Wacker Chemie Ag Ord

Ladies and gentlemen, welcome to the Wacker Chemie Q2 2025 conference call. I'm Vicky, the chorus call operator. I would like to remind you that all participants will be in listen-only 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 1 on your telephone. For operator assistance, please press star and 0. 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.

JÖRG HOFMANN, Head of Investor Relations Thank you, Operator. Welcome to the WACKER CHEMEA-HE conference call on the second quarter 2025 results. Dr. Christian Hartl, our CEO, and Dr. Tobias Ohler, our CFO, will walk you through the presentation. 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 presentation and the 2024 annual report for information on risk factors. All documents mentioned are available on our website.

Chris? Hello, everyone. Thank you for joining us on our second quarter 2025 results call. During the second quarter, demand in many customer sectors was weak and competition was intense. There were no economic tailwinds either. Trade policy uncertainties are slowing economic development, and there are no signs of a recovery yet. In this challenging environment, with ongoing macroeconomic and few political uncertainty, we lowered our full-year outlook on July 18th. Furthermore, the situation was compounded by the unfavorable development in the Euro-US dollar exchange rate since the beginning of the second quarter and our expectation that the current exchange rate level will remain unchanged. Our second quarter performance and our updated full-year outlook reflect these headwinds. Sales during the second quarter reached 1.41 billion euros, with Group EBDA at 114 million euros. The sum of the four operating segments, EBDA, totalled 182 million euros. Although this reflects an 11% decline year over year, it also shows a 7% sequential increase over the previous quarter. Segmental gain was primarily driven by an insurance compensation in silicones, but also supported by some seasonality in polymers and much higher semiconductor polysilicon volumes. Before we move to the full year outlook on the next page, let me address our most recent initiative in sustainability. We just launched a new tool that allows us to calculate the carbon footprint of our products per the Together for Sustainability guideline. With this PCF tool, we can provide customers with reliable and standardized carbon footprint data for our products. Customer feedback has been incredible so far, with customers requesting PCFs for thousands of products. We see our leading sustainability credentials as a way to differentiate ourselves in the market and to strengthen relationships of key customers by helping them to meet their old sustainability targets. Now moving on to our guidance on page number three. As you saw in our July 18 pre-release, we updated our full-year outlook to account for ongoing trade-related volatility and currency headwinds resulting from a strengthening euro. We now forecast sales between 5.5 and 5.9 billion euros with an EBITDA range of 500 to 700 million euros. Due to lower EBITDA, we expect net cash flow to be more or less balanced and net debt to come in significantly higher than last year. The chemical industry faces unprecedented challenges, and we are not immune. We are countering these challenging market environments with a clear focus on growth, cash, and cost initiatives. We will drive profitable growth by intensifying our sales activities, customer interactions, and innovation. We relentlessly seek out new customers and new applications, always with an eye to achieving profitable growth. We will improve cash flow generation by reducing and optimizing investments and implementing working capital measures, such as targeted reductions in inventories and accounts receivables. And we will reduce our costs by driving productivity and optimizing our plant utilization rates so we can run our assets at the highest level of efficiency and profitability. Also, we will continue to align our entire organization with the new underlying framework conditions. Three strategic priorities will help us to ensure our success. First, we are forging ahead with our specialty strategy. This means that we will be focusing even more on those products and solutions that set us clearly apart from our competition. These are often developed on a customer-specific basis, have a greater depth of added value, and achieve higher margins. Second, we are boosting our efficiency and speed. It's no longer enough to simply have the best solution. We also need to be able to launch it quickly. Speed has become the decisive factor for success in today's world. We have already implemented effective programs to improve our performance and will be exploiting further potential also by making systematic use of digitalization and automation opportunities. Third, we will further strengthen the Wacker's team abilities and skills. Today, especially with everything becoming faster and more digital, this is essential. In these uncertain and volatile times, a clear path is needed here at Wacker We have it and we are following it. Together, we will continue to work on the solutions of tomorrow with expertise, customer proximity, and innovative strength. With that, I'll turn it over to Tobias for a deeper dive into our results.

