Wacker Chemie Ag Ord

to the WCAG conference call on our Q3 2023 results. Dr. Christian Hartl, our CEO, and Dr. Tobias Ohler, our CFO, will take you through our prepared slides momentarily. The press release, Q3 presentation, and detailed financial tables are available on our webpage under the caption Investor Relations. Please note that management comments made during this call include forward-looking statements involving risks and uncertainties. We encourage you to review the Safe Harbor statements in today's press release, the presentation, and our recent annual report regarding risk factors. All documents mentioned are available on our website. Chris?

Hi. Welcome, everyone. Group sales reached 1.5 billion euros with an EBITDA of 152 million euros. Both are down sequentially and year over year. Declining prices in solar-grade poly and commodity silicones were the biggest contributors to this decrease. Across the board, the chemical industry reported low demand for its products, while the pressure from imports, inflation, and high energy costs remained high. We do not see a recovery in demand over the last quarter. As a result, our messaging on chemicals today is essentially unchanged since the presentation of our second quarter results at the end of July. In silicones, we faced weak demand for specialties without an economic recovery. We pushed volumes into standard grades, which we see very low prices today, to keep utilization rates at upstream assets at economic levels. This shift led to adverse mix effects. These factors, alongside continued and trailing high costs for silicon metal stock, held the segment's results back noticeably. Order intake is short-term and stagnating at a low level. Although prices for standards have roughly halved since last year, specialty prices have held up well. In polymers, positive net pricing supported a strong result as we defended our margins. While orders have stabilized, we remain cautious about the European construction markets. And by solutions, We are actively integrating the ADL and WACKER teams at the site in Leon. With the acquisition, we gained access to much needed fermentation capacities to serve the growing demand for sustainably produced dietary and food ingredients. As expected, costs for the upcoming mRNA facility and digitalization projects held back earnings. Polysilicon. delivered a positive double-digit EBITDA figure despite China's low market price for solar-grade polysilicon. Demand for our solar polysilicon outstrips our contractually valuable volumes this and next year. Yet a substantial part of our volumes remains under legacy terms tied to the China Domestic Index. Our semi-business remained resilient, seeing both solid prices and volumes. We saw a strong demand from our SEMI customers committing to very long supply agreements. This summer, we announced that we will increase our etching capacities for SEMI by 50%. When good for order in 2025, this will allow us to improve our mix further and increase the resilience of polysilicon. Looking at our sustainability initiatives, WACKER was recently nominated as one of the finalists for the German Sustainability Award in the Chemicals category. While conserving energy and resources has always been a top priority at WACKER, we have increased our commitments and aim to achieve net zero by 2045. This nomination recognizes our efforts already made to reach this ambitious target. We see a strong business case for sustainability. Bakker's long-term success depends on providing sustainable and innovative solutions to our customers. Sustainability keeps us focused on efficiency and strengthens our relationships with key customers. I'm happy that our external stakeholders and banking partners increasingly recognize our activities. One brokerage recently named Bakker an ESG leader in their coverage universe. Thank you for recognizing our efforts here. Looking at the next page now, our guidance. We see full-year EBITDA at the lower end of the earnings range which we communicated in July. We expect EBITDA between 800 and 900 million euros with sales of about 6.5 billion euros. Markets have been weaker than we expected. Our customers remain cautious. In polymers, we face uncertainty from the construction markets. In silicones, Order intake is not showing improvements. We continue to have limited visibility in both segments, with our customers shifting to just-in-time ordering. This makes it difficult for us regarding both production planning and forecasting. Even though we continue to face considerable headwinds, I'm confident we will successfully tackle the challenges ahead. We have an excellent team at WACKER. What's more, we are well-placed strategically. Our strategy 2030 provides us with goals, faster growth, high profitability, and better resilience in light of constant change. While adapting our modular investment strategy to the changing environment, we remain committed to the path. We continue to grow in the regions close to our customers. We recently announced a new 150 million euros specialty silicon investment in China, which will be ready for order in the second half of 2025. Sanjagang is one of the Wacker's largest fully integrated production sites. From here, we supply the rapidly growing Chinese markets with a wide array of downstream silicon products such as sealants, elastomers, emulsions, and fluids. And two weeks ago, we actually celebrated 30 years of Wacker being in China. We continue to drive our business sustainable development forward. Investment in our future growth is vital to realizing the opportunities ahead of us. But major challenges persist. In addition to weak demands, the combination of unfavorable German policy choices and the fallout from geopolitical events, such as the war in Ukraine, keep energy costs up. We believe the conflict in the Middle East will result in higher uncertainty and may delay in economic recovery. Energy-intensive industries in Germany remain burdened by high power costs and supply needs to be more secure. We see that renewables will answer this problem, but we need short-term measures to support the industry through this transitional period. In Berlin and Brussels, much talk has been about an industry power price and the reshoring of critical raw materials in industries. Unfortunately, until now, it remains only talk while other regions act. Now to Tobias for details on Q3 results.

