Wacker Chemie Ag Ord

The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Yorick Hoffman, Head of Investor Relations. Please go ahead.

Thank you, Operator. Welcome to the VACA-CHEM-EAG conference call on the 2024 second quarter results. Dr. Lucien Hartel, our CEO, and Dr. Tobias Ola, our CFO, will take you through our prepared slides momentarily. The press release Our IR presentation and detailed financial tables are 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 our 2023 Annual Report regarding risk factors. All documents mentioned are available on our website. Chris?

Welcome, everyone. The second quarter of 2024 saw a good result in chemicals and polysilicon and a successful cloud startup in biosolutions. While overall market conditions remain challenging and some end markets, such as construction, stay weak, we see slowly improving conditions in a number of areas. It is still too early to speak about a broad-based macroeconomic recovery. The strength of order intake still fluctuates and varies from region to region and application to application. On the last earnings call, we mentioned that order intake began to weaken at the start of April. This slowdown did not continue. Activity picked up in our chemical segments, supporting a better-than-expected performance in silicones. Group sales came in at about 1.5 billion euros. The combined EBDA of the four operating segments was 205 million euros, up 11% on the previous quarter. Group EBDA, however, was 7% lower quarter on quarter due to the other segment. Sequentially, the other segment incurred higher costs while the CO2 charge was comparable. As explained before, the CO2 charge will be reversed when we get reimbursed in the fourth quarter. Now, chemicals EBDA came in at 149 million euros, which is up 17%, and 9% year-over-year and quarter-over-quarter, respectively. Demand for chemicals shows signs of improvement, but low prices and overall cost inflation continue to define our results. In silicones, we completed our planned turnaround ahead of schedule. The impact of this regular maintenance event did not hold us back to the extent that we indicated on the last earnings call. Demand for specialty silicones developed positively in the second quarter, and we are now looking to raise prices for certain applications. For polymers, we see seasonal quarter-on-quarter improvements. While demand for construction-related binders is weak in Western Europe and China, we see good demands in other regions. All tumor-related binders are performing well, with strong growth in packaging applications and coatings. In BioSolutions, we successfully opened the new mRNA facility in Halle at the beginning of June. Our colleagues did a great job, and the site was completed ahead of time. I will provide some additional details on the next page. In the second quarter, Polysilicon reported a sequential improvement in earnings on much lower sales. Supported by lower energy costs, EBITDA came in at 55 million euros, up from 43 million euros in the previous quarter. During the quarter, the plant in Tennessee was successfully ramped and is now fully operational. Polysilicon sales declined over quarter, quarter over quarter, as we eliminated our exposure to domestic China solar prices. The intense competition in the oversupplied Chinese polysilicon market results in unsatisfactory domestic pricing that hardly reaches local variable cash costs. The outside China market saw strong volumes and spot interest until the anti-dumping, countervailing duties, ADCVD, petitioned targeting cell and module manufacturers in Southeast Asia were filed in the U.S. As a result, the market for solar-grade polysilicon outside China is currently experiencing uncertainty. This may persist until there is clarity of the outcome of these investigations. Looking forward and regardless of the outcome of the ADCVD investigations, PV solar installations in the U.S. will continue to grow. The monocrystalline modules for these new projects will need to be produced with UFLPA compliant polysilicon. Supply chains will adjust to any potential outcome to ensure access to the U.S. market. These investigations further strengthen our view that the U.S. will protect its domestic solar market. We continue to discuss with existing and new customers about selling the volumes that are currently not contractually committed. We intend to have these volumes be the basis of long-term agreements with customers who want to access to the premium US market. Looking to sustainability. At WACKER, our efforts are targeted at lowering the footprint of our operations and enabling and improving the performance of sustainable products. We've committed ourselves to reaching net zero by 2045 and have shown good progress towards reaching this target. SPTI validated our net-zero target in early 2024, putting us among the first companies worldwide. There is a strong customer pool for sustainable products and solutions. In electromobility, there is a clear need to improve battery performance and safety. At this year's Battery Trade Fairs, we presented new specialty silicone solutions. One product was specifically developed to enhance the safety of lithium-ion batteries. Essentially, our silicon rubber compound prevents fire from spreading in the event of a thermal runaway in a cell. Silicones play an important role in enabling electromobility by improving the performance of batteries with this and other applications, such as thermal interface materials. With the completion of our new mRNA facility in Halle on June 3rd, we have achieved a key milestone in biosolutions. This new production line more than triples our capacity at the site, which is now part of the German pandemic preparedness program. If needed, we can produce 80 million vaccine doses per annum for the German government. In return for keeping these capacities available, we will receive a standby fee until 2029. The new site provides BioSolutions with a strong foundation for further growth in biopharma. As a contract development and manufacturing organization, we will produce advanced therapies targeting multiple indications in areas such as oncology and personalized medicine for our customers. We see growing interest from customers who are attracted to our PDNA and mRNA capabilities and larger capacities. We've already started acquiring the first customer projects and we intend to gradually load the new sites. Before I hand over to Tobias, I will first address our full year guidance. As you saw in this morning's press release, we confirmed our full year guidance. We now expect EBITDA to be in the upper half of the 600 to 800 million euro range. The range is defined by improving conditions in chemicals and reflects current market conditions in polysilicon. In chemicals, we see room for price increases in certain applications as demand for specialty silicones improves, while other areas remain challenging. In polymers, our global setup provides us with an exposure to growing markets, helping us offset the weakness in certain construction markets. In biosolutions, we are focused on filling our new capacities. In polysilicon, our semi-business provides a stable foundation. We continue to invest in our future and act on unique opportunities. We just closed a small acquisition to increase our silicone's wound care capabilities in the US. Silicones offer best-in-class solutions for certain applications due to its unmatched skin compatibility and tunable adhesive properties. We will continue to look for add-ons to further strengthen our portfolio. Now to Tobias for further details on our results.

