Wacker Chemie Ag Ord

Ladies and gentlemen, welcome to the Wacker Chemie conference call on Q1 2025. I am Sandra, the chorus call operator. I would like to remind you that all participants will be in listening mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jörg Hofmann, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Welcome to the Wacken Chemie AG conference call on the Q125 results. Dr. Christian Hartler, CEO, and Dr. Tobias Ohler, CFO, will take you through our prepared slides momentarily. The press release, our presentation, and the 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 presentation and our 2024 AD report regarding risk factors. All documents mentioned are available on our website.

Chris? Welcome, everyone, to our conference call on the first quarter of 2025. The performance of our operating businesses was in line with our expectations. Considering the overall market environment, we have made a good start to the year. Sales in the first quarter of 2025 came in at 1.48 billion euros, at slightly below last year's level and substantially higher than the previous quarter due to typical seasonality. The reported Group EBITDA came in at 127 million euros and was well below last year's result of 172 million euros. This decline was primarily due to weak demand for solar-grade polysilicon and construction-related polymers and low utilization rates holding the other segments back. When looking at the four operating segments, the cumulative EBDA was just 3% lower year-over-year at 197 million euros. Overall, the chemicals EBDA at 145 million euros was up 6% year over year. This increase was driven by strong growth in specialty silicones. Our semi-business with polysilicon also grew strongly, with substantially higher volumes sold. Given the challenging markets, we focus on improving resilience through specialization, efficiency measures, and cost-cutting. In polysilicon, semi-grade materials are specialty products with high barriers to entry. Here we are ramping up our new edging line in Burghausen. The line will enable the next generation of chip production and strengthen our leadership position in the industry. With our growing semi-volumes, we are improving our mix and resilience. in the polysilicon segment step by step. On our last call, I highlighted that we systematically leverage efficiency programs to lower specific operating costs. These longstanding programs are part of our DNA. On the next page, you can see the different winners for each division. These awards are a great way to regularly honor our team's achievements and keep the company focused on driving efficiency in lowering operational costs. Now, looking to sustainability. For us, this is not only about CO2, but also very much about safe operations. Producing chemicals clearly involves many risks. These risks need to be properly managed, and this requires a strong safety culture. Water where not only accidents, but also near misses are reported. These incidents must be thoroughly examined and measures implemented to keep our employees safe every day. We must ensure a safety culture where employees speak up and actively take steps to ensure safe operations. This is not a single action and we need to strive to improve our performance constantly. This is why we launched a new global safety initiative, effectively sharing safety information across all our plants globally. We intend to make our operations even safer by further raising awareness. At WACKER, safety is the precondition for everything we do. Consequently, our safety performance is part of management's remuneration packages. The WACKER operating system, a unique efficiency tool developed over a decade ago and is a key feature of our continuous improvement. At the annual WOS conference, we awarded four projects for their significant contribution to improving our operations. They have all something in common, increased output and productivity while maintaining or even decreasing costs. This combination yields substantial savings in specific operating and energy costs. Driving efficiency is not a matter of big wins. It is about continuously implementing many projects. Last year alone, we initiated nearly 1,000 projects, which yielded a net savings of about 60 million euros. These were all hard won, and we will continue to drive efficiency and productivity across our operations. Going to page four, and here's an overview of some exciting new innovative products we presented at the European Coating Show Nuremberg in March. The SILRAS product is a silicon-based resin hardener for long-lasting protective topcoats on high-value steel structures such as bridges. The durable epoxy polysiloxane topcoats are highly weather and UV resistant and have excellent performance and safety benefits compared to competing products. Our GenuSil hybrid polymers combine the functionality of silanes with a polymer black bulk. Essentially, we capture the benefits of both chemistries in one product. This enables our customers to formulate high-performance sealants and adhesives for an increasing range of applications. In addition, we showcase some new solutions that increase the sustainability of our products or improve the performance of products with lower carbon footprint. Our Equilire and ElastoSeal sealant is made from renewable raw materials for natural stone applications. Our vinyl resins for heat sealing, industrial coatings and printing inks are available with a reduced carbon footprint by leveraging renewable energy. And last but not least, we have polymer binder solutions for tile adhesives produced with composite