Wacker Chemie AG

Welcome to the Wacker Chemie AG Conference Call on our Third Quarter 2021 Results. Dr.

Christian Hartel, 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. Please note that management comments during this call will include forward-looking statements, which involve risks and uncertainties.

Regarding risk factors, I encourage you to review the Safe Harbor statement contained in today's press release and the presentation and/or any report. All documents relating to a Q3 2021 reporting are available on our website.

Chris?

Thank you, Joerg. Welcome to our call on the third quarter of 2021.

We had an excellent performance in the third quarter and demand remains at high level across our entire portfolio. Both sales and EBITDA grew significantly over the second quarter and the third quarter of last year.

Our Q3 chemicals EBITDA is up by 40% year-over-year and 30% consecutively. A significantly higher contribution from specialty silicones drove margin expansion in the quarter.

Despite unprecedented raw material headwinds and supply constraints, our ability to implement surcharges allowed us to match last year's result in polymers. In polysilicon, we benefited from solid end markets in both semi and PV solar.

Polysilicon states types and prices have continued to move upwards. Considering all the challenges this year, our teams have done an exceptional job and I'm really proud of that.

In September, we joined the United Nation's Race to Zero initiative. We have committed ourselves to achieve climate neutrality by 2050 and report annually on our progress.

Wacker is one of the first chemical companies worldwide to make this pledge Race to Zero. I'm convinced that the stringency and execution of our actions will decide our future.

Sustainability has a top priority at Wacker and has been a core component of our strategy for years. Our recently published sustainability report details our ambitious ESG initiatives and progress towards our 2030 targets.

At our upcoming Capital Market Day in December, we look forward to presenting even more ambitious targets needed to fulfill our recent Race to Zero pledge. On page three, you'll find an overview of our businesses.

On the last call, we explored construction applications. Today, I will talk about our latest acquisition in silicones and consumer and industrial applications in polymers.

Looking now at page four in the presentation. Yesterday, we've just announced the acquisition of a 60% stake in specialty silane manufacturer SICO Performance Material.

The joint venture is a consistent step in our strategy to expand the share of high margin specialties in our silicones business worldwide. SICO is a leading manufacturer of organo-functional silane in China.

The company achieved sales of €54 million in 2020, displaying a very strong growth. SICO operates very profitably and generates a positive cash flow.

The transaction closes a technological gap in our specialty silicones portfolio. At the same time, the acquisition enhances our global presence, supporting the regionalization of our businesses in fast-growing markets.

Polymers on page six is not all about construction, but drivers in our consumer and industrial key markets are the same. It's performance-based substitution and sustainability.

VAE binders have excellent adhesion properties and are water-based with low VOC, exactly what packaging materials for online shopping and food delivery need. VAE is the fastest growing polymer latex out there and we are the world's largest supplier.

Wacker is well-positioned with its global and regional presence to benefit from this growth. You see the effects of this strategic positioning across our Q3 results.

Our chemical businesses saw strong demand and polysilicon benefited from firm and rising pricing. These developments carry to the fourth quarter as challenges from raw materials, logistics, and energy prices become more pronounced.

Silicon metal was particularly hard hit by power curtailments in China and the ensuing tightness saw costs flying up to unprecedented levels. As Tobias is going to show, we are dealing with these challenges proactively and aggressively.

We recently updated our guidance to an EBITDA range of €1.2 billion to €1.4 billion for the full year of 2021. Momentum carries our results towards the upper half of this range, Despite raw material headwinds increasing by another €100 million to more than €400 million this year.

So, to sum it all up, Wacker looks to achieve a record results this year despite significant headwinds. We have a great team of strong commitment, the right tools, and our strategy continues to play out.

I'm proud of our performance in this challenging year. I will now hand over to Tobias Ohler, who will take you through the Q3 financials and the outlook.

Thank you, Chris. Welcome everybody.

