Wacker Chemie AG

Thank you, operator. Welcome to the Wacker Chemie Ag full year 2016 conference call.

My name is Jörg Hoffmann, and I’m the Head of Investor Relations at Wacker. With me are Dr.

Rudolf Staudigl, our CEO and Dr. Tobias Ohler, our CFO, who will take you through our presentation in a minute.

The presentation is available on our webpage under www.wacker.com under the caption Investor Relations. But before they begin, let me point you to our Safe Harbor statement, which you will find at the beginning of the deck.

With this, let me now hand you over to Dr. Staudigl, our CEO.

Dr. Staudigl?

Ladies and gentlemen, welcome to our full year 2016 conference call. 2016 was a year of records for us.

Silicones went through the €2 billion sales level for the first time in history. Silicones EBITDA contribution was at €360 million, the highest in record, testifying to the success of our combined specialty and cost-focused strategy.

Polymers alone contributed about as much EBITDA to the group as polysilicon, following another year of very strong demand for its products. Our chemicals operations contributed 70% of group EBITDA, excluding Siltronic and special income.

2016 ended the year with a strong quarter. Strong demand for semi wafers, silicones and for our polysilicon drove performance higher than we had expected at our last call.

Current trading conditions suggest that these trends, coupled with seasonal recovery in polymers, will continue. But before we get there in detail, let’s have a look at our results presentation.

Starting on Page 2. 2016 sales came in at €5.4 billion, slightly over the prior year, mainly driven by strong demand for our products.

Full year EBITDA, excluding special income, grew at 19% year-over-year, almost twice as fast as expected, with the full year results coming in at €1.08 billion. As I just said, our chemicals operations saw very strong volumes, especially in silicones.

Across all segments, we saw very good cost performance last year also. Page 3 then shows how the year shaped up against prior year and our last guidance.

You can also see that our net cash flow increased substantially to €400 million as CapEx declined to €428 million. As outlined, for the leverage phase of our growth path, we expect similar net cash flows in 2017.

As you saw today, we have proposed a €2 per share dividend for 2016. This reflects about 53% of net earnings, just over the level we have set as a new target at our last Capital Markets Day in October.

Looking into the full year 2017 for today, we are confident about our capabilities, but also somewhat concerned about the macroeconomic impacts and some pricing trends. We are seeing raw material inflation in methanol, vinyl acetate monomer, ethylene and acidic acids, which will affect our chemicals businesses.

We now expect full year 2017 sales to increase by mid single-digits over last year, with an EBITDA at the level of last year on a comparable basis. If current market conditions remain unchanged during the year, we definitely see additional upward potential for EBITDA over and above our present expectations.

Let me now hand over to Tobias for more detail on our financials and an outlook into Q1.

Looking at last year’s P&L on Page 4, sales were driven by volumes and overall performance was held back by price attrition. All segments showed similar performance, with the exception of Siltronic, where price, volume and exchange rate were balanced year-over-year.

The increase in depreciation from €575 million to €735 million had an impact on gross margins and operating result. As a result, gross profit was down despite a better performance in underlying volume and a better cost performance than in the prior year.

Over the next 3 years, we expect to see depreciation decline back to 2015 levels. If you look at EBITDA performance and adjusted for special income, EBITDA was up 19%.

In light of top line pressure from lower prices, this figure shows impressively our underlying volume and cost performance. EBIT was lower due to the increase in depreciation.

Other operating income improved by €62 million despite lower special income. In 2015, we have still booked preoperational expenses and currency losses were also higher in 2015 than in 2016.

The net financial result decreased from minus €67 million to minus €101 million. The key factor in the change was the lack of capitalized interest as we completed the Tennessee plant during 2016.

This has an impact of €17 million. Full year tax rate came in as expected at just 28.5%.

We suggest to model with 30% going forward. Looking at our balance sheet on Page 5.

You will see that non-current assets actually decreased over 2015 as we depreciated more than we added to assets. Pension liabilities are up year-by-year by about €500 million to €2.11 billion, as the pension discount rate declined from 2.75% for 2015 to 1.94% for 2016.

However, compared to Q3 2016, our pension liability actually came down by about €460 million, as the pension discount rate increased again towards year end 2016 to 1.94%, up from 1.38% at the end of Q3. In 2016, as announced, we advanced €50 million cash as a top-up into our pension schemes, which will be booked against pension liabilities in Q1 in 2017.