cements. These new binders support the use of low carbon cements in construction. I encourage you to visit our website for more details on these specialty applications. So before I hand over to Tobias, let me comment on some recent headlines about trade tariffs and new German government policy initiatives. The German government recently announced massive fiscal support programs for infrastructure and defense. Additionally, the incoming government intends to lower energy costs in general by five cents per kilowatt hour by eliminating various taxes, fees, and surcharges. While the energy intensive industry is already exempt from many of these items, at least to different extent, the government has also signaled that they intend to introduce measures that would also support the energy intensive industry. We see this as a renewed commitment to address power costs in Germany, but it remains unclear how they will implement it. We have been arguing for an industry power price for some time. It's imperative that Germany has competitively priced energy and that its energy-intensive industries have a level playing field with global competitors. So from that perspective, we welcome the German government's initiative to drive the needed investments and keep energy prices competitive. This will likely be a net positive for the German economy and our customers, but we remain cautious about what benefits we may see until concepts are both clear and implemented. Yet this year's defining political news is the frequent and deep changes to U.S. trade policies. Forward-looking indicators have weakened in recent weeks, particularly in the U.S., but also globally. Current developments in international trade relations, particularly potential customs conflicts, pose a considerable risk to global economic development and security. Customers report increased uncertainty and our order intake has seen higher volatility in the second half of March and April. Given the frequency of changes to the tariffs and counter-tariffs, predicting the potential impacts of any reliable degree of certainty is difficult. We have, therefore, decided to leave our guidance unchanged. We expect Group EBITDA between 700 and 900 million euros. However, the potential impacts of a trade war are not included in our forecast. Considering these increasing uncertainties in the market, We focus on further strengthening our resilience. We are driving efficiency improvements and digitalization, pushing ahead with process and structural improvements. WACKER stays on course. We have confirmed our strategy. We have a strong financial position and are benefiting from global megatrends, whether it's renewable energies, sustainable construction, electromobility or digitalization. These trends will drive our business forward. And now to Tobias for Further details on our results. Thank you, Chris. Welcome, everyone. Looking at the profit and loss, sales during the first quarter of 2025 were 1.48 billion euros. Group sales were down 1% year-over-year, due mainly to lower volumes of solar-grade polysidicants sold. On the other hand, sales in chemicals were 2% ahead of the prior year figures. Sage growth in specialty silicones offset lower sage in polymers. Strong growth in biopharma significantly supported higher sage year-over-year in biosolutions. EBITDA during the first quarter came in at 127 million euros versus 172 million euros a year ago. Looking first at the positive items, chemicals increased earnings year-over-year. Chemicals EBTA reached 145 million euros, an increase of 6%, driven by growth in specialty silicones. As Chris already pointed out, the lower group EBTA resulted from lower volumes sold in construction-related polymers and solar-grade polysilicon and lower utilization rates. Others held back the reported EBTA by 52 million euros versus the 13 million euro charge last year. This year's higher charge resulted from the lower contribution from our equity stake in Citronic, the lower absorption of group infrastructure costs, lower hydropower output in Borkhausen, and higher foreign currency hedging costs in the quarter. As a reminder, the main component of the other EBITDA is the CO2 compensation offset. In the first quarter, this was approximately 40 million euros. As in the previous years, we expect this will be refunded in the fourth quarter of this year. Due to the lower reported EBITDA and the higher depreciation, EBIT was at break-even. Depreciation has been increasing in line with the higher level of investments in the past couple of years, We have reduced investments this year. Our focus is on filling new capacities. Our total net income was a negative 3 million euros, equating to a loss of 16 euro cents per share. Our balance sheet shows strong financials with a high liquidity of 923 million euros, 4.8 billion euros in shareholder equity and a low net debt position. Net working capital increased by 148 million euros in the first quarter of 2025 as trade receivables increased by 15% over year end. This primarily reflected the typical seasonal increases in chemicals. Overall, the reported inventory position decreased somewhat in the first quarter. This was due to the policy constraints exceeding production volumes. As you recall, we built significant inventories in Polysilicon last year and have taken steps now to match production with demand. Going forward, we look to use these inventories to meet the potential demand recovery for solar grade Polysilicon. At silicones, sales in the first quarter were approximately 745 million euros, up 5% year over year. Due to typical seasonality, sales were 