As pronounced, Q3 was another strong quarter. All segments delivered higher margins and EBITDA levels.

Cash generation was even higher. We ended the quarter with a net cash position of over €500 million.

Let's look at these developments in more detail. Sales increased by 40% over last year.

As you can see on the chart, price increases contributed €330 million and volume improvements contributed €136 million to the overall sales growth. Gross profit came in at €486 million, significantly higher than the prior period.

Again, the main drivers we have price and volume effects supported by strict cost control. Our Shape the Future program is on track and will deliver over €100 million in savings this year.

The operating results increased from €81 million last year to €341 million in Q3. Our tax rate was 25%.

Q3 net income was €249 million or €4.90 per share. Our balance sheet on page eight improved further following higher discount rates for pensions and the higher earnings contribution to equity.

As a result, shareholders' equity increased by €943 million since the end of last year. And moving now on to page nine.

Silicones increased sales beyond the already strong Q2 and came in at 24% over last year. Sales were €680 million with an EBITDA of €161 million.

The quarterly EBITDA margin moved up to 24% as specialties rose and standard products benefited from better pricing. Demand for our product continues to be very strong, specialties performed exceptionally well in the key market health and care and industry.

In Q3, we saw very high utilization rates as challenges in supply and logistics intensified. As Chris alluded to, the silicone industry now faces a global imbalance in silicone metal.

Prices for silicone metal increased substantially in a very short period. Our raw materials chart in the appendix shows the latest pricing.

It is unclear at this time now how long the global shortage in silicone metal will last. In the light of this development, we announced 30% price increases and silicones to cope with rising raw materials and energy prices.

In Q4 in addition to normal seasonality, we see force majeures and plant maintenance at large production sites, resulting in lower utilization rates. For the full year, we continue to see an low double-digit percentage rise in sales combined with an improved EBITDA margin over last year.

Polymer saw strong demand for its products again, especially in powders. Polymers is a key enabler to smart construction and delivers clear performance benefits in consumer and industrial applications.

Demand trends are fully intact. The typical mid-summer slowdown did not come this year.

The combination of better volumes and pricing surcharges buffered the effects of rising raw materials. We report sales of €169 million with an EBITDA of €85 million as we operate at capacity limits in all our plants.

I want to highlight that the pricing power we demonstrated. We defended our absolute EBITDA although facing unprecedented raw material prices.

Despite several supplier force measures, our procurement team was able to avoid major production disruptions in Q3. In some markets, excess raw materials remains difficult constraining volumes in Q4.

Raw materials and polymers remain higher for longer than experts had initially anticipated. We have announced up to 20% price increases to cope with the situation.

Despite these industry challenges, we see polymers having a solid finish to the year. We upgraded our outlook for the full year and now expect for your sales of about €1.6 billion.

EBITDA should come in close to our 16% target margin. Biosolutions generated €78 million with an EBITDA of €11 million.

We continue to see strong demand for our Biopharma and Bioingredients product. Our full year outlook for the segment is unchanged.

Demand for solar and semiconductor products and polysilicon continues strong. Tightness in both market supported the strong performance.

In addition, ongoing cost reductions have the strong result. Q3 sales came in at €409 million with an EBITDA of €201 million.

Like in our Chemical businesses, we see headwinds developing for the polysilicon industry in general from the shortage of silicone metal and rising power prices. Despite this, we have upgraded our outlook and now expect full year sales of €1.5 billion with an EBITDA margin of about 40%.

Let's move on to page 13 now. We saw very strong cash conversion in the third quarter.

Net cash flow reached €426 million. Our year-to-date net cash flow has reached €765 million compared to around €700 million for all of last year.

Strict cost controls and active working capital management support the solid cash conversion in the quarter and year-to-date. Our net cash position climbed to €538 million at the end of the quarter.

On page 14, you'll see the summary of our group guidance. We updated our annual sales and EBITDA guidance for the full year in mid-September.

