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.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone 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 one at this time. The first question comes from the line of Christian Seitz from Kepler-Chevreux. Please go ahead.

Yes, thanks. Good afternoon. Two questions, please. First of all, can you remind us where, at this point, which of your product groups are impacted by tariffs, even only via precursor products? I'm aware that now also silicones are hit. And what else? And is there any estimated financial impact you could provide us for the remainder of the year from tariffs? And the second question is in polysilicon. What is the current split roughly between semi-crate and solar-crate? Thanks very much.

Okay, Christian. This is also Christian answering the question. Our first question on the tariffs. In essence, there's not much more development on the tariff side. And I mean, we communicated already that we expect a direct impact of 20 to 30 million euros for the full year, which is, I think, more important. We also expect that we can pass this on to our customers, most of it. And I think it's also fair to say that probably the bigger financial impact goes from the indirect effect, meaning that there is less demand because of uncertainty of these tariffs But, of course, that is much harder to get a grip on. Yeah, and so nothing really kind of new. On the mix between semi and solar, I mean, you know, we don't disclose these numbers. But as Tobias also mentioned, we see good growth this year. And although we don't speak about, you know, next year, I can assure you, We will also see growth in the semi-size next year. And of course, solar depends on the regulatory decisions.

Okay, thank you very much.

The next question comes from the line of Chetan Udeshi from JP Morgan. Please go ahead.

Yeah, hi. Thanks for taking my question. I was just looking at your Q3 numbers, and I was surprised at the comment of solar polysilicon ASP down Q1. Why is it down? Because you're really not selling to the Chinese customers. So why is the ASP falling in that business? The second question I had was, you know, you're talking about pronounced seasonality in silicones in Q4. I mean, you've not really seen any seasonal pickup through this year. So why would you see a pronounced seasonality in terms of decline? I mean, I'm just curious, are the orders getting worse in October so far compared to what you would normally expect for this time of the year? And is that mainly a function of weaker volumes or is it more that you see incremental pressure on pricing in Q4, which is driving that pressure?

Tobias here trying to answer your two questions. The first is on the ASP trend for solar, as we have referenced, a sequentially lower price. I think you can find that also in the international price index, if you look at that. There's a little bit of a downtick, and as we have that also in mind when setting the price with our customers, we are also impacted. by that. The second question is a bit broader, Chetan, on the overall seasonality. I would say all regions and industries see volumes that are lower than last year, and the market dynamics haven't changed. So overall, all industries and regions' customers are very cautious, and I think that sluggish microeconomic behavior leads to a sluggish macroeconomic environment. And with respect to the current trading that we see, we had the weakest orders in August. So September and October were above that, but they were flat. And if I compare that to the order pattern of last year, we had an uptick in October, and then we had an uptick in November. And we haven't seen that in 2025 so far. And that's the reason why we are cautious to assume a year-end slowdown. So it wouldn't be surprising to see customers working on their inventories. And I mentioned we are working on our inventories. So don't be surprised if that is the broad picture that we feel in the market. So that's why assuming a slowdown and inventory management is our key assumption for the fourth quarter.

Thank you. Maybe can I ask one more on your polysilicon business? Again, you know, what I'm seeing as a dynamic is some of the Western polysilicon companies, you know, Hemlock, OCI, they seem to be going down the chain, doing their own way first, using their own polysilicon and trying to sell the wafers in the US and maybe other Western world. Is this something you will consider as part of your strategy to use your solar polysilicon or you would rather just shut it down if there's not enough demand for solar polysilicon, especially one of your plants in Germany, which is focused solely on the solar part?

We have a clear strategy focusing on semiconductor polysilicon. I think that has been proven to be quite successful with the market share of about 50% globally and now with the very successful ramp of our new edging line leading into further volume growth also next year and quite some long-term agreements we have with our global customers. So, from that perspective, that is the clear focus we have, the clear strategy we have on polysilicon. The solar side, we see as an opportunistic opportunity, and the Section 232 investigations, once there's a final ruling, this might be an attractive opportunity to continue. But I think it very much depends on the 232 ruling, and before that, I think, It doesn't make sense to talk about further downstream integration. But even if it would come, if it would be attractive, then we would follow this opportunity. And then I would say there's also no need for an additional downstream investment. So from that perspective, we stick with SEMI. That's our strategy. We follow up on the opportunity which might arise from 232 solar in the US. but now downstream investments into the solar chain.