Prepayments decreased by €182 million to €271 million as legacy contracts with prepayments are running out. For the next 12 months, we expect a decrease in these prepayment levels of about €100 million.

Working capital increased year-over-year by 15.3% to €1.25 billion. This reflects the strong operating performance in Q4, which drove up receivables, combined with slightly higher inventories and lower payables.

And now moving to Page 6 in the presentation, Silicones saw a strong demand for its product and benefited in the last weeks of 2016 from competitive outages. Demand was strong in all regions, with an over-proportional increase in specialty products.

Silicones exceeded €2 billion of sales for the first time in history. EBITDA increased by 31% to €360 million, following high plant loading, good cost performance and an improved product mix.

The EBITDA margin in Silicones increased from 14.2% to 18.1% in 2016. Now looking into 2017, we expect a mid single-digit increase in full year sales and slightly higher EBITDA, headwinds come from sharply rising methanol costs.

On the next page, sales in polymers were slightly up as price deflation nearly compensated strong volume growth. Sales reached about €1.2 billion.

Full your EBITDA came in at €261 million, 17% up from last year. The biggest contributors to this increase were volume growth and a good cost performance, including efficiency gains.

The 2016 EBITDA margin was a record of 21.8%. 2017 is going to become more difficult in polymers as VAM, ethylene and acetic acid costs rise.

As a result, we expect a significant decrease in EBITDA, but despite this, full year EBITDA margin in polymers should come in above our 16% long-term target for the chemical segments, with sales in polymers up mid single-digits. On next page, polysilicon, polysilicon reported sales of €1.1 billion, as volume growth only slightly overcompensated for lower price and mix effect.

Reported EBITDA was down 29% year-over-year as special income decreased. We also incurred ramp-up costs and prices fluctuated substantially during the year.

When adjusting for ramp costs and special income, EBITDA margin was 29% versus 33% in 2015. Shipments increased to 66 kilotons in 2016 at all plants, including Tennessee were utilized at their respective capacity limits throughout the year.

Looking into 2017, we expect sales at the level of 2016 and an EBITDA excluding special income, slightly higher than in 2016. We expect volume growth year-over-year, yet the lower ASPs will largely compensate those gains.

Siltronic on next page, Siltronic reported their full year results today, with sales at last year’s level, EBITDA increased by 18% to €146 million. Key contributors were high plant loading, combined with a good cost performance and lower hedging costs.

For 2017, Siltronic expects sales over €1 billion, with an EBITDA margin of at least 20%, if not significantly higher. For more detail, please contact Siltronic directly.

Net financial debt on Page 11, decreased as guided to just under €1 billion, as gross cash flows increased to €737 million and net cash flow came in at €400 million, as cash outflow for investments decreased by about €300 million to €517 million. The difference between cash outflow for investments and 2016 CapEx is the timing of the cash flows.

So some CapEx was booked in 2015, but the actual cash outflow happened shortly after the year end 2015. Looking into the first quarter on Page 12, we see strong demand for our chemical operations with order intake over the level of last year.

While volumes look good, we are looking with some concern to the recent rise in raw materials, in particular, to methanol and ethylene. Polysilicon operates at full utilization and Siltronic guided to a strong 2017.

Overall, we expect Q1 group sales at about €1.4 billion, with an EBITDA clearly above Q1 2016. With this, let me hand you back to Rudi.

Thank you, Tobias. As you heard, we think we are in good shape.

We see some challenges going forward, but our course is clearly set. For the full year 2017 guidance on Page 12, we expect mid single-digit increase in sales and an EBITDA at the level of 2016, excluding special items.

With CapEx discipline, our CapEx should stay at about the level of last year, leading to net cash flow of about €400 million. That said, we believe that the coming year can bring upsides and downsides to this guidance.

Should current end market conditions persist however, we would look to improving our guidance as we move on through the year. This concludes the presentation today, ladies and gentlemen.

Thank you for your attention so far. We will now be happy to answer your questions.

Operator?