To then, that went from raw materials and energy costs have increased from more than €300 million to now more than €400 million. As Chris said, we now see us reaching the upper half of our EBITDA guidance range.

In addition, we upgrade our net cash flow guidance. We now expect to achieve a net cash flow above last year.

Our strong cash generation, solid financial position, and pricing power support our confidence. These strengths help us to face current shortages and raw material inflation.

You should expect us to continue our specialties and growth strategy relentlessly. At our upcoming Strategy Capital Markets Day next year in March, we will detail our ambitious targets to accelerate growth in chemicals and semiconductor polysilicon.

Thank you. Operator, we are now ready to begin the Q&A.

Thanks for the opportunity to stand with my questions. Actually first on silicon metal and energy, could you elaborate a little bit how your supply contracts are defined -- are they -- if it comes to volume and you have long-term contracts?

And how secure is your supply? And what can we expect -- how fast the prices we see right now in the market are reflected in your P&L in both in silicone and [indiscernible].

And you have your own effort integration to some extent, doesn't it make sense to rethink whether you increase this portion when you have this opportunity in Norway? And then energy, also here, gas is probably your main source of energy.

How are your contracts here? And how are you biased to spot -- to other metrics in the energy equation?

And then lastly, on polysilicon, this all the tightness we see right now, is it fair to assume that in 2022, the polysilicon market will stay tight all over the year?

Andreas, Tobias, I'm taking a look first two questions on silicon, metal, and energy. We -- from the headwind that we see in this year and we updated our number to more than €400 billion in 2021.

I mean the majority comes from them as you know. Silicon metal supply prices have recently become an issue.

I think the reason for that is well known in the industry, it starts with low hydro production in Brazil, and then some significant energy contaminants in China, which led to silicon metal pricing, gaining momentum right now to a quite unnatural situation. But with respect to the impact on us, I can say that around a third of our demand is captive in Norway and the rest is sourced externally.

And we have a quite broad supplier portfolio. We are one of the largest buyers in silicon metal.

And supplier portfolio ranks in the region, Europe, all Americas that South and North America and then also Asia-Pacific. So, with respect to our contract sector, we do not see a significant impact from pricing in this year.

And I think it's too early to give you a number for next year, but we are very confident that that as a player with a significant portion of backward integration and broad supplier base that we can secure the material that we need. That's one thing.

On the price side, we just very actively manage our own selling prices, especially in in silicone. As you may have noticed that we just released a significant price increase of 30% just in light of those energy and silicon metal headwinds.

And that leads me to energy. Energy as a as a topic is I think, in the press, so you will have an idea on the fundamental drivers of the market development.

From our procurement perspective, we have both for electricity and gas rolling, hedging strategy. So, we are not exposed to the spot market.

So, I could say that roughly 50% of -- also of next year is already secured both electricity and gas. And the remainder is open needs to be seen how that develops over time.

So, that market is very volatile and -- yes, in contrast to silicon metal, as I just said, we have some open volume in energy that will go at this elevated pricing level, which gives us a mid-double-digit euro headwind in the fourth quarter. And yes, as I said, it will be most likely more for next year, but it's too early to give you a number on that.

And on polysilicon and the market?

Okay. On the polysilicon, yes, Andreas hello, this Chris.

So, I mean, what we see today is a throughout the year a very, very strong device for polysilicon both for the solar industry, but also for semiconductor industry and we see also -- if you look at our customer side, a strong demand also going into next year. If you read announcements about climate change, about measures to fight climate change about measures to fight climate change, also within China, there are a lot of programs now starting to install more capacity.

So I think it was just recently that Xi Jinping announced a program of 400 -- I think 400 gigawatt wind and solar farm with 100 gigawatt of that already starting from next year. So from our perspective, the underlying fundamentals for growing PV solar are very much intact.

And yes, there are capacity announcement for polysilicon, definitely. I think the world would also need more polysilicon going forward, if you really want to become climate neutral as a planet.

