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Operator: Ladies and gentlemen, welcome to the Wacker Chemie AG Conference Call Q3 2025. I am Mathilda, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Joerg Hoffmann, Head of Investor Relations. Please go ahead.
Jörg Hoffmann: Thank you, operator. Welcome to the Wacker Chemie AG conference call on the third quarter 2025 results. Dr. Christian Hartel, 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 web page 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 our 2024 annual report for information on risk factors. All documents mentioned are available on our website. Chris?
Christian Hartel: Hello, everyone, and thank you for joining us on our third quarter 2025 results call. 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, the 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 EUR 1.34 billion with an EBITDA of EUR 112 million. The sum of the 4 operating segments EBITDA amounted to EUR 159 million. This is 18% lower than a year ago and 13% lower sequentially. Despite the lower EBITDA, net cash flow at plus EUR 19 million 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 chemicals 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, semi continued to see strong demand year-over-year and our new etching line proceeds on schedule. Before we move on to the next page, let me say that the Chem-X 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 EUR 5.5 billion to EUR 5.9 billion range. We expect EBITDA in the lower half of the EUR 500 million to EUR 700 million 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're 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 Wacker for sustainable value creation. Let me now hand over to Tobias for a look at the group financials and segments.
Tobias Ohler: 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 EUR 1.34 billion, down 6% year-over-year, and EBITDA declined to EUR 112 million from EUR 145 million a year ago. This development was primarily driven by lower pricing, foreign exchange and volume mix. Excluding others, which held back the reported EBITDA by EUR 47 million, the cumulative EBITDA of the 4 operating segments came in at EUR 159 million. This is down from EUR 195 million 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 EUR 40 million. 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 EUR 20 million versus the plus EUR 30 million 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 remeasurement of our deferred tax assets. The lower tax rates led to a deferred tax expense of EUR 30 million in the third quarter of 2025. After this expense, net income was a negative EUR 82 million, equating to a loss of EUR 1.73 per share. Our balance sheet shows EUR 4.42 billion in shareholder equity and strong liquidity of about EUR 781 million. Since the start of the year, inventories are EUR 173 million 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 EUR 1.94 billion. 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 Schuldschein issue with 3-, 5- and 7-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 EUR 673 million, 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 EUR 86 million, down 19% versus the prior year. For the full year 2025, we have updated the Silicones 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 EUR 344 million, 6% below last year and 5% below the previous quarter. Sales 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 EUR 47 million 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 EUR 93 million, down 7% year-over-year and 6% higher than in the previous quarter. EBITDA came in at EUR 8 million, down year-over-year and a bit ahead of the previous 2 quarters. The sales and EBITDA 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 EUR 25 million. Our focus is on filling our capacities, but we see some customers delaying projects due to market uncertainty. At Polysilicon, sales in the third quarter totaled EUR 197 million, 6% lower year-over-year and 10% lower than the preceding quarter. EBITDA came in at EUR 18 million. Our performance over the past 5 quarters primarily reflected the low volumes of solar-grade polysilicon sold. 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 EUR 100 million. In Polysilicon, our semi volumes continue to grow strongly and the new etching line is on schedule. Semi is our primary focus and the new facility 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 U.S. 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 9 months of 2025, we generated a gross cash flow of EUR 128 million. After cash flow from investing activities before securities of EUR 411 million, the dividend payment of EUR 124 million and some other effects, we ended the third quarter with a net debt of EUR 1.16 billion. 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 EUR 400 million. 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.
Operator: [Operator Instructions] The first question comes from the line of Christian Faitz from Kepler Cheuvreux.
Christian Faitz: Yes. 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 grade and solar grade?
Christian Hartel: Okay, Christian. This is also Christian answering your questions. Now first question on the tariffs. In essence said, not much more development on the tariff side. And I mean, we communicated already that we expect an impact -- a direct impact of EUR 20 million to EUR 30 million for the full year. And 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. Yes. And so nothing really kind of new. On the mix between semi and solar, I mean, we don't disclose these numbers. But as Tobias also mentioned, we see quite good growth this year. And although we don't speak about next year, I can assure you we will also see growth in the semi side next year. And of course, solar depends on the regulatory decisions.