Yes, good afternoon. First, I would like to understand a little bit more what your assumptions are for polysilicon, you are addressing that the average selling price will be down year-on-year and you addressed also that, that might be due to the prepayments going down, so is the contract volume having a lower percentage there, could you give – shed some light what you can see right now in Q1, will we see this already or is what we have seen on the spot market as quite nice price level something we will see also – see in higher earnings and price in the first quarter.

And maybe anything what you can say to us what you assume from today’s point of view what the spot prices, the only thing we can see from the outside, you have put into your guidance assumption, that’s on the polysilicon. And on polymers, basically the only thing but obviously, quite harsh impact comes from raw materials, could you address how much of the raw material headwind you might be able to transfer by higher pricing and as this is the only segment where you indicate that profits are going down but that on group level, earnings might be flat, it means that the substantial decline of this segment should we offset all of the increase of the three others, which would highlights really quite significant decline, could you shed some more light what your assumptions for this segment are?

Thanks.

Yes. Andreas, let me talk first on the conditions of the polysilicon market.

I think we have seen that last year, this up and down, which was represented by the events of price fluctuation. And within the last few weeks, there was a little bit of a downward trend.

And for the year, we simply assumed decreasing prices, just to be on the safe side, because we don’t know what will happen. Whether we will see something like last year or not, I mean if conditions are getting good, of course we will see upside.

It’s just very difficult to read right now.

But looking on Q1 is what we see in this PV inside is something which should come through in the sense of higher prices or is the lower percentage of contract volume offsetting this, so basically, if I look on what we have seen last year it was around €60 per kilogram in the first quarter, if my math is right and looking onward, we see right now on the spot market is similar, but probably, volumes for the semiconductor industry has higher prices and your contract volume is also higher prices, so what is the mix out of this, what you can – should have clearly already seeing a pocket for Q1, just to get a flavor on how important this contract mix is?

I mean there is a lot going on if you compare Q1 to the prior year. But also if you compare Q1 to Q4, I mean we definitely see that increase in prices if you compare, especially the first month of Q4 to the first month of Q1.

But on the other hand, I mean we also had for example, higher electricity prices in January. And so I would be a little cautious on just extrapolate that price index into our results.

So I think that is a simplification that I mean many would love to use. But I mean our result is basically coming from the strong volume and then our continuous cost improvement.

And so everything is going according to plan, as we see it. But the mathematics not entirely predict maybe the – what we see today.

Okay. Thanks.

With respect to raw materials, your key question was on how do we pass it on to our customers, I mean as we continuously said, we do have in polymers roughly 25%, which is 50% of the liquid business or 25% of the total business index. For this, we pass it on.

For the rest, it’s small or less value based pricing. And then it very much depends on the competitive situation that we have.

So we assume overall for polymers, still despite the formula pricing and overall slight price decline, but less than in 2016, but we see significant headwind in ethylene and VAM and also acetic acids. I mean that more or less comes from higher NAFTA pricing, which goes back to oil prices, but it also comes from higher coal prices, which almost doubled since the trough that we had seen in 2016.

So that’s why we guide for a significantly lower absolute EBITDA, but we are very confident that we will be above our target margin of 16%.

Thank you.

Good afternoon everybody. A couple of questions, if I can please, first, I wonder – I wanted to ask some questions about the volume number in polysilicon, I was a little bit surprised by the 66,000 tons that you suggest you shipped last year, I was sort of under the impression that at the nine-month stage, volumes were something in the low-40s, which suggests a very significant shipment in the fourth quarter, above your production rate, so I wonder if you could just confirm that.

And if so and given the pricing points that we saw – the shift in pricing in the fourth quarter and the fact that you had put inventory strategically into the system, I think during the third quarter, just wonder about your thought process of effectively selling out of – apparently selling out of those inventories at what were pretty low prices in the early point of the fourth quarter. And the second question was on just coming back to the prepayments question, so I note you are talking about prepayment amortization of around €100 million, presume I think around €20 million of that is Siltronic, so around €80 million for the polysilicon business, should we read that basically as a lower for longer prepayment amortization program, so you expect now to have some prepayment benefits or some – to pricing into 2018 and probably 2019 as well?

Thanks very much.

Peter, maybe I will start with the first two, which are more or less as I understand them linked. I mean we reported that we had in September, with the dry up in demand build some strategic inventory at our Asian hubs close to customers.

So for Q4, there was no big change in that. So basically, we kept this strategic inventory.

