Wacker Chemie AG

Thank you, operator. This is Jörg Hoffmann from Investor Relations.

Welcome to the Wacker Chemie AG Conference Call on Full Year 2020 Results. Dr.

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

The presentation is available on our web page under the caption, Investor Relations. Before we begin, please allow me to point you to our Safe Harbor statement, which you'll find at the slide deck's beginning.

Dr. Staudigl?

Ladies and gentlemen, welcome to our call. 2020 was a difficult year for all of us.

Coronavirus pandemic cursed the economy with considerable force. Public life ground to a halt in many countries around the world.

Today, the pandemic still poses enormous economic, political and social challenges for all of us. A year has passed since the initial COVID-19 shocked and today, we can see that we have so far steered Wacker very well through the crisis.

We delivered good financial results in challenging markets. While we worked on improving our competitiveness, we focused and continued to focus on three priorities; protecting the health of our employees, keeping production running and supplying our customers and safeguarding the company's long-term future.

The key part of our long-term positioning is our focus and our ongoing sustainability initiatives. We continuously expand our sustainable product portfolio.

We reduced the carbon dioxide intensity of our business, and we ensured that our business standards are upheld in our supply chain by actively engaging with our suppliers. While our sustainability efforts do not drive short-term results, they do help to prepare us for the climate-related risks and opportunities of tomorrow.

Our financial figures reflect the overall market volatility last year. We saw a significant slowdown in sales at mid-year, followed by a growing demand for our products in the second half of the year.

In 2020, we reported full-year sales of €4.7 billion, 5% below 2019. Our reported EBITDA came in at €666 million, essentially at the same level of 2019 when adjusting for insurance compensation.

Our fourth quarter saw an excellent performance driven by a demand rebound across all sectors. The strong performance in all our businesses continues into the New Year.

As a range [ph] of topics that will influence our performance this year, many of them positive, some are challenging. The EU Green Deal and global climate policies add momentum to an underlying surge in demand for sustainable solutions.

We benefit from this trend in all our businesses. Our chemical products enable process improvements that reduce water or power usage.

Our products eliminate carbon dioxide in the applications or via the sourcing of renewable feedstocks and energy. Rising demand for sustainable product solutions promises to add a layer of growth opportunities, especially in our polymers and silicones businesses increasing targets for renewables installations globally and the sheer competitiveness of PV, solar drives our polysilicon business.

In the appendix, we showcase two new product innovations based on renewable raw materials. These products are industry-first and allow us to enable our customers' climate ambitions Last year, we progressed on our Shape the Future program.

This ambitious restructuring program targets annual cost savings of €250 million by the end of 2022. Already last year, we benefited from over €50 million in savings.

We expect to achieve over €100 million in additional cost savings this year. In parallel, we continue to drive our so-called Wacker Operating System cost and efficiency programs.

We have successfully championed specific cost reductions in our larger units for years now, creating truly competitive world scale units. Also, our intensified cost roadmaps are generating results.

In polysilicon, these results are now becoming visible. Across our businesses, we do not only grow in volumes, but also benefit from mix improvements.

In silicones, we see fast-growing shares of specialty products and sales. We also see this in Biosolutions, albeit, on a smaller scale.

Our fast-growing biopharmaceutical business will change the shape of this segment as we advance. As the economy recovers in force, we are facing raw material inflation.

Such a reaction is not entirely unexpected. What is new though is the speed of some cost increases.

VAM, for instance, has just very recently more than doubled since Q4, driven by strong demand and planned outages at large suppliers in unprecedented numbers. Also, the fast rebound is putting global logistics under strain.

Wacker stands on a very solid financial foundation. Our liquidity is high, and we are virtually debt free.

This financial stability is the basis of our dividend policy, which is to distribute some 50% of our net income to our shareholders. This year's dividend proposal follows our established dividend policy.

Therefore, the Executive and Supervisory Boards will propose a dividend of €2 per share at the upcoming Annual Shareholders Meeting. Now to the outlook before Tobias covers our segments and current trading conditions in more detail.

The pandemic still has a firm hold on Germany and the world in 2021. The restrictions remain substantial.

Yet even as we still take all necessary precautions against COVID-19 and weighing opportunities and challenges, we are optimistic about this New Year. We want to grow our full-year sales by mid-single digits.

EBITDA should improve even faster at a rate of about 10% to 20%, leading to a substantially higher net income for the full-year 2021. Now, let me hand over to Tobias.

Thank you, Rudi. Welcome to all of you.

Let me begin on Page 3 with our P&L. Sales came in at €4.7 billion, down by 5%.

The biggest contributors to the decrease were lower volumes and price reductions in standard silicones. Gross profit, however, came in 8% higher on cost reductions and lower depreciation.

The improvement is even greater at about 26%, when adjusting for the €112.5 million insurance compensation, which was booked into cost of goods sold in 2019. SG&A improved by about 7%, following strict cost controls and the first benefits of our Shape the Future program.

Our other operating result was essentially unchanged when adjusting for two items. A €50 million restructuring provision booked in Q4 2020, and the impairment on polysilicon assets booked in Q4 2019.

The results from associates include for our last time, our adjusted share of net income from Siltronic. In 2020, the contribution amounted to €32 million.