Thank you, Chris. Welcome, everybody. Looking at the profit and loss, sales during the second quarter of 2024 came in at 1.5 billion euros, down 16% year over year. The year over year development in sales was driven by several puts and takes in each of our segments. In chemicals, lower average selling prices were offset by higher volumes. On the other hand, the average higher selling prices in polysilicon came with lower volumes sold for solar grade applications. Although we benefited from higher specialties demand and lower energy prices, the effects of the lower solar volumes in polysilicon and lower prices in chemicals left marks throughout our figures. Second quarter group EBITDA was 160 million euros, 37% lower year over year. As with the development of sales, several factors are at play here. The EBITDA contribution from policy can contracted by 100 million euros to 55 million euros. On the other hand, the chemicals EBITDA expanded by 21 million euros to 149 million euros. This was due to the improved demand both year over year and sequentially. segment was minus 45 million euros in the second quarter, this primarily reflects the charges related to the embedded cost of CO2 in our energy bills. Once we receive the CO2 refund in the fourth quarter, the cumulative charges over the first three quarters of this year will be reversed. For the full year, there is no change in our expectations here. We expect the others EBITDA, excluding the investment income, will be at approximately minus 20 million euros. Now looking at the last line items in the P&L. Including the contribution from Celltronic, the results from investments was 5 million euros. Net income was 35 million euros. This equates to earnings per share of 0.58 euros. Our balance sheet shows strong financials with 1.1 billion euros in liquidity and 4.6 billion euros in shareholder equity. Networking capital increased by about 278 million euros compared to the end of last year, and this primarily reflects the safe development in chemicals with respect to the accounts receivables and higher inventory in polysilicon. At Silicon, sales in the second quarter were 790 million euros up 3% year-over-year and slightly ahead of the preceding quarter. At 90 million euros, the second quarter EBITDA was well above last year's result. This was primarily due to the higher specialty volumes, a good mix, lower raw material costs, and better plant loading. During the second quarter, we completed a turnaround and limited the availability of standards. We have updated our silicones outlook for 2024. We now expect a low double-digit percentage EBTA margin up from high single-digit before. Overall, specialty volumes are at a good level, but margins remain well below target. This is now primarily a function of price and raw material costs. As Chris mentioned, We do not see yet a broad base recovery, but there is a good demand for certain specialty applications. For these applications, we intend to benefit from the stronger market conditions. Dates and polymers were 389 million euros, 7% below last year, mainly driven by lower prices led by raw materials. Average selling prices were comparable to the previous quarter, and higher volumes underpinned the 5% sequential sales growth. We see good demand for consumer-related binders with volumes being clearly up both year-over-year and quarter-over-quarter. Construction-related polymers are comparable year-over-year and showed some sequential improvements due to higher building activity in the summer. Higher acid utilization rates supported the second quarter's EBTA, which came in at 59 million euros, up 5% from the previous quarter. For 2024, our full-year outlook is unchanged. As with silicones, we see different demand patterns developing across the regions and applications in polymers. For construction polymers, we see good demand in Southeast Asia, Americas, and Middle East, while Western Europe and China face headwinds. Consumer-related applications see good growth in adhesives for paper packaging, driven in part by the plastic-to-paper trend. At biosolutions, sales during the second quarter were 98 million euros, up 8% year-over-year, and 37% higher quarter-over-quarter. Sales were primarily supported by growth in biopharma. We opened the new mRNA facility at the beginning of June, and we booked one month of the annual reservation payment in the second quarter. The payment, therefore, only had a limited impact on the second quarter EBITDA, which came in at 1 million euros. Our full-year outlook for BioSolutions is unchanged. Sales growth will be driven by both biopharma and bio-ingredients. We expect a significantly better result in the second half of 2024. Polysilicon reported 232 million euros during the second quarter, 23% lower quarter over quarter. The primary driver was the significantly lower solar grade volumes. Equationally, EBITDA increased to 55 million euros up from 43 million euros on lower energy costs. We have updated our full year outlook for Polysilicon. We now expect sales in the range of 1.1 to 1.4 billion euros with an EBTA in the range of 200 to 300 million euros. During the first half of 2024, we generated nearly 100 million euros in EBTA. We are now halfway to the lower end of our full year guidance range. Charleston has successfully ramped and we expect an improved operational performance in the second half of the year. Stable average selling prices and higher volumes sold in the second half of this year will define the higher end of the range. There is some uncertainty in the industry currently, but the guidance range addresses the most likely scenarios in our views. Now let's look at our net financial position. The first half of 2024, we generated a gross cash flow of 4 million euros. Broad cash flow was held back by investments in working capital following the development of chemical sales and inventory and policy during the second quarter. Cash flow from investing activities was 310 million euros compared to the reported capex figure of 294 million euros during the first half of 2024. The difference between the two figures is due to the timing of the investment cash payout. After the dividend payment of 149 million euros during the second quarter, we ended the first half with a net debt of 661 million euros. Before we start with the Q&A, let me summarize. WACKER is well positioned financially and strategically. We have made good progress towards reaching our full-year targets. We continue to have a high focus on costs and strengthening our specialty businesses.

