WCH.DE FY2025 Q2 Earnings Call Transcript
Date: 2025-08-01
Source: Financial Modeling Prep

Operator: Ladies and gentlemen, welcome to the Wacker Chemie Q2 2025 Conference Call. I'm Vicki, the Chorus Call operator. I would like to remind you that all participants have been in listen-only mode, and the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Joerg Hoffmann, Head of Investor Relations. Please go ahead, sir.
Joerg Hoffmann: Thank you, operator. Welcome to the Wacker Chemie AG conference call on the second quarter 2025 results. Dr. Christian Hartel, our CEO; and Dr. Tobias Ohler, our CFO, will walk you through the presentation. The press release, our IR presentation and detailed financial tables are available on our web page under the caption Investor Relations. Please note that management comments during this call include forward-looking statements involving risks and uncertainties. We encourage you to review the Safe Harbor statement in today's presentation and our 2024 annual report for information on risk factors. All documents mentioned are available on our website. Chris? Christian Hartel Hello, everyone. Thank you for joining us on our second quarter 2025 results call. During the second quarter, demand in many customer sectors was weak and competition was intense. There were no economic tailwinds either. Trade policy uncertainties are slowing economic development, and there are no signs of a recovery yet. In this challenging environment, with ongoing macroeconomic and geopolitical uncertainty, we lowered our full year outlook on July 18. Furthermore, the situation was compounded by the unfavorable development in the euro-U.S. dollar exchange rate since the beginning of the second quarter and our expectation that the current exchange rate level will remain unchanged. Our second quarter performance and our updated full year outlook reflect these headwinds. Sales during the second quarter reached EUR 1.41 billion, with group EBITDA at EUR 114 million. The sum of the 4 operating segments EBITDA totaled EUR 182 million. Although, this reflects an 11% decline year-over-year, it also shows a 7% sequential increase over the previous quarter. Sequential gain was primarily driven by an insurance compensation in silicones, but also supported by some seasonality in polymers and much higher semiconductor polysilicon volumes. Before we move to the full year outlook on the next page, let me address our most recent initiative in sustainability. We just launched a new tool that allows us to calculate the carbon footprint of our products per the Together for Sustainability guideline. With this PCF tool, we can provide customers with reliable and standardized carbon footprint data for our products. Customer feedback has been incredible so far with customers requesting PCFs for thousands of products. We see our leading sustainability credentials as a way to differentiate ourselves in the market and to strengthen relationships with key customers by helping them to meet their own sustainability targets. Now, moving on to our guidance on Page #3. As you saw in our July 18 prerelease, we updated our full year outlook to account for ongoing trade-related volatility and currency headwinds resulting from a strengthening euro. We now forecast sales between EUR 5.5 billion and EUR 5.9 billion, with an EBITDA range of EUR 500 million to EUR 700 million. Due to lower EBITDA, we expect net cash flow to be more or less balanced and net debt to come in significantly higher than last year. Chemical industry faces unprecedented challenges, and we are not immune. We are counting -- we are countering these challenging market environment with a clear focus on growth, cash and cost initiatives. We will drive profitable growth by intensifying our sales activities, customer interactions and innovation. We relentlessly seek out new customers and new applications, always with an eye to achieving profitable growth. We will improve cash flow generation by reducing and optimizing investments and implementing working capital measures such as targeted reductions in inventories and accounts receivable. And we will reduce our costs by driving productivity and optimizing our plant utilization rates, so we can run our assets at the highest level of efficiency and profitability. Also, we will continue to align our entire organization with the new underlying framework conditions. Three strategic priorities will help us to ensure our success. First, we are forging ahead with our specialty strategy. This means that we will be focusing even more on those products and solutions that set us clearly apart from our competition. These are often developed on a customer-specific basis, have a greater depth of added value and achieve higher margins. Second, we are boosting our efficiency and speed. It's no longer enough to simply have the best solution. We also need to be able to launch it quickly. Speed has become the decisive factor for success in today's world. We have already implemented effective programs to improve our performance and we will be exploiting further potential also by making systematic use of digitalization and automation opportunities. Third, we will further strengthen the Wacker's team abilities and skills. Today, especially with everything becoming faster and more digital, this is essential. In these uncertain and volatile times, a clear path is needed. Here at Wacker, we have it, and we are following it. Together, we will continue to work on the solutions of tomorrow with expertise, customer proximity and innovative strength. With that, I'll turn over to Tobias for a deeper dive into our results.