Until the closing of the transaction, we will account for our share of Siltronic as an asset for sale. You will find more detail on this and other modeling help in the appendix to the presentation.

Our tax rate came in low, as we continue higher depreciation levels in the tax books. You will recall that the 2019 impairment affected our IFRS accounts, but not the German tax accounting.

As a result, we suggest modeling with an effective tax rate of about 25% for the next couple of years. Net income came in at €202 million, or €3.81 per share.

On Page 4, our balance sheet has changed a bit since we last spoke. We now show our share in Siltronic as an asset held for sale at a book value of €550 million.

Cash and securities now amount to over €1.3 billion. This is more than twice the amount of 2019.

We strongly increased the buffer as part of our crisis management. Our pension liabilities went up again.

As interest rates decline, our liabilities grow. Most of this relates to pension scheme that was closed in 2005.

We are taking steps to reform our pension system. The reform should, both reduce our liability and our annual contributions.

We'll keep you updated as we make progress on this difficult issue. Moving on to silicones on Page 5.

After a strong fourth quarter, silicones ended the year with sales of €2.2 billion. This is 9% lower than in 2019, as the pandemic led to a business contraction in the second quarter and most of the third quarter.

This decline was particularly noticeable with products for the automotive and textile industries. EBITDA declined to €388 million, as volumes and prices on standards declined.

The business found traction late in the third quarter and saw an outperformance in the fourth quarter. Volumes were higher than normal at the year-end.

This was driven by catch-up effects and refilling of supply chains. We saw order intake for specialty stronger than for standard and far above prior year levels.

While the full year 2020 was lower than the prior year, Q4 saw a strong performance as you can see on the left side of the chart. Into 2021, these trends persists and we continue to see very strong demand.

Major product groups are now on allocation, as we face surging demand outpacing supply chains. However, we see mounting headwinds from raw materials, notably silicon metal and methanol, in addition to adverse currency movements.

Looking into the full year, we now expect mid-single digit sales growth in silicones restrained by capacity and logistics issues. We see continued strong growth in specialties, but also see lower ASPs in some areas.

We expect to date full-year EBITDA and margins slightly higher than last year despite raw material and energy headwinds. On Page 6, polymers saw an outperformance in 2020.

Polymers benefited from an early rebound in smart construction demand and lower-than-usual seasonality in the fourth quarter. Full-year sales came in at the level of 2019 at €1.3 billion.

EBITDA was 39% over 2019 at €271 million. Supported by a good cost performance and lower raw materials, the strong performance in the fourth quarter was truly exceptional.

Sales were up 9% and EBITDA 35% higher than in 2019. Many positive effects aligned to make this happen.

Competitor supply challenges drove our own utilization up. Raw materials were very low, supported by our own upstream production and the construction market picked up momentum first, leading to positive mix effects.

Current trading at polymers continues just as dynamic. We continue to see strong demand, although logistics issues are slowing some of our shipments.

The fast rebound of market distorts the flow of shipping containers, resulting in bottlenecks in some ports. Since Q4, however, prices for important raw materials such as VAM and ethylene have continuously increased.

Very recently, prices have skyrocketed to double the level of 2020, fueled by strong demand and some significant outages of acetic acid and VAM plants. You can find more details on Page 20 in the appendix of our presentation.

It is unclear how long prices remain elevated. These new headwinds make it now increasingly challenging to reach the lower end of our forecasted EBITDA margin of 15% to 18%.

While our renegotiated contracts already saw price increases, they do not cover these large and unexpected increases. We have already raised prices for uncontracted volumes and will adjust prices for contracts due at the end of the second quarter.

We are also looking at our annual contracts as to how and if we can maintain prices, given this unprecedented increase in raw material costs. BioSolutions on Page 7, saw growth in its biologics and cyclodextrins businesses.

On the other hand, gumbase saw volumes decline as the pandemic affected chewing-gum sales globally. Total segment sales came in at the level of prior year.

At the same time, EBITDA came in at 23% plus, benefiting from better capacity utilization in our Amsterdam and Lyon facilities. In BioSolutions, current trading in biopharmaceuticals continues dynamically, as we prepare for the rollout of CureVac's mRNA-based vaccine against COVID-19.

For the full year, we expect a strong performance in biopharmaceuticals. Results, however, will be held back this year by significant ramp and integration costs, both following our expansion in Amsterdam and for the acquisition of the pDNA specialist, Genopis, which we announced weeks ago.

We expect a slow recovery in chewing gumbase Overall, we see annual sales increasing at a low double-digit percentage, while full-year EBITDA should come in slightly higher than last year. We expect much lower EBITDA contributions during the first half due to ramp and integration costs, and then a strong EBITDA performance towards the year end.

Polysilicon on Page 8 saw strong solar volumes and increasing prices in Q4. Full-year sales came in at €792 million, at the level of the prior year.

EBITDA came in at €5 million, a strong improvement in underlying performance as the preceding year saw the insurance compensation payment. Ongoing mix improvements, such as higher sales, semiconductor, polysilicon and stronger sales into advanced solar materials, as well as significant progress on our aggressive cost roadmaps supported this development At the start of 2021, volumes are strong and order intake continues at a high level.