Thank you, Chris. Welcome, everybody. For the third quarter, we reported sales of 1.5 billion euros down nearly 30% year over year. We continue to see weak end market conditions, low demand for specialties, weight on utilization rates, particularly in silicones. While polymers also saw weak demand, we continued to benefit from net pricing. Polysilicon saw much lower prices for solar-grade materials due to overcapacities in China. High energy prices continued to burden us, particularly in Germany. Globally, this year's energy bill will still be twice as high as before the hike last year. All these effects worked their way through the P&L from top to bottom. The gross profit margin was 13% down from almost 23% last year. EBITDA contracted to 152 million euros. Earnings per share came in at 0.56 euros. During these challenging market conditions, we have increased our focus on controlling costs and are implementing additional short-term measures on top of our existing programs. This covers personnel costs, technical spending, direct materials, and all discretionary spend. We must consider all options to run as efficiently as possible. As Chris mentioned, we now see our group four-year sales and EBITDA in the bottom half of the communicated ranges. I will walk you through our expectations for each segment after I address the balance sheet on the next page. Our balance sheet shows strong financials with about 1.4 billion euros in liquidity and about 4.7 billion euros in shareholder equity. Our net working capital position is about 100 million euros lower than at the end of last year. We have achieved meaningful reductions in inventory as we continue to reduce our stock levels. We actively work with key suppliers to match our needs with current market conditions. As our sales grew rapidly, we invested significantly in working capital over the past two years. As demand slows and prices recede, we expect this to unwind, supporting cash flow. Our financial borrowings have been constant at about 1.5 billion euros in the last couple of years with similar levels of liquidity. This has resulted in a net interest charge of 15 to 20 million euros annually This year, we will end with a positive net interest figure of around 5 million euros. Essentially, this comes from increased deposit rates, while interest rates on borrowing were fixed in time and remained the same. Our financing portfolio is well diversified across lenders with maturities between 2024 and 2030. We are solidly financed with 1.4 billion euros in liquidity and fully undrawn syndicated loans of 600 million euros. Moving on to silicones. Sales decreased to about 670 million euros, down nearly 25% year over year. The decline was mainly due to much lower specialty volumes and due to prices in standards. Sequentially, sales were somewhat lower. We see continued weak demand in all regions and some negative pricing effects in some specialty products. Silicon's EBITDA was unchanged compared to the preceding quarter at about 50 million euros. Low output and high silicon metal costs held back earnings as with the preceding three quarters. With low demand and specialties, our product mix adversely moved towards a higher share of standards. We have updated our silicones outlook. From today's perspective, we do not see a demand recovery in the fourth quarter of this year and rather assume year-end management of some customers. With a low volume turnover, headwinds from trailing higher raw material costs continue longer than anticipated. While we have reduced our silicon metal stock position significantly, work still needs to be done here. We now expect 4-year sales between 2.7 and 2.8 billion euros with an EBITDA margin of about 8% versus our previous margin expectation of around 10%. Polymers reported sales at just below 400 billion euros down around 20% year over year. Sales were down about 5% at similar volumes. The much lower revenues were driven by the development of selling prices, which we adjusted to reflect our raw material costs. Despite demand remaining particularly weak in Europe, the EBITDA was much higher year over year and at the same level as the preceding quarter. As a reminder, the previous year's quarter was held back by a planned turnaround. The main factors driving the consistently strong results throughout 2023 have been net pricing and our efforts to defend margins. For the full year, we have left our