And so our phase was you could argue, close to our production level. And we ran Tennessee as high as we could, close to the total capacity.

And going forward we see that I mean with the lead time that we have to our customers, that we would take the opportunity to again, build strategic inventory as prices are low. And that’s what we have as clear intention.

So I wondered, could you – I apologize for interrupting, but could you then confirm, were volumes around 20,000 tons in the fourth quarter and so my assumption the nine-month was wrong?

As a matter of principle, we do not comment on quarterly volumes. So I can’t help you on that.

I am sorry.

Okay, thank you.

Maybe on the prepayments, yes, there is some prolongation of the prepayments and there is even on certain contracts, even an inflow of prepayments, although on a much lower basis than in the past.

Thank you very much.

Good afternoon. Thank you for taking my questions.

Firstly, sorry to labor that, but back to polymers, please, you are saying that you are looking for a volume increase in 2017 as well as maybe some price declines, if I heard that correctly, in spite of the higher raw material prices, but you are still looking to beat the 16% EBITDA margin, so all-in-all, the pressure from pricing can’t be too bad, but if we compare that to 2016 where we saw lower pricing, but favorable volume growth, leading to the growth that you just communicated, how can volume growth in 2017 be only in the mid range of single-digit percentage if we will see a favorable volume growth and let’s say, slight movements in the price, that will be my first question. polysilicon, just to verify what I just heard, is it true that you are basically sold out and is it just at the moment, currently selling basically what you produce without having, let’s say sizable inventories that will enable you to give customers, let’s say better trading conditions from that point of view, so basically, you are able to shift at once, not only you have four weeks after the contract that the customer has in place.

Lastly, could you give me the gap between the cash flow from long-term investment activities, securities, so the almost €517 million and the CapEx you highlighted, €428 million, what is that related to? Thank you.

So pretty long list, Oliver. I would love to start with the last one.

I think the key difference between the CapEx and cash outflow is that we had some CapEx booked in 2015, which led to cash outflow in ‘16. That’s why there is that deviation.

And typically, if you have a large project at Tennessee, you run very high and intense on year end. And then you pay bills in the beginning of next year.

For polymers, as I just indicated, I mean we guide for mid single-digit sales growth, but in that forecast, we include a slight price decline. But as I said, this price decline is actually lower than the price decline that we saw in 2016.

And to give you a little bit flavor, I mean, it means – it depends on how the market also develops. We – just recently, we have seen some price increases in China.

And also, for the dispersible powder business, Europe is getting tighter. So we try to pass on any cost increases it makes sense to our customers and if the competitive situation allow us.

And that’s why we are really confident that we are above our target margin.

May I jump in there? Just to label the point, is expected volume growth more or less on the level of 2016 or 2017?

Would that be a fair assumption?

It’s broadly right. I would say, we assume a stronger year for our dispersible powder as we had really a terrific year for dispersions last year.

It could be the other way. So, dispersible powder is stronger than dispersions.

Thank you.

Okay. And maybe on the polysilicon, basically, we sell what we produce.

But as Tobias already mentioned, we sort of reserve the right to put some material in inventory rather than selling it just to reduce the shipment time, the future shipment time to some Asian customers.

Thank you.

Hello, guys. I have got three questions.

Firstly, how should we think about Wacker’s stake in Siltronic? I know in the past, you have indicated a complete exit at some point in time.

Can you give us an update on the timing of this? And I will follow on after that, please.

Okay. Our strategy definitely is to reduce our stake to go to a minority position and yes, that’s certainly the next step, which we will follow at the right time.

Okay, fair enough. Secondly, question on your Slide 2, your global PV forecast, I am quite curious to know about your rest of the world forecast.

It seems relatively large compared to previous years. Can you give us a bit more clarity on this line, please?

Yes. I am just looking it up right now, yes.

We do really extensive research on country basis. And so the rest of the world basically, the biggest part of the rest of the world is South America and there are significant projects going on in South America.

Okay. And any specific countries within South America?

It’s Chile, for example. Chile, Brazil.

Yes, okay. Alright.

And my final question is about the poly price right now. I would like to just get a bit more of an understanding on the differential between the spot price in China versus the international market and how you guys see that going forward.

Is the spread wide now? I know from one of your competitors, they have talked about that spread widening.