Operator: The next question comes from the line of Chetan Udeshi from JPMorgan.
Chetan Udeshi: I was just looking at your Q3 numbers, and I was surprised at the comment of solar polysilicon ASP down Q-on-Q. 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'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 Ohler: Chetan, Tobias here, trying to answer your 2 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, in all industries and regions, customers are very cautious. And I think that sluggish macroeconomic 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.
Chetan Udeshi: Maybe can I ask one more on your Polysilicon business. Again, what I'm seeing as a dynamic is some of the Western polysilicon companies, Hemlock, OCI, they seem to be going down the chain, doing their own wafers, using their own polysilicon and trying to sell the wafers in the U.S. 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?
Christian Hartel: Well, Chetan, we have a clear strategy focusing on semiconductor polysilicon. And 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 etching 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 is 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 U.S., but no downstream investments into the solar chain.
Operator: We now have a question from the line of David Symonds from BNP Paribas.
David Symonds: Yes, a couple for me, please. So just 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 step 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 Silicones, EBITDA was down 20% year-on-year in the third quarter. It set 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 Silicones in Q1. Q2 in Silicones, there was a EUR 20 million one-off. So if I sort of follow that math through, I think you have a EUR 50 million to EUR 60 million headwind in Silicones 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, 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 you next year.
Christian Hartel: Okay. David, on the -- 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 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. Yes.
Tobias Ohler: 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 some -- also some price, I mean, all 3 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 the 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 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.
David Symonds: Understood. And then maybe just on that working capital point, I mean I noticed that payables as a percentage of sales is actually down quite a lot last year -- versus last year. Is there anything that's changed there? Or what's meaning that payables seems to be running at a much lower level this year?
Tobias Ohler: Payables are running lower also from our reduced investment levels. I mean that is a huge swing factor. As I mentioned, going forward, we are targeting '26. And that type of guidance I can't give because we are just right in the midst of the planning discussions. We will be far below EUR 400 million in next year. And I mean that -- I mean decline in investment also plays a major role why payables are running lower.
Operator: The next question comes from the line of Sebastian Bray from Berenberg.
Sebastian Bray: I have 2, 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 Wacker 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, 1/4 of its stock at the current stock price with it. What is going on in that segment? And what are your thinking 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?
Tobias Ohler: Sebastian, Tobias here to start with your first question on Silicones and pricing in 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.
Christian Hartel: Sebastian, let me answer your second question and maybe for clarification. So this ambitious and holistic cost project, which both I and Tobias talked about is for all the divisions. So it's not specific only for Polysilicon or only for Biosolutions. It's also for -- it's for the whole group. Therefore, it's kind of really comprehensive and ambitious. And it is on the -- especially on the cost -- sorry, 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 Poly 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 strategy. And hopefully, we get an answer from a 232 decision. On the Biosolutions, 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 in the pharma space, sometimes it takes more time. We have a pipeline working on it. And so that's what makes me confident about this and optimistic about this segment, but it might take more time than we have originally anticipated.
Sebastian Bray: That's helpful. 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?
Tobias Ohler: Again, Sebastian, it's rather early. But I mean 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, 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.
Operator: [Operator Instructions] We now have a question from the line of Tristan Lamotte from Deutsche Bank.
Tristan Lamotte: 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 multiyear contracts? So I'm just kind of wondering about the materiality of potential upside.
Christian Hartel: Okay, Christian (sic) [ Tristan ]. Again, Christian, I'm happy to answer Christan's (sic) [ Tristan's ] questions. And the answer is yes. We do -- 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 hedging line.
Tristan Lamotte: 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?
Christian Hartel: Yes, 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? Yes, it's in some chemical segments. And I would say more also on construction-related and standard product-related stuff. And 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 tariffs. The question is, will it go away? I'm cautious on that. At least we prepare with our cost program to be -- to stay competitive and not to hope for that 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 of -- which can be taken by the Chinese or other competitors.
Operator: [Operator Instructions] Ladies and gentlemen, there are no more questions at this time. I would now like to turn the conference back over to Joerg Hoffmann, Head of Investor Relations, for any closing remarks.
Jörg Hoffmann: Thank you, operator. Thank you all for joining us today and for your interest in Wacker Chemie. 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 or 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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