Operator, we're now ready to begin the Q&A.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one or the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Anyone who has a question may press star and 1 at this time. Our first question comes from Ricky Patel with BNB. Please go ahead.

Hi. Thanks for taking my questions. Firstly, just wanted to dig a bit deeper on Outlook. It would be great if you could give us a bit of color on each segment into Q3. I suppose on silicones in particular, you pointed towards pricing increases. Does that mean that we can assume EBITDA will be up sequentially? And then secondly, maybe just on cash flows. So I suppose in the first half, you've invested in working capital and appreciate the dynamics are a little bit different in chemicals and polysilicones. But maybe if you could just give us a bit of color on how you expect working capital to develop in the second half. Thank you.

Rikim Tobias speaking here. Thanks for your question. On the trading update, I assume you're not only interested in silicones. But starting with silicones, as you were trying to see the movement from Q2 into Q3, As we have it also in our PowerPoint notes, there is an uneven order pattern that is still sort of defining the picture. We had seen a very strong Q2 for specialties, and order entry is now again cooling down somewhat compared to the last few months, and it looks a bit like restocking being over. But don't forget that August, at least in Europe, usually runs slower. And I think what we see is quite imperative to what many other industries see. They're not as optimistic as they had been at the beginning of Q2. But if I look at input costs, if I look at prices, I think everything should be sort of comparable Q3 against Q2. So if you summarize, EBITDA also will likely be comparable quarter over quarter. But it will be clearly up year over year. I think it really depends on how orders shape up over the summer, over the coming weeks and months. For polymers, we also see stable demand into Q3. Europe is stable year over year. U.S. a bit better. Construction in China is still under pressure. So we also expect Q3 to have a continuation of the first half with a moderate development in the construction-related businesses and a good demand in the consumer-related businesses, sales price is broadly stable, but also raw material is stable, so no change from that perspective. Buyer solutions, we have the standby payment that will support Q3 results, and then I think we should look at the second half being stronger EBITDA-wise than the first half, if you put all together. And for polysilicon, the third quarter is clearly semi is very resilient, both in price and volumes. And as you know, we have successfully moved away from the China selling price. So we expect the outside China volumes also to be comparable at similar prices. So if you put all together, also Q3, Q3 should continue similar to the Q2 level. And yeah, I think the second question, Ricken, was on cash flow. You had spotted that, yeah, we had quite a working capital build in the first half that should not repeat in the second half to make it forward. Typically, we have some seasonality, and for that reason, cash flow in the second half should be better than in the first.