15% higher quarter over quarter. At €108 million, EBITDA was up 33% versus the prior year. This increase was primarily due to a significantly better product mix amidst stable pricing. Specialties continued to see volume growth. Healthcare applications and high-performance LEDs in displays performed particularly well. The EBITDA margin was 14.5% compared to 11.4% a year ago. While this represents a step in the right direction, the reported margin is well below target and still unsatisfactory. We are focused on portfolio management and efficiency measures to improve the overall level of profitability. Looking at the proposed US trade tariffs, some silicones appear to be exempt from tariffs. However, any outcome remains unclear. Important to note is that the U.S. market is undersupplied and needs imports to function. For this reason, we expect to pass on most of the cost of any additional tariffs. Therefore, we only expect a minor direct impact from the proposed tariffs, but see the potential for indirect effects. Dilly cones are at the start of many value chains, and if customer products are impacted, we will also see lower demand. Our expectations are unchanged for the full year 2025, but highlight a higher level of uncertainty due to tariffs. Demand in the US became weaker in March, and we need to see how trade talks develop and what impact this may or may not have. At Polymers, sales in the first quarter were €360 million. 3% below last year and up 7% quarter on quarter due to seasonality. Somewhat lower prices and volumes in construction-related powders drove the year-over-year sales development. In addition, EBITDA in the first quarter was held back by lower utilization year-over-year and inventory effects. Ongoing weakness in construction in Europe and Asia offset volume growth in the Americas. Demand for dispersions remained at good level and volumes were at the prior year level. For the full year 2025, our expectations for polymers are unchanged. As with silicones, we also see higher U.S. trade tariff-related risks. While our U.S. polymers business is for the most part regionally contained and sees limited direct impacts, the indirect impacts may be meaningful. Particular building material costs may increase due to the U.S. tariffs. Recently, builder confidence in the U.S. has dropped. If this translates into lower construction rates there, we will not be immune to this. At BioSolutions, sales during the first quarter were 91 million euros, up 27% year-over-year, but 14% lower than the previous quarter. BioPharma drove the sales development in In both cases, the improvement year-over-year was due to the reservation payment in connection with the German pandemic preparedness plan. The lower sales compared to the previous quarter were due to the timing of biopharma project completions. These effects carried through to the EBTA line. Earnings were on par year-over-year but well below the previous quarter. As a reminder, last year's first EBTA benefited from a good product mix. and customer projects. Our expectations for the full year 2025 in biosolutions are unchanged. We do not see a major recovery in biotech this year yet, and we expect the market environment for CDMOs to remain challenging. At polysilicon, sales in the first quarter came in at 245 million euros, 18% lower year over year due to significantly lower solar grade volume sold. In comparison to the preceding quarter, sales climbed by 18%, higher volumes in both semi- and solar-grade polysilicon doses. The first quarter EBITDA was 29 million euros, including only a small IRA contribution. This level of earnings was comparable to the performance of the past two quarters. Lower energy costs and an improved mixed supported earnings, but the sequentially lower utilization rate held them back. For the full year 2025 in Polysilicon, our expectations are unchanged. As I highlighted on the last call, we base the lower end of the range on contractual supplies. Scenarios above the low end of our EBITDA guidance range require an improvement in demand beyond our contracts. During the quarter, the preliminary and now final anti-dumping and countervailing determinations for some Southeast Asian countries increased significantly. Needless to say, the higher tariffs create additional uncertainty in the market, and the supply chain will need some time to adjust for that. On the other hand, our strategic focus is on semiconductor policy concerns. Here, our volumes are growing nicely and the ramp of the new etching line is on track. This will support our business's overall resilience. Now let's look at our net financial position. In the first quarter of 2025, we generated a gross cashflow of 32 million euros. Trade receivables driven by typical seasonal patterns and chemicals has backed the cashflow. After cash flow from investing activities of 197 million euros and some other effects, we ended the quarter with a net debt of 880 million euros. Before we start with the Q&A, let me summarize. WACKER is well positioned financially and strategically. We have made substantial investments, strengthened our asset base and improved our regional exposure. Our specialty business is performing well in a challenging environment. and we will continue investing to serve our customers in attractive markets. Given the overall economic and geopolitical uncertainty, we need to remain flexible. We are taking actions to ensure that we have the right balance between supporting our customers' growing businesses and being prepared for more challenging economic conditions should headwinds become more persistent. Operator?