Wacker Chemie Ag Ord

Conference is now being recorded. Welcome to the Wacker Chemie AG conference call Q1 2023. At the moment, all participants have been placed in a listen-only mode. The floor will be open for questions following the presentation. I now hand the conference over to Jörg Hoffmann, Head of Investor Relations. Please go ahead.

Thank you, Operator. Welcome everybody to the Wacker Chemie AG conference call on our Q1 2023 results. Dr. Christian Hartl, our CEO, and Dr. Tobias Oller, 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 include forward-looking statements involving risks and uncertainties. We encourage you to review the safe harbor statement in today's press release, the presentation, and a recent annual report regarding risk factors. All documents mentioned are available on our website.

Chris? Welcome, everyone. Thank you for dialing in on this late Friday afternoon. As we discussed on our fiscal year 2022 call just a month or so ago, we saw low demand and significant destocking at the end of last year. These trends have eased somewhat, but remain defining factors in our chemical segments during the first quarter of 2023. In silicones and polymers, we are beginning to see moderate demand improvements. Volumes are somewhat higher quarter on quarter. This supported a markedly better performance in chemicals. Silicones operational EVDA is nearly twice as high at 96 million euros compared to the preceding quarter. Polymers reported EVDA is about 60% higher at 71 million euros, and our solution is largely unchanged, with results defined by upfront costs and investments. Polysilicon was held back by low demand at the beginning of the year against high volatility in the polysilicon price index and plant maintenance at our Charleston site in the U.S. Over the first quarter, polysilicon volumes improved and EBITDA came in just shy of 100 million euros. Bakker generated sales of 1.7 billion euros and an EBTA of 281 million euros in the first quarter. Earnings per share came in at 290 euros per share. Markets remain volatile, and Bakker is not insulated from these events. Inventory drawdowns by customers had a noticeable effect on our sales and earnings. Our teams reacted quickly to navigate these challenges successfully. Their efforts were instrumental in delivering what we consider a solid result in adverse conditions. Please allow me and on behalf of the entire Board to thank them for a job well done. So yes, the first quarter in chemicals shows some improvement compared to the preceding quarter. We are, however, not out of the woods yet. Energy prices remain elevated and are a significant headwind to chemicals and polysilicon. While customer destocking is slowing, we are not yet seeing firm signs of a recovery. Our customers communicate expectations of stronger demand in the year's second half, but their current order pattern remains focused on the short term. the much-expected recovery of the Chinese economy after Chinese New Year has not materialized so far. Based on our customers' views, we expect an improvement in demand for our products in the second half of the year. The first quarter was in line with our expectations and showed good progress towards our full-year expectations. We are therefore keeping our full guidance unchanged. We see full-year sales between 7 and 7.5 billion euros, generating an EBITDA between 1.1 and 1.4 billion euros. Since we released our full-year results, we have met with many of you, and most meetings followed a similar sequence. Typically, we covered our segment's ongoing performance and strategic position first, and then we would discuss the US IRA and its potential European counterpart. Many of you expect to hear more about these two topics today. Currently, we have nothing really new to report. We continue to see and meet politicians and speak to current and potential customers. We have clarified our positions toward the main question on capacity extensions to support solar reshoring. And as we have repeatedly said, we need competitive power prices. We need customers and we need prices reflecting the market conditions outside China. Only when these topics are addressed, we can build a solid economic case needed for future solar investments. To invest, we need compelling, solid and long-term economic conditions. This will be the basis for our decisions going forward. Over the last few months, I have had many constructive discussions in Europe and in the U.S., and I remain convinced that WACKER will be part of the solution in solar reshoring. Nevertheless, and again, as said before, we will not rush into new investments in solar and then sacrifice growth in chemicals and biosolutions. Our strategy for 2030 has clear targets, increasing growth, higher profitability and improved resilience in times of dynamic change. We want to grow our group sales by 2030 beyond 10 billion euros with an EBITDA margin of over 20%. To realize this strategy, higher investments are necessary. This year, we will invest around 650 million euros. We have defined more than 40 projects globally to reach these goals. We focus on our specialties in chemicals, biologics and bio-ingredients and bio-solutions, and increasing our semi-grade capabilities in polysilicon. A key part of our strategy is to improve our sustainability profile by lowering our emission footprint and offering innovative products and solutions which enable resource-saving technologies for our customers. We aim to achieve net zero emissions. Reducing scope three emissions is an important part of this equation. WACKER just held its first carbon footprint conference with key suppliers. We now ask them to report their product carbon footprint for certain materials. We see sustainability as a key value driver, and this is an important step forward in measuring and addressing our carbon impact. We showcase solutions addressing smart construction at the European Coding Show in Nuremberg. Smart construction is a key to both raw material savings and energy efficiency. In the appendix, you will find the ECS and the