It has to be seen how fast these capacities, a, will be installed and, b, I think this is the new question, how the power curtailment in China will impact these capacities and their speed into the market with new capacities. But overall, I think there will still be high demand for polysilicon next year.

Thank you.

I have three questions, actually two then linked to polysilicon and then one on polymers. Firstly, could you just remind us in terms of your Tennessee infrastructure, if you had to do a debottlenecking, what sort of level of capacity increase could you do without breaking massive sweat in terms of CapEx?

Is it like 20 kt, 30 kt. I appreciate you wouldn't want to give any quantitative numbers here but just some color would be great?

Second question really linked to sort of polysilicon is you guys are shipping about 50 kt of your product to China, these days. I mean, just strategically, have you had discussions with authorities in Europe and the US where you see governments encouraging downstream wafer and module investments because that's, frankly capacity that you're giving to China, which if you had wafer capacity in Europe could be sold in Europe for sort of in-house European solar value chain.

That's my second question. And then just a third question really is around polymers.

Obviously, your key supply -- your key competitor is backward integrated. And it seems like they've sold or chosen to sell more VAM and acid this year.

Have you actually picked up share because of that in VAE market and in the powders market, because they voluntarily backed off a little bit? Thanks a lot.

Okay. Thank you, Jaideep.

I would start with the first question you asked on debottlenecking capacity, which you would see in our site in Tennessee and Charleston. And I mean, just to give you a rough number, I mean, for us debottleneck is typically 10% to 20% capacity increase on that capacity.

We ship a lot of our polysilicon to China. It is mainly for our solar customers.

That is correct. That is because the supply chain of wafers and modules is in China today.

But on the other hand, we do see also a strong demand coming up, stronger demand in -- both in Europe and in the US for our material, okay, given order of magnitude is different than in China. I would say, we did not talk so much with authorities.

It's also because personally, I'd rather like to talk to companies and not to politicians, because typically, you get more concrete answers from them. On the political front, there is a lot of talk on this on reinstalling our capacities and supply chains, PV supply chains in Europe and in the US.

For us, it really counts if there are companies contacting us and asking for more volumes. And as I mentioned, this is increasing, but yes, on a lower level than in China.

Jaideep, on your question with respect to polymers and whether we have grabbed some market share, I don't want to comment on a specific competitor. I think we never do that as a matter of principle.

But I can confirm that part of our success is that we were able to deliver while others were not. And you see that also in our absolute numbers, if you compare EBITDA of this year to last year despite the dramatic headwind.

In raw materials, we have the same number of about €85 million in EBITDA. And I think this shows that we have pricing power, and we -- yes, we are effective in our surcharge and price increase approach.

So yes, I think we have grabbed the market share. That's right.

Thanks a lot, and looking forward to some bullish long-term targets. Thank you.

I think that's me. It's Mubasher Chaudhry from Citi.

Just two quick questions, please. In silicones, you talked about the force majeure, and the plant maintenance.

Are you able to quantify the impact of that? Some thoughts on that would be helpful.

And then in -- are you seeing a silicon production uptick in China, and then you've seen the silicon prices come off as well. Does this impact the kind of the 30% price increases that you've announced?

Does it make it a little bit more challenging to push those price increases through? Thank you.

To be speaking on the force majeure that, we mentioned, I think just the force majeure alone is a low to mid-double-digit impact on EBITDA. But I would answer that, question a little bit broader because as part of our guidance for the fourth quarter, we definitely see in silicone continued strong pricing, I mean, also consistent to our announcement maybe not one to one, to be frank.

But consistent in strong pricing and we have some headwinds in raw material energy as mentioned, that we will have in the fourth quarter seasonality. But a very specific situation to us is that what you just asked about the force majeure at one of our sites.

And that comes together also with other plant maintenance in other units, including in China and Burghausen. And if you put all together, this is a mid-double digit impact for us in EBITDA, against the prior quarter.

