Wacker Chemie not immune to polysilicon pricing pressure

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Despite being a low-cost producer and enjoying long-term polysilicon supply contracts at competitive prices, Wacker Chemie’s third quarter results indicate the company is not immune from continued polysilicon pricing pressures. Though polysilicon margins were 47.4% in Q3 – up slightly from the previous quarter due to debottlenecking and high utilization rates – the days of 50% margins are gone as the company guided margins lower for Q4.

There were no revenue shocks to report, Wacker posted polysilicon sales of €378.2 million, up 8% compared with the same period a year ago. EBITDA was reported at   €179.4 million, down 6% from €189.9 million in the same period a year ago. The third-quarter EBITDA margin was 47.4%, down from 54.3% in the same quarter of 2010.

Management noted that demand, especially from Asia, for high-quality polysilicon remained “very strong,” despite “extreme overcapacity and initial consolidation in the downstream value-added stages of the solar industry.”

“The polysilicon market is also affected by the events in the solar PV market,” noted Dr Rauhut, CFO of Wacker Chemie, in prepared remarks in a conference call to discuss Q3 results. “Overcapacities, rising inventories, slowing installations, some inertia in market development outside of Europe and price competition are defining the industry today.”

“In a difficult environment, Wacker Polysilicon operates from a position of strength. Our leading cost positions, high quality products and the prepayments in our order books provide us with a good negotiating position. We are working with our customers on a variety of individualized solutions, taking the market situation, their capabilities and the relevant prepayments into account. While in most cases this should lead to higher shipments, there may be cases where we retain the prepayment and stop shipping,” added Dr Rauhut.
Wacker invested a total of €299.1 million in Q3, with over half of this figure on capital expenditures mainly focused on the expansion and construction of polysilicon production facilities.

Management noted that the company may not quite achieve the sales and earnings figures previously forecast for full-year 2011. Sales of about €5 billion were guided, where as before this had been over €5 billion. According to its latest estimates, EBITDA will be at last year’s level of approximately €1.19 billion.

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