Wacker Chemie AG – Specialty Chemicals for Global Future Markets

Brief Summary for Investors: Wacker Chemie AG is a broadly positioned German chemical group specializing in silicones, polymers, biosolutions, and polysilicon for semiconductors and photovoltaics. The company is currently undergoing a phase of normalization following exceptionally high earnings during the post-COVID period and the energy crisis.

Development The share price performed strongly from 2020 to mid-2022 (from approximately €85 to over €176), driven by high demand, supply bottlenecks, and rising energy prices, which led to record results (EPS 2022: €25.18). Since then, the share price has corrected significantly (currently approximately €63), reflecting the decline in key financial figures. The recent decline in sales to €1.33 billion in the last quarter (from €1.49 billion in Q1/24) and the sharp decline in profit (net profit of €139.9 million in the last quarter vs. €1.25 billion for the full year 2022) reflect the industry normalization, lower polysilicon prices, and persistently high energy prices.

Opportunities:

• Long-term megatrends: The business areas are anchored in structurally growing markets (e-mobility, renewable energies, semiconductors, electronics).
• Solid balance sheet: Despite the weak earnings, the company demonstrates robust liquidity (current ratio: 2.66) and continues to generate significant free cash flows (€910 million in the last quarter).
• Operating strength: Even in a difficult environment, the company remains profitable (EBIT margin of 11.4% in the last quarter).

Risks:

• Cyclical Dependence: Demand in key segments such as construction and consumer electronics is cyclical and currently weak.
• Energy Costs: As an energy-intensive chemical company, profitability remains vulnerable to volatile energy prices.
• Competition and Overcapacity: Particularly in the polysilicon business, overcapacity and international competition continue to put pressure on prices and margins.
• Debt: The debt-to-equity ratio (debt-to-equity of 0.95) is moderate but present.

Additional Notes: The return on equity (ROE) of 2.9% and return on assets (ROA) of 1.5% in the last quarter are low, underscoring the current challenges. The per-employee ratios are declining but remain at a high level.

Conclusion: Wacker Chemie operates in a consolidating market environment. The current weakness is primarily cyclical and industry-driven, not structural. The company's fundamental strength, with its promising product lines and solid cash flows, remains intact. Investors are faced with the question of whether the current share price sufficiently discounts the long-term growth prospects and whether they have the patience for a cyclical recovery.

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