Wacker Chemie Ag Ord

Ladies and gentlemen, welcome to the Wacken Chemie AG conference call Q3 2025. I am Matilde, 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 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 Hoffmann, Head of Investor Relations. Please go ahead.

JÖRG HOFFMANN Thank you, operator. Welcome to the WACKER ChemEAG conference call on the third quarter 2025 results. Dr. Christian Havel, 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 Investor Relations section. 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 or 2024 annual report for information on risk factors. All documents mentioned are available on our website.

Hello everyone, and thank you for joining us on our third quarter 2025 results call. The chemical industry is under pressure worldwide, but especially in Europe. The economic situation is tense and demand is weak. At the same time, the market environment is challenging and competitive pressure is high, especially from China. In addition, a stronger euro creates headwinds. Like many other chemical companies, we had to revise our full year forecast downward in the middle of the year. All our divisions are affected. Despite these challenges, WACKER remains focused on executing its strategy and safeguarding profitability. Our third quarter performance and our refined full year outlook on the next page reflect the ongoing headwinds. Sales in the third quarter came in at 1.34 billion euros with an EBDA of 112 million euro. The sum of the four operating segments EBDA amounted to 159 million euros. This is 18% lower than a year ago and 13% lower sequentially. Despite the lower EBDA, net cash flow at plus 90 million euros was markedly better than a year ago. The result was supported by targeted actions to reduce working capital. Utilization rates remain unsatisfactory, and our operations continue to be held back by ongoing macroeconomic and geopolitical headwinds. Our chemical segments, silicones and polymers, saw low demand in all major markets. Polysilicon was held back by weak demand and lower prices for solar products due to still ongoing regulatory investigations. On the other hand, Xemi continued to see strong demand year over year, and our new edging line proceeds on schedule. Before we move on to the next page, let me say that the Chemex initiative under sustainability marks an important step towards standardizing data for product carbon footprint calculations. Robust PCF data enables us to reliably speak about the sustainability of our products and strengthen our competitiveness. Now to our refined guidance. Considering the ongoing headwinds and soft order intake, we have updated our guidance. We now see full-year sales at the lower end of the 5.5 to 5.9 billion euros range. We expect EBITDA in the lower half of the 500 to 700 million euros range. These changes also affect our expectations about net cash flow. Net cash flow will be negative, but significantly higher than the prior year. Our priorities are clear. sharpen focus on specialty chemicals, align polysilicon with semiconductor growth, accelerate efficiency and speed across the entire organization. Immediate measures addressing cash and costs are already underway. In the next step, we have launched a comprehensive project with the aim of significant cost savings. It will primarily target fixed production costs. We expect to achieve significant cost cuts in production and production-related areas, as well as administration. We are also taking a close look at asset optimization across all regions. Measures are currently being developed. We intend to start implementation in the first quarter of 2026. Our goal is clear. Restore competitiveness, protect profitability, and position backer for sustainable value creation. Let me now hand over to Tobias for a look at the group financials and segments. Thank you, Chris. Welcome, everybody. Let's now take a closer look at the financials for the third quarter of 2025. Sales in the third quarter were 1.34 billion euros, down 6% year-over-year, and EBITDA declined to 112 million euros from 145 million euros a year ago. This development was primarily driven by lower pricing for an exchange and volume mix. Excluding others, which have backed the reported EBITDA by 47 million euros, the cumulative EBITDA of the four operating segments came in at 159 million euros. This is down from 195 million euros in the third quarter of 2024. As previously discussed, the main component of the others EBITDA is the CO2 compensation offset. In the third quarter, this was approximately 40 million euros. As explained before, we expect a refund of these offsets in the fourth quarter of this year. The lower EBITDA and higher depreciation drove EBIT to minus 20 million euros versus the plus 30 million euros a year ago. Depreciation has increased in line with investments made over the past couple of years. Many of our major growth projects are by now completed, and our focus is on growth and filling the new capacities. As already flagged in the H1 report, the German government will gradually lower the corporate income tax from 15% to 10% during the period of 2028 through 2032. This is a welcome development, but it triggers a re-measurement of our deferred tax assets. The lower tax rates led to a deferred tax expense of 30 million euros in the third quarter of 2025. After this expense, net income was an active 82 million euros, equating to a loss of 1.73 