Wacker Chemie Ag Ord

The conference is now being recorded. Welcome to the Vakashimi AG conference call Q3 2022. At the moment, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Now I hand over to Jörg Hoffmann, Head of Investor Relations. Please go ahead.

Thank you, Operator. Welcome to the Vakashimi AG conference call on our third quarter 2022 results. Dr. Christian Hartl, our CEO, and Dr. Tobias Ohler, our CFO, will take you through our prepared slides in a minute. The presentation is available on our webpage under the caption Investor Relations. Please note that management comments during this call will include forward-looking statements that involve risks and uncertainties. We encourage you to review the Safe Harbor Statement in today's press release and in the presentation, as well as in our last annual report regarding risk factors. All documents mentioned are available on our website.

Chris? Hi, welcome everyone. WACKER continues to deliver strong results in a challenging business environment. We reported 2.13 billion euros in Q3 sales, which is up 29% year over year. Despite massive raw material and energy inflation and turnaround related costs, EBITDA was higher than last year at 457 million euros. This strong performance is clear evidence of our competitiveness. It speaks to the resilience of our business model, even under more challenging conditions. And this success highlights the strength of our specialties business and the effectiveness of our pricing management. As expected, our EBDA margin was lower than last year and below the preceding quarters. We flagged earlier that the first half of this year, performance was exceptional, particularly in silicones, where we benefited from very strong global supply and demand and some trailing raw material effects. Net cash flow at nearly €300 million showed another strong cash conversion in the third quarter. In chemicals, our pricing management supported EBITDA solidly over the last year, despite strong headwinds from raw materials and energy. Now looking to the order entry, we've been registering a decline in incoming orders in some sectors, particularly in construction since the summer. I believe that this development will most likely continue in the fourth quarter and into the following year. Should this trend continue, To manifest itself and Germany and Europe's limit to recession, we will not be completely isolated from these effects. Now, despite near-term recessionary risks, we see our long-term prospects intact and strengthened. We remain committed to our modular growth strategy, which we detailed at our Capital Markets Day with 23 targets earlier this year. Our biosolutions expansion project in Halle for mRNA capacity for the German pandemic preparedness plan continues at a fast pace. We continue to pursue our silicone specialty expansion plans in the US. In polysilicon, semiconductor wafer customers are expanding their capacities and will get higher volumes from us in the future. In polymers, we expect higher fossil fuel prices to drive further demand for our smart construction materials. This is especially the case of polymers used in external insulation systems to drive energy savings. Reducing energy consumption and improving the efficiency of our own operations has always been a priority. In light of the current energy crisis, it has become imperative. We introduced a new budget this year with new sustainability-specific KPIs. So far, we have approved 17 projects amounting to €60 million, which will reduce the energy intensity of our operations and cut CO2 emissions by more than 100,000 tonnes per annum. This project continues steps towards reaching net zero by 2045. Sustainability is a key strategic focus for WACKER. when we see it as a clear differentiating factor among our competitors. Looking on the next slide on energy pricing in Europe. Over the last two quarters, the shifting dynamics of the German natural gas market kept us pretty busy. Gas prices kept soaring with major pipelines out of service and amid a political imperative to fill gas storage before the winter. When we last spoke, a gas surcharge to soften the impact for importers and gas curtailments were options on the menu. Our last guidance reflected all these uncertainties with a provisional 200 to 250 million euros charge against our full year expectations. However, these measures did not come to pass and we actually no longer see gas curtailment as probable in 2022. The new LNG terminals are seeing good progress and storage levels are over 95% here in Germany. Policy-driven and price-indiscriminate buying for storage drove up the cost of natural gas in Q3. Although hedged to a high degree, the open portion of our gas and power portfolio increased so much in price that it impacted profitability in our segments. Overall, the third quarter saw more than 300 million euros higher costs than last year for raw materials, energy, and logistics. Today, the natural gas market, as a result, the power market, continue to reflect the ongoing uncertainty over future supplies and risks stemming from the ongoing war in Ukraine. Yet, what we see is that the rush to fill the gas storage has now slowed and prices in Q4 are sequentially lower than in Q3. Due to the load and expected energy and raw material prices in Q4, we now see 2022 full-year raw materials, energy, and logistics costs rising over last year by 1.3 to 1.4 billion euros. And you remember the last call where we mentioned the 1.5 billion euros flag earlier. Looking to the next year, forward contracts are still at a record high. with some declining during the last weeks. The German government is currently formulating plans for a potential power and gas price cap, but at the moment it is difficult, and it's only to speculate on this until we have final details available. Now, page four, looking onto our guidance. Group guidance for 2022 continues to look for 8 to 8.5 billion euros in sale, and we also confirm our EBITDA outlook for the full year at the upper half of the range previously communicated. We expect our full year EBITDA to come between 2.1 and 2.3 billion euros. Despite weakening order intakes, our guidance reflects our ongoing good operational performance, improved pricing in polysilicon, and lower than initially expected energy costs in Q4. Now, before I hand over to Tobias, let me touch on the biannual cave fair in Düsseldorf, the world's largest plastics and rubber fair that came to an end yesterday. We have been there for many, many decades, and this time we showcased silicon rubber compounds produced with non-fossil methanol, thus significantly conserving resources. And a further spotlight was on self-adhesive liquid silicon rubber grates for polycarbonate parts, and also novel silicon resin for manufacturing molded parts that remain stable at high temperature in electrical applications. A lot of fascinating applications and true innovations for our customers. And here again, you can see the huge potential that lies in the field of silicones. In the appendix, you will find slides detailing numerous applications presented at the fair showing, for example, the opportunity that electric vehicles present to bucket. Tobias.