Thank you, Chris. Welcome, everybody. Before I begin, let me address some changes in the way we present our numbers. We have prepared the first half year and the second quarter results applying a revised presentation of our investment results in the profit and loss statement. Investment income or equity income is now reported under financial results instead of operating results. The most visible effect from this change is that the investment result from our stake in Cetronic is no longer relevant for EBITDA and EBIT. The reclassification also affects how we record dividends received in the cash flow statement. We implemented this change to enhance the transparency of our operating performance and improve comparability with the peer group companies. There's additional information on these changes in the appendix of this presentation and the notes section of the first half-year report. Also, in the Excel file published this morning on the WACA website, you will find the restated numbers. Having addressed that, let's now look at the profit and loss, which shows the restated second quarter 2024 figures of €155 million versus the €160 million we reported last year. So the overall effect is quite small. Sales in the second quarter were 1.41 billion euros down 4% year-over-year, primarily due to exchange rate, pricing, and volume effects in polymers, polysilicon, and biosolutions. In silicones, sales decreased by 1% year-over-year, despite somewhat higher volumes. Customers have taken a wait-and-see approach due to trade uncertainty. Order intake was volatile throughout the second quarter, and we have not observed any improvement so far. This had effects throughout the entire P&L. EBITDA declined to 114 million euros from 155 million euros in the second quarter of 2024. Looking only at the performance of the four operating segments, the added EBITDA came in at 182 million euros. Others held back the reported EBITDA by 69 million euros versus the 50 million euro charge a year ago. The higher charge resides from the lower absorption of group infrastructure and higher currency hedging costs. As previously discussed, the main component of the others EBITDA is the CO2 compensation offset. In the second quarter, this was about 40 million euros. As before, we expect this will be refunded in the fourth quarter of this year. Lower EBITDA and higher depreciation drove EBIT to minus 11 million euros versus 38 million euros a year ago. Depreciation has been increasing in line with investments in the past couple of years. Many of our major growth projects are now completed, and our focus is on filling the new capacities, improving cash flow, and driving profitable growth. All told, net income was a negative 19 million euros equating to a loss of 49 cents a share. Our balance sheet shows strong financials with high liquidity of about 800 million euros and 4.5 billion euros in shareholder equity. Due to Typical seasonality and accounts receivable in chemicals and lower payables, net working capital increased by 135 million euros since the end of last year. Inventories overall are somewhat lower, largely driven by targeted reductions in stock levels. Financial liabilities are largely unchanged since the start of the year at 1.9 billion euros, The shareholder equity ratio at 51% remains at a high level. At silicones, sales in the second quarter were about 713 million euros down 1% year-over-year and 4% below the previous quarter. EBITDA was up 16% versus the prior year and slightly ahead of the first quarter. This was primarily due to the low double-digit Euro million insurance compensation in connection with supply chain issues that held us back in 2024. Absent that insurance payment, the second quarter EBITDA would have been well below the preceding quarter due to trade uncertainty and exchange rate. While overall volumes were somewhat higher quarter over quarter, a combination of exchange rate price and mix effects held us back both in sales and EBITDA. As we cautioned on the last call, the largest headwinds facing chemicals may come from the indirect impact of tariffs. Silicones are at the start of many value chains, and when customer products are impacted, we too will see lower demand. For the full year 2025, we have updated our silicones outlook. We now expect sales and EBITDA to be at the prior year level. The updated outlook essentially underpins our expectations that markets will remain challenging for the remainder of the year. At polymers, sales in the second quarter were 363 million euros, 7% below last year. EBITDA came in at 40 million euros down from 59 million euros a year ago. The year-over-year development of sales in EBITDA was driven by exchange rate and volumes in consumer-related dispersions. On the other hand, volumes in construction-related powders were more stable year-over-year and showed some improvement compared to the previous quarter. This improvement was due to seasonality and supported a modest sequential increase in EBITDA despite the VAM turnaround. For the full year 2025, we have updated our outlook for polymers. We now expect sales to decline by a low single-digit percentage with a margin at prior year level. Overall, construction markets remain weak in Europe and Asia, and trade uncertainty is weighing on consumer-related binders. At BioSolutions, sales during the second quarter were 87 million euros down 11% year-over-year and 4% lower than the previous quarter. Nearly all businesses were affected by softer market demand. EBITDA came in at 5 million euros, somewhat higher year-over-year and stable compared to the previous quarter. For the full year 2025, we have updated our buyer solutions outlook. We now expect sales in EBITDA to be at prior year levels our focus remains on filling capacities, and we have achieved several commercial wins so far this year. Recently, we announced a partnership with Benio for the production of human milk oligosaccharides, also known as HMOs. Wins like this support our overall longer-term goals. At Polysilicon, sales in the second quarter totaled €218 million, 6% lower year-over-year and 11% lower than in the preceding quarter. EBITDA came in at 34 million euros operationally essentially around the level of the preceding three quarters. The development of sales in EBITDA was primarily due to significantly lower volumes of solar-grade policy consult. The headwinds here overshadow our ongoing success in Semi, where we continue to show strong growth. For the full year 2025, we have revised our outlook for PolySilicon. We now anticipate sales at the prior year's level with approximately 100 million euros in EBITDA. In PolySilicon, our Semi volumes are growing strongly and the new etching line is proceeding in line with our expectations. Semi is and remains our primary focus. But solar remains challenging. We have reduced further our capacity utilization. Demand for solar has been weak for over a year now, but the situation remains uncertain, especially in the US. There might be opportunities ahead due to recent regulatory changes. We need to await the outcome. Now let's look at our net financial position. In the first half of 2025, we generated a gross cash flow of minus 5 million euros. Trade receivables, driven by the typical seasonal patterns in chemicals, as well as payables held back the cash flow. After cash flow from investing activities of 296 million euros, the dividend payment of 124 million euros, and some other effects, we ended the quarter with a net debt of 1.1 billion euros. Before we start with the Q&A, let me summarize. The headwinds we and our peers are facing are well understood. In this environment, it is essential that we utilize every tool at our disposal to control costs, improve cash flow, and at the same time drive profitable growth. We have launched comprehensive initiatives addressing both direct and indirect costs. Many of our larger strategic investment Both projects are now complete, and our focus shifts to filling these new capacities. This paves the way for lower capex going forward, lower costs, free up resources so we can invest in innovation, sales, technical service, and marketing. We do this to drive specialties growth and to improve the financial performance and resilience of WACKER.

