(New: Statements from the annual press conference on the current order situation and medium-term targets in the 1st, in the 8th and in the last paragraph, share price development updated)

MUNICH (dpa-AFX) - Wacker Chemie expects significant losses in 2023 in an environment that remains difficult for the entire industry. In the first two months of the current year, demand declined in a number of customer industries, the MDax group announced on Tuesday when presenting its annual report for 2022. In the course of the year, demand should recover - with lower selling prices. The company is focusing on business with high-margin specialty products. Overall, the order situation in March already looks better than in January and February, it said. After a record year in 2022, the dividend is also set to rise sharply.

The annual report of Wacker Chemie offers optimists and pessimists material, said a trader in a first reaction. Thus, dividend hunters are likely to be attracted, while the rather uninspiring outlook could weigh on the share price. The share also initially fell sharply in the morning, but then recovered and turned positive. Around midday, they then led the MDax index of mid-cap stocks with a gain of a good four percent to 151.90 euros. This put them back on course for their high since June 2022, reached at the end of February at almost 162 euros. For the still young stock market year 2023, they are now again up 27 percent.

The company intends to increase the dividend per share by half to 12 euros. This will allow shareholders to participate in the strong business performance of the past year, as the Group normally distributes around 50 percent of its annual earnings. And that had risen by more than half to just under 1.3 billion euros last year, as has been known since the publication of preliminary figures in January. Earnings before interest, taxes, depreciation and amortization (Ebitda) increased by a good third to around 2.1 billion euros in 2022, with sales growing by almost a third to 8.2 billion euros.

However, the company was already feeling the effects of customer restraint, particularly toward the end of the year. The entire industry suffered from a reduction in inventories, some of which were too high, and from the gloomy economic environment. This was particularly noticeable in the business with silicones - versatile plastics that are in demand, for example, in the electronics industry, the construction sector, textile manufacturers, medical technology companies and carmakers.

"The momentum of the global economy has weakened significantly," Group CEO Christian Hartel said, according to the statement. "The economic and political environment worldwide remains volatile. High energy prices, especially in Europe, continue to weigh on our business." The construction industry in particular is weakening. High interest rates are making financing more expensive and high inflation has driven up construction costs, with many projects on hold. In the textile industry, however, Wacker Chemie expects a turnaround in 2023 after a drop in demand at the end of last year.

Meanwhile, the company wants to grow in the specialty products business, i.e. away from mass-produced goods. "This applies in particular to applications in the energy sector, electromobility, the pharmaceutical industry and medical technology, as well as in the manufacture of labels," the annual report states. In the case of the latter, the growth of the mail-order business is coming to bear. And the expansion of 5G mobile communications and trends such as artificial intelligence are boosting demand from the electronics industry for gases and high-purity silanes. These are substances that are added to paints, sealants and water protection agents, among other things, but are also used in insulating layers for semiconductor components.

All in all, sales are expected to fall to 7 to 7.5 billion euros in 2023 and operating earnings (Ebitda) to 1.1 to 1.4 billion euros. That would mean a drop of up to almost 15 percent in revenue and up to almost half in operating profit. The average analyst estimates tend to be at the lower end of the range for sales and at the upper end for profit.

In the first quarter, operating profit is likely to come under particular pressure and fall to between 250 and 280 million euros, compared with 644 million euros a year ago. Business with polysilicon, the basic material for the solar and semiconductor industries, is particularly weak, and business with the solar industry in particular is currently not running smoothly. At the end of the first quarter, however, the order situation was already better in some areas than immediately after the turn of the year, explained the management at the annual press conference. However, many customers are still placing orders at very short notice because it is difficult for them to assess demand for their products in the current environment.

This is another reason why the company is focusing its investments more on the high-purity polysilicon business for the semiconductor industry, which uses it to manufacture electronic chips. At the same time, the company is putting a lot of money into expanding its business with specialty chemicals and with biotech products around mRNA vaccines and drugs. In total, investments are expected to rise to around 650 million euros in 2023.

This spending is expected to drive growth in the medium term. Wacker is sticking to the target it set itself a year ago of generating sales of more than ten billion euros in 2030, of which more than one-fifth should be in the form of operating profit. However, the sales target no longer seems as conservative as it did when it was drawn up, said Wacker Chemicals CEO Hartel at the annual press conference./mis/nas/ngu