling of information, confidentiality and
dation as to which auditors it should propose to the Annual data security, the prevention of money laundering, and
Shareholders’ Meeting. In accordance with the resolution the separation of personal and business interests.
of the Annual Shareholders’ Meeting, it awards the auditing
contract to the auditors and determines the focus of audit- –  Code of Innovation: this specifies our principles
ing. It then monitors the audit, in particular the auditors’ ­concerning research and development, partnerships,
independence and the services they deliver. Above and patents and innovation management.
beyond that, the Audit Committee reviews the accounting
process and the effectiveness of the internal control, risk
management and auditing systems, as well as compliance-­

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

–  Code of Teamwork & Leadership: this outlines our Further Information on Corporate Governance
­understanding of teamwork and leadership. Key as- at WACKER
pects here include trust and esteem, motivation and Compliance with the Provisions of Article 17 of MAR
success, recognition and development, teamwork and We comply with the provisions of Article 17 of MAR (EU
equal opportunity, work-life balance and the positive Regulation No. 596  /2014 – Market Abuse Regulation). For a
example set by managerial employees. number of years, we have maintained an ad-hoc publicity
coordination unit in which representatives of various
–  Code of Safety: this defines our safety culture and ­specialist areas examine issues for their ad-hoc relevance.
sets safety guidelines for workplaces, facilities, and In this way, we guarantee that potential insider information
products and their transport. is handled in accordance with the law. Employees who
have access to insider information as part of their jobs are
–  Code of Sustainability: this lists principles for sus- included in insider lists.
tainability to be adhered to by R&D, procurement and
logistics, production and products, and describes Share Dealings by the Executive and Supervisory Boards
our commitment to society. Persons discharging managerial responsibilities (at Wacker
The codes are available at: www.wacker.com/cms/en/wacker_group/ Chemie AG, these are members of the Executive and
wacker_facts/policy/policy.jsp. ­Supervisory Boards) as well as persons closely associated
with them are obligated under Art. 19 of MAR to notify the
Responsible Care® and the Global Compact – German Federal Financial Supervisory Authority (BaFin)
Integral Parts of Corporate Management and the company of transactions conducted on their own
Two voluntary global initiatives form the basis for sustain- account relating to the shares or debt instruments of that
able corporate management at WACKER: the chemical company or to derivatives or other financial instruments
­industry’s Responsible Care ® initiative and the UN’s Global linked thereto within three business days. A reporting
Compact. WACKER has been an active member of the ­obligation exists, however, only where the total volume of
­Responsible Care ® initiative since 1991. Program partici- the transactions made by the person concerned exceeds
pants undertake to continually improve health, safety and € 5,000 within a calendar year.
182 environmental performance on a voluntary basis – even in
the absence of statutory requirements. WACKER is equally In 2016, no reportable transactions were notified by
committed to the UN’s Global Compact initiative. We ob- ­members of the Executive and Supervisory Boards or by
serve the Global Compact’s ten principles, which address persons closely associated with them who are subject to
social and environmental standards, anticorruption and the reporting requirements.
protection of human rights. We also expect our suppliers
to respect the principles of the Global Compact, and we Blue Elephant Holding GmbH, which is majority-owned by
evaluate them on this point in our risk assessments. Dr. Peter-Alexander Wacker (Supervisory Board Chairman
of Wacker Chemie AG), holds over 10 percent of the shares
In 2011, WACKER created an internal Corporate Sustainability in Wacker Chemie AG.
department, which implements the company’s voluntary
commitments under Responsible Care ® and the Global Dealing Responsibly with Opportunities and Risks
Compact, and coordinates its sustainability activities Dealing responsibly with risks is an important part of
worldwide. good  corporate governance. WACKER has in place an
­o pportunity and risk management system to regularly
Social Commitments identify and monitor material risks and opportunities.
Companies can be commercially successful only if they Its objective is to recognize risks at an early stage and
have society’s trust. Consequently, WACKER is serious minimize them through systematic risk management. The
about its social responsibilities toward communities near Executive Board informs the Supervisory Board regularly
its sites and wherever people are in need around the about existing risks and their development. The Audit
world. We regularly promote and support a wide variety Committee regularly reviews the accounting process and
of charitable projects, organizations and initiatives. Our the effectiveness of the internal control, risk management
commitment covers activities relating to science, educa- and auditing systems. It is also involved in auditing the
tion, sports and various charities. ­financial statements. The opportunity and risk manage-
ment system is continuously being enhanced and adapted
to meet changing conditions.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