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

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. The first question from Christian Feitz, Capital Silver. Please go ahead.

Yes, thanks very much. Good afternoon. Good morning, everyone. My first question is, in light of the weak US dollar, can you remind us of your hedging policies for transactional activities, i.e., where you produce particularly in the Euro region, but for non-Euro markets? And I guess my second question is kind of null and void after your comments, Dr. Ola, but I was going to try to fish for some silver lining in terms of revival of demand post the summer lull. But again, let me know if this is null and void post your comments.

Christian, thanks for the two questions and also for the comment on the second. I'll start with the first one. Sensitivity to the US dollar is that a one cent change is worth about 15 million euros in revenue and free in EBITDA unhedged. And our typical hedging is 50% for the exposure for a year out. So we are not hedging. I mean, only to a very small extent we are hedging longer term. And yes, the famous summer lard, I mean, markets are difficult to read. What I can say is that the order intake has been really very poor since the start of May, and it has remained volatile and short-term, and there's no improvement also throughout the entire month of July. So we are one month into the third quarter, and summer continues at least, and also the trade discussion continues. So I would be happy to report any uptake also since the weekend, but we haven't seen that so far. So I think the overall market sentiment is that we have to maneuver through this volatile environment. And as I said before, we are doing everything. We are focusing on profitable growth, also on the short-term opportunity to try to catch as many orders possible in this environment. We are focusing on cash-reducing capex and working capital, and for sure we are working on cost. The market is not very benign these days.

Control the controllers. Thanks very much.

The next question is from Sean McLaughlin, HSBC. Please go ahead.

Thank you and good afternoon for taking my two questions. I'd like to just understand a little bit the cash generation outlook, I suppose, for the second half and your leave. You've given us a very helpful indication of where you can effectively try to pull back on spending cash. I'm just wondering, could you first of all let us know what is a maintenance capex figure? What is the minimum capex that you can spend if you pull back? And is there any flexibility on any expansion capex that you're currently involved in, particularly if we don't see a rebound in EBITDA through the second half? That's the first question.

