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Wacker Chemie Now Sees Loss In FY19 On Polysilicon Impairment Charge

German chemical group Wacker Chemie AG (WKCMY.PK,WKCMF.PK) on Thursday said it now expects a negative net result for 2019 of around 750 million euros, compared to previous guidance of slightly positive net income.

The Munich-based company said it intends to take an impairment of around 750 million euros in its fiscal 2019 on the carrying amount of its production facilities for hyperpure polysilicon. The write-down is due to the continued absence of a recovery in solar-grade polysilicon prices due to the high overcapacity created by Chinese manufacturers.

As earlier, the outlook excludes special income of 112.5 million euros in insurance compensation. WACKER's net result would exceed 100 million before the special effect stemming from the write-down but including this insurance compensation.

The impairment charge would also reduce this year's Group EBIT and Wacker Polysilicon's EBIT. Cash flow, on the other hand, will be unaffected by the write-down.

According to the company, the expected solar-market recovery has not yet materialized and prices are still very low for polysilicon used in photovoltaic applications.

WACKER's CFO, Tobias Ohler, said, "...China's construction of new solar installations falls short of initial expectations. An additional burden is the high polysilicon overcapacity in China. The Chinese government is subsidizing this expansion not only with loans and incentives, but also by providing polysilicon producers there with coal-generated electricity at extremely favorable prices. We have adjusted our projections for the coming year accordingly."

The company's polysilicon strategy remains unchanged. Ohler added that the company is continuing to work hard to reduce costs and are keeping focus on polysilicon for semiconductor applications and on high-quality material for monocrystalline solar cells.

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