Accounting and Auditing In September 2015, the Supervisory Board set the target
As stipulated by the Corporate Governance Code, we have for the proportion of women on the Executive Board for the
agreed with the auditors, KPMG AG Wirtschaftsprüfungs- period up to June 30, 2017 at zero.
gesellschaft, Munich, that the Chairman of the Supervisory
Board shall be informed without delay during the audit about Likewise in September 2015, and with a deadline for im-
any grounds for disqualification and /or bias. In ­addition, plementation of June 30, 2017, the Executive Board of
the auditors shall immediately report all significant discov- Wacker Chemie AG set target values of 10 percent for the
eries and events which concern the Super­visory Board’s management level directly below the Executive Board and
duties. If, in the course of their audit activities, the auditors 17.5 percent for the second management level below the
establish facts that reveal errors in the Declaration of Executive Board.
Conformity pursuant to Section 161 of the German Stock
Corporation Act, the Supervisory Board shall be notified Compensation Report
accordingly and /or a note included in the audit report. The following compensation report forms part of the com-
bined management report and of the audited consolidated
D&O Insurance financial statements.
WACKER has concluded a financial liability insurance policy
( i. e. D&O insurance) that also covers the activities of the Compensation System for the Executive Board
Executive Board and Supervisory Board members. This On the basis of preparatory input from the Executive
insurance provides for a statutory deductible for the Committee, the full Supervisory Board is responsible for
­members of the Executive Board. determining the individual compensation paid to members
of Wacker Chemie AG’s Executive Board.
Supporting the Participation of Women in Executive
Positions as per Section 76 (4) and Section 111 (5) of the In accordance with the Executive Board compensation
German Stock Corporation Act system in effect since January 1, 2010, the Executive Board’s
Effective May 1, 2015, the Act on Equal Participation of compensation comprises the following key components:
Women and Men in Executive Positions in the Private and
the Public Sector calls for the Supervisory Board of Wacker (I) A fixed annual salary: 183
Chemie AG to be composed of at least 30 percent female The fixed annual salary is paid in equal monthly installments.
members and at least 30 percent male members. These
requirements apply to new appointments for the first time (II) A variable, performance-related bonus:
as of January 1, 2016. Since January 1, 2016, neither the The amount of the variable bonus (long-term bonus), which
shareholders nor the employees have made any new is paid annually and in arrears, depends on the achievement
­appointments to Wacker Chemie AG’s Supervisory Board, of agreed annual Group targets set by the Supervisory Board
which is why the proportion of female members on the for all Executive Board members. The bonus is calculated
Supervisory Board remained unchanged at 12.5 percent based on target achievement in the ­reporting year, as well
in fiscal 2016 (one shareholder and one employee repre- as on average overall target achievement in the two years
sentative). As of January 1, 2017, Hansgeorg Schuster – prior to the reporting year. The targets are based on the
who had already been elected an alternate member during following key indicators: business value contribution, cash
the last employee-representative elections to the Super­ flow, target return, and return on capital employed (ROCE).
visory Board in March 2013 – automatically succeeded The computational target bonus in the event of 100-percent
employee representative Anton Eisenacker, who left the target achievement during the evaluation period depends
Supervisory Board with effect from December 31, 2016. on the Executive Board member in question and amounts
Since the election of Mr. Schuster was completed prior to to either 180 percent or 140 percent of the average annual
December 31, 2015, the new legal provisions did not yet base salary in the last year of the evaluation period. The
apply. The proportion of female members on the Super- maximum ­b onus, too, depends on the specific Board
visory Board therefore currently totals 12.5 percent. member and amounts to either 220 percent or 180 percent
of the average annual base salary in the last year of the
The act also requires Wacker Chemie AG to specify target evaluation period. The Supervisory Board thus has the
values for the proportion of women on the Executive Board discretion to increase or reduce the calculated bonus by
and in the two management levels below the Executive as much as 30 percent, taking into account all circum-
Board. The target values for the Executive Board are set by stances and the Executive Board member’s individual
the Supervisory Board and those for the two management performance. The Executive Board members are obligated
levels below the Executive board are set by the Executive to purchase Wacker Chemie AG shares for an amount
Board. equal to 15 percent of their annual gross bonus. A holding
period of two years applies to these shares.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

(III) A contribution to retirement benefits: Total Compensation for the Members of the
The members of the Executive Board are entitled to pay- Executive Board for Fiscal 2016
ment of an annual retirement pension should the event The current level of each Executive Board member’s com-
insured against occur, i. e. when they reach retirement age pensation is listed in the tables below, which follow the
or become afflicted by permanent occupational disability. model tables recommended by the German Corporate
Before said event occurs, Dr. Rudolf Staudigl has a basic Governance Code (DCGK ).
entitlement to the premature payment of an annual pension
if he leaves the Executive Board against his will without With effect from April 1, 2016, Dr. Rudolf Staudigl’s gross
good cause or if he, of his own accord, ceases his activity fixed annual salary was increased from € 800,000 to € 840,000.
for good cause and the company is responsible for said Also with effect from April 1, 2016, Auguste Willem’s gross
cause. The amount of the pension is calculated on the fixed annual salary was increased from € 580,000 to € 610,000.
basis of the last pensionable fixed annual salary received These salary increases were paid pro rata temporis in 2016.
and the length of Executive Board membership. A percent- Said increases have no effect on calculation of the pension,
age of the pensionable base salary is defined as a basic since they were determined as additional fixed non-pen-
amount and adjusted by means of an annual percentage sionable compensation components. They are taken into
rate of increase for each year of service. Entitlement to a account, however, when calculating the long-term bonus.
pension presupposes at least five years of service on the
Executive Board. The following table shows the value of compensation and
benefits granted for fiscal 2016. It also lists minimum and
The company grants the members of the Executive Board maximum attainable values.
appropriate insurance coverage, in particular D&O insur-
ance, with a deductible as stipulated in the German Stock
Corporation Act ( AktG ).

If they leave the company, Executive Board members are

subject to a 12-month obligatory waiting period, during
184 which they are paid competitive-restriction compensation.
The competitive-restriction compensation is calculated as
50 percent of the member’s latest overall annual compen-
sation (average of the last three years). Any pension received
is set off against the competitive-restriction compensation.

If Executive Board membership is prematurely terminated

without good cause, the contracts with Executive Board
members specify that any compensatory payments shall
be limited to a maximum of two full annual salaries (in the
case of Dr. Rudolf Staudigl, Auguste Willems and Dr. Tobias
Ohler) or one full annual salary (in the case of Dr. Christian
Hartel). This is referred to as the severance pay cap.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

Compensation and Benefits Granted for the Year Under Review ( Targets)

€ 2016 (target) 2016 (min.) 2016 (max.) 2015 (target) 2016 (target) 2016 (min.) 2016 (max.) 2015 (target)

Dr. Rudolf Staudigl Auguste Willems

President & CEO Executive Board member

Fixed compensation 1 830,000 830,000 830,000 800,000 602,500 602,500 602,500 580,000
Payment unrelated
to the accounting
period 2 – – – 28,125 – – – 20,625
Additional benefits 3 54,733 54,733 54,733 55,132 50,302 50,302 50,302 53,995

Total 884,733 884,733 884,733 883,257 652,802 652,802 652,802 654,620

Multiyear variable
compensation 4 1,552,100 737,870 2,158,000 1,312,000 1,126,675 535,623 1,566,500 951,200
Total 2,436,833 1,622,603 3,042,733 2,195,257 1,779,477 1,188,425 2,219,302 1,605,820
Pension expenses 5 10,079 10,079 10,079 10,583 538,976 538,976 538,976 598,603
Total compensation 2,446,912 1,632,682 3,052,812 2,205,840 2,318,453 1,727,401 2,758,278 2,204,423

Dr. Tobias Ohler Dr. Christian Hartel

Executive Board member Executive Board member
since November 1, 2015

Fixed compensation 1 580,000 580,000 580,000 400,000 400,000 400,000 400,000 66,668
Payment unrelated
to the accounting
period 2 – – – 15,000 – – – –
185
Additional benefits 3 44,479 44,479 44,479 44,391 49,709 49,709 49,709 8,100

