Wacker Chemie Ag Ord

Welcome to the Orca Chemie AG conference call on our second quarter 2096 results. Christian Hartel, our CEO, and Tobias Ohler, our CFO, will take you through the presentation. The press release, our IR presentation, and the detailed financial tables are available on our website under Investor Relations. Management comments during this call include forward-looking statements involving risks and uncertainties. Please review the Safe Harbor Statement in today's presentation and the 2025 annual report for information on the relevant risk factors.

Chris? Good afternoon, everyone. Thank you for joining us today. The market environment remained challenging in the second quarter. Demand was still subdued in many end markets, while geopolitical tensions added volatility to energy, raw materials and logistics costs. Against this backdrop, our focus was clear. Strength and competitiveness improve operating performance and maintain financial discipline. That focus delivered results. Group sales increased to 1.52 billion, up from 1.41 billion a year ago. EBTA, before the pension accounting effect, rose by 53% to 175 million, compared with the 114 million in last year's results. Our project on cost was the main driver of this improvement, supported by pricing, higher volumes, and better operating performance in the chemical sector. This was not the result of a broad market recovery. It was the result of actions within our control. Despite the uneven demand, volatile input costs, and currency headwinds, we protected margins by driving cost savings, and we adjusted prices when necessary to pass on higher cost. Reported EBTA was 211 million and includes a 37 million non-cash effect from introduction of a capital option in existing pension plans. So EBTA before specials amounted to 175 million. Included in the net income figure of 350 million Euro are significant non-operating siltronic-related effects totaling some 243 million. Now, looking at our operating performance in the second quarter and first half of this year, PACE remains central to our progress. We reduced expenditure through tighter budgets, procurement efficiencies, lower technical spending, and structural measures. We also reached an important agreement with the Workers Council on the reduction of 1,600 positions in Germany. The related personal savings will become visible mainly from 2027 onwards and we remain committed to achieve savings of more than 300 million by 2028. Savings in the first half amounted to 85 million with a 45 million contribution from PACE in the second quarter. At the same time, we are streamlining our structures and processes and sharpening our business model. In our chemical divisions, we focus on specialty products, in the polysilicon division on the semiconductor market, and in our life science division biosolutions on innovative biotech applications. This will enable us to form the basis for future growth. Progress is visible across the businesses and we are improving today's performance while focusing the portfolio on profitable growth. In chemicals, pace-related savings, disciplined pricing and an improved mix strengthen the profitability. In bio-solutions, our priority is to convert the project pipeline, fill our capacities and improve cost performance. In polysilicon, semiconductor grade volumes continue to grow while solar remain weak. We are managing debt contrast with strict cost, inventory, and capital discipline. We had expected greater clarity on US trade policies for polysilicon by now, but the process is taking longer than anticipated. This continued uncertainty is affecting customer purchasing decisions and is holding back volumes. It also limits our ability to take long-term strategic decisions. Before turning to the outlook, Let me briefly mention some important customer recognition of our sustainability work. WACKER received the Royal Energy Award in the raw materials category. By reducing the CO2 emissions from silicon metal production in Norway through renewable energy, biogenic carbon, and potentially also carbon capture in the future, WACKER reduces financial risks and creates opportunities to grow with strategic customers. It also strengthens our value proposition for customers seeking differentiated lower carbon solutions. The award shows how sustainability and innovation go hand in hand. Now turning to the guidance. We updated our full year EBDA range now to 625 to 750 million. This improvement is driven by the good operation performance in the second quarter and the special effect from pensions. Our confidence is supported by visible operating improvements. PACE is delivering. Chemicals is performing well and semiconductor-grade polysilicon continues to grow. These are meaningful strengths as we enter the second half of this year. Nevertheless, we are realistic about the external environment. GDP and relevant end-market dynamics still don't show a true recovery. Competition remains intense, demand visibility is short, and U.S. trade proceedings concerning polysilicon remain unresolved. We will therefore continue to focus on cost control and self-help. Overall, our strategy is gaining traction. We are improving profitability, strengthening cash generation, and positioning Bakker for sustainable, profitable growth. On September 17th, we will hold a Capital Markets Day in London. Since our last Capital Market Day, the environment has changed, and WACKER has changed with it. We have reviewed the roles of our businesses, the way we allocate capital, and the financial framework against which we manage the group. In London, we will introduce new group-level targets. We have made substantial progress in strengthening our competitiveness, improving performance, and sharpening our strategic priorities. It's therefore the right time to explain where WACKER is heading and how we intend to create value. With that, let me hand over to Tobias.