Prices for solar, polysilicon and mono grades have increased significantly since the start of the year, with strong solar installations expected globally and few new capacities entering the market this year. We also see continued strong demand from semiconductors.

Our inventories are running very low as demand exceeds our production capability. Given the demand and price strengths [ph] for solar materials in the most recent weeks, we now see upside to our expectations for the full year.

Mid-single digit sales growth in polysilicon with higher volumes and improved mix could now become low double-digit sales growth. EBITDA is expected substantially higher than last year.

Our performance in Q4 is a good indicator for the average quarterly earnings levels we plan with, adjusting also for potential volatility in the second half of the year, higher raw materials and energy costs. Overall, the recently very strong demand in polysilicon gives upsides, compensating for polymers' downside risks from recent raw material spikes which we discussed.

Moving on to net cash flow on Page 9. Net cash flow was the big story last year.

We managed to eliminate almost all net debt in the previous year. As Rudi said, Wacker places special emphasis on its strong financial footing.

So when the pandemic heated up, we switched to cash generation mode. We used all levers from cost reduction to working capital releases and reduced CapEx.

Net cash flow increased four-fold over the prior period to €698 million. At the end of the year, net financial debt amounted to only €68 million.

Our final net debt number includes an injection of €73 million into our pension system in addition to our scheduled annual contributions. Let's move on to guidance on Page 10.

All our segments reported combination of strong demand, high order intake and increasing raw material costs. Given the unresolved pandemic, we guide cautiously.

For the group, we expect a mid-single-digit percentage increase in sales, with an EBITDA increase between 10% and 20%. Net cash flow will be clearly positive, but would come in below last year, also because we increased CapEx to €350 million, with more than half of this designated for silicones.

Let's be more specific on Q1 on Page 11. We have seen a solid start into 2021.

While we remain alert about the pandemic risks, we face strong demand, essentially across our entire product portfolio. We continue to focus on cost reductions, and continue our programs to reduce or curtail discretionary spending.

All businesses have defined cost roadmaps that will drive their cost competitiveness further. Our efficiency program is well on track and implementation progresses.

We expect to spend about €20 million on early retirement schemes in the segment and central functions this year. This compares to the €50 million restructuring provision of last year, but we will not break out these costs separately at this low level, but digest them in our businesses.

For the first quarter, we expect sales of €1.3 billion and EBITDA significantly higher than last year. With this, I hand you back to Rudi.

Thank you, Tobias. Ladies and gentlemen, as Tobias showed, all our segments performed exceptionally well in Q4.

Yes, we are proud of our performance and the challenging circumstances last year. At this point, I also want to thank our employees who adapted to the new realities in an exemplary manner.

2021 is not without challenges either. The pandemic is not yet defeated.

Many countries like Germany still suffer from lockdowns, and the whole range of restrictions on human interactions and travel. While demand for goods is strong today, in many segments, this might change with new waves of infection or alternatively, when consumption swings back to more services again.

Therefore, we want to exercise caution in forecasting. At this time, we see a strong demand rebound in all our businesses.

Yes, we see a raw material inflation, but we also have the right mechanisms to address these issues. We will work on price increases on our own.

As the pandemic continues as an outstanding challenge to lives and livelihoods, we help provide vaccines to the world and we will and can expand our capacities if necessary to service this need. We meet our customers' growing demand for sustainable products.

Our products are already best-in-class and we continue to make progress on improving our entire portfolio. Many of our product groups drive a more sustainable economy.

We provide leading solutions for smart construction, e-mobility, resource efficiency and renewable energy. This sets us apart from our competition.

About 60% of our processes are already electrified. This puts us in an industry-leading position to achieve carbon-neutral production as the share of renewables in the grid increases.

Only with competitive power prices will the European chemical industry be able to stop carbon leakage. We strongly support an industry power price and are working to ensure that our voice is heard Just recently, we submitted a project proposal to the EU, together with partners to build and operate an innovative carbon negative renewable methanol plant based on green hydrogen.

We hope to receive EU funding for this innovative project. This project will establish a hydrogen network in Southeast Bavaria and accelerate industrial defertilization of the region and beyond.

On Page 12, you will find a slide describing this groundbreaking project. In pursuit of our BioSolutions' strategy, we acquired Genopis.

The chart deck has a slide on this on Page 13. This transaction is a further step towards completing our value chain around pDNA and mRNA.

You should expect us to stay active in this area. We see significant growth opportunities in biopharmaceuticals and nutritional products.

Ultimately, we want BioSolutions business to reach about the €1 billion in sales to balance our portfolio. We intend to sell our shares in Siltronic and GlobalWafers -- to GlobalWafers.

The acquisition of Siltronic by GlobalWafers will create a leading supplier of semiconductor wafers globally, combining complementary businesses. Upon all regulatory approvals and final closing, we will see a cash inflow of about €1.3 billion.

I firmly believe that we should not start distributing funds before we have received them. But I can say today is that our priority is to accelerate the growth of Wacker, all this with rigorous prioritization for strategic fit and financial attractiveness.

Ladies and gentlemen, the coronavirus is still prevalent and we need to remain vigilant. The health and safety of our employees while maintaining deliveries to our customers remain our highest priority.

