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Technology Stocks : MEMC INT'L. (WFR -NYSE) The Sleeping Giant?

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To: ---------- who wrote (829)	9/16/1996 5:06:00 AM
From: Robert Zeiss	of 4697

Hi folks, I ordered the Annual Report from VEBA AG and Huels AG last week. VEBA is a big industrie conglomerat in Germany. Their original name is "united electricity and mining corporation". They were formed in 1929 by the government to save the Prussian government corporations. In 1978 they bought Huels AG (99,6 %) and put all their chemical activities under the government of Huels. Huels had a very bad time in the early 90's and lost up to USD 400 million in 1993. Last year they had a turnover of USD 7,5 billion and a net earning of USD 500 million. They employ about 30 000 people worldwide and did USD 800 million capital investments. According to the Annual Report 1995 Huels wants to restrict its activities to their core businesses to avoid further losses. Electronic Materials is one of the fields they want to strengten in the future. MEMC Corp. makes 12 % of Huels' turnover. The former member of the board of management Ludger Viefhues now runs the activities of MEMC. Huels AG raised a one-time dividend of USD 100 million before last year's IPO. A few days ago I wanted to have some informations from their public relations department. But they meant that they cannot answer my questions and I had to send them a fax which they will pass to the management. The next day Mr. Willing (financial officer) gave me a phone-call. As I hadn't any time he promised to call back on Monday. That is what he did today. I asked him why they did the IPO last year. He told me that MEMC wants to invest USD 600 million this year. This forms 50 % of the capital investments of Huels group. They couldn't spend the money alone. As they don't want to miss the great possibilities they decided to do the public offering. MEMC will not pay any dividend in the next years because they need the money for further investments. Regardless to the latest news the investments in MEMC is still very interesting for Huels. Jonathan an Anastasiadis, I can calm you THEY WILL NOT SELL ANY STOCKS. As Huels stated in their Annual Report that their part in MEMC was USD 702 million in the end of 1995 (now it is about USD 430 million) I asked him if Huels has to write of some losses regarding their investment. He didn't tell me the value for MEMC in their balance sheet but he said that it is far below the present share price. I asked him about the use of plant capacity at MEMC. He told me that the customers held about 30 to 35 day-productions in stock in the past. In the last months hey had cancelled orders and have about 15 to 20 day-productions in stock now. The downtrend was only in the 100 mm and 200 mm region. The customers who are able to process 200 mm wafers are still demanding more quantities. (Sorry Lao he said he doesn't know the exact share of 200 mm wafers in their sales.) Furthermore I asked Mr. Willing about the high quota of equity capital (about 57 %). He toldme that this is not a very high quota for US companies (I wasn't aware of this) and that this was important for the IPO and for the solidity regarding their customers. (Maybe thei will need some more capital as the customer-deposits will decrease.) In the end I asked him if they will appreciate their part in MEMC again. He told me that there are NO PLANS AT PRESENT to raise the 52 % share. According to the share-price (only 15 % above the book-value) he explained that Huels cannot reconstruct the current slump. Mr. Willing meant that there are a lot of institutional investors in the market and that there was an overreaction. (There are about 20 million shares in the market. Last week we had daily volumes of 4 million.) MEMC is a longtime investment for Huels and they will maintain the capital investments. I hope this will calm down the nerves and you could sleep a little bit better in the future. I wanted to buy some shares last week but I didn't get them in Germany as my limit order was to low. (In Munich, Germany the stock is always traded a little big higher than in New York.) I think I will get them this week. Bye, Robert PS: Doug I asked Mr. Willing your question about the cash flow situation. He told me that there are no problems at all. As I don't have current figures I couldn't contradict him. But it was very interesting to listen to him. He always spoke of the "third party" when he meant the stock-holders. This shows the very strong chain between Huels and MEMC. I think that MEMC is the "big future" for Huels. As stated earlier in this message MEMC does half of the capital investments of Huels. And you don't have to forget that Huels isn't a independent company. It's just the name for the chemical activities of VEBA. VEBA is under the TOP 5 of German companies with net sales of USD 48 billion, a cash-flow of USD 6 billion and 125.000 employees. They raise their money out of the electricity business where they have a monopoly. In the "Aufsichtsrat" (compareable to US directors) there are H.J. Strenger (Chairman of Bayer AG), Dr. H. Schulte-Noelle (Chairman of Allianz AG, biggest insurance worldwide), H. Kopper (Chairman of Deutsche Bank AG, biggest or second-biggest banking corporation worldwide and my most recent employer). They have a lot of power and according to the Annual Repot of VEBA AG they they were "very busy" with MEMC's IPO. This shows how important the Electronic Material's business is for them.

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