Total 624,479 624,479 624,479 459,391 449,709 449,709 449,709 74,768

Multiyear variable
compensation 4 1,084,600 515,620 1,508,000 516,000 588,000 280,000 832,000 86,000
Total 1,709,079 1,140,099 2,132,479 975,391 1,037,709 729,709 1,281,709 160,768
Pension expenses 5 456,746 456,746 456,746 354,563 172,075 172,075 172,075 1,201,045
Total compensation 2,165,825 1,596,845 2,589,225 1,329,954 1,209,784 901,784 1,453,784 1,361,813

1
Calculation of the pensionable portion of the compensation excluded an amount of € 3 0,000 (Dr. Staudigl ) and € 2 2,500 (Mr. Willems) in 2016.
2
In 2015, the Executive Board members were each paid the second 50-percent installment of the amount withheld in 2013.
3
Additional benefits include, in particular, social insurance allowances and the use of a company car.
4
Multiyear refers to the assessment basis. The Executive Board members purchase Wacker Chemie AG shares in the amount of 15 percent of their annual gross
bonus ( holding period of two years). Once determined, the fixed bonus amount calculated using a three-year assessment basis is not influenced by subsequent
developments. Calculation of the minimum and maximum values took the actual level of target achievement in the two previous years into consideration. The
following values were set for 2016: a minimum value of 0 percent and a maximum value of either 220 percent or 180 percent. The disclosure of each theoretically
achievable minimum or maximum value also includes the Supervisory Board’s potential scope of discretion.
5
Service cost, pursuant to IAS 19, from pension commitments and other pension-related benefits. In connection with the appointment of Dr. Hartel to the Executive
Board of Wacker Chemie AG, a past service cost in the amount of € 1,119,185 was incurred in 2015.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

The following table shows the payments for fiscal 2016 from
fixed compensation, additional benefits and variable com-
pensation – grouped according to one-year and multiyear
variable compensation – as well as pension expenses.

Payments in the Year Under Review

€ 2016 2015 2016 2015

Dr. Rudolf Staudigl Auguste Willems

President & CEO Executive Board member

Fixed compensation1 830,000 800,000 602,500 580,000

Payment unrelated to the accounting period 2 – 28,125 – 20,625
Additional benefits 3 54,733 55,132 50,302 53,995

Total 884,733 883,257 652,802 654,620

Multiyear variable compensation 4 1,734,700 1,320,000 1,259,225 957,000

Total 2,619,433 2,203,257 1,912,027 1,611,620
Pension expenses 5 10,079 10,583 538,976 598,603
Total compensation 2,629,512 2,213,840 2,451,003 2,210,223

Dr. Tobias Ohler Dr. Christian Hartel

Executive Board member Executive Board member
since November 1, 2015
186
Fixed compensation1 580,000 400,000 400,000 66,668
Payment unrelated to the accounting period 2 – 15,000 – –
Additional benefits 3 44,479 44,391 49,709 8,100

Total 624,479 459,391 449,709 74,768

Multiyear variable compensation 4 1,212,200 520,000 660,000 86,667

Total 1,836,679 979,391 1,109,709 161,435
Pension expenses 5 456,746 354,563 172,075 1,201,045
Total compensation 2,293,425 1,333,954 1,281,784 1,362,480

1
Calculation of the pensionable portion of the compensation excluded an amount of € 3 0,000 (Dr. Staudigl ) and € 2 2,500 (Mr. Willems) in 2016.
2
In 2015, the Executive Board members were each paid the second 50-percent installment of the amount withheld in 2013.
3
Additional benefits include, in particular, social insurance allowances and the use of a company car.
4
Multiyear refers to the assessment basis. The Executive Board members purchase Wacker Chemie AG shares in the amount of 15 percent of their annual gross
bonus ( holding period of two years). Once determined, the fixed bonus amount calculated using a three-year assessment basis is not influenced by subsequent
developments.
5
Service cost, pursuant to IAS 19, from pension commitments and other pension-related benefits; this does not concern payments during the fiscal year.
In connection with the appointment of Dr. Hartel to the Executive Board of Wacker Chemie AG, a past service cost in the amount of € 1,119,185 was incurred in 2015.

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Corporate Governance Report and Declaration on Corporate Management

Compensation for Former Members of the The members of the Supervisory Board are compensated
Executive Board and Their Surviving Dependents
for any outlays incurred in connection with the execution
€ 2016 2015 of their duties with an annual lump sum of € 20,000, and are
also reimbursed for any VAT payable on that lump sum.

Total 2,383,467 1 1,922,900

The company grants the members of the Supervisory
Board appropriate insurance coverage; in particular, the
1
This compensation contains the competitive-restriction compensation paid company concludes a D&O insurance policy for the benefit
to Dr. Rauhut in 2016 in connection with the expiry of his employment contract.
of the Supervisory Board members.

Supervisory Board Compensation

Pension Obligations for Executive Board Members
€ 2016 2015

€ 2016 2015

Pension obligations for active Fixed compensation 1, 2 2,165,000 1,716,973

Executive Board members Variable compensation – –
Total 27,587,433 22,692,191
Total 2,165,000 1,716,973

Pension obligations for former

members of the Executive 1
Fixed compensation includes the aforementioned annual lump sum.
Board or their dependents 2
The employee representatives are subject to the rules of the German
Trade Union Confederation (DGB) and of the German Association of
Total 39,163,469 36,718,229
Employed Academics and Executives in the Chemical Industry ( VAA)
concerning the transfer of supervisory board compensation.

Compensation of Supervisory Board Members

The compensation of Wacker Chemie AG’s Supervisory 187
Board members is governed by the company’s Articles
of Association.

At the Annual Shareholders’ Meeting of May 20, 2016, it was

resolved that both the fixed compensation and the annual
lump sum (for outlays) for members of the Supervisory
Board would be increased retroactively as of fiscal 2016.

Consequently, as of January 1, 2016, the members of the

Supervisory Board receive fixed annual compensation in
the amount of € 90,000, payable on expiry of the fiscal year,
and are also reimbursed for any VAT payable on their com-
pensation. Supervisory Board members who join, or depart
from, the Supervisory Board during the fiscal year receive
the corresponding compensation pro rata temporis.

The compensation is multiplied by a factor of 3 for the

Chairman of the Supervisory Board, by a factor of 2 for the
Vice Chairman and for chairs of committees, and by a factor
of 1.5 for members of committees. Multiple functions are
ignored in this calculation.