Thank you.

We now have a question from the line of David Siemens from BNP Paribas. Please go ahead.

Thank you. Yeah, a couple from AP. So following up slightly on Chetan's question, struggling to follow the development of the polysilicon division a little bit, EBITDA, virtually halved quarter on quarter, despite the semi line running quite well. Could you maybe say whether, I mean, I think some of these contracts in the solar business are probably starting to roll off. So was there a material set down in the solar volumes that you did quarter on quarter? That's question one. And then question two, bear with me because it's a little bit of a long one. So apologies. But if I look at silicons, EBITDA was down 20% year on year in the third quarter. It's said to be down 40% year-on-year in the fourth quarter, based on your updated divisional guidance. And coming into the first half of 2026, the comp from this year is very tough. So EBITDA was up 40% in silicon in Q1. Q2 in silicon, there was a 20 million one-off. So if I sort of follow that math through, I think you have a 50 to 60 million headwind in silicon alone, just from sort of mechanical comps next year. which is around sort of a 10% EBITDA drag at group level. And I'm just thinking, you know, is there a chance that EBITDA could actually be down in 2026 overall for the group? Maybe you could comment on that and on any sort of mitigating factors that might benefit NASA. Thank you.

Okay. David, on your first question on the solar side, so we do have solar LTAs for this year, and we also have solar LTAs for next year to come. And, you know, that's the good part of it. And I think, as we said before, the 232 decision, hopefully soon, will give us some more clearance and guidance on this segment. Yeah. David, Tobias here for the silicones question. I mean, you are trying to move towards 26. I think that's far too early. As you know, we typically give guidance in March next year. But nevertheless, your observations for silicones, I'm happy to comment on these. I mean, you see a significant slowdown in the second half. Why is that? because we have a drag on, as we described, on the top line. I talked about adverse effects from volume mix and exchange rate and also some price. I mean, all three together. But on the other hand, also in the second half, we see the impact of our efforts to reduce working capital. And if you run at lower utilization, just to get that under control, you get a lower absorption on fixed costs. And that definitely makes it not a good way to think about a run rate for next year. So it's far too early. We have many moving parts, as Chris mentioned at the introduction. I mean, we have embarked on a comprehensive cost program, exactly focusing also on the on the fixed manufacturing costs. So I would be not in the position now today to talk about any 26 hint on how the profitability might move.

Understood. Thank you. And then maybe just on that working capital point, I noticed that payables as a percentage of sales is actually down quite a lot versus last year. Is there anything that's changed there? What's meaning that payables seems to be running at a much lower level this year?

Payables are running lower also from our reduced investment levels. I mean that is a huge swing factor and as I mentioned going forward we are targeting And that type of guidance I can give because we are just right in the midst of the planning discussions. We will be far below 400 million euros next year. And I mean, decline in investment also plays a major role in why payables are running lower.

Understood. Yeah, that's clear. Thank you very much.

The next question comes from the line of Sebastian Bray from Berenberg. Please go ahead.

Hello, good morning and or good afternoon, I should say. It's been a long day and thank you for taking my questions. I'd have two, please. The first is on the pricing in specialty silicones more broadly. I've played with this data in different ways, but it looks as if at the margins, the specialties pricing may have started to slip a little. Is this fair and what can be inferred about behavior moving into 2026? My second question is on the cost savings measures that have been announced, and in particular as they relate to biosolutions, because we're focused on polysilicon and if WACA can maybe shut a production line or what goes on there. But if I take the amount of capital invested in biosolutions over the last decade, the company could have bought back, as a rough guess, a quarter of its stock at the current stock price with it. What is going on in that segment, and what are your thinking about in terms of what is on and off the table when it comes to making potential savings? Could you shut a polysilicon line? Could it involve divesting parts of biosolutions? What are your preliminary thoughts?