Okay. Thank you, Tobias.

Our next question comes from . Please go ahead.

Yeah. Thank you. Two questions I made. First is, again, I'm pulling silicon. So with the situation you face now in Southeast Asia, what is your production plan in Q3? Currently, I understand that your plants are fully available and running at high utilization rate. Do you continue to do that or do you change that given the uncertainty in Q3? That's the first question. And the second one, could you go in a little bit more detail in BioSolutions? There are various different businesses and looking into the Q2 outcome, It seems that not everything is doing very well. When can we expect that this business is getting back to normal, which I would say is a 15% APTA margin? Thanks.

Okay, Andreas, this is Christian. Thank you for your questions. I will start with the first one on the polysilicon business. And as you said, I mean, currently there is a window of opportunity which opens. because of these anti-dumping, countervailing duty discussions. Preliminary findings, to our knowledge, should be filed in September, at least for the countervailing duties. But the key message is that that window of uncertainty will also close sometime. It is now in the market. How does it affect us? That was your question. Our expectations, we will plan for production in Q3 at a similar level to Q2. And second part of your question was on BioSolutions. Yeah, as you mentioned in the past, obviously we had some, you know, upfront payments and integration costs to cover. And I think a big milestone has been achieved now on the 3rd of June. And we are all very proud about this. with the pandemic preparedness plans being faster on time than expected, getting full green light from the government, and also with the payments now coming in from the beginning of June, that will definitely give some tailwind on the results for the second half. And we saw also strong sales and growth in the biopharma business, Bio-ingredients, which is also with the new site in Lyon, the custom manufacturing business, still facing integration costs, and also we do have some legacy products in the life science segment that see decline. So, as Tobias mentioned, a much better second half of this year for BioSolutions, and then gradually improving from then.

Is it improvement in the second half only the HALEP plan or are the other parts of the business also improving in the same path?

No, we also see an improvement in the other paths, yes.

Okay, yeah. Thanks a lot.

Our next question comes from the line of Shetan Udesh and JP Morgan. Please go ahead.

Yeah, hi. Thanks for taking the questions. Just looking at your cash flow statement, I noticed in the first six months, and this is mainly in the second quarter, I think, you are showing a change in contract liabilities of minus 20, which I remember from the past I used to have these advance payments from customers in polysilicon, which you used to recognize as income from time to time, especially when customers don't honor the volume commitments. So just curious if polysilicon numbers today are partly supported by these advanced payments coming through the P&L because some of these customers might not be taking their contractual volumes. And if that's the case, how long will that continue? Is it in the numbers even in Q3? The second question was, at what point do you stop building inventory in polysilicon? Is there a threshold beyond which if you can't agree to new volume contracts with existing or new customers on X China price. At what point, you know, do you have like a threshold, okay, you need to get that by end of the year, otherwise you will stop producing at full run rate or you're not at the moment contemplating any time frame for that. And last question on silicones is, You mentioned the order books are still volatile. Is there any particular end markets where you see more, let's say, more or stronger demand versus weaker demand within silicones? Anything noticeable by end markets?

I'll start with the first, hand over to Chris for the second, and then I'll take the third again. I mean, there's no... in the second quarter in PolySilicon. So that has nothing to do what you had spotted in the cash flow. So yeah, I think that's it.

Yeah, and Zita, let me answer the second question. Well, on PolySilicon, first of all, I think what we need to be clear about, as Tobias also pointed out, semi-business, which is a clear strategy of ours, growing very consistently both in volumes and also in profitability. That being said, there is now uncertainty because of these CVD-AD investigations from the U.S. side, but we also see continued growth of the PV systems in the U.S., and these projects require materials which is compliant with U.S. regulations. And therefore, we are absolutely confident that there will be demand for material that we can produce which is US-compliant polysilicon to continue the growth. At this moment, it is definitely too early to talk about reduction in our production. We continue to produce because we believe this window of uncertainty will close and we will be able to sell more of this volume which is in high demand in the U.S. market.