Wacker Chemie AG – Annual Report 2016

 Consolidated Financial Statements – Declaration by the Executive Board on Accounting Methods and Auditing

Declaration by the
Executive Board on
Accounting Methods
and Auditing

The Executive Board is responsible for preparing Wacker

Chemie AG’s consolidated financial statements and com-
bined management report. WACKER’s consolidated financial
statements were prepared in compliance with the rules
published in London by the International Accounting Stan-
dards Board (IASB) and endorsed by the European Union.
WACKER has set up effective internal monitoring and steer-
ing systems to guarantee that the combined management
report and the consolidated financial statements comply
with the applicable rules and procedures of proper corpo-
rate reporting. The internal auditing division continuously
examines the reliability and workability of the monitoring
and steering systems on a worldwide basis. KPMG AG
Wirtschaftsprüfungsgesellschaft has audited Wacker
Chemie AG’s consolidated financial statements and Group
188 management report and granted them an unqualified
certificate. WACKER’s consolidated financial statements, its
combined management report and the auditors’ report
were discussed in detail by the Supervisory Board’s Audit
Committee at its meeting on February 27, 2017. For infor-
mation about the Supervisory Board’s audit, please refer
to its report.

Assurance by the Legal Representatives in Accordance

with Sections 297 (2) and 315 (1) HGB
To the best of our knowledge, and in accordance with the
applicable reporting principles, the consolidated financial
statements give a true and fair view of the Group’s net
assets, earnings and financial position, and the combined
management report includes a fair review of the develop-
ment and performance of the business and the position
of the Group, together with a description of the principal
opportunities and risks associated with the Group’s
­expected development.

Munich, February 27, 2017

Wacker Chemie AG

Rudolf Staudigl Christian Hartel

Tobias Ohler Auguste Willems

Wacker Chemie AG – Annual Report 2016

Consolidated Financial Statements – Auditors’ Report

Auditors’ Report Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the

consolidated financial statements comply with IFRS s, as
adopted by the EU, and with the additional requirements of
German commercial law pursuant to Section 315a (1) HGB,
We have audited the consolidated financial statements and give a true and fair view of the net assets, financial
prepared by Wacker Chemie AG, Munich – comprising position and results of operations of the Group in accor-
the  statement of financial position, income statement, dance with these requirements. The report on the position
statement of comprehensive income, statement of changes of the Company and the Group is consistent with the
in equity, statement of cash flows and explanatory notes consolidated financial statements, complies with the
– together with the report on the position of the Company statutory requirements and, as a whole, provides a suit-
and the Group for the business year from January 1 to able view of the Group’s position and suitably presents the
December 31, 2016. The preparation of the consolidated opportunities and risks of future development.
financial statements and the report on the position of
the Company and the Group in accordance with IFRS s, as Munich, February 27, 2017
­a dopted by the EU, and the additional requirements of KPMG AG Wirtschaftsprüfungsgesellschaft

German commercial law pursuant to Section 315a (1) HGB

(Handelsgesetzbuch: “German Commercial Code”) are the Andrejewski Maurer
responsibility of the parent company’s management. Our
responsibility is to express an opinion on the consolidated Auditor Auditor
financial statements and on the report on the position of
the Company and the Group based on our audit.

We conducted our audit of the consolidated financial

statements in accordance with Section 317 HGB (“German
Commercial Code”) and German generally accepted stan- 189
dards for the audit of financial statements promulgated by
the Institut der Wirtschaftsprüfer (Institute of Public Auditors
in Germany) (IDW ). Those standards require that we plan
and perform the audit such that misstatements materially
affecting the presentation of the net assets, financial posi-
tion and results of operations in the consolidated financial
statements in accordance with the applicable financial
reporting framework and in the report on the position of
the Company and the Group are detected with reasonable
assurance. Knowledge of the business activities and
the economic and legal environment of the Group and
expectations as to possible misstatements are taken
into account in the determination of audit procedures. The
­effectiveness of the accounting-related internal control
system and the evidence supporting the disclosures in the
consolidated financial statements and the report on the
position of the Company and the Group are examined
primarily on a test basis within the framework of the audit.
The audit includes assessing the annual financial state-
ments of those entities included in consolidation, the
­determination of entities to be included in consolidation,
the accounting and consolidation principles used and
significant estimates made by management, as well as
evaluating the overall presentation of the consolidated
­fi nancial statements and Group management report.
We believe that our audit provides a reasonable basis for
our opinion.

Wacker Chemie AG – Annual Report 2016

 Further Information – Multiyear Overview

Multiyear Overview

€ million 2016 Change 2015 2014 2013 2012

in %

Sales 5,404.2 2.0 5,296.2 4,826.4 4,478.9 4,634.9

Income before taxes 264.8 – 3 4.9 406.7 365.2 31.0 203.9
Net income for the year 189.3 – 21.7 241.8 195.4 6.3 114.7
EBITDA 1,101.4 5.0 1,048.8 1,042.3 678.7 795.4
EBIT 366.2 – 2 2.6 473.4 443.3 114.3 266.6

Fixed assets 4,765.5 – 4.0 4,964.9 4,471.0 4,067.7 4,260.7

Intangible assets 50.4 57.0 32.1 32.9 20.4 25.5
Property, plant and equipment 4,596.4 – 4.3 4,800.6 4,312.8 3,785.6 3,924.4
Financial assets 118.7 – 10.2 132.2 125.3 261.7 310.8

Current assets, incl. deferred taxes

+ accruals and deferrals 2,696.1 17.2 2,299.5 2,476.2 2,264.7 2,232.1

Liquidity 283.5 – 8 .7 310.5 325.9 431.8 192.6

Equity 2,593.2 – 7.2 2,795.1 1,946.5 2,197.1 2,121.3

Subscribed capital 260.8  – 260.8 260.8 260.8 260.8
Capital reserves 157.4  – 157.4 157.4 157.4 157.4
Treasury shares – 4 5.1  – – 4 5.1 – 4 5.1 – 4 5.1 – 4 5.1
190 Retained earnings, consolidated net income,
and other equity items 2,006.3 – 8 .6 2,195.1 1,549.3 1,805.7 1,730.0
Non-controlling interests 213.8 – 5.8 226.9 24.1 18.3 18.2

Borrowed capital 4,868.4 8.9 4,469.3 5,000.7 4,135.3 4,371.5

Provisions 2,550.7 27.7 1,996.7 2,137.7 1,401.9 1,575.3
Liabilities, incl. deferred taxes
+ accruals and deferrals 2,317.7 – 6 .3 2,472.6 2,863.1 2,733.4 2,796.2