polymer's outlook unchanged. We expect sales between 1.6 and 1.7 billion euros with an EBITDA margin of around 17%. Despite considerably lower volumes, our absolute full year EBITDA will be comparable to last year's record result. Although polymer's demand has stabilized recently, we remain cautious about European construction markets. In biosolutions, sales came in at 77 million euros. Lower prices and volumes for some established chemical products offset sales growth in biopharma. As in our chemical segment, We see weak demand and inventory management of our customers for these products. EBITDA in the third quarter was minus 3 million euros. Earnings continue to be burdened by upfront costs related to the German pandemic preparedness plan. For the full year, we have updated our buy solution sales outlook. Demand has been weaker than expected and we now forecast a low single digit percentage sales growth down from a high single digit previously. Our EBITDA forecast is unchanged. We expect a result below last year. Please remember that we carry substantial costs today from our new mRNA center in Halle and will see revenues in mid-2024. While we currently see a challenging funding environment for many smaller biotechnology companies, we continue to see a strong growth outlook for advanced medicines. Thousands of new molecules are under new development and will need a CDMO partner such as WACKER to bring these therapies to market. In polysilicon, we reported third quarter sales of about 340 million euros. EBITDA came in at 46 million euros. Compared to the preceding quarter, both sales and earnings contracted meaningfully. This was primarily due to the steep fall in the market prices for solar-grade polysilicon in China at the end of the second quarter of this year. Another factor was lower volumes in the third quarter as maintenance in our US facility resulted in lower output. The solar market is now differentiating products by origin. We expect this trend to continue and we see more demand for our polysilicon than we currently contractually have available. We still have significant contractual exposure to the Chinese domestic market price today. We are actively addressing this and work to change nearly all our solar volumes to the ex-China price by the end of next year. We have updated our polysilicon outlook. We now see sales at about 1.6 billion euros and an EBITDA between 300 and 350 million euros. The lower range is due to the lower volumes as we perform maintenance in the US facility and due to trailing price effects from the end of Q3 market price indices. Looking at our net financial debt, page 10. Through the first nine months of this year, we generated approximately 630 million euros in cash flow from operations. Our cash conversion improved markedly compared to last year, where inflationary pressures resulted in a significant investment in working capital. We see this now unwinding with raw material prices declining. Cash flow from investing activities came in at 550 million euros, primarily representing investments and M&A as we expand our capabilities and capacities in line with our 2030 strategy. Including the dividend payment of about 600 million euros in May, we ended the first nine months with a low net debt of about 160 million euros. So yes, our investments are high at a time of weak demand. On the one hand, these investments represent decisions taken before the slowdown, but they also include recent decisions. I see this as a clear sign of confidence in our markets. We want to be prepared when market conditions improve and markets pick up. We are completing maintenance today and making the needed investments to support our customers' growing demand for innovative and sustainable solutions. These new capacities will allow us to service our customers better once demand recovers. As Chris said, our development work with customers continues to expand further and improve our specialties portfolio. So let me wrap it up before we start with the Q&A. We continue to see challenging markets. The anticipated recovery is delayed and our visibility still remains low. This makes both internal planning and external communications demanding. I expect many of you will be looking for comments on how 2024 may develop. We will stick to our usual approach to guidance. We will communicate our 2024 full guidance when we publish our full year 2023 results in March next year.