To the third question on silicones, looking at the segments, we see in the second quarter stronger demand in some industrial applications, in coatings, in other consumer applications like textile. But if you're asking also for the weak spots, definitely the automotive industry, there we had seen a decline in demand. So it's a bit patchy, that picture, as we described it.

Understood. Thank you.

Our next question comes from Matthew Yates in Bank of America. Please go ahead.

Good afternoon, gentlemen. To follow up really on the last thing you made there, I wanted to ask about how the practicality of pricing works in specialty silicones. I've noticed some headlines from some of your peers announcing price rises. But given you make, if I'm not mistaken, literally thousands of products in that business, do you do an across-the-board price increase? Or given what you're saying about the patchiness, do you have to go product by product? And how easy is that to do in reality? Thank you.

Okay, Matthew. This is Chris. I take your question. It's definitely a good question. So, this year we have seen good demand for specialties, and that's also the reason why we say we are looking to raise prices in certain applications. We've seen comments from competitors for increasing prices. Obviously, we appreciate these comments. Because it is a little bit patchy, as Tobias pointed out, and also if you look at our order book, and also what we stated in our press release, it is not yet a broad-based recovery of demand, which of course would make it more easy or more straightforward to increase prices on a broad-based level. And therefore, it is more like what you also mentioned. You need to be specific, at least specific by segment, and also specific by region because of the different competitive landscape. So it is a tedious process, but nevertheless, we've shown in recent years that we are able to do this, and the teams are working really with high priority on selectively increasing prices where it's possible.

Can you talk a little bit about the supply side of the more commodity grade? products. Are we through with the capacity additions in the industry? Are we seeing any rationalization? Or are you still having to contend with a badly oversupplied market there when there's not much traction of tightness?

Well, I mean, first of all, the standard side is really not our core. We look at specialties. We see a good picking up demand there. There are some announcements on Chinese capacities, as you can imagine, as for all chemical products in the world. And I guess at the same time, we will see some sort of consolidation. Will there be enough to have an even supply-demand side? Question mark, I would say. But again, it's not so much of a concern to us because the core of our business and the strategy goes into the into that specialty segment.

Okay, thanks very much.

Our next question, please go ahead.

Thank you for taking my questions. Just firstly, you said various scenarios are baked into the policy. Could you maybe just elaborate a little bit more on what scenarios these might be and what is your base case assumption at this point. Second question is on buyer solutions. I mean, I understand that you've got improvement coming in the second half, but you're still way below, I suppose, what you're targeting. I mean, to what extent do you intend to actually slow CapEx and maybe hold back on M&A until you're able to demonstrate stably higher performance? profitability, or is that not the way we should be thinking about this business? Thank you.

Sean, Tobias here on your first question on PortoCirc and our expectations for the remainder of the year. As you had seen, we had changed the guidance to now 200 to 300 million euros EBITDA. First half of the year, we are at 100. And our basic assumptions that Q3 would be similar to Q2. And then the final quarter would define where we end in the range. And that's how we look at it with the uncertainty Chris talked about. We don't see a big change in the third quarter, but as those uncertainties go away, we could grow with additional volumes and that could bring us to the upper end of the range.

Okay. And Jean, on the second question about solutions, yes, we are currently not where we want to be. Therefore, we exactly go the way that you pointed out. We will definitely hold back on further investments and M&A, especially regarding new sites or new acquisitions. With the Halle inauguration and also with the acquisition of Leon, we achieved two major milestones in our growth plan. And now the strategy is really all about filling the capacities and improving profitability. That being said, of course, you do need to invest in current business for maintenance of the business and some selective investments in the sites. to improve profitability there and have a new growth, but very clear focus now on acquiring new business and improving profitability.

Thank you. If I could just follow up on the prior question. So, I mean, do you have a base timing on when you expect to complete renegotiation projects at this end Q3?

Which project do you mean now?

Sorry, the non-China poly volumes.