euro per share. Our balance sheet shows 4.42 billion euros in shareholder equity and strong liquidity of about 781 million euros. Since the start of the year, inventories are 173 million euros lower with efforts to reduce stock levels gaining traction. Looking at our financial liabilities, they are largely unchanged since the start of the year at 1.94 billion euros. The shareholder equity ratio is 52% and remains at a high level. After the end of the reporting period, we successfully closed the order book for a new Schultzstein issue with three, five, and seven-year tranches. Settlement is set for November 6. This is part of our established strategy of having well-balanced debt maturities. At silicones, sales in the third quarter were 673 million euros, down 7% year-over-year and 6% below the previous quarter. Following a weak order intake, Volumes were largely flat year-over-year. A combination of price, foreign exchange, and a weaker mix held back both sales and earnings. EBITDA was 86 million euros down 19% versus the prior year. For the full year 2025, we have updated the Silicon's outlook. We now expect sales and EBITDA to be a low single-digit percent below the prior year level. In the fourth quarter, we typically see a year-end slowdown. This is nothing unusual, but this time around, we expect a pronounced year-end seasonality due to the ongoing weak order intake. At Polymers, third quarter performance was defined by ongoing slow markets. Sales came in at 344 million euros, 6% below last year and 5% below the previous quarter. were held back by a combination of foreign exchange and price, as well as lower volumes in consumer-related binders. Volumes in construction-related binders, on the other hand, showed some improvement year over year, but remained at a low level. EBITDA came in at 47 million euros, at the same level as last year and ahead of the preceding quarter. As a reminder, our second quarter performance was held back by a turnaround. For the full year 2025, we have updated our polymers outlook. We now expect sales to decline by a mid-single-digit percent with a margin below the prior year level. Overall, end-market dynamics have not changed and remain challenging. For the fourth quarter, we expect to see the typical year-end slowdown. At BioSolutions, our performance was marked by a soft demand environment. Sales during the third quarter were 93 million euros, down 7% year-over-year, and 6% higher than in the previous quarter. EBTA came in at 8 million euros, down year-over-year, and a bit ahead of the previous two quarters. The sales and EBTA performance was primarily driven by the timing of customer project recognition. For the full year 2025, we have updated our BioSolutions outlook. We now expect sales to be similar with the prior year level with an EBITDA of around 25 million euros. Our focus is on filling our capacities, but we see some customers delaying projects due to market uncertainty. At Paula Silicon, sales in the third quarter totaled 197 million euros 6% lower year-over-year and 10% lower than the preceding quarter. EBITDA came in at €18 million. Our performance over the past five quarters primarily reflected the low volumes of solar-grade policy consult. Headwinds in solar over this period masked our successes in SEMI. Here, we continue to show strong growth with volumes being significantly higher year over year. For the full year 2025, we have updated our outlook for polysilicon. Sales are now expected to be a high single-digit percent lower than the prior year, with an EBITDA of approximately 100 million euros. In polysilicon, our semivolumes continue to grow strongly, and the new etching line is on schedule. Semi is our primary focus, and the new facility in Burghausen will support strong semi growth. This supports the segment's overall performance, but we still have significant exposure to solar. As we highlighted on the last call, there might be opportunities ahead due to ongoing regulatory changes in the US solar market. We need to wait for the outcome of these investigations only then we will be able to get a reliable view on how our solar demand may develop going forward. Now, let's look at our net financial position. During the first nine months of 2025, we generated a gross cash flow of 128 million euros. After cash flow from investing activities before securities of 411 million euros, the dividend payment of 124 million euros, and some other effects, we ended the third quarter with a net debt of 1.16 billion euros. Before we get to the Q&A part of this call, let me make this clear. We are acting decisively. We will reduce CapEx meaningfully going forward. I expect 2026 CapEx to come in well below 400 million euros. We implement targeted measures to improve our capital efficiency. While we have seen some progress already, we see further room to free up cash tied up in working capital. And we have initiated an ambitious holistic cost project aimed at all our production sites to structurally reduce production costs and administrative expenses. As Chris already mentioned, we will keep you informed as our plans become more developed. We face a demanding environment, but our actions are clear and focused. By improving cash flow and reducing costs, we will free resources to invest in innovation and specialty growth, strengthening WACKER's resilience and profitability. Thank you for your attention, and we are now ready for your questions.