Net financial debt (–)

Net financial receivables (+) – 9 92.5 – 7.6 – 1,074.0 – 1,080.6 – 792.2 – 700.5

Total assets 7,461.6 2.7 7,264.4 6,947.2 6,332.4 6,492.8

Employees (average for the year) 17,118 1.1 16,937 16,744 16,134 16,663
Employees (Dec. 31) 17,205 1.4 16,972 16,703 16,009 16,292

Wacker Chemie AG – Annual Report 2016

Further Information – Multiyear Overview

€ million 2016 Change 2015 2014 2013 2012

in %

Key profitability figures

Return on sales (EBIT ) = EBIT /  s ales (%) 6.8 n. a . 8.9 9.2 2.6 5.8
Return on sales (EBITDA ) = EBITDA  / s ales (%) 20.4 n. a . 19.8 21.6 15.2 17.2
Return on equity = net income for the year / e quity
(as of Dec. 31) (%) 7.3 n. a . 8.7 10.0 0.3 5.4
ROCE – return on capital employed
= EBIT / c apital employed (%) 6.1 n. a . 8.1 8.4 2.2 5.2

Key statement-of-financial-position figures

Investment intensity of the fixed assets
= fixed assets /  total assets (%) 63.9 n. a . 68.3 64.4 64.2 65.6
Equity ratio = equity /  total assets (%) 34.8 n. a . 38.5 28.0 34.7 32.7
Capital structure = equity /  b orrowed capital (%) 53.3 n. a . 62.5 38.9 53.1 48.5

Cash flow and investments

Cash flow from operating activities 736.6 19.3 617.2 485.2 464.0 363.2
Cash flow from long-term investing activities – 516.9 – 3 6.6 – 815.6 – 4 97.3 –  5 55.2 – 1,053.8
Cash flow from financing activities – 135.8 > 100 57.9 – 8 8.6 227.6 326.6
Net cash flow = CF from operating activities
+ CF from investing activities – additions from
finance leases 400.6 > 100 22.5 215.7 109.7 –  5 36.2
Investments 427.6 – 4 8.7 834.0 572.2 503.7 1,095.4

191
Share and valuation
Consolidated net income 189.3 – 21.7 241.8 195.4 6.3 114.7
Earnings per share (€ ) = consolidated net income /
 n umber of shares 3.61 – 27.4 4.97 4.1 0.05 2.4
Market capitalization
(total number of shares without treasury shares) 4,910.7 27.5 3,851.0 4,523.2 3,994.1 2,466.5
Number of shares 49,677,983  – 49,677,983 49,677,983 49,677,983 49,677,983
Price as of reporting date December 31 98.85 27.5 77.52 91.05 80.4 49.7
Dividend per share (€ ) 2.00  – 2.00 1.50 0.50 0.60
Dividend yield (%) 2.6 n. a . 2.2 1.7 0.8 1.0
Capital employed 6,018.0 2.4 5,875.4 5,260.7 5,238.2 4,979.0

Wacker Chemie AG – Annual Report 2016

 Further Information – Financial Glossary – Chemical Glossary

Financial Glossary Chemical Glossary

Business Value Contribution (BVC) Biotechnology

BVC is a financial performance measurement that deter- Biotech processes use living cells or enzymes to transform
mines the value created by the WACKER Group and its units and produce substances. Depending on the application, a
once all capital costs have been deducted. BVC is the differ- distinction is made between red, green and white biotech-
ence between profit (EBIT ) and cost of capital (WACC x CE). nology. Red biotechnology: medical and pharmaceutical
BVC is a profit variable that is adjusted to allow for ex- applications. Green biotechnology: agricultural applications.
traordinary effects (e. g. sale of parts of the company). This White biotechnology: biotech-based products and industrial
makes it an ideal tool for measuring business performance. processes, e. g. in the chemical, textile and food industries.

Capital Employed (CE ) Chlorosilanes

Capital employed is the sum of average noncurrent fixed Compounds of silicon, chlorine and hydrogen. The semi-
assets (less noncurrent securities and deferred tax assets), conductor industry mainly uses trichlorosilane to make
plus inventories and trade receivables less trade payables. polysilicon and for the epitaxial deposition of silicon.
It is a variable used in calculating the cost of capital.
Cyclodextrins
Cash Flow Cyclodextrins belong to the family of cyclic oligosaccharides
Cash flow represents the movement of cash and cash (i. e. ring-shaped sugar molecules). They are able to encap-
equivalents into or out of a business activity during a finite sulate foreign substances such as fragrances and to release
period. Net cash flow is the sum of cash flow from operat- active ingredients at a controlled rate. WACKER BIOSOLUTIONS
192 ing activities (excluding the change in advance payments produces and markets cyclodextrins.
received) and cash flow from long-term investing activities
(before securities), including finance leases. Cysteine
Cysteine is a sulfur-containing amino acid. It belongs to the
EBIT non-essential amino acids, as it can be formed in the body.
Earnings before interest and taxes: EBIT is a good indicator It is used, for example, as an additive in food and cough
for comparing companies’ profitability, since it is widely mixtures. Cysteine and its derivatives are a business field
used across the corporate world. at WACKER BIOSOLUTIONS.

EBITDA Dispersions
Earnings before interest, taxes, depreciation and amor­ Binary system in which one component is finely dispersed
tization. in another. VINNAPAS ® dispersions from WACKER are vinyl-­
acetate-based binary copolymers and terpolymers in liquid
Equity Ratio form. They are mainly used as binders in the construction
The equity ratio is calculated from the ratio of equity to a industry, e. g. for grouts, plasters and primers.
company’s total assets. It indicates the level of economic
and financial stability at a company. Dispersible Polymer Powders
Created by drying dispersions in spray or disc dryers.
IFRS VINNAPAS ® polymer powders from WACKER are recom-
The International Financial Reporting Standards (until 2001 mended as binders in the construction industry, e. g. for tile
International Accounting Standards, IAS) are compiled and adhesives, self-leveling compounds and repair mortars.
published by the London-based International Accounting The powders improve adhesion, cohesion, flexibility and
Standards Board (IASB). Since 2005, publicly listed EU-based flexural strength, as well as water-retention and processing
companies have been required to use IFRS in accordance properties.
with IAS regulations.

ROCE
Return on capital employed is the profitability ratio relating
to the capital employed.