So, Sean, to be honest here, I would start with a cash flow question and also give some early insight into how we want to develop the CapEx going forward. I mean, first of all, the cash flow generation, the first half of the year was around about negative 300 million was poor, no question. And we are working towards more balanced overall cash flow for the full year. And there are several levers that come into play. First, it's the return. program to reduce our accounts receivables. I mean, there will be also some help of seasonality, but there's also additional efforts in shortening payment terms. The second is inventory reductions, where we have launched a program reducing and this, I mean, also beyond the polysilicon inventories. It is basically focusing on the other divisions. And we will invest less in the second half. And you also are aware that we receive the CO2 compensation, that payment for the reimbursement for the CO2 cost, always in the fourth quarter. So all this together should drive us to a more overall balanced cash flow for this year. But still, that is not satisfying, and that's why we are looking into the CapEx needs for the years to come. We have completed many strategic projects, and as everyone is aware, we are also underutilized, so we can slow down significantly and move somewhere between maintenance CapEx and some very few growth projects and strategic projects, and this would be then... definitely below depreciation, significantly below depreciation level, which is about 500 million that we see today. But I don't have a precise number for this going forward today, but we are working hard on getting it for some years to a much lower level, given the realities that we face.

Thank you. That's super helpful. My second question is on the competitive outlook for polysilicon in the US. Your US peer is making what appears to be a strategic push to supply the US market more aggressively. I'm just wondering how this might change competitive dynamics for semi and solar poly in the US and any update on the section 232 probe as well.

Thank you. John, I'm not sure when I got 100% the first part of your question on the competitive side. Could you repeat that, please?

Yeah. Your main U.S. peer sounds like it's making a strategic push to increase supply in the U.S. for both solar and semi, if I've understood it correctly. And I'm just wondering if you'd notice any change in the competitive dynamics in the U.S. market in general.

Mm-hmm. Okay. Yes, I mean, we also saw this announcement. To my understanding, and again, I mean, for the details, of course, you have to ask them, not us. My understanding is they are going forward in the value chain of solar using existing capacities for polysilicon to enter the field of wafers, of cells, and ultimately modules, which I think is is a sign of a belief in the solar market in the U.S., which we are also still propagating. I think the U.S. markets, there are some uncertainties now on the big beautiful bill, for example, on the solar outlook, but we are still pretty confident that the U.S. PV market will remain relevant as solar is the cheapest and most scalable form of energy production in the world and also in the U.S., and the demand of energy is definitely rising. So, from this perspective, I think these announcements show there is an opportunity also in the U.S. market for PV. On the semiconductor side, I mean, as Tobias stated, we are running pretty well, pretty good. We inaugurated our new edging line in Burghausen just two weeks ago. It's running really on track. And that's one of the reasons why we're expanding the capacity there. And it ensures that we remain, you know, the quality leader in this segment, which is our prime target segment, the semiconductor area. Then your second part was, is there an update on the Section 232? Well, I mean, the 232 investigation, that is one of the recent trade investigations that also Tobias was referring to. Currently, I have to say we need to assess these investigations and also the outcome of these investigations, which is not yet defined. And upon that, we can see how that moves further.

Thank you.

The next question from Thomas Wigglesworth, Morgan Stanley. Please go ahead.

Christian, thank you very much for the opportunity to ask questions. First question, if I may, is, you know, there's been quite a mixed reaction from the industry as to the statements around policy support, both from the EU and or what might be happening in Germany. I'd be keen to get your take as to where you see the basis for optimism in those statements and what you think can change and will change, you know, and how quickly. The second question I have is around polysilicon. Clearly, things are bad on the solar side and could improve on the semi side. But obviously, if we assume the 100 million euros base run rate, are there temporary factors in there that are allowing you to make that level of profitability, i.e., outside of a massive change in costs, you know, could it get worse? Or is that genuinely a floor level that you could just leave it alone at this point and it would run at 100 million euros? Or is this a business which could still see further pressure because contracts might roll off that aren't renewed or, you know, pricing on the solar side is reset lower? I'm just trying to get a for that business, whether the current environment improves or not. Thank you.