So that is the reason for our guidance in silicones. And on silicon metal and pricing in silicone, as I mentioned also to Andreas, I think the market is -- yes, it has been going up to new levels, and it remains volatile, and it's difficult to give you a number for next year.

But we are just aggressively, passing that on to our customers. We are ahead of the curve.

And that's why we announced these price increases because in the situation, it's obvious we are running on all cylinders in operations. So we are fully loaded, and we cannot meet all orders.

So that's why any headwind from raw materials will be passed on to our customers. And that's why we have had this announcement in just two weeks ago.

Thank you very much. That's very clear.

Hey, good afternoon, gentlemen. I have two questions for me.

The first one is on your SICO acquisition. Can you shed some light, if this business has similar margins in new business or your specialty business?

And also what kind of cross-selling, or revenue synergies you might expect out of this deal? The second question is again on silicon metals, sorry to come back.

You said you have a diversified silicon metal purchase in China -- in Brazil, Malaysia, Norway, Northern China. Can you help us on this kind of China portion?

Long term, when you look backwards was the kind of portion of China you put your silicon metal, that would be helpful? And then lastly, again, on energy, can you remind us on the share of renewable energy you use?

And, is this in the discussions with your customers becoming a major selling point under ESG terms? That would be my three questions.

Thank you.

Okay. Markus, I will start on the SICO acquisition.

So I mean, the rationale for us for this acquisition was it's a -- it complements strategically our portfolio from a technical perspective. We do Organofuntional silanes today already, but only in our plant in Burghausen.

And with the acquisition in SICO, we obviously broadened the production base for this, but also have -- so that is about synergies. But also have there a good team of development capacities.

So we can also grow this market of organofunctional silanes. The business what we reported had sales of €54 million of sales in 2020, and I can't give you a precise number on the profitability.

But this is definitely the profitability in line with our specialty strategy, which we have for silicones. And I do expect, yes, I wouldn't really call it cross-selling.

But I think we can broaden our specialty basis of products going forward. So, I think it's a great deal for us.

With respect to silicon metal, Markus, as I mentioned before, roughly a-third is captive and two-thirds is sourced broadly. And the biggest region for external supply is Europe also for logistics reasons.

And in addition, we have Americas and that is especially also South America. But also some quantities for our Tennessee plants just, yes, by our neighbors in the US.

And then we have Asia-Pacific, and part of Asia-Pacific is a rather small portion from China.

Okay. And then, Markus, I think your third question was on the renewable energy, which we buy.

And of course, that's a complex question depending on the different sites on the different regions, where we buy. What I can definitely tell you is, I mean, we also buy renewable energy, there are some challenges if you are a gamified [ph] in Germany, on how much renewable energy you can buy, but we do this.

And we are going to increase this and you will probably see more of -- more details on this at our Capital Markets Days in December. Is that a benefit which we can serve to the customer?

Definitely. And it goes two ways.

The first way is, if you talk, for example, polysilicon, which is the biggest consumer of the energy we buy this process. Here, we are probably the most efficient in the world producing polysilicon.

And that means, the input factor of electricity is lowest worldwide. And therefore, that itself is a benefit, which we also actively sell to our customers, which generates also a very high interest in the market.

And if you then combine it with even greener energy, I think there is just the way to go. And what you said and that's our strategy.

We'll elaborate a little bit more on that in the Capital Market Day in December.

May I sneak another question on this, what can be compared to that historic levels, polysilicon compared that massively, but more long-term speaking. Could you think an illustration there then a kind of polysilicon product, which is more produced than green energy could have a premium compared to others, which are then more producing electricity, which is coming from fossil based resources, is this something you can think of?

Well, I mean, I would say, first of all, the customers have to think about that. What we know is that in some regions in the world, and I think in France, if you go for public tendering, that is actually one of the criteria, the CO2 footprint of the modules, I think it's just a minor share in the overall equation, but it shows that there is a trend, a tendency in that direction.