Lockdowns and other disruptions remain a real risk. All told, I'm optimistic -- I'm very optimistic about this year.

Demand is robust, and the growth drivers for our products are not just intact but in many ways, strengthening. Thank you.

Our presentation ends here. We will now begin with the Q&A session.

Operator?

Thanks for giving me the chance to ask three questions if I may. The first is on polysilicon and the solar market.

So, we have seen a very rapid penetration of the monotechnology falling very fast in multi. Now the Nexus is coming, which as you elucidated might be much slower the switch from p-type to n-type.

Maybe you can elaborate how fast that might be. Is 5% this year, 10% next year something we should think about and how do you see yourself in this n-type market?

How differentiated is it what you can deliver here? Second in BioSolutions, you have elucidated on the headwinds you will have.

I guess that it is very much headwind in the first half and then in the second half much stronger as you already said. I would have the split that you almost are nothing in the first half and almost all of the earnings you envisage for in the guidance for the full year in the second half.

Can it be that extreme or is it less or is it more balanced? And the last one is if I look on the guidance and I take what you said on Silicones, Polymers, BioSolutions and what in the slide deck you have said on corporate, I would get to roughly give or take €640 million, which leaves for the guidance only €160 million for Polysilicon.

That's basically what I would assume you can earn already almost in the first half. So, is it baked in that potentially Polysilicon could fall to breakeven again in the second half?

These are my three questions.

Okay. On your first question, I mean there is certainly a migration from -- first of all to mono that's almost completely done and then from p-type to n-type and the n-type share is growing.

It's -- right now it's probably in the range of 10%, 15%. But it certainly will significantly grow as demand for more and more efficiency is still intact and then even the next step I'm sure will be to go to heterojunction technology.

So, I mean it's happening as we always said. The demand for higher quality material is increasing and solar will be completely technological drive and technology sector and our position there especially in the n-type is extremely good.

And so our material goes into the highest technology segments mostly. And from customers, we know that they use our material to improve other materials and so they are able to increase the efficiency of the final product.

And we always said quality is our hallmark and this is what we are focusing on in solar as well as in semiconductor where highest possible quality is the pre-condition for the latest technology products.

Andreas, on your second and third question. The second one on BioSolutions and distribution of our EBITDA across the year first half and second half, I would put it this way.

You are not entirely off, but you are bit too extreme from my feeling. But you are absolutely right that we will see limited EBITDA in the first half even through the third quarter and then have a very strong performance to the end of the year as we see it today.

Because we are investing also a lot in ramping up the production and with the acquisition, it also comes at an integration cost as described in the speech. So, that it's our profitable business also in those quarters that I just mentioned.

The third question was again similar on the distribution of EBITDA in Polysilicon. I think we hinted that you could take the Q4 performance at -- as an average performance for the full year in order to narrow down also modeling, you get to little bit higher than €160 million as you mentioned.

And I think you are bit too extreme, at least it wouldn't fit to our today's modeling that it would be all in the first half and breakeven in the second half. We don't see -- we put in some volatility, but we don't see it dropping us back to breakeven in any quarter.

Then your guidance is really cautious, right, because if I take Polymers even well below the 15% and look how prices are in the first half for Polysilicon and I would also assume that it will not fall to breakeven, then there is quite some upside -- at least more likelihood of upside than downside I refer only to the upper end of the guidance.

Yes, but keep in -- yes. You're absolutely right.

But the polymer spike really refer to the Slide Number 20 in the appendix. This is a tremendous headwind that we will see short term and it all depends how quickly markets will normalize again.

I mean they won't stay at that level, that's for sure, but this is something you need to absorb in the near future.

Very clear. Thanks.

Okay, welcome.

Thank you. First question really on polysilicon.

Firstly, a lot of your competitors in China are increasing capacity and clearly you are focusing more on mix improvement and then we have seen a lot of long-term agreements being signed. So first of all, are you basically sold out for 2021 and you've also entered in some of these LTAs?

And secondly, just strategically longer term would you sort of think about joint venturing here given the fact that this is a market which is increasing in volume and I'm assuming you don't want to increase capacity here by investing in this business? So, that's the first question.

The second question just is on polymers. When you compare the VEA technology with some of these other technologies like SPL, acrylics, BVA in terms of just the price increases that you are trying to push through, when I look through other raw materials, they are all sort of in short supply, they've all sort of gone up.

So, doesn't this allow you to sort of push prices through in a more unique setting this time around than sort of in the past. That's the second question.

And then just really the third question around silicones. The last time, if I'm not wrong, you guys were sort of if I may use the term on allocation, margins were sort of well north of 20%, Again I appreciate you want to be cautious, but can you just explain to us in terms of profitability this year, how does silicones progress these [ph]?

Thanks a lot.

Okay. On polysilicon, yes, there have been few announcements on significant capacity increases.

I mean, looking at the past, there were many announcements on capacity increases. And they didn't come as fast as they were announced.

I mean, we are observing the market very carefully. And yes, we -- it remains to be seen what's really coming.

Even if we look at the demand right now and the official capacities that have been announced in the past, it leads us to the conclusion that the capacities that have been announced in the past really have never been established in that magnitude. So, we are watching it very carefully.