Thomas, let me start with the first question on the policy support from the EU and from Germany. And definitely, you hear me talking positive on what's going on in recent months. On the EU side, there was the chemical industry strategy strategy package and meeting with Ursula von der Leyen, which we also participated. And you can clearly see and feel that there's much more openness for supporting this enormously important industry for Europe. So the understanding is definitely there. And also, if you talk, for example, on the German industry power pricing, there has always been a long discussion with the EU Commission on regulatory approvals for that, that now has been developed under the state aid framework for the Clean Industrial Deal. And I think that's a massive move forward. Now, you hear me also saying what I always say with politics, a great first step, great signals, great movement. But we needed to be finalized and we needed to be signed and implemented to really see these effects. And same is true on the German side with, again, industry power price. We are now also in a phase where we, you know, also bring in our inputs to politics to hopefully work out something which would be beneficial for the industry. and hence for Germany and for Europe. As I'm still convinced, you know, this energy question could be really a game changer for the European economy and for the German economy. So you hear me positive. We have a little caution on the implementation side.

Thomas, Tobias here on the policy again. Yeah, question with respect to profitability. So we guided for this year that we would end around 100 million euros. And as you can see from the numbers, we had around about 60 in the first half of the year. So there's 40 left to come to that number, divided by two for the quarter. So as I said in the speech, we are assuming that we are running at a similar level going forward. But as I also said, there's uncertainty. I mean, we are not knowing how the solar market is developing. So it could move up, it could move down. And I think it's not a good use of time to speculate on that today. Our core, and this is my emphasis, is the semiconductor strategy going forward. And we have invested in that. We are seeing substantial growth year over year. We will continue to see that next year and in the years to come. If that was the only business, we would adjust capacities accordingly. But there's no need to think about that today because the solar could have an opportunity. And there are questions around this, whether that would be an opportunity or not. So I think we can adjust accordingly in any case of the development.

Okay. Thank you very much.

The next question from David Simmons, PNP Paribas. Please go ahead.

Hi. Thank you very much for taking the questions. So the first one, just on the guidance in silicon, so you've mentioned that you're not seeing any improvement yet in July. But if I look at the silicon's guide, I think it actually implies a step down in the third quarter, even considering taking out the one off in 2Q. So could you talk a little bit about what you're expecting for silicons for the rest of the year and what's underlying the guide?

the guide is basically assuming as you said no improvement and we had a one-off boost low double digit from the insurance compensation the second quarter if you take that out you come to a number of the third quarter with which is somewhat lower and then i mean as there is volatility in the market we would assume some seasonal slowdown in the fourth quarter, as it is quite typical. And from that perspective, we come to a number that is close to our prior year number. It could accelerate. We don't assume that. I mean, as you know, in the environment, it could also become worse. We don't assume that either. So that's why we point towards a performance which is close to our last year's performance.

Understood. Thank you very much. And then my second question, I was surprised to see, you mentioned cost-saving measures. I was surprised to see that employee numbers actually increased in the quarter by around 70 positions, I believe, in all divisions except for bio-solutions. Will the cost savings measures include some OPEX savings as well as the CAPEX savings?

Definitely. We would be looking at that, David. I mean, the increase this year is basically also for the ramp of new capacities. Just take our semiconductor investment for polysilicon that had to be – And for that reason, we had seen a slight increase for all the strategic investments. But going forward for looking for cost savings, we look for the entire P&L going from operating costs down to the functional costs below the gross profit. And yes, that would also include potential reductions in the numbers.

Understood. And if I could possibly squeeze one more in, it's coming back to Tom's question on polysilicon and the trough rate, if you like. My understanding is you entered short-time work in polysilicon in October last year, and usually this is a 12-month measure, I believe, in less of extreme circumstances, and you could extend that to 24 months. So In the guidance, have you assumed that you're going to be bringing those people back to work, or is the assumption that the short-time work will be extended to 24 months?