Wacker Chemie AG – Annual Report 2016

Further Information – Chemical Glossary

Elastomers Silicon
Polymers that exhibit almost perfectly elastic behavior, i. e. After oxygen, silicon is the most common element in the
they deform when acted upon by an external force and earth’s crust. In nature, it occurs without exception in the
return to their exact original shape when the force is form of compounds, chiefly silicon dioxide and silicates.
­removed. While the duration of the force has no effect on Silicon is obtained through energy-intensive reaction of
perfectly elastic behavior, the temperature does. quartz sand with carbon and is the most important raw
material in the electronics industry.
Ethylene
Ethylene is a colorless, highly reactive gas and a key raw Silicon Wafer
material in the chemical industry. A silicon wafer is a disc with a thickness of between
­a pproximately 200 and 800 μm and is used by the semi-
Polymer conductor industry for the manufacture of semiconductor
A polymer is a large molecule made up of smaller molecular devices, i. e. integrated circuits and discrete components.
units (monomers). It contains between 10,000 and 100,000
monomers. Polymers can be long or ball-shaped. Silicones
General term used to describe compounds of organic mol-
Polymer Blends ecules and silicon. According to their areas of application,
Mixtures of synthetic and natural products in which silicones can be classified as fluids, resins or rubber grades.
the  ­renewable raw material forms the main component Silicones are characterized by a myriad of outstanding
­comprising at least 65 percent. The VINNEX® binder system properties. Typical areas of application include construc-
­a llows polymer blends to be produced from renewable tion, the electrical and electronics industries, shipping and
raw  materials such as starch, polylactic acid ( PLA ) or transportation, textiles and paper coatings.
polyhydroxyalkanoates (PHA ).
Siloxanes
Polysilicon Systematic name given to compounds comprising silicon
Hyperpure polycrystalline silicon from WACKER POLYSILICON atoms linked together via oxygen atoms and with the
is used for manufacturing wafers for the electronics and ­remaining valences occupied by hydrogen or organic 193
solar industries. To produce it, metallurgical-grade silicon groups. Siloxanes are the building blocks for the polymers
is converted into liquid trichlorosilane, highly distilled and ( polysiloxane and polyorganosiloxane) that form silicones.
deposited in hyperpure form at 1,000 ° C.
VINNAPAS®
Pyrogenic Silica VINNAPAS ® is the name of WACKER’s product line of disper-
White, synthetic, amorphous silicon dioxide (SiO2 ) in pow- sions, polymer powders, solid resins and their associated
der form, made by flame hydrolysis of silicon compounds. product solutions. VINNAPAS ® dispersions and polymer
It is versatile in applications as an additive for silicone powders are primarily used in the construction industry
rubber grades, sealants, surface coatings, pharmaceuticals as polymeric binders, e.g. in tile adhesives, exterior insu-
and cosmetics. lation and finish systems (EIFS) / external thermal insulation
composite systems (ETICS), self-leveling compounds, and
Semiconductor plasters.
A substance whose electrical conductivity is much lower
than that of metals, but increases dramatically as the
temperature rises. Semiconductors can be modified for a
particular purpose by doping them with foreign atoms.

Silanes
Silanes are used as monomers for the synthesis of silox-
anes or sold directly as reagents or raw materials. Typical
applications include surface treatment, reagents in pharma-
ceutical synthesis or coupling agents for coatings.

Wacker Chemie AG – Annual Report 2016

 Further Information – List of Tables and Figures

List of Tables and Figures 2.37 Cash Flow from Operating Activities
(Gross Cash Flow)   69
2.38 Cash Flow from Long-Term Investing
Activities before Securities   69
2.39 Net Financial Debt   70
2.40 R&D Expenses   71
2.41 New-Product Rate (NPR)   72
2.42 Investments in R&D Facilities   72
2.43 Breakdown of R&D Expenditures   72
Cover 2.44 Employees in R&D as of December 31   73
2.45 R&D Organization   73
WACKER at a Glance   C2 2.46 Key Product Launches in 2016   74
Financial Calendar 2017   C3 2.47 Number of Employees at December 31   75
Contacts & Publishing Details   C3 2.48 Number of Temporary Workers at December 31   75
2.49 Personnel expenses   75
2.50 Idea Management   77
2.51 Employee Turnover Rate   77
A– 2.52 Demographic Analysis of German and
International Sites in 2016   77
For Our Shareholders 2.53 Workplace Accidents Involving Permanent
1.1 WACKER Share Performance ( indexed to 100)   37 Staff and Temporary Workers – Group   79
1.2 Facts & Figures on Wacker Chemie AG’s Stock   38 2.54 Product Lifecycles   81
1.3 Dividend Trends   38 2.55 Environmental Indicators from 2012 to 2016   81
1.4 Useful Information on WACKER Stock   38 2.56 Electricity Supply   82
1.5 Banks and Investment Firms 2.57 Energy Consumption   83
Covering and Rating WACKER   39 2.58 Procurement Volumes ( incl. Procurement
for Capital Expenditures)   83
2.59 Plant Utilization in 2016   84
2.60 Key Start-Ups   84
B– 2.61 Breakdown of Marketing Costs   85
2.62 Tradeshows   85
Combined Management Report 2.63 Statement of Income   86
2.1 Key Factors for Multidivisional Sites   43 2.64 Statement of Financial Position   88
2.2 WACKER’s Production and Sales Sites 2.65 “Three Lines of Defense” Model   91
and Technical Competence Centers   44 2.66 Risk Management System   92
194 2.3 Executive Board Responsibilities   45 2.67 Basis of Our Internal Control System (ICS)   93
2.4 Group Structure   45 2.68 Probability and Possible Impact of Our Risks in 2017   95
2.5 Group Structure in Terms of 2.69 Controlling Financial Risks   99
Managerial Responsibility   46 2.70 Opportunity Management System   104
2.6 WACKER’s Competitive Positions   47 2.71 Overview of Business Opportunities   104
2.7 Leading Operational Indicators   48 2.72 Sales Volumes: Opportunities and Risks   105
2.8 Strategy at Each Business Division   50 2.73 GDP Trends in 2017   106
2.9 Non-Financial Performance Indicators Used 2.74 Construction-Industry Growth Rates by Region,
for Decision-Making in Parts of the Company   52 2017 to 2019   107
2.10 Planned and Actual Figures   52 2.75 WACKER’s Key Customer Sectors   107
2.11 ROCE and BVC   52 2.76 Photovoltaic-Market Trend in 2017   108
2.12 Strategic and Operational Planning   53 2.77 Facility Start-Ups in 2017   110
2.13 Information Required by Section 315 (4) 2.78 WACKER’s Environmental Targets through 2022   111
of the German Commercial Code (HGB)   54 2.79 Outlook for 2017   112
2.14 GDP Trends in 2016   55
2.15 Growth Rate of Construction by Region in 2016   56
2.16 Installation of New PV Capacity in 2015 and 2016   56
2.17 Spot-Price Trends for WACKER’s Key Raw Materials   57 C–
2.18 Comparing Actual with Forecast Performance   59 Consolidated Financial Statements
2.19 Expenses by Cost Type   60
2.20 Reconciliation of EBITDA to EBIT   60 3.1 Statement of Income   117
2.21 Reconciliation of EBIT to Net Income for the Period   61 3.2 Statement of Comprehensive Income   118
2.22 Year-over-Year Sales Comparison   61 3.3 Statement of Financial Position   119
2.23 Key Data: WACKER SILICONES   62 3.4 Statement of Cash Flows   120
2.24 Key Data: WACKER POLYMERS   63 3.5 Statement of Changes in Equity   121
2.25 Key Data: WACKER BIOSOLUTIONS   63 3.6 Reconciliation of Other Equity Items   122
2.26 Key Data: WACKER POLYSILICON   63 3.7 Segment Information by Division   123
2.27 Key Data: SILTRONIC   64 3.8 Segment Information by Region   124
2.28 Divisional Shares in External Sales   64
2.29 External Sales by Customer Location   65
2.30 External Sales by Group Company Location   65
2.31 Trends: Assets   65
2.32 Working Capital   66
2.33 Asset and Capital Structure   66
2.34 Trends: Equity and Liabilities   67
2.35 Net Cash Flow   69
2.36 Net Cash Flow   69