So, I mean, yeah, well, I mean, maybe we didn't point it out clearly enough. You know, we said in the last 18 months our clear target is to achieve changing all contracts from the inside China to, or getting away from the inside China pricing. We did achieve that. And that's a big success story for us. We have no contract at the moment, which is linked to the inside China price. So we are definitely not selling to the inside China price anymore. As we have some uncertainty now in the market, you know, the volumes we sold in Q2 were not as high as they could have been. But I think, as I said before, this window of uncertainty will close again because there is demand compliant polysilicon to the U.S. market, and then volumes also will go up again.

Thank you. Our next question comes from . Please go ahead.

Yeah, hi. Thanks for taking my questions as well. Also, maybe again on the polysilicon part, and we said also that you're no longer selling under the Chinese prices, but I guess you have also I started the negotiations with your customers, and I was just wondering whether you could give a bit more color on really what the feedback from your customers were. You touched, I mean, on the uncertainty from the AD and CVD currently, but maybe you could also shed some light on how your discussion with customers were about the capacity additions in the Middle East. I think you said already in the last call that you think 25 or end of 25 is maybe a bit optimistic. Is that also the view of your customers, or are they a bit more maybe, yeah, optimistic on that timeline, and could that be a reason for them also to be a bit more cautious in negotiations with you?

Well, Konstantin, I would really say at the moment it is majority really about this anti-dumping, countervailing duty story. Obviously, there is some interest in new plants coming up, which have to prove that they can produce the right material in the right volume. But that's really not the essence of the talks that we have in the moment. And regardless of that, I would say, you know, if you look at the U.S. solar market, there is a lot of growth expected, and I really believe in that growth. you know, maybe next year already 55, 60 gigawatts, that's a lot of compliant polysilicon, which you need in a very tight market. So, therefore, I'm not that concerned about any additions of capacity, which have to prove to be the right material.

Maybe one follow-up, I think, speaking of the tight market, which is tied with obviously without your capacities and maybe becoming also tied with your capacities, depending on whether the Middle East come on time early or later. However, do you really see that the customers are also here then willing to take the full volume, so maybe wait just a bit and take then maybe more growth in 25 or in 26 onwards? when the market's not tight anymore and maybe then the prices are lower.

Well, Konstantin, I mean, there's actually a lot of speculation and obviously not all the customers have the same thinking. Again, my message would be there is no uncertainty and everybody is kind of a little wait and see and that window of uncertainty will definitely close and from that on there will be more volumes to be sold.

All right, thanks. Our next question comes from Sebastian Salts, NCT. Please go ahead.

Yeah, thank you very much. I've got a couple of follow-ups on PolySilicon as well. So just talking about this window of uncertainty, what do you think needs to happen for your customers to have sufficient confidence again to enter into new contracts? And then the second question would be thinking of different scenarios. What do you think is the risk that you need to potentially write down some of the inventories that you're producing at the moment if indeed customers are not willing to enter new contracts? So if you could help us understand the technicalities around that, that'd be great. And then lastly, again, thinking of supply for non-Chinese international polysilicon, and the Middle East has just been mentioned. Just wondering if you could comment on the cost of producing polysilicon in the Middle East. Not sure if you looked into it yourself, but maybe if you could just tell us what you think what the cost is likely going to be. Just trying to better understand what the marginal cost of production for international polysilicon is going to be. Thank you very much.

Okay, Sebastian. I will start with the first question. You know, the main topic is uncertainty. Uncertainty means you don't know what comes. And I think what our customers would need is at least a sign with a preliminary ruling on countervailing duties and anti-dumping duties, because then you can factor it in. And of course, it's obviously a difference if it's 10% or if it's 100% or if it's more. And therefore, that's really what customers need first and foremost, a clear ruling what they can expect and they can adjust their production and planning on that.

On the second question, Sebastian, Tobias here. As you know, we book inventories at the lower of the cost or the market price. And from today's perspective, we don't see that as a likely scenario that we have to write down on the inventories.

And Chris, again, on your, Sebastian, on your third question on the cost position of the guys in the Middle East. Well, obviously, you should ask these people first who are building because they have, obviously, the much better insight than we have. I can tell you that we scouted the areas some time ago before building the tenancy plans. And it's always, you know, at least what we did, you know, it's a mixture of what our factor costs regarding personnel is, but it's also a valuability and capability of people. It's raw material supply. It is electricity, of course. And at that time, our decision was to go to Tennessee and not to the Middle East. You know, I'm not saying that maybe something's changed in recent years, but I mean, we are not in the details of these new plans and the framework of, you know, the conditions. So, very hard to judge for us.