carbon footprint conference information. I invite you to look, and I'm sure you'll find it both impressive. Before I hand over to Tobias, We would both like to take this opportunity to thank our fellow board member, Guido Willems, who leaves us in a few days. You have met Guido at various Capital Market Days events over the last 16 years. Guido has been a great pillar of our company, and he has been a valued colleague and a dear friend. Guido Willems will be succeeded by Christian Kirsten, previously at Henkel Ateezes, responsible for the European activities. Christian brings a valuable customer perspective and deep experience in specialty chemicals to our executive board. And now to Tobias for details on Q1 financials. Thank you, Chris. Welcome. I will walk you through our Q1 performance. We reported sales of about 1.74 billion euros with an EBITDA of just over 280 million euros. The result was at the top of the range, which we communicated on the full year 2022 conference call. While the figures are clearly lower than last year, we see our first quarter performance being solid amid very challenging markets, as Chris said. The problem with a truly exceptional year like last is that it sets us up with difficult comps for this year. This will be particularly true during the first half of the year. Strong demand across the entire portfolio, high utilization rates, high prices, and some low-priced raw material stocks defined the first half of 2022. This year, the first quarter's performance was defined by low demand and trailing high energy costs. These effects worked through the P&L from top to bottom with EPS coming in at 290 euros. Our restructuring program, Shape the Future, is on track, clearly supporting earnings. This year, we expect to save around 250 million euros. We have done our homework, and we can now benefit from a more resilient setup with a more responsive organization. Our balance sheet on the next page shows very strong financials with over 2 billion euros in liquidity and shareholder equity of over 5 billion euros. Moving on to silicon, sales increased to When adjusting for the revaluation effect in the fourth quarter of last year, EBITDA increased from around 50 to 96 million euros. After a difficult end to last year with deep destocking following two years of tightness and allocation, we saw some volume improvements in the first quarter. Our utilization still lags well behind the very high loading we experienced during the first half of last year. While destocking appears to be slowing, it's not over yet. And order entry doesn't show a stronger demand yet. Also, the unwinding of high-cost inventories will burn silicones well into the second quarter of this year. Our silicones guidance for the full year is unchanged. We expect full year sales between 3.1 and 3.3 billion euros. we expect a full-year EBITDA margin of about 15%. Moving on to the next page, polymers. Polymers also reported a sequential improvement. Dates came in at €428 million, slightly higher than in the fourth quarter, owing largely to higher volumes. De-stocking began earlier in polymers. EBTA improved considerably in the first quarter as raw material costs decreased faster than our selling prices. You will recall that we implemented a surcharge model to address the recent unprecedented rise in raw material prices. This has proven to be a very effective tool in improving polymers' earnings profile and resilience. Looking to the full year, our guidance for polymers remains unchanged for 2023 We expect sales of 1.8 billion euros with a slightly higher EBTA margin than last year. In biosolutions, sales came in at 77 million euros. In biopharma, we are seeing some project wins, and these projects will first contribute to sales with a delay in the second half of the year. We remain focused on transforming biosolutions into a meaningful pillar here at WACA. Our growth initiatives require continued investments and trigger higher upfront costs. For example, we hire staff today for our new mRNA competence center in Halle, Germany, to generate revenue in next year, 2024. Looking to the full year in biosolutions, we continue to expect a low double-digit percentage sales growth supported by biopharma and bioingredients. EBDA will be backloaded to the second half and substantially higher than last year. In polysilicon, we reported first quarter sales of 441 million euros with an EVTA of around 100 million euros. Our semi-business continues strong, delivering both higher volumes and prices. The segment overall saw volumes decline due to significantly lower shipments of solar-grade silicon. This was driven by a slow start at customers at the beginning of the year due to volatile polysilicon prices, as well as our maintenance shutdown in Charleston and the subsequent ramp of the facility. We used this period to move material into hubs close to our customers. Towards the end of the quarter, we saw increasing solar volumes as the value chain ramped operations, again ahead of what looks to be another record year for PV solar installations. For 2023, we continue to see sales of 1.6 to 1.8 billion euros in polysilicon with an EBTA of 300 to 500 million euros. We are convinced that we will continue to achieve premium prices for solar-grade polysilicon with different market prices based on quality and origin. However, we expect regional and contract mix as well as new competitor capacities to have an impact on solar price levels and volatility. Now looking at our net financial position. We ended the quarter with net assets of nearly 450 million euros after generating a net cash flow of around 50 million euros during the quarter. Growth investments are our top priority for capital allocation. Our proposed 12 euros per share dividend will be paid out following our AGM in May. This has been a complicated quarter, and still we delivered over a quarter billion euros in EBITDA. I am proud of our progress, and we are working on further expanding the resilience on display here. In summary, our strategy works. We operate in a challenging environment,