Wacker Chemie AG – Annual Report 2016

Further Information – Index

Index executive board   31, 33 – 35, 37 – 39, 45 – 46, 51 – 54,

58 – 59, 70, 73, 76, 82, 86, 90 – 92, 94 – 95,
104 – 106, 113, 125, 146, 149, 152, 159,
165 – 166, 173 – 175, 177 – 188

F–
A– financial liabilities   67, 87 – 89, 136, 154 – 155
accounting and valuation methods, financial position, financial situation   33, 52, 68 – 71, 88,
reporting principles   93, 132 – 139, 188 98 – 100
amortization   51, 86 – 87, 131, 133, 169, 192 financing measures   53
auditors’ report   35, 90, 125, 188 – 189 fixed assets   60, 66, 86, 88, 103, 120, 123,
139, 142, 156, 190 – 192

C–
capital expenditures   33, 49 – 53, 58, 66, 71, 83, G–
98, 104, 109, 112 – 113  glossaries   192 – 193
cash flow   50 – 53, 59, 65, 68 – 71, 89 – 90, 100, 104, group structure   46
106, 112 – 113, 118, 120, 122, 130 – 131, 134,
136, 147, 162, 164, 166, 168 – 169, 183, 191 – 192
compensation   34, 45, 51, 67, 76 – 77, 103, 149, 151 – 152, I–
157, 174 – 175, 178, 181, 183 – 187 innovations   11, 19, 48 – 49, 72, 74, 108
consolidated financial statements   117 – 189 intangible assets   64 – 6 5, 119 – 120, 123 – 124, 131,
corporate governance   34 – 35, 45, 125, 178 – 184 133, 141 – 142, 147, 169
interest result, net interest income   61, 86 – 87, 120, 137,
139 – 140, 165 – 166
D– inventories   52, 65 – 66, 86, 88, 95, 195
depreciation   49, 51, 59 – 61, 66, 69, 71, 86 – 88, 119 – 120, 137, 139, 144, 192
98, 109, 112 – 113, 120, 123, 127, 131, investments   33, 49 – 52, 58 – 59, 62 – 66, 69, 72,
133 – 134, 137, 142 – 143, 169, 192 84, 86 – 87, 89 – 90, 98 – 99, 102, 109, 112,
dividend   38, 59, 67, 69 – 70, 86 – 89, 113, 118, 120, 122, 128, 131, 135 – 136, 138,
120 – 121, 129, 135, 143, 147 – 148, 159, 191 141, 145, 147, 152, 165 – 166, 168, 191
investments in joint ventures and associates,
equity-accounted investments   65 – 66, 86 – 87, 98, 117, 119,
E– 123, 129, 135, 139 – 140, 143 – 144,
earnings   60 – 6 5, 86, 93, 95 – 97, 101 – 103, 162, 169
125 – 128, 143, 158, 188 – 189 investor relations, investors   31, 36, 38 – 40, 45, 65,
earnings per share   38, 159, 191 147, 177, 179
EBIT   51 – 52, 60 – 6 4, 117, 123, 169 – 170, 190 – 192
EBITDA   33, 48, 50 – 53, 58 – 60, 62 – 6 4, 71, 86, 90,
112 – 114, 123, 130, 165 – 166, 169, 190 – 192 L–
economic trends   55 liabilities   52 – 53, 66 – 67, 88 – 89, 99, 119 – 120, 126,
employees   9, 24, 33, 35, 43, 52, 54, 59, 62 – 6 4, 68, 129, 131 – 132, 134 – 139, 141, 148,
73 – 79, 84, 87, 89, 91, 93 – 94, 100 – 101, 103 – 104, 154 – 157, 159 – 174, 190
111, 123 – 124, 148 – 149, 153, 180 – 183, 190 liquidity   51, 66 – 6 8, 70, 89, 99 – 100, 148,
environmental protection   46, 53, 67, 79 – 80, 89 – 90, 152, 156, 165, 168 – 169, 190
132, 138, 153 – 154, 182
equity   65 – 67, 71, 88 – 89, 100, 118 – 119, 121 – 122,
129 – 131, 133, 135 – 137, 141, 143 – 144, 146 – 148, M–
163 – 164, 166 – 167, 171 – 172, 189 – 192 management processes   51 – 53
events after the balance sheet date­­­­­­­­­­­­­   175 management report   41 – 114

