Wacker Chemie, the world's No.2 maker of polysilicon, slashed its dividend and provided a gloomy outlook for this year, saying a fall in polysilicon price from a year ago would hurt its earnings.

The German company's polysilicon is a key ingredient in the production of solar cells. But solar companies in Europe and the United States have been hit hard by oversupply, falling prices, low-cost Asian competition and lower government subsidies.

Wacker Chemie said polysilicon prices were significantly lower than a year ago, but the fall was not continuing.

Munich-based Wacker Chemie said it plans to pay shareholders a dividend of 2.20 euros per share for 2011, compared with 3.20 euros a year earlier, after its net profit slumped by 23 percent to 356.1 million euros ($466.8 million).

Core operating profit will likely decline by more than 10 percent this year, with an even bigger decline in net profit, the company said on Wednesday.

"Wacker is currently experiencing sales-volume increases at its polysilicon business. However, prices are well below the 2011 level," it said, adding it expects the economic situation to remain "challenging" until at least mid-year.

Sales will edge up to about €5 billion in 2012, from €4.91 billion last year, which is above consensus in Thomson Reuters StarMine of €4.88 billion.