I just wanted to get a feel for what you think of what happened in that dynamic this year?

Well, certainly, you can see that on the PV index price, the polysilicon price outside of China is – tends to be lower than in China. And this is due to the significant pressure outside of China, because there are capacities that cannot be sold in China.

That’s the reason.

Okay, alright. Thank you, guys.

Hi, thank you for taking my question. Just a couple more around polysilicon.

Could you just tell us what the competitive environment is like? Are you seeing significant additions or capacity additions for polysilicon in markets such as China, which may impact your belief to sell there going forward?

And previously you had mentioned that for 2017, you expected to sell volumes of around 80,000 metric tons. Is that a kind of like a guidance that we can look for 2017 in terms of the volumes you expect to sell?

And also if you can give us an update on the preferential agreement you have with MOFCOM and how that sort of update is proceeding? That would be great.

First of all, we did not say that we will sell 80,000 tons. We said our capacity this year is 80,000 tons.

It’s just the 20,000 in the U.S. and the 60,000 in Germany.

And of course, the amount which we sell also depends on the product mix. There are some products that eat up a little bit more capacity than others and this is why we cannot be more specific at this point in time.

In terms of capacity additions, there are several pieces of information there will come additional capacities over time, especially in China and we are watching that and we will see what’s coming. But it does not give us sleepless nights at this point in time.

In terms of MOFCOM, I have to start with the European view first. As you probably know, this trade dispute between China and Europe on modules and sales has been almost resolved.

I mean, it’s the so-called minimum import price for Chinese modules have been reduced by 20% beginning of the year for Chinese producers and so-called interim review has been started that takes about 6 to 9 months. And then the intent of the European Commission is to consecutively reduce the minimum import price to ultimately get to a wealth price level for modules and cells.

And I think this is, from our point of view, a great development. We think that Europe made a mistake in putting up such high variance and it’s not only our view.

There is a whole industry here in Europe that shares that view. But since China always said they would mirror what Europe is, they would mirror that on polysilicon, our assumption at this point in time is that the import hurdles for us would be reduced as well in China.

Great, thanks.

Sure.

Thank you and good afternoon. Three questions, please.

First, again, circling back to raw materials, I am afraid, in polymers, would you then agree that your total raw material as you budget today will increase by something around 10% to 15% in 2017 based on the guidance you are giving? And then similarly, at silicones, you mentioned methanol being an issue, but I understand you have also locked in some lower press contracts for silicon metals.

So, how does that pan out that offset each other? What’s the raw material bill increase here year-on-year?

And lastly, on VAM, from memory, I thought you had a net long position in VAM, especially in the U.S. and China.

Wouldn’t that mitigate the impacts from increasing raw material costs for you or am I mistaken here? Thank you.

Patrick, I think your raw materials assumption in polymers is sort of okay. I wouldn’t debate that.

There is a substantial increase in raw materials for polymers. For the second question, methanol is largely traded at an index.

So there we see a substantial impact immediately on our bill if we procure the methanol based on the index with a discount. So that is what we are seeing as significant impact to the Silicones, but asking the question about silicon metal, you are right, given our contract structure, we also see at the silicon metal price indices, we see increases, but that is largely mitigated by our contract structure.

So the impact is mainly from methanol for our Silicones business. And for the VAM, I think we are not long in VAM, but we are net buyer in VAM.

So, we only have production capacity for our German demand and we procure VAM in addition to the capacity also in Europe, but to 100% in the Americas and Asia.

Understood. Thank you very much.

Yes, thanks very much. You talked about the European position, I was wondering if you give us an update on the U.S., whether you indicated the storage at Tennessee to be part of the tariff regime and just how that’s panning out.

And on the prepayments, you said that it changed and you said you are actually starting to get some incoming. I wondered if you could give us some more color on the prepayments and how you see that evolving over the medium-term and how that could affect your volumes over the medium-term as well.

And what was the cause of the change in the degression of all the use of those prepayments? Thanks.

On the tariff regimes, yes, I mean, as an American producer at this point in time we cannot export to China, which I think is a problem for our Chinese customers, because it’s new and very high quality, very productive facility, but that’s the fact. And so we are selling the material outside of China.