Thank you very much. Our next question comes from Sebastian Bray in Bernberg. Please go ahead.

Hello, hello. Good afternoon and thank you for taking my questions. The first one is an in-principle question on half one versus half two. If I think about the balance for two and the implied step up at the midpoint of guidance, I can think of three or four factors that would mean that H2 would have some benefits. You've got the reservation fee from the buy solutions business. you potentially get a tax credit from inflation reduction act, although I'm not quite sure if it's baked into guidance or not. From memory, it wasn't for U.S. production of polysilicon. And if things develop according to plan, potentially get to mark up the polysilicon that's now gone into inventory at the point of sale at higher price, is there anything else other than those three that in principle would mean that H2 would be higher than H1 Oh, I forgot the reversal of the up provision in the other line. But I just want to check that that list is reasonably exhaustive. Thank you.

Actually, I'm not entirely sure whether I've followed all of your items, but I see your point on the reservation fee ticked off. I think that's part of our bio-solutions guidance. On the policy, again, we had discussed about the range, 200 to 300 euro DBA, depending on how the market develops. That is not including the tax credit. As we said, we are not putting that into the guidance. I think one large step upwards on the city count side, in comparison to our Q1 guidance, But also that assumes that we have some seasonality in the fourth quarter, and that's why second half not as strong if you do the math. At first half, we need to see whether there's momentum. We are happy to take it, but we usually experience some queue for inventory management from customers depending on the market situation. One point I think you missed and didn't mention is the CO2 compensation scheme that we can only account for in the fourth quarter. And that will make the second quarter – in the fourth quarter, that will make the second half stronger than the first half. If you put it all together, I mean, if you feel comfortable in – moving up our view on the range, as we said, to the upper half. But there's uncertainty, and it's better than we expected at the beginning of the year.

That's helpful. Thank you. Just the second one I think has been touched on, but I want to clarify. For the most recent weeks of trading, where there is visibility, have there been any changes to the order books in the silicones segment?

Yeah, a bit slower order intake, but still a decent book for summer. And as I said before, it depends on the summer, how it develops. But, I mean, second quarter was stronger than expected. So I think we have to be flexible and we have to cope with some uneven demand patterns.

That's helpful. Thank you. My final one is on BioSolutions. The segment that has just been finished, the facility that has just been finished in Halle, I believe, making RNA. I remember last year when Lonza ended its contract with Moderna, it shut the RNA facility that it was using, presumably because it couldn't readily reallocate the capacity. Can I ask two things? The first is, Is the capacity, leaving aside the reservation fee, is the capacity that VACA has available actually filled at this stage, or is it still waiting to be contracted? And the second question is, is this a dual-use facility in the sense that it can switch between RNA and other production, be it, I don't know, bacteria-produced biologics or that type of thing, or it's purely an RNA production facility? Thank you.

Okay, Sebastian, a good question on the Halle facility. Now, as you mentioned, if you comment on mRNA, I mean, the big business in the last years was obviously huge volumes for COVID vaccination. And this will not be replaced by one day to the other. I think this is common knowledge also in the industry. But don't forget, there are more than a thousand clinical studies working on mRNA. products, only a small part is actually vaccination. Most of them are therapies like in oncology. So therefore, we do see a lot of, you know, development going on in this part of new medicine. And I think what you need for that is rather kind of flexible capacities and not kind of the super, super huge capacities which you would need for COVID vaccination. I'm not, you know, in the detail with the site of Moderna, so I cannot comment on this. But what I can tell you is that our site can be used both for, you know, medium, larger scale, but also for smaller medium scale production. And as you pointed out, it is not purely for mRNA. We're actually also working on some plasmid DNA project at the moment. So there is a multiple use for this capacity, which also helps to fill the capacities.

That's helpful. Thank you for taking the questions. Sure.

Our last question comes from Yadid Pandia and on field research. Please go ahead.

Thanks a lot. A few questions, please. Firstly, I want to clarify, so if we talk about policy linking for Q2 versus sort of Q1, when you put this material at inventory, what have you used as a cost base to account for it? Because I think we understood earlier it was at cost, but I think, Tobias, you also just mentioned it's low risk of inventory write-down, which means it is accounted at China price. So which one of the two is it?