Wacker Chemie AG – Annual Report 2016

 Further Information – Index

N– sectors, sector-specific   55, 82, 96, 104, 107, 131

net assets   65 – 6 8, 70, 88, 93, 95, 98, 100, segments, segment reporting   62 – 6 4, 169 – 170
102 – 103, 123 – 129, 137, 143, 158, 188 – 189 share, stock   36 – 40, 54, 59, 61, 70, 88, 117, 119,
net financial debt   33, 52, 58 – 59, 70 – 71, 89, 100, 121, 126, 130 – 131, 135, 146 – 147, 152, 159, 164 – 165,
112 – 113, 148, 190 170, 173, 175, 180, 182 – 183, 185 – 186, 190 – 191
noncurrent assets   51 – 52, 65 – 66, 119, 124, 130, 139, share price   34, 36 – 38, 70, 131, 152
147, 156, 190, 191 Siltronic   36 – 37, 45 – 48, 50, 56, 58 – 60, 64 – 66, 69,
notes to the consolidated financial statements   125 – 175 71, 73 – 75, 78, 80, 84, 86 – 87, 89, 95 – 97, 106,
109, 111 – 113, 120 – 123, 125, 128, 146 – 147,
149, 169 – 172, 176 – 177
O– sites   8, 43 – 4 4, 46, 52, 64, 71, 75 – 82, 90,
opportunities report   104 – 106 98 – 99, 103 – 104, 111, 154, 158, 182
outlook   90, 106 – 119 social responsibilities   79, 182
statement of cash flows   120, 126, 168, 189
statement of financial position   68, 88, 90, 119, 125, 129,
P– 135 – 136, 138, 141, 160 – 161, 163,
pension provisions, provisions 166 – 169, 189, 191
for pensions   62, 65 – 67, 71, 86 – 89, 119, 132, statement of income, 
137, 141, 148 – 149, 158, 169, 174 income statement   86, 90, 117 – 118, 122, 125, 129 – 131,
personnel costs, personnel expenses   59 – 60, 71, 75, 133, 135 – 138, 166 – 167, 169, 189
86 – 87, 90, 111, 133, 158 statutory information on takeovers   54
procurement, purchasing   31, 45, 48, 59, 78, 83 – 8 4, 87, strategy   10, 11, 24, 37, 39, 43, 45, 49 – 50, 52 – 53, 86,
92, 95, 97, 101, 106, 110, 153 – 154, 156, 91, 93, 104, 108 – 109, 114, 152, 178, 180
158, 165– 166, 177, 182 supervisory board   1, 33 – 35, 45, 53 – 54, 59, 70, 76,
products   2, 6, 9, 11, 19, 21, 24, 33, 43, 46 – 50, 55, 90 – 95, 125, 165, 173 – 174, 176, 178 – 188
58, 62 – 6 3, 68, 71 – 75, 79, 81, 84 – 85, 95 – 98, sustainability   49, 78, 80 – 81, 84, 108, 111, 179, 182
196 101 – 110, 113 – 114, 130, 165, 169, 182, 192 – 193
property, plant and equipment   64 – 6 5, 88, 89, 119 – 120,
123 – 124, 128, 130 – 131, 134 – 135, T–
139, 141 – 142, 147, 158, 169, 190 technical competence centers   2, 9, 11, 24, 43 – 44,
provisions   62, 65 – 67, 86 – 89, 95, 119 – 120, 131 – 133, 104, 109, 111
137 – 141, 148 – 150, 153 – 154, 158, 169, 190 training   76, 78 – 79, 84, 93 – 94, 101, 103, 181

R– W–
rating   70, 99, 132, 165 WACKER BIOSOLUTIONS   2, 31, 33, 45 – 48, 50, 55, 59,
report of the supervisory board   32 63 – 6 4, 73, 75, 85 – 87, 105, 109 – 110,
research and development, R&D   31, 45, 61, 63, 68, 112 – 113, 128, 177, 192
71 – 75, 81, 98, 101, 105, 110, WACKER POLYMERS   31, 33, 45 – 48, 50, 55 – 56, 59,
133, 177, 181 – 182 62 – 6 4, 72 – 74, 84 – 87, 96, 105,
risk management system   35, 90 – 94, 106, 165, 182 108 – 109, 111 – 113, 177
WACKER POLYSILICON   31, 45 – 48, 50, 56, 59 – 60, 63 – 6 4,
71, 73, 75, 84, 86 – 87, 89, 96,
S– 105 – 106, 112 – 113, 177
sales trend   48, 55, 63, 71 WACKER SILICONES   7 – 11, 24, 31, 33, 45 – 48, 50,
scope of consolidation   70, 90, 121, 123 – 124, 127 – 128, 55 – 56, 59, 62, 64, 66, 73 – 74, 84 – 87,
131, 139, 142 – 143, 146, 150, 168, 189 96, 105, 108 – 109, 112 – 113, 177

Our Annual Report was published on March 14, 2017. It is available that may cause the actual figures to differ considerably from
in English and German and you can access both versions online. the forward-looking statements. Factors that may cause such
www.wacker.com/annual-report discrepancies include, among other things, changes in the eco-
nomic and business environment, variations in exchange and
This Annual Report contains forward-looking statements based interest rates, the introduction of competing products, lack
on assumptions and estimates of WACKER ’s ­E xecutive Board. of  acceptance for new products or services, and changes in
Although we assume the expectations in these forward-looking corporate strategy. WACKER does not plan to update the forward-­
statements are realistic, we cannot ­g uarantee they will prove to looking statements, nor does it assume the obligation to do so.
be correct. The assumptions may harbor risks and ­u ncertainties

Wacker Chemie AG – Annual Report 2016

2017 – Contacts –
Financial Calendar Publishing Details

Investor Relations
April Joerg Hoffmann
Head of Investor Relations
27
Tel. +49  89  6279-1633
joerg.hoffmann@wacker.com
Interim Report
on the 1st Quarter of 2017
Media Relations
Christof Bachmair
Tel. +49  89  6279-1830
christof.bachmair@wacker.com
May

19
Publisher
Annual Shareholders’ Meeting Wacker Chemie AG
Corporate Communications
Hanns-Seidel-Platz 4
81737 München, Germany
Tel. +49  89  6279-0
July Fax +49  89  6279-1770
28 www.wacker.com

Interim Report
Overall Responsibility
on the 2nd Quarter of 2017 Jörg Hettmann

Project Coordination
October Heide Feja

26
Concept and Design
Interim Report hw.design, München, Germany
on the 3rd Quarter of 2017 www.hwdesign.de
Wacker Chemie AG
Hanns-Seidel-Platz 4
81737 München, Germany
Tel. + 49  89  6279 - 0
Fax + 49  89  6279 -1770
www.wacker.com