In France, it might be because of the nuclear power, which they actually use, but that's another big topic to discuss. Is this is a real premium?

I think we have to see, but there's definitely a growing demand for it.

Okay. Thank you.

You’re welcome.

Yes. Good afternoon, everybody.

I have three questions, please. Firstly, on siloxane, and I remember a couple of years ago, you decided against building an own plant.

And you were thinking about covering your growing demand from the expansions that were plant in China? I mean, in the light of the current development in China, do you think this strategy needs to be adjusted, meaning, could you be thinking of expanding your siloxane capacity?

So that's number one. Number two, pushing into very similar direction.

And it's also on your captive on your own silicon metal production? And sorry, if I missed it before.

Are you able to expand your production in Norway? And are you currently planning to do so?

And the last question is kind of summary of that? I mean, there is a couple of things you could invest in.

You’re saying you’re running at full capacity here and there. Could you give us an update from a top down perspective?

What should we think of CapEx for the next few years? Thank you.

Okay. Thank you, Thomas.

Let me start with the first question. You talked about the potential siloxane expansion versus buying material from the market.

Let me answer the question in that way. I mean, we would definitely not invest into siloxane just to have more of commodity business and standard products.

What we would consider is expanding capacities, which would allow for growing our specialty business. And so therefore, if we look at it, we would today look in a different way on it.

And not just a pure siloxane expansion, but an overall expansion allowing, more or less, let's call it, specialty raw materials to be produced, which are really hard to buy on the market.

Thomas, and your question on silicon metal our backward integration. In Norway, yes, we will definitely look at adding an additional furnace.

We have just added one, there's more space. And this is an attractive opportunity, especially if you link it also to Marcos question on renewables, we have hydro powered electricity as a source.

We have potentially also the future to go charcoal to go carbon capture. So this is an ideal place for us to expand our silicon metal production.

And you asked a question to Chris about [indiscernible] to me about the silicon metal and it tied together, what's the CapEx? I think I still need to ask for your patience.

But I can give you the big picture. I mean, we are talking about accelerated growth.

We are talking about lots of attractive opportunities. We will put all this together and talk about this at Capital Market Day in March.

That's fair enough. Thank you very much.

Hello, good afternoon, and thank you for taking my questions. I would have two please.

The first is on the Silicone segment. Are customers pre-buying in the expectation that things are going to get ugly on the raw material prices side?

I remember the last time we were looking at margins at this level. It was 2018.

And there was some production problems in China. And there was -- I think what was then guided to be about $100 million of over earning in EBITDA.

I suspect that this time is different, but why is that the case? The second question is on the Biosolutions segment.

Can you remind me of why the increase in sales is so much higher than the increase in EBITDA? And is this something that you can imagine reverting, i.e.

having more increase in EBITDA for an increase in sales next year? Thank you

Sebastian on the silicone situation, and whether customers are pre-buying, I would say it's just not possible to pre-buy, because we are fully sold out. We have not more to sell.

And we are providing at the limit of our operations. So it's just impossible.

I think orders are high potentially yet also from the fear that prices would increase reserve. But as we can't confirm the orders that we are fully booked, I think that is not a difference to the customers.

And on Biosolutions, I think we stick to what we say for the full year. We have an unchanged guidance.

And I think we do not comment on the quarterly results. I think it was a decent quarter for Biosolutions.

We are very happy with our developments also in Biopharma and Bioingredients. We have the long-term target 2030 and to make it 1 billion sales and 35% EBITDA margin business.

And for next year, I think it's -- as for the other segments, it's too early to give you any indication.

If I may rephrase the question on Biosolutions, can you give an idea of the magnitudes of the P&L cost or headcount or related figures for that business now versus, let's say, two or three quarters ago. I was picking out here as if this is a case of all the business has been bought on the D&A side.

And there's some integration costs, but everything is fine. Was there some heavy duty P&L investing going on here, that's going to take two or three years to work through before margin start to inflect?