Yes, there have been many LTAs announced. We have LTAs too.

And in some of the LTAs, what we are seeing is that, yes, there are some LTAs but they are negotiated on quantities and price every month. So it's -- they are not that type of LTAs that we normally see in the chemicals business.

Are we sold out? Yes.

Yes. I mean, we can supply all the material we can produce right now.

And you asked about our long-term strategy. Without really going into details, I mean, we certainly see ourselves as the top quality supplier for the top quality needs of the solar customers and the semiconductor customers.

And of course, when markets justify it, we can get more, let's say, more material out of our facilities. And -- but we are certainly not focusing on big-scale expansions.

On -- yes, the dispersions basically, dispersions and special markets, whether it's VAE or other chemistries. It's certainly a unique situation, as we said.

I mean, we see this spike in pricing and we see three big facilities plants for VAM out right now and as well as three significant plans for acetic acid. I mean, this is certainly a very unusual situation and that should allow us to be as aggressive as possible in terms of price increases and believe me, we definitely are in the business to make profits.

And that's why we will do whatever is possible, I would say, to pass on the prices because, I mean, it wouldn't be a good service to our customers either, if we would need to scale back on capacities or whatever. So, I think it's an unusual situation in the market and it's a question of time when it's over.

On silicones, yes, the supply situation is tight. No question, it's very tight.

It's tight as I have seen it in the silicones business, and I'm observing this market for a long time now. But on the other hand, extreme tightness will not be -- will not continue like that forever.

We certainly increase our capacities wherever we can on the short-term and on mid and longer terms as well. But yes, I mean, that's the situation, how it is in silicones.

Just one follow up then on polysilicon. Sorry about this.

But if everyone is sort of "I may use a language sold out" and on lot of LTAs and very little volume is traded on spot, in what scenario then do you expect the price crash in second half, because at least, my simple brain cannot foresee this. Maybe I'm just being too rude [ph] again.

No. For the second half of this year, I definitely don't see a price crash.

No, I don't see.

Okay. Thanks a lot.

And if you're not going to be on the Q1 call, I may just say, wish you very good luck and congrats on great career at Wacker.

Okay, thank you very much. But there is still one conference call I have to do.

Okay. All right.

Then I just -- I didn't know. I'm sorry about that.

No, but I appreciate it. I really do.

Yes. I'd just echo my sentiments from Jaideep.

And, Rudi, thank you. Couple of questions from me.

One longer-term one on silicone anodes. A major auto manufacturer was holding up Power Day yesterday, talking about accelerated, charging times of silicone anodes enabled.

I'm just wondering where Wacker is on that? Are you -- is that something that you're thinking about building capacity for going forwards?

That's first question. Second question, if I may, you called out lower ASPs in some areas of silicones, which I'm quite surprised about given the strength of the market.

So if you could expand on that, that would be very helpful. And lastly, a question on capital allocation.

I mean it sounds like that you are indicating that a special is not of interest, even with the proceeds in from the sale of Siltronic. Is that -- is that -- I mean it doesn't look like it's going to look any better in terms of business performance across all the divisions at this point, I mean polymers aside.

Can you help dimensionalize the spending CapEx you're intending and/or what kind of firepower you want to retain for M&A? Any color on that would be very helpful.

On the silicon anodes, yes, I think there is still lots of hope for the performance of silicone in anodes and quite a number of companies are working on that and we are too. And as you know, we also have share in another company that is working on it.

But I think it will still take some time, until it will need full-scale production. And yes, I think we are probably more cautious than others, but it has turned out to be right to be a little bit more cautious.

Maybe to the second question on the ASPs in some areas of silicones where we expect lower prices in this year than in last year, I think you should wind back a bit, I mean, where we come from. I mean the pandemic is still around and we have seen a strong volume decline in last year and then a slow recovery and a strength then in the fourth quarter, which is linked to some strong ordering, also refilling some pretty long supply chains.

And as we have some annual contracts also in silicones specialty, these come really still from negotiation times, when it was not so clear how strong the market could become. So, that is what we have from last year.

But I mean, anything new which is negotiated today where we talk about additional volume, I mean, it's for sure that we are after price increases in this market environment because we are having a tremendous effort in our own supply chain to come up with such volumes. And so it's a big burden.

So, we tried to have the customers also take their share. But in some areas, we still have lower prices and we cannot do anything about it.

And maybe also consider that the standard prices have declined in silicones in last year and this typically also have a lagging effect on some -- at least, some specialties as I described

And then, your question on capital allocation. As always within Wacker, we will be extremely careful.

Well, first of all, the Siltronic deal is not closed yet. And it can take into the fourth quarter, maybe in the first quarter of next year, we don't know.

But independently of that, I think our finance situation is quite good and we have worked really hard to get there. So, I mean, what we are simply going to do is to strengthen our existing businesses.

I think we have quite many opportunities to do that. And as I also mentioned, we want to grow our BioSolutions business also through, let's say, smaller-scale acquisitions.

And we are definitely not out there to make big acquisitions with big risks that normally does not pay off. But on the other hand, we see many opportunities where we can invest and to grow the company faster than we could grow in the past because of -- yes, and the main reason why we did not grow faster was the price decline in polysilicon over the last few years.