That is a super-detailed question. We do have some flexibility here, how to maneuver through this regulatory framework, and we are definitely running at very low utilization. And as we said, we are trying to balance the low demand with our production, and we will do the best to optimize here.

Understood. Thanks very much.

The next question from Matthew Yates, Bank of America. Please go ahead.

Hey, afternoon, everyone. I'd like to follow up on a few points raised already. I guess firstly, maybe to continue on David's theme about the increase in the cost base. If we look at silicones, obviously you've invested a lot of money in new capacity. Thomas referenced that in the context of depreciation with plants now starting up. How much additional fixed cost or operating costs are you now carrying in that business? Because I would imagine if your revenue is flat, your utilization is therefore significantly worse than it would have been a year or two ago before you had that additional capacity. So how much is that weighing on, particularly if we thought about EBIT margins rather than EBITDA margins? And then I've got a follow-up after.

Matthew, Tobias here. That is very detailed. don't have a precise number on that, but, uh, fundamentally you are absolutely right. It is weighing on, on cross profit that we are having new capacities coming with depreciation, coming with fixed costs, coming with, yeah, staff, uh, and we are not fully utilized yet. And that is, um, one of the reasons also why cross profit has not, uh, um, yeah, moved towards, uh, the right direction in this year. And as I mentioned in one of the questions before, we are actually looking at that, trying to address that going forward.

Okay, thank you. Second point, I'm not sure if it was yourself or Christian who made the statement earlier about there's no need to think about closures today because SOLA still might have opportunities. guess i'm wondering at what point does your patience run out on on that view uh where you have to take a more radical measure um whether that's even feasible if there's too many interlinkages with the rest of the portfolio and just on the section 232 point sorry if this is more of a legal or a political question but if section 232 has transformed the steel market in the us into one of the most profitable markets in the world And so when I see them launching a Section 232 investigation on poly, that conceptually sounds quite interesting. But what was your understanding as to the difference Section 232 could make versus what's happened so far around sort of the ADCVD rulings, which frankly haven't achieved anything? And when it says polysilicon, it's derivatives. Is your understanding that this also covers things like wafers and modules? Because I guess importing polysilicon isn't actually the issue in the U.S. market. It's these more downstream form factors, if you will. Thank you.

Okay, Matthew. So, your second question that was on the decision on the polydemat. And I think it's very much what Tobias already elaborated on. I mean, at the moment, we are running at a low utilization rate. We have an EBDA of about 100 million, and it's not the greatest number for sure, but I think there is still that opportunity out there, as I mentioned, on the solar market. And as long as we see this opportunity on the solar market, also driven by regulation, there is a potential for us to have an attractive market. And as long as we have the opportunity for an attractive market, I think it makes no sense to to idle or shut down capacity. So that would be a kind of, if you want, a decisive point for taking that decision. And as I said, we don't see it right now. Now, on the Section 232, I mean, the U.S. Department of Commerce is currently initiating quite some of these Section 232 investigations secure the supply of strategic raw materials for national security purposes for the U.S. And as you mentioned, indeed, one of the last ones was polysilicon and its derivatives. So, you also asked for the derivatives. It has not been, to our knowledge, kind of officially defined in the announcement. What we assume is that it may refer to wafers in ingots, cells, and modules in the solar supply chain. and also to wafer and ingots and potentially chips not yet assembled into electronic devices. And as you rightly stated, the import of polysilicon per se is not really the big issue because there is not much of an import today to the US. So what could be kind of an an impact that's kind of what I hence from your question. Well, first of all, I think we have to analyze the investigation itself and then, of course, the outcome. But I think it's kind of fair to say that if there would be a truly effective 232 on polysilicon and its derivatives, that it would help us to economically produce polysilicon in the U.S. and potentially also in Europe. So that could have a positive impact, definitely. But again, we have to see it's not yet closed and it's not yet finalized, the decision on it.

Thank you, guys.

The next question from Chetan Udaishi, J.P. Morgan, please go ahead.