I mean, I can't give you the specific, but you're absolutely right. We are in an investment phase also on the P&L with having onboarded the acquisition in San Diego, and also having increased our capacities in Amsterdam, including more staff.

So yes, if that's the background of your question, I can confirm, but I don't have a specific number on that.

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

All right. Thanks for taking my questions.

Just two follow-ups from me. Firstly, on the Biopharma business, you announced in mid-September that Wacker will no longer produce the CureVac.

Can you maybe just update us on your progress in filling those capacities and maybe how the pipeline has developed in the meantime? And then secondly, just following up on the discussion around raw materials, if you were to mark-to-market right now, could you give us some sort of indication on what the headwinds could look like for 2022?

Thanks.

Okay, Rikin, I think the first question on the Biopharma and you talk about specifically the CureVac business, and if we got some new opportunities on that. We are working with full force for new projects.

Of course, we also did that before. But keep in mind that CureVac contract -- the CureVac cancel the contract in September, and there were still some open slots to be done for them to finish the whole process.

So there was not real idle capacity at that timing. And as I said, we're looking with high motivation of finding new projects.

And there are already some, it's not yet ready to talk about, but we do see some opportunities. Again, with respect to the raw materials, I don't have a number yet for 2022.

As I said before, I think markets are very volatile. They are difficult to read.

In some cases, we see the headwinds coming and we act aggressively in passing it on to our customers. But it's too early to really do the equation on what does it mean for next year.

Great. Thanks guys.

Yeah, hi. Thank you.

I just had one question. When I listen to you, and I read through the statement, et cetera, it doesn't feel like there is any hint of any slowdown in any business as far as trends goes, or sorry, trend goes today in Q4, is that a right impression that I'm getting?

Yes.

And then what about --?

I would say -- Chetan, I would say yes, because I mean, our orders are high. We also hear about slowdown in automotive.

What we can say, for example, to that segment, in lots of the trends also with immobility are in our favor. So right now -- and maybe the supply chain is also so empty that we don't see it yet.

I would expect it to come at some point in time to be frank, we are not ignoring that. But for the time being, not yet.

In other segments, we are a broad-based GDP type in silicones. I think we see strong demand, as you said, before in polymers, we are talking about construction was healthy.

Overall, there is a bit of a normalization in the DIY sector, but the professional sector and construction is very strong still. And in the consumer industrial segment that we talked about also about innovation on our side, we also have a very good order book I think and we have tightness in polysilicon.

I mean, I don't need to talk about that.

That's clear. Thank you.

Thank you for taking my questions. Two for me.

Just looking at your very healthy net cash balance. I mean, you've not really given us much of a color on CapEx, but I mean, should we assume that that is the thrust of where incremental cash might be going?

Should we think that you'll be more aggressively targeting M&A, particularly once Siltronic comes in as well? What is the potential at this point for returns to shareholders?

My second question is on solar. We're starting to read about nerves on demand at the current high prices that we're seeing now throughout the solar supply chain.

So I get that you're at the top of the tree, and we're looking at tightness in this market continuing. Do you have any hints of any nerves from your customers about potential delays or even cancellations at these current high poly prices?

And just to understand a little bit how your poly contracts are structured in terms of volume guarantees? Thank you.

Okay, John, let me let me take these questions. So you asked on -- essentially, what are we doing with the money.

And I think we pointed it out already, at our last call, pretty clearly that our main target is accelerated growth. So we want to grow the company stronger than we did in the past.

And that means there will be investments coming as Tobias pointed out. We cannot tell you today the number for next year, but there will be more investments coming and of course numbers will go up.

M&A, we always said will take -- will be a part of that accelerated growth story. And we will look at all these opportunities.

But having more money doesn't mean for us, we will rush into any decision on that. It'll take the same prudence in taking a decision.