The chemical businesses always grew, except for, of course, 2020, but grew on the average of something like 6%. And with further opportunities, I think our portfolio is great, trust me, so with lots of opportunities.

Very clear. Thank you, both.

You are very welcome.

Yes, good afternoon. Yes, most of my questions were actually already asked and answered.

I still will try to ask you a little bit more on capital allocation and especially on the gross CapEx you mentioned. I mean, if I remember correctly, you were saying over the last years that you are in a capital-light expansion mode going forward, meaning that the expansions you have on mind are in the downstream and do not require much capital.

I mean, reflecting on the pile of cash that you are likely going to receive at some point of time this year or early next year, is there more than this to invest in future growth? Do you still have ideas beyond of what we might be thinking in the downstream?

Any thoughts on this would be very helpful. And secondly, a follow-up on the pension top-up.

Could you give us an idea if this is going to continue in the same dimension or you have a little bit more in mind in terms of topping up, given the money coming in? Thank you.

On the capital allocation, I think you have to sort of remember where we are coming from. I mean, we had lots of capital expenditures to globalize the company.

I mean, we built big plants in China. We built our Tennessee facility and so on, and this required a lot of capital.

And then we went to the, let's say, capital savings mode and investing less than depreciation, which was very good. And yes, of course, the expansion in the downstream in our chemical businesses really required much less cash than building all these big facilities.

But now we are having these big facilities and we can invest there and grow our market penetration in China, in America. And this is certainly what we are going to do.

And there are, of course, the ideas to go into, let's say, market segments that are adjacent to what we are doing right now. And we certainly do have the funds to do that, but we do these things very carefully and it's always good to have excellent balance sheet.

And as I already mentioned in one of the calls, we certainly -- yes, I mean, one of our targets certainly is not to depend on banks. And so I think everything that where we are in right now and what's coming towards us is helping us to pursue a growth strategy and with -- yes, with many ideas and we have many ideas and we have the funds to pursue them.

Thomas, maybe quickly on the pension question. I mean, we had made some top-ups in the past couple of years as you noticed, but it's definitely not our intention to continue or even accelerate this.

And we talked about a potential reform of the pension system. We are in discussion with the workers' council on this.

We are examining a number of options there. So it's premature to talk about this today.

But we would keep you posted as we progress.

Thank you.

Yes. Good afternoon, gentlemen.

I've got three questions from my side. And first one is on your currency assumptions you have baked into the guidance and also, then update on hedging and potential effects there.

Then the second question would be again on BioSolutions and the smaller scale acquisitions you said. Can you help us understand, do you still see white spot for your BioSolutions business?

And then, the last question if I may. Maybe you can help us to understand what considerably means for your Q1 guidance?

You said lower earnings at BioSolutions and higher earnings at polysilicon. Maybe you can help us to understand the Q1 EBITDA bridge and also what considerably means?

Thank you.

I would start, Markus, with the first question on exchange rate assumptions. We plan today with 1.20 for the US dollar to the €o.

And if you compare that to the average of the first quarter, it was 1.10 to the average of full-year 2019 towards 1.14. We do have an exposure of -- per $1.10 movement, we have about €10 million in sales and €3 million in EBITDA.

And typically, we hedge 50% of our EBITDA exposure with buying forward contracts. But this is just smoothing out the movement that we need to absorb.

That's how we stand there. I think on the third question, I might want to ask you again what -- what bigger scales [ph] you are talking about?

Yes. Q1 '21 EBITDA bridge, what considerably means?

You guided for considerably higher earnings to the year, for the first quarter this year. And what are the EBITDA steps for the bridge part for this quarterly guidance?

Okay. Thanks for clarifying it.

It's just on Q1. Okay.

So Q1, we said considerably higher. I would phrase it like this, I mean our full-year EBITDA guidance is 10% to 20% increase.

We are definitely at the upper end or even above the upper end for the first quarter -- in comparison to first quarter of last year. I wouldn't compare it to the fourth quarter of last year sequentially.

So comparison to first quarter, it is significantly up as we described it.

On BioSolutions, I think if you look at our product portfolio, you see that we are quite diverse and we are screening the markets and working ourselves into new markets, I mean, just as we did with pDNA and mRNA. And we did that at times when mRNA was not considered for vaccines yet.

But we see many growth opportunities and everybody is talking about, for example, mRNA as cancer drugs or cancer vaccination. This is certainly a field.

And of course, we want to be the company, when somebody needs a whole supply chain from pDNA to all the final products, we want them to come to Wacker. Of course, we know that our market share is still not very high in that field, but we intend to grow that.

And yes, there are some white spots that we see where we can move into, but I hope you understand that I'm not going to announce those here.

Okay. Thank you.

Hello. Good afternoon, and thank you for taking my questions.

I would have three, please. The first is a technical one on BioSolutions.

Low double-digit percentage growth in absolute terms is about €25 million in my book for this segment. That would imply that you or Wacker are on 100 million doses is doing something in the region of, let's say, €0.20 to €0.25 per RNA dose.

Are you making much money on this? Or are you just being nice in the sense that you ramp up the business, do the volumes at minimal profitability?