Thank you, Chris. Good afternoon, everyone. Second quarter sales increased 7% year-over-year to 1.52 billion euros, driven by higher prices and volume. EBITDA before special pension effect rose 53% to 175 million euros. The strong improvement reflects both savings achieved in our PACE program and higher volumes. PACE contributed about 45 million euros in the second quarter. Importantly, the quality of our earnings improved significantly. Cost of goods sold remained flat year over year despite higher volumes. as G&A expenses declined, demonstrating strong cost management across the organization. Reported EBITDA was 211 million euros, including a 37 million euro positive pension accounting effect recorded in the other segment. This is due to a newly introduced capital option as payout mode, which lowers our required pension obligation. As a result, Others reported an EBITDA of just minus 1 million euros. For the full year, we now expect the others EBITDA to be minus 15 million euros. This is an improvement from our previous guidance of minus 50 million euros. After depreciation of 115 million euros EBIT reached 96 million. Below EBIT, the sale of Zertronix shares and the revaluation of our remaining stake following Zertronix capital increase contributed 243 million euros to the financial result. We have a slide on this in the appendix, and if you'd like a deep dive, please speak to investor relations. All told, net income reached 350 million euros, equivalent to earnings per share of 6 euros and 86 cents. The second quarter demonstrates that we are structurally strengthening the resilience of the business, creating a stronger foundation for sustainable value creation. Our balance sheet remains very strong. At the end of June, shareholders' equity stood at 4.18 billion euros, while liquidity remained robust at 1.57 billion euros. Working capital increased by 166 million euros. versus year end primarily reflecting the seasonal build up in trade receivables. At the same time, inventories decreased by 26 million despite higher raw material costs underscoring our continued discipline in inventory management. Pension provisions declined by 58 million year to date to 569 million euros. This reduction was driven by the new capital payout option and higher discount rates. Overall, our financial position remains solid with 48% equity ratio and a strong liquidity base. Now let's turn to the operating segments. At Silicon, second quarter sales reached 757 million euros, an increase of 6% year over year. Stronger volumes and higher pricing more than offset currency effects. EBITDA increased to 123 million euros. The strong performance was driven by pace as well as higher volumes, mixed effects, and better pricing. The conflict in the Middle East prompted some customers to pull forward orders into the first quarter. This resulted in a significant moderation of order entry starting into the second quarter and yet May and June came in above prior year. While orders remain very volatile, the order book is higher than a year ago. This supports our expectations for the second half of the year. Supported by ongoing pay savings and strong operational performance in the first half, we are increasing our outlook for silicones. For 2026, we now expect mid single digit percentage sales growth and an EBITDA margin above the prior year level. At the same time, we remain measured in our assessment of market environment. End markets continue to face headwinds, and we have not yet seen a broad-based improvement in underlying demand conditions. At polymers, second quarter sales reached approximately €406 million in entries of 12% year over year. The growth was primarily driven by prices, while volumes grew slightly and the regional mix improved. EBITDA increased to 69 million euros. The improvement was supported by PACE and a positive inventory effect. Polymer's performance demonstrates the execution strength of our teams. Faced with a rapid increase in raw material costs, they successfully applied our proven playbook enabling us to recover cost inflation quickly and effectively. This disciplined approach protected margins and allowed us to service our customers. As with silicones, the conflict in the Middle East prompted customers, particularly in Asia, to push orders forward into the first quarter. As a result, order intake declined sequentially in the second quarter. However, our order book continues to be higher than a year ago but it is short term in nature. At the same time, market conditions remain volatile. Raw material prices in Asia had largely retreated from the highs reached earlier this year and we had begun to adjust accordingly. Against this backdrop, we have updated our outlook for polymers. The situation in the Middle East is again more uncertain and energy and raws move up again For the full year, we now expect polymer sales to increase by a mid-single-digit percentage. EBITDA margin is expected to be above the prior year level due to PACE-related savings and the strong operational performance during the first half of this year. With that, we remain cautious on demand. Construction markets continue to be weak, particularly in Europe and China, and customer order patterns remain short-term in nature. At BioSolutions, second quarter sales reached 99 million euros, an increase of 13% year-over-year. Growth was driven by pricing measures to offset raw material inflation, as well as higher biopharma project-related business. EBDA came in at 7 million euros, supported by disciplined cost management. Our four-year outlook remains unchanged. continue to expect high single digit percentage sales growth and an EBITDA of around 30 million euros. While market conditions remain competitive, we relentlessly work on converting the opportunity management pipeline into revenue, increasing utilization of available capacity, and further improving our cost base. At PolySilicon, Second quarter sales were approximately €226 million, up 3% year-over-year. Growth was driven by higher semiconductor grade sales volumes, which offset lower solar grade polysilicon prices. EBITDA came in at €11 million. Strong semiconductor demand and cost savings supported the results, but profitability remained impacted by lower solar pricing, higher energy costs, and solar inventory destocking. The solar market remains challenging, characterized by weak demand and low capacity utilization across the value chain. In addition, ongoing regulatory uncertainty continues to limit visibility. Against this backdrop, we have updated our outlook for polysilicon. For 2026, we now expect sales to increase by a high single-digit percentage year-over-year, with an EBITDA close to the prior year level. Earnings will be clearly supported by a double-digit percentage volume growth in CEMI and PACE-related savings. Both help to offset the substantially higher energy costs this year. Now let me turn to the net financial debt and cash flow. In the first half, gross cash flow increased to 193 million euros, reflecting the significant improvement in earnings. Working capital reduced gross cash flow by 88 million euros, primarily due to the seasonal increase in trade receivables. At the same time, lower inventory levels released 47 million euros in cash, despite higher raw material costs. This highlights our continued focus on inventory management. Cash flow from investing activities before securities amounted to 19 million euros. Proceeds from the sale of siltronic shares contributed 185 million of cash, offsetting capital expenditures of 172 million during the period. Looking ahead, we continue to expect capital expenditures of approximately €300 million for the full year 2026. With our major expansion projects now completed, our focus has shifted to filling capacities and operational efficiency. This allows us to run capex clearly below depreciation. At the end of June, net financial debt stood at €722 million, supported by earnings Disciplined capital spending and continued cash generation in the second half of the year, we expect net financial debt to decline to around 500 million euro by year end. Before we begin with the Q&A, let me close with a few key messages. Our priorities remain clear. Achieve PACE-related cost savings, improve capital efficiency, and only allocate resources to differentiated businesses where WACA can create sustainable value and profitable growth. The improvement in earnings this year has been driven by our execution as well as the pension effect. As we move into the second half of this year, we have the confidence in our ability to execute but remain cautious on geopolitical developments. Pays, pricing action, and stronger operational performance have delivered tangible results. Reflecting on this progress, usual year-end seasonality and the special effect from the pensions, we raised our full-year EBITDA guidance to a range of 625 to 750 million euros. That concludes my part. We look forward to your questions. Operator, we're now ready to give you names.