Yeah, hi, thanks for taking my questions. First one is just when your comments suggest we should probably be looking at third quarter broadly in line with second quarter, except for that one off in silicones. Is that right? So, you know, 100 million EBITDA or can it be even below that, do you think, in Q3? The other question was, you know, just going back to this power price, discussion in Europe. I'm just curious if, let's say, you get a subsidized 50 euro per megawatt hour price in Germany for electricity, is that a material tailwind for you? Because I think you do already get some sort of, you know, subsidy in Germany already, you know, maybe mainly on CO2 cost compensation, but I'm just curious, is 50 euro a big tailwind for WACA if you were to get it?

for the question on the Q3 EBTA. And I think your calculation is, I mean, sort of, yeah, aligning very nicely to my messaging. Q3 is similar to Q2. I mean, we would see some pluses or minuses in the various segments. Insurance compensation would be a minus for silicones, for polymers. We had a turnaround. slide plus, buy a solution similar, polysilicon, no real change. I said, yeah, 40 million euros for the second half, so maybe 20 for each quarter. So I think if you take others, and this then leads over to Christian's answer to the second question, others is normally burdened by the CO2 compensation offset, which is 40 million euros. So, overall, a similar number for EBITDA for the third quarter. That's how we see it today.

Okay. And, Gitan, on your second question on the power pricing discussion in Europe, yeah, I mean, as I mentioned, I think the good news is that the EU Commission is willing to, you know, accept something like this in Germany, and it's under the CSAF agreement, the chemical industry, sorry, the Clean Industry Act state aid framework, and what we know so far, there is a proposal out, which, as you mentioned, is a 50 euro that will be the lowest level. There are some caveats into it, like it is only for 50% of the procured power, and also you have to kind of reinvest 50% of that. If you would keep it In that kind of original idea, I think the effect for us would be not really big, as you mentioned, because we have other means today. But we see it more as a starting point of a discussion with also the German government and the EU Commission. Because if you implement a new tool which brings exactly the same like the old tool, probably the necessity is not that high, and therefore we would go into discussions to make something more meaningful out of that.

Okay, thank you.

The next question from Tristan Lamotte, Deutsche Bank. Please go ahead.

Hi, thanks for taking my question. I was just wondering if you think that the reported plans to close down underutilized Chinese polysilicon capacity, if that's actually likely to take place and if the mechanism that's been proposed, whether that mechanism could actually work and say this does go ahead, where do you think prices in China could go? And could that really be enough to bring those prices up to the much, much higher ex-China price that you currently transact at. And then the kind of follow-on from that is, does this China supply-side reform actually matter for you at all? Thanks.

Okay, Tristan, very good, very good, and not a simple question to answer. First of all, let me say, I think that in general, if there are measures in place that reduce overcapacity in the world, that is per se positive. Now, your question was, you know, does it work, the concept which we hear about in China? That's something I cannot answer today. It's an interesting concept, I would call it. It has some ideas on reducing, I think, the capacity of about a million tons, which is substantial. Nevertheless, and it goes into the second part of your question, today we talk about a 3.5 million tons of capacity. So taking out one is significant, yes, but it would still leave 2.5 million tons in the market, which would be enough for 1,000 gigawatts of solar. And keeping in mind that, you know, I think last year's installation was more in the range of 500 to 550 gigawatts. you could still call that a significant overcapacity. But nevertheless, I think it's the right move, and also what I hear since the beginning already of the year, that the Chinese government is very much keen and interested in doing something on it. I think it is seen as a challenge, and whether you call it anti-involution, which is a difficult word, Some call it the rat race, or some call it cutthroat competition. I think every measure that reduces this is positive. Will this first step, this announcement, lead to similar prices to the outside China index? I'm not so sure about that, especially in the short term. And is it beneficial for us? Today, we don't really sell much volumes to China, but I think it would have an indirect effect, which is positive, increasing price levels of polysilicon for solar.

Thanks a lot.

The next question from Sebastian Bray, Berenberg. Please go ahead.

Hello. Good afternoon, and thank you for taking my questions. I have two, please. The first is on polysilicon inventory. I'm thinking about the rate at which the company would like to reduce this or would be able to reduce this inventory. And could we end up with a situation where the 200, 300 million of excess inventory that's currently on the books just stays there for two or three years if the market conditions remain unchanged? The reason that I'm asking this is that with an eye towards 2026, I'm thinking, well, There might be a recovery in the segment. The costs could go down. There's some government support. But there's still the underlying issue that the current level of production is not really making a dent in the inventory pile. My second question is on the other line. Could you give us an idea of what the underlying number is now exotronic, assuming that the group utilization doesn't really improve. Is it about minus 50 to minus 60 a year? Thank you.