And do you think RNA is a high-margin business in the long term? That's my first question.

My second one is on pension. Could I push you a little on this?

What does reform mean? Could it mean adding some of the Siltronic proceeds to pay down the pension, together with some kind of cuts to service all or some -- give on the workers side?

That's my second question. And the third one is on power price.

What is the current European P&L power cost at Wacker? Is it about €400 million to €450 million?

And is the company currently buying carbon credits to hedge increases in power prices, given that carbon seems to be the driver of the European power price and Wacker is quite a big consumer? Thank you.

So, on your first question, of course, we are nice guys, but never on price.

On the second question, Sebastian, I mean, pension, as I said before, the Siltronic proceeds will have nothing to do with our intention to reform that system, nothing. And on power, I don't have -- I mean I think we don't have the absolute number as a regular reporting item.

But we see two effects, if -- I mean, as we buy some of the power at the market, if you have CO2 certificates going up, I mean, they're part of the power plant, setting the price. This is normal.

So power prices go up for this amount. And we will see this as additional burden in our power cost.

We do get some compensation as we are energy intensive, but I also do not get into that level of disclosure.

And maybe going back to your first question, again. In all seriousness, of course, we would never reveal any agreements with customers.

So that's why I hope you understand that we cannot give you a serious answer on the questions, but just understand that we do everything to service and serve our customers extremely well.

Understood. If you ex-out the integration costs associated with the DNA business, Genopis, and just said, well, biopharma is running along quite nicely, what would be the EBITDA run rate on that business?

And perhaps to make it a bit less point estimate, would it be greater than 20% EBITDA for the BioSolutions segment as a whole?

I really ask for your understanding that we cannot disclose these numbers on a sub-segment basis.

Yes. As a matter of principle, nothing is disclosed below the segment level in our reporting.

Understood. Thank you for helping with my questions.

Yes. Good afternoon, and thanks for taking my questions.

I've three questions. Two on polysilicon and one on polymers, please.

The first two on polysilicon. First, can you comment if those recently high solar grade spot prices on platforms such as PV insights have also made it in your contract prices or have those not materialized yet?

Secondly, you also reflect [ph] higher raw materials and energy prices to be a headwind to polysilicon in 2021. Would you say that your cash cost per kilogram in 2021 would be above or below 2020 levels.

And do you see larger headwinds from silicon metal pricing? Or is it rather energy pricing?

And the final question is on polymers. You mentioned a doubling of your capacity at the Nanjing side for 2022.

Can you provide some color here? How much volume you're currently producing there or how much the expansion could add to, say, it's over the next couple of years?

That's it. Thank you.

We are certainly -- and I hope you understand I'm not publishing any polysilicon prices that we agree on with our customers. Our costs, certainly, will be lower in 2021 than in 2020.

That's what we can definitely say.

And on the third question, the Nanjing sales potential capacity, I'm sorry to say this, but we do not disclose it on a location basis, as it's, again, the same below segment level. But to double it means it's significant and we see very strong market growth and opportunities in China.

And from today's perspective, it will be the next step, but it will definitely not be the last step.

Okay, understood. Thanks.

We really can see China now getting to a very strong level of usage of polymer powders, for example. We can see the significant improvement in the quality of construction in China.

And it's absolutely moving in the right direction in the direction of, let's say, European levels.

Thanks.

Well, good afternoon, and thank you for the opportunity to ask some questions. I apologize for coming back to the capital allocation question.

But can you just confirm that you're basically saying that none of the proceeds from Siltronic will be returned to shareholders? It's all going to be used to invest in the business.

So, can you just confirm that, please? That would be helpful.

And then I was wondering if you could sort of help us understand what polysilicon price you're assuming in your outlook for 2021? Thank you.

Well, I did not say what you implied in terms of investments. There are simply no decisions made on that and no decisions necessary right now.

Let's get the deal closed and then we can talk about more details.

And for polysilicon, we had a cautious wording, I would say that. It would not assume average prices of 2022 -- '21 to be below '22 -- 2020, sorry.

But as we all know, I mean, they are far higher today. But we don't get into more details.

Maybe I ask the question a different way then and say, are you expecting the polysilicon price for 2021 to be below the average you are seeing so far in your debt [ph]?

We do not expect them to be below the average of last year.

No, but the question is yes -- below the average of today's level, I think we do not linear our forecasting just by spot pricing of the most recent weeks. So that's never our approach.

So, we assume some volatility, but do not have more details to that.

Okay. Thank you.

Thank you for taking my questions. I'm sorry if I am trying to beat a dead horse.

But going back to the guidance. Five days ago, Wacker published a comment, wanting to raise prices all over the board in silicones by 10% to 20%.

I guess, given the high demand, you should be able to push over or into the market most of that price increase, which, what basically implies revenues by -- to the same amount. Polymers, obviously, high pressure from raw material costs, but you are at least trying to compensate some of that by pushing for higher prices as well and you were talking about price increases in VAM and other raw materials by up to 100% here.

So those price increases have to be significant again. Obviously, BioSolutions, higher year-on-year and polysilicon, as we just heard, no price decline below the level on average on 2020 and still you're just guiding for, let's say, a mid-single-digit increase in revenues.