Sebastian Tobias here to start with your first question on silicones and pricing specialties. I think there is not Big movement in pricing. I think if you look at the overall development throughout the year, we had a very strong start in the year with a strong mix. But if you look at the overall margin progression in specialties, I think it's rather flat. So from that perspective, it is flat and unsatisfying today because of the low utilization. And that is the topic also of that comprehensive cost program that we are trying to address our fixed cost base. And for that reason, no view into 26 again. As I said before, guidance will be disclosed in March as always. Sebastian, let me answer your second question and maybe for clarification. project, which both I and Tobias talked about, for all the divisions. So, it's not specific only for polysilicon or only for biosolutions. It's also for the whole group. Therefore, it's kind of really comprehensive and ambitious, and it is on the production cost side. Now, your question was more specific on what could we do on biosolutions and on poly. And I think that's a totally different topic, because on the solar side, I think, on the policy side, it is very clear, as we mentioned before, strategy on semi. If there would be a very clear decision that there is no attractive solar market left for the Western players like us, then yes, you are right. We would have probably one plant too many for our semi strategies. Now, and hopefully, we get an answer from a 232 position. On the solutions, I think we have a totally different situation. Although the utilization is also not satisfactory at the moment, we do see potential for growing this business. And I think at the moment, it is more by a very soft market environment, which we and others face. But we work very diligently on acquiring new projects. You know, in the pharma space, sometimes it takes more time. We have a pipeline working on it. And so, therefore, that makes me, you know, confident about this and optimistic about this segment. But it might take more time than we have originally anticipated.

That's helpful. Thank you. Just as a quick follow-up, can you give any guidance on energy cost relief year-on-year expected for 26 for at-current hedging, prevailing spot rates, and so on?

Again, Sebastian, it's rather early, but for energy, we do have our hedges. We see market prices trending down a bit, so there should be some relief on that On the other hand, energy costs will be higher next year due to the lower CO2 compensation because that is always coming with a time lag from lower production as a reference. But on the other hand, there might be some positive changes from regulation. So again, as I said before, it's too early to give you a precise guidance for this cost next year. And the same goes for raw materials, slightly trending lower, but too early for guidance.

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

As a reminder, if you wish to register for a question, please press star and 1 on your telephone. We now have a question from the line of Tristan Lamotte from Deutsche Bank. Please go ahead.

Hi. Thanks for taking my question. I was just wondering if we could see material upside to EBITDA from demand for polysilicon for semis in 2026, or is it more kind of the case that most of these capacities are already filled and therefore it's not really going to move the dial and the pricing is fairly stable and on multi-year contracts. So I'm just kind of wondering about the materiality of potential upside.

Okay, Christian. Again, Christian, I'm happy to answer Christian's questions. And the answer is yes. Although we don't want to talk about guidance for 2026, I think this is the exception we can really make. We do see an upside to EBITDA from the semi side because of increasing volumes to be sold next year, coming also from our edging line.

And maybe second, I was wondering if you could just talk a little bit more about where you're seeing pressure from China, and is there any reason that you're seeing why that additional pressure should go away at some point, or is this kind of the new normal?

Yeah, it's a very, very good question, especially the second part of the question. For the first part, where do we see pressure from China? Yeah, it's in some chemical segments, and I would say more also on construction-related and standard product-related stuff. And, you know, the main reason is an underutilization of assets in China and a weaker-than-expected market development in China. So we see volumes from China pressing into Europe, obviously not so much into the U.S. because of the The question is, will it go away? I'm cautious on that. At least we prepare with our cost program to be, you know, to stay competitive and not to hope for that, you know, everything will come back. I think that's the right and cautious approach you should take in such a situation. And of course, we fight on the market for the volumes. And I think here also our very clear strategy on more specialties, on more elaborated products, working together with customers is the answer in reducing the share which can be taken by the Chinese or other competitors.

That's great. Thanks a lot.

Once again, to ask a question, please press star and one on your telephone. Ladies and gentlemen, there are no more questions at this time. I would now like to turn the conference back over to Jörg Hoffmann, Head of Investor Relations, for any closing remarks.

Thank you, Operator. Thank you all for joining us today and for your interest in Wacker Kinney. Our next conference call on the full year 2025 results will take place on March 11, 2026. As usual, we intend to publish our preliminary numbers at the end of January for the beginning of February. As always, please don't hesitate to contact the IR department if you have further questions. Thank you for your interest.

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