So I give it a try, Sebastian, on the poly inventory. I mean, you have seen us reducing utilization throughout the year and keeping inventories in check. And that is... following the soft demand that we have experienced throughout the year. And as we mentioned before, we would continue to adjust accordingly. So given the uncertainty in the environment, we could reduce quickly if there's a demand hike. And then we would, as those products are already close to customers, we would sell it quickly. If that doesn't happen, we would continue to adjust production. And even if we would have the inventory for longer, I think I come to it. I mean, there is no degradation. I mean, this product is of quality for years. And we would then have to wait longer and be patient until we can sell it off. But rest assured, we would adjust capacities accordingly and utilization. On the second question, on the other line, we mentioned that our overall guidance for the year is, I think, minus 40%. from a lower utilization. It used to be minus 20, but given the overall, I mean, lack of absorption of infrastructure costs, we have set it at minus 40. And then you have that effect between the quarters, Q3, Q1, Q2. We have that offset for the CO2 compensation that gets reversed in the fourth quarter, as you know. The synchronic result, to be clear, is not part anymore of the others line as it was before, and we have adjusted that also for the comparable numbers for last year.

That's helpful. If I might follow up on the inventory points. I imagine that the utilization of the segment is around 40% or so at the moment, although I appreciate you might not want to give a number. when we talk about the balance of protecting EBITDA versus clearing inventory is it possible that this utilization rate could go lower in your view or the company would be more minded to protect its EBITDA level it goes back to last year where we consciously decided from the uncertainty point of view to rather continue a production at a higher level

thus protecting EBITDA and taking a strategic stock position. In this year, it's different. We adjusted production accordingly, so also taking the burden of the low utilization into the EBITDA but protecting cash and keeping inventories despite the weak demand environment in check. And that would continue going forward.

That's helpful. Thank you for taking my questions.

We have a follow-up question from David Seamans, BNP Paribas. Please go ahead.

Hi, sorry, yeah, just a couple more on Siltronic, if I may. I think there's been a bit of a rumbling in the market that they could at some point look to raise equity. I'm not expecting you to speculate on that, obviously, but perhaps you could comment on whether you would look to, whether you want to maintain the current level of stake in Siltronic, whether you would do that through any kind of process by them.

Well, I mean, there's There's no real change in our strategy regarding Soltronic. I mean, we decided a couple of years ago to reduce our share in Soltronic, which we still believe is a good company, no doubt about it. And we had this good deal on the table with Global Welfare, which has not been approved by the German authorities, unfortunately. There's no rush for us now to sell off any material stakes in that. We are open for discussions. But to be honest, I think geopolitically, it might be the world is not getting easier. And so we see it as a valuable financial asset. And again, no rush to sell off anything.

Okay, understood. And then just on the value of the stake, I think the implied stake value from the market cap is now considerably below the balance sheet value. What would trigger a write-down on that? And now that you've moved Siltronic from the earnings line, I assume the write-down would still go through your earnings as opposed to through the financial line. But maybe you could confirm that.

So we did an impairment test at the close of the half year and We performed a valuation of our shares, and based on the forecast cash flows, we determined that there's no need to adjust the valuation at this point in time. And yeah, for sure, we would have to repeat that exercise at the year end. But you're right, David, it would definitely still affect our P&L, but would not go through the EBITDA or EBIT line in the P&L. Understood. Okay, thank you.

That was the last question. I would like to turn the conference back over to Mr. Hoffman for any closing remarks.

Thank you, operator. Thank you all for joining us today and for your interest in VACA Chemie. Our next conference call on the third quarter of 2025 results is scheduled for October 30th. As always, don't hesitate to contact the AR department if you have further questions. Thank you.

Ladies and gentlemen, the conference call is now over. Thank you for participating. I wish you a very nice rest of the day.