Keeping in mind that you are pushing for higher volumes as well, how can I square that circle of all those price increases, plus some positive volume trends and then come up only with, let's say, a mid-single-digit increase in sales, even taking into account some headwinds from the FX side? That would be my first question.

The second question. On pensions, we talked about that before, but I'm a bit late to the party here.

It seems like interest rates have been starting to raise again. Pension provisions are bound to come down, somewhat reflecting those changes in interest rates.

So, is that not a problem? That should, at least in the mid-term, basically take care of itself and shouldn't require a major influx of capital into pension assets to limit, both service cost and the pension gap.

That would be my second question. And my third question would be, looking at your site at Tennessee, still, let's say, a pure-play polysilicon plant in stark contrast to the set up you have in Burghausen, where you have an integrated polysilicon, silicones facility and obviously, taking some positive cost effects from that.

After having, let's say, two, three good years in the silicones, I wonder why you are not pushing forward with putting some silicones added to -- adjacent to the existing polysilicon production facilities you have in Tennessee? Why haven't we seen some heads up in regards to investments into that plant?

Thank you.

To your first question, yes, if you really take all positives that can happen together, our forecast is too conservative. No question.

But the question is, will there only be positives in this year? I think that as I tried to explain, the pandemic is still around.

You just don't know what's happening. And this is why we are cautious.

Yes, maybe we have the reputation of being more cautious than we should be, but it's better to be cautious than to be exuberant and then falling on the knees or on the nose, even worse. So, then to your third question, we already have built the fumed silica facility in Tennessee, which certainly helps lowering the cost altogether for polysilicon as well.

And you can be very sure that we have plans in place to invest in silicones assets in Tennessee. That's what we said all along and we are moving ahead.

And if there wouldn't have been the corona year with an absolutely uncertain outcome, we already would have been further doing that.

For the question on the pensions, Oliver, I think it's definitely the right timing to work on the reform for this, because over the past couple of years, we have seen the debts increasing. With the interest rates getting lower and lower and lower, this has had effect on our balance sheet with the increased share of the pension deficit to the total liabilities.

It has had an effect on our EBITDA with an increase of the annual service costs for additional slivers of pension for the employees. And last but not least, we have had several top-ups now.

So the timing is now to get structurally to a better system, and I would hold it as very premature to see any inflation discussion and a potential correlation to an increase in interest rates from this as a solution to this. And that's why we work and explore different options together with workers' council and we'll see how we can come to a much better system.

Very clear. Thank you for your answers.

I would like to add one more thing to your third question on investments in silicones in the US. We probably have announced it, but not really in that context.

We have started to construct an innovation center in Adrian, in Ann Arbor, Michigan, for silicones mainly. And so, this will enhance our presence in America.

And as far as we can see, we are the only ones investing really in innovation silicones in the US market. And innovation, obviously, has to come first before you put more assets on place, but the assets are certainly on the drawing board and you can or you will see in the future that we will expand the Tennessee facility.

Thank you very much.

Hi, it's actually Chetan from JPMorgan. I just have two questions.

First one was, you don't talk about your semiconductor silicone business within polysilicon. Can you just update us on how big is it now, whichever metric you might want to use, volumes, sales, et cetera, just to get a sense?

I think what I'm trying to get to is, there is always this volatility in polysilicon, with solar pricing going up and down. I mean, is there a way to think about semiconductor business reaching some sort of a scale over the next few years, that, that would still mean that, eventually, the solar part doesn't move the earnings in polysilicon as much?

Or is solar still going to be the dominant force in terms of how the polysilicon business as a whole performs? That's first.

Second question was just on BioSolutions. It's one of the smallest businesses within Wacker at the moment.

Clearly, there is a promise. The question is, do you guys have some sort of a timeframe, two years, three years, four years, during which we should expect this business maybe reach some sort of a critical mass in terms of the exposure to certain products or technologies that these guys have, that could make this business a big business than it is today?

Thank you.

Well, we certainly want to make it a big business. No question.

But I think it's premature to talk about the specific timeframes there for BioSolutions. Semi poly is doing very well.

It's in high demand because semiconductor chips are in high demand, and we are absolutely leading in that field in quantity as well as quality. There will be additional investments over the next few years to improve the quality even further.

But we will maintain our leading position in that business. But quantity wise, I think solar polysilicon -- the solar market will be always much bigger than the semiconductor market.

But isn't the pricing in semiconductors much higher as well? I'm just thinking, is the semiconductor business now, is it close to half of the total sales by €o million for you guys in polysilicon?

Or is this still much smaller than that?

We really don't disclose these details. But, of course, it's a very attractive business.

No question.

It is attractive to grow that portion in our portfolio, but the entire semiconductor market is just not big enough, so that we could just run on semiconductor. So it is a substantial portion, but the solar market and the growth in the solar market and the technology change in the solar market will also be very important driving forces for our future.

But the technology demands is in -- and that's the -- the costs are certainly much higher in the semiconductor poly than in the solar.

Understood. Thank you.

Thank you, operator. We will report our Q1 results on April 30.

Until then, we're looking forward to further discussions with you. Thank you for joining us today, and for your interest in Wacker Chemie.