Sorry, I was jumping too quickly. I mean, we account for the lower of the two costs and selling price, but it's our selling price. It has nothing to do with the China domestic price.

Okay, but I presume that given the provision you took end of 2024, You know, because the prices were too low. I presume even your selling price is lower than your cost price, or is it?

No, no, no, no, no, no, no, no, not at all. That was specific to some of the contracts that we had.

Okay, so your selling price that you're accounting for is higher than your cost price. That's how we should understand, just to be very clear.

Clearly, we are profitable with the solar business as we strive for the outside China market, as Chris mentioned. Yes. And we're not selling to the China price anymore.

Okay. All right. That's very clear. The second point is I appreciate the uncertainty for the new customers, but I presume a lot of the volume for outside China is also going to the U.S., at international prices. So have you seen any weakness in volumes for those customers? Because I presume, you know, they would also face that uncertainty. So can you define how is the demand or mentality of your current customers versus some of the conversations you're having with your new customers? That's my second question. And then the third question is, I think you participated in an inter-solar after a very, very long time. So I want to understand how was the response from that? And is this international price only going to be relevant for the U.S.? Or is there an appetite also building in Europe for, let's say, non-Chinese material for the through and through value chain? And then my last question, sorry for this, is on silicones. I understand the seasonality point and the patchy outlook, but if I compare what you've published today versus what you gave as outlook at Q1, clearly things have improved meaningfully and your competitors are saying the same thing. So given there is no turnaround in Q3, why would EBITDA queue on queue? Thanks a lot.

Maybe one thing to jump in here. I mean, I think we didn't say patchy outlook. We said patchy order intake.

Sorry, patchy order intake.

I wouldn't call it the outlook. You know, I'm rather positive on the outlook. But, you know, the order pattern is not just every month. It's the same. I think that was the remark regarding the patchiness of the business.

And, Jadiv, if I add to the silicone's question. We do have a shutdown also in the second half at the other large site. So there is a bit of a drag on volumes again. And then we are normally facing a slower demand in the fourth quarter, but still fourth quarter would be up against prior year. And I think that confirm the overall positive sentiment that we see in the silicones business.

Okay. And, Jaydeep, then we look at your second question that was on the polysilicon and the uncertainty from us for current customers and other market players. Well, you know, my simple answer would be, I mean, everybody in the market is currently affected by that uncertainty. Actually, we don't see a big difference between existing customers and new customers. And therefore, I hope that this uncertainty will be closed soon. It will definitely be closed. Now, the next timing should be September for the CVD preliminary findings on that. Second question was the international pricing only relevant for the U.S. and also in Europe. Well, you know, at the moment, it is mostly on the U.S. side. Again, there are some political discussions in Europe going on, you know, should we do something similar? But as always, if European politics takes time and more effort to achieve something. So not much to report on that.

Right. If I may just ask one follow-up and ask Jayden's question in a slightly different way. You know, is there like expiry date or some kind of a quality issue timeframe when you produce polysilicon and store it? Or can you, you know, use and store the material for more than a year? And then on the volume of how much you're storing, if you don't want to disclose the price, You know, historically, at the beginning of the year, you told us a third is semi, a third is international, and a third is China linked to the China price. Now that you've stopped selling China linked to China price, should we think then that mechanically speaking in the second half, that's the level of volume that you would inventory if you don't find a new customer? Thanks a lot.

Let me start with the durability or how long you can store polysilicon. You can actually store it indefinitely so it doesn't get worse also in the way it's packaged by us. So that shouldn't be of any concern. And we've done this before.

And with respect to the details on the inventory bill, I think that's not engaged in the speculations. The case will be resolved, and then the uncertainty is away, and yeah, that's it.

Okay, perfect. Thanks a lot.

Ladies and gentlemen, there are no further questions. Back over to the management for any closing remarks.

Thank you, Mr. Operator. Thank you all for joining us today, and for your interest in Wacker Chemie, Our next conference call on the Q3 results is scheduled for October 29th. In the interim, we will hold our 2024 Capital Market Day on September 18th and 19th at our main site in Borkhausen, Germany. As always, don't hesitate to contact the IR department if you have further questions. Thank you.

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