In terms of the prepayment, as I said, there is only very little – or there is new prepayment incoming, but nothing compared to the times when heavy prepayments were paid in order to reserve capacities, but it just demonstrates that our high-quality polysilicon is very – there is a high demand for that and some very high-quality customers want to make sure that they get enough of that material. And then there is the fact that some of the prepayment contracts are prolonged into the future, so the existing prepayments sort of distributed over more years.

And this altogether determines the lower prepayment reduction within a year and that it’s distributed over more years.

And how much of your business – can you just give us why – what was the publication for the change? Is it customer-led or is it...

Yes, its individual customers, but I really want to emphasize that it’s, by far, not to let that expense as in the past. And as I always stress, even for long time, the – basically, polysilicon will be a normal chemical business.

And in a normal chemical business, you do not get prepayments for future deliveries. In some instances, you get it to make sure that customers – or customers want to make sure that they really get enough quantity of high-quality materials.

But you should not look at the polysilicon business globally the business where there is a change in trends towards more prepayments again. These are very customer-specific issues.

Okay. And just one last question, my reaction in thinking that it’s simply you being cautious.

And what – and I don’t understand, why it is you are saying that what you are seeing currently is you don’t believe will be a trend to follow where you are not prepared to assert that it’s going to be a trend for the full year. Is that just natural conservatism on the part of Wacker?

It might be part of it, absolutely. But what we saw in polysilicon last year, I mean, there is significant decline in demand and pricing mid of the year, but certainly, to an extent that nobody had expected throughout the first half of the year.

And we just with our first guidance of the year, we just do not want to mislead anybody, so it’s just careful. I think it’s the way to do business.

Yes, okay. Thank you very much.

Hi, thanks for taking my question. Just sorry one more on the polysilicon guidance, can you just clarify, so you are guiding to flat sales with volumes up offset by lower prices and then somewhat higher EBITDA?

And then this also includes the €50 million lower costs, because you don’t have the ramp up costs for Tennessee, if I am correct. So the math on this would imply that you are expecting volume growth at 5% or below, which seems pretty low to me.

Is that correct or am I missing something? Thank you.

Yes. Matthew, we are not commenting on the assumption of volume growth.

But I mean, overall, we do see volume growth. As we already said, we do have the capacity available.

But as Rudi said, we also have the effect of demanding product mix. And if you take this together, lower ASP also coming from the product mix and maybe a cautious a market price outlook, I mean, you see that, I mean, price effects go 1 to 1 into our profitability to the bottom line, while adding volume just increases the contribution margin over your variable costs.

And what I also mentioned for the question on the first quarter, electricity prices were up so. I mean, basically, as we see it today, it’s a fair guidance for the segment.

We see revenue at the level and EBITDA slightly above prior year, if you exclude the special effects from prepayment.

Okay, thank you.

But of course, we also do everything to reduce our cost as well over the year.

Thank you. Good afternoon.

Two questions. Firstly, on group CapEx, I noticed this is slightly up year-on-year.

You saw a number of last projects, both at the Charleston plant, Burghausen in Brazil. Was 2016 a CapEx trough?

Are we likely to stay on an upward trajectory is my first question? Secondly, on Polysilicon, just to clarify, are you confirming that 80,000 tons is not a production target for 2017?

It is a production target. No question.

But we do not comment on how much we sell, how much we put potentially in inventory. There is an influence of product mix, specifications, how much goes to semiconductor, how much goes into multicrystalline, solar, solar wafers, how much goes into monocrystalline wafers.

There is this multitude of influences and that’s just very hard to predict at this time. But our nameplate capacity is 80,000, and we certainly always tried to all this we try to exceed that.

.

And with respect to CapEx, I think the 450 number that we have for 2017 is – there is no trend in comparison to prior year. But we always said that we would invest below depreciation.

And so take a number of between 450 to 500 and we have sufficient CapEx also to have larger projects. As we announced, we have included [indiscernible] in Tennessee.

We have included silicon metal expansion in Norway. So yes, and I think that’s the level of CapEx that we see.

And don’t forget that depreciation will also come down over time. So the peak that we had in last year was €735 million, we will see it below €600 million in, I would say, in 2020.

€450 million per year is a lot to work with.

Okay. Thank you.