And for M&A, it's all about is it a technology which helps us? Is it a product portfolio which helps us on specialty growth?

Is it something on regional perspective, that will help us? And these three criteria, the most important and of course, at the end of the day, we always look for a reasonable price regardless of our cash position.

And then of course, the other two points, as you mentioned is, of course the dividends, the dividends, that is a clear strategy which we have in place on our dividends to pay out about 50% of the earnings. And then as a third point, I think we mentioned that also last time that I know reform on the pension system is something where we also would allocate some of the money.

Poly contracts and is there a demand destruction I think was your second question. We see continued high demand for our products in the PV chain.

We see it also on the semiconductor side, so we do not see any demand destruction from our perspective and our poly contracts. We don't want to go into the details here.

But of course, we also see the increases in the pricing, which are happening in the market in our contracts.

Sean, Tobias here. I can add that to the question about demand destruction.

I mean, we have seen financials of our customers that are yet even improving sequentially. So that I think that's not the case as there's demand destruction.

Very clear, thank you.

Thank you so much for allowing me a follow up. It's just really around where Wacker is today?

You're sold out in a lot of markets across and polysilicon obviously, again, you're sort of sold out. So when we think about growth really in sort of three to five year period, is it really that you need CapEx?

Or is it sort of a lot of selective debottlenecking that you can do to grow the business? And then just sort of around what is happening with a semi capacity that you're bringing on and pricing around semis?

I mean, is it fair to think that given solar prices have gone up so much that there will be some degree of renegotiation in semi grade pricing as well next year? Thank you so much.

Okay, first question Jaideep on the -- yes, I mean, clear, yes. I mean, we said accelerated growth, and we need more investments for that.

So that's absolutely correct how you phrased it, I think. On the semi side, we see a strong demand also for the next year's coming up, but typically -- again, also not going into the details of the pricing and contract structures.

But it is a little bit different in the semi side, which is more longer term oriented. But of course, what we look at is, if they are -- if price hikes and raw materials are well covered in these contracts and if that would not be the case, then we would also renegotiate these cases.

All right, thank you.

Hello, afternoon. Thanks for taking my question.

And I just got two at the moment. The first one, we've touched on it a little bit earlier with regards to one specific segment, but more generally understand perhaps inventories are low across your customer segments.

Are there any in particular that you'd highlight as an extreme case? And in which case, perhaps you would expect some stock rebuilding through into next year?

If you have any view on how long that demand can sustain that be really helpful? And then the other one on a slightly different topic.

I saw the news release about signing a contract with Prokarium in your bio solutions business. Is that going to be your primary focus at the moment?

Or do you have ability to take on further contracts beyond that? It sounds like maybe you do from earlier comment?

I would start Tobias here with the first question on low inventory levels at our customer. To be frank, we don't have that -- I mean, as we are so broad in our setup, we don't have too much information on that.

I would say from their ordering behavior I think they are rather low in their inventories surrounding also add capacity and at the limits of supply. Okay.

And you're -- and the second question was on the on the announcement which we had on the prokarium. So it's a contract for microbial immunotherapy for bladder cancer patients.

Is that the direction we go with the whole business, no, definitely not. I mean, it is -- we are a CDMO contract and development manufacturing partner for the pharmaceutical industry.

And that was just a project where we worked on for a couple of years and which proved to be an excellent fit for both sides. And that's the reason why we're doing it.

But from that one single case, you cannot really conclude on that bladder cancer is the direction we want to go. I mean, we are very versatile in the capacities which we offer.

And that's just a great fit for us. And that's what we do.

Understood. Thank you.

There are no further questions. And so I hand back to Joerg Hoffmann.

Thank you, operator. Thank you all for joining us today.

And for your interest in Wacker Chemie. Our next instalment of the CMD series is scheduled for December 16.

Here we will look at ESG and polysilicon. Looking forward to see you there.

Until then, don't hesitate to get in touch with the IR department, if you have further questions. Have a good day.