Thank you for taking my follow-on questions. Firstly in Silicones, you are expecting a good product mix, some raw material price increases, but you think you are still able to raise your EBITDA.

Firstly, your market position in Silicones, I would say number two in the market, is weaker than any polymers. It seems like you are more successful passing on the higher raw material prices in Silicones compared to your polymers franchise, why is that the case.

Secondly, in that context, what’s good product mix, we should see some higher prices, which leaves little room for volume increases, will that be an assumption. And then lastly, just a housekeeping number, the 80,000 tons, or 80 Kilotons in polysilicon, is that as good as it gets for the time being or will we see some more the debottlenecking already in 2017?

Thank you.

We are always working on debottlenecking projects. This is very important for cost reduction.

But we said the 80,000 is a nameplate capacity number. And yes, we do not want to speculate on anything we achieve through debottlenecking.

In polymers and Silicones, significant difference between the two is that the percentage of raw material influence on total polymer cost was much higher than on Silicones. It’s important to know.

But in Silicones, the clear strategy is and if successful, to go more and more into higher value added products. And with higher value added products, the pricing power is also much better.

And – but on the other hand, our market position as you rightfully said, in polymers is better because we are number one. And you can rest assured that we are trying to pass on additional costs that we have as much as we can.

Okay, thank you.

Yes. Thanks for letting me ask questions.

I had a follow-up question on polymer business. I am seeing one of your major competitor announce multiple price increases over the last six months in products that they compete with you and so I was just wondering, why do you think your pricing was going to be down or is it more a function of more competitive for the competitor environment becoming more fiercer or tougher this year versus say, last year.

And the second question would be, historically, as you have seen over the past 8 years to 10 years, we have already seen a big volatility in your chemicals business margin because of raw materials, price changes, so is that a way that you could lower that in the future by maybe structurally changing some of your selling prices, how you will define your contracts with pricing, etcetera? Thank you.

To the question on the price increase of our competitors, you can rest assured that we will also increase prices in those products and in those regions. So it always depends on the very specific competitive situation that you have.

And as I mentioned in a previous answer, we do see price increases, for example, in China. And we still see very strong demand and that’s what’s going on in the polymers business.

It really depends on which product and which region. And with respect to the volatility and passing on more of the raw materials to our customers, as we said, we try to do that, but most of the business as we are specialty chemicals company, we are value-adding very much to the processes or to the products of our customers.

So with that, we always try to seek the best solution. So as raw material price index contracts are for that is not so much coming.

Okay. Thank you.

Thank you for taking my follow-up questions. Two, I have.

The first is on the efficiency gains you mentioned you are striving for, for the polysilicon segment, are they able, from today’s point of view, to outstrip what you have at higher cost for electricity, that’s the first question. And the second is on CapEx, you said that the €450 million is enough even to have gross projects and you have mentioned some, if Siltronic wants to go for capacity additions and it probably needs more than doubling what they spend right now, which is focused on maintenance only, would Wacker support these investment ideas going forward for Siltronic or is the €450 million budget more important?

Well, I think within the €450 million, there is already significant budget for Siltronic. But of course there is no budget for an additional fab, but as you know, Siltronic doesn’t need an additional fab for 300-millimeters, because in case additional capacity is needed, they could do it within the existing buildings.

With respect to the question on efficiency gains and the electricity cost increase, I mean I would like to emphasize that the cost increase that we saw was at the beginning of the year. So markets also seem to have normalized.

And I would definitely assume that efficiency gains would be, yes, more than what we see as a cost increase in the first quarter.

Thank you.

Sorry for having me again. Could you please – is it possible to quantify the increase in the electricity price you obtained [ph]?

No, I am sorry. We don’t do this on such a detailed level.

But I would like to explain the rationale why it’s increased. I mean it really comes back to, in January, a situation where the coal price was very high, as I mentioned initially.

And then suddenly, you had French, which is a typical producer of energy having their nuclear power plants down and had a very I mean strong demand of electricity in winter. So they needed to import electricity, which made coal fired power plants run even higher.

And added to this, we had some low level of rain water and all this led to higher electricity prices at the beginning of the year.

Understood. Thank you.

Thank you for joining us today and for your interest in Wacker Chemie. We are looking forward to further discussions with you as the quarter progresses.

We will be back again with a conference call on Q1 on April 27. Goodbye.