Tobias Ohler: Thank you, Chris. Welcome, everybody. Before I begin, let me address some changes in the way we present our numbers. We have prepared the first half year and the second quarter results applying a revised presentation of our investment results in the profit and loss statement. Investment income or equity income is now reported under financial results instead of operating results. The most visible effect from this change is that the investment result from our stake in Siltronic is no longer relevant for EBITDA and EBIT. The reclassification also affects how we record dividends received in the cash flow statement. We implemented this change to enhance the transparency of our operating performance and improve comparability with the peer group companies. There is additional information on these changes in the appendix of this presentation and the notes section of the first half year report. Also in the Excel file published this morning on the Wacker website, you will find the restated numbers. Having addressed that, let's now look at the profit and loss, which shows the restated second quarter 2024 figures of EUR 155 million versus the EUR 160 million we reported last year. So the overall effect is quite small. Sales in the second quarter were EUR 1.41 billion, down 4% year-over-year, primarily due to exchange rate, pricing and volume effects in polymers, polysilicon and biosolutions. In silicones, sales decreased by 1% year-over-year despite somewhat higher volumes. Customers have taken a wait-and-see approach due to trade uncertainty. Order intake was volatile throughout the second quarter, and we have not observed any improvement so far. This had effects throughout the entire P&L. EBITDA declined to EUR 114 million from EUR 155 million in the second quarter of 2024. Looking only at the performance of the 4 operating segments, the added EBITDA came in at EUR 182 million. Others held back the reported EBITDA by EUR 69 million versus the EUR 50 million charge a year ago. The higher charge resulted from the lower absorption of group infrastructure and higher currency hedging costs. As previously discussed, the main component of the others EBITDA is the CO2 compensation offset. In the second quarter, this was about EUR 40 million. As before, we expect this will be refunded in the fourth quarter of this year. Lower EBITDA and higher depreciation drove EBIT to minus EUR 11 million versus the EUR 38 million a year ago. Depreciation has been increasing in line with investments in the past couple of years. Many of our major growth projects are now completed, and our focus is on filling the new capacities, improving cash flow and driving profitable growth. All told, net income was a negative EUR 19 million, equating to a loss of EUR 0.49 a share. Our balance sheet shows strong financials with high liquidity of about EUR 800 million, and EUR 4.5 billion in shareholder equity. Due to typical seasonality and accounts receivable in chemicals and lower payables, net working capital increased by EUR 135 million since the end of last year. Inventories overall are somewhat lower, largely driven by targeted reductions in stock levels. Financial liabilities are largely unchanged since the start of the year at EUR 1.9 billion. The shareholder equity ratio at 51% remains at a high level. At silicones, sales in the second quarter were about EUR 713 million, down 1% year-over-year and 4% below the previous quarter. EBITDA was up 16% versus the prior year and slightly ahead of the first quarter. This was primarily due to the low double-digit euro-million insurance compensation in connection with supply chain issues that held us back in 2024. Absent that insurance payment, the second quarter EBITDA would have been well below the preceding quarter due to trade uncertainty and exchange rate. While overall volumes were somewhat higher quarter-over-quarter, a combination of exchange rate, price and mix effects held us back both in sales and EBITDA. As we cautioned on the last call, the largest headwinds facing chemicals may come from the indirect impact of tariffs. Silicones are at the start of many value chains. And when customer products are impacted, we too will see lower demand. For the full year 2025, we have updated our silicones outlook. We now expect sales and EBITDA to be at the prior year level. The updated outlook essentially underpins our expectations that markets will remain challenging for the remainder of the year. At polymers, sales in the second quarter were EUR 363 million, 7% below last year. EBITDA came in at EUR 40 million, down from EUR 59 million a year ago. The year-over-year development of sales and EBITDA was driven by exchange rate and volumes in consumer-related dispersions. On the other hand, volumes in construction-related powders were more stable year-over-year and showed some improvement compared to the previous quarter. This improvement was due to seasonality and supported a modest sequential increase in EBITDA despite the VAM turnaround. For the full year 2025, we have updated our outlook for polymers. We now expect sales to decline by a low single-digit percentage with a margin at prior year level. Overall, construction markets remained weak in Europe and Asia and trade uncertainty is weighing on consumer-related binders. At biosolutions, sales during the second quarter were EUR 87 million, down 11% year-over-year and 4% lower than the previous quarter. Nearly all businesses were affected by softer market demand. EBITDA came in at EUR 5 million, somewhat higher year-over-year and stable compared to the previous quarter. For the full year 2025, we have updated our biosolutions outlook. We now expect sales and EBITDA to be at prior year levels. Our focus remains on filling capacities, and we have achieved several commercial wins so far this year. Recently, we announced a partnership with BENEO for the production of human milk oligosaccharides, also known as HMOs. Wins like this support our overall longer-term goals. At polysilicon, sales in the second quarter totaled EUR 218 million, 6% lower year-over-year and 11% lower than in the preceding quarter. EBITDA came in at EUR 34 million, operationally essentially around the level of the preceding 3 quarters. The development of sales and EBITDA was primarily due to significantly lower volumes of solar-grade polysilicon sold. The headwinds here overshadow our ongoing success in semi, where we continue to show strong growth. For the full year 2025, we have revised our outlook for polysilicon. We now anticipate sales at the prior year's level with approximately EUR 100 million in EBITDA. In polysilicon, our semi volumes are growing strongly and the new etching line is proceeding in line with our expectations. Semi is and remains our primary focus, but solar remains challenging. We have reduced further our capacity utilization. Demand for solar has been weak for over a year now, but the situation remains uncertain, especially in the U.S. There might be opportunities ahead due to recent regulatory changes. We need to await the outcome. Now, let's look at our net financial position. In the first half of 2025, we generated a gross cash flow of minus EUR 5 million. Trade receivables driven by the typical seasonal patterns in chemicals as well as payables held back the cash flow. After cash flow from investing activities of EUR 296 million, the dividend payment of EUR 124 million and some other effects, we ended the quarter with a net debt of EUR 1.1 billion. Before we start with the Q&A, let me summarize. The headwinds we and our peers are facing are well understood. In this environment, it is essential that we utilize every tool at our disposal to control costs, improve cash flow and at the same time, drive profitable growth. We have launched comprehensive initiatives addressing both direct and indirect costs. Many of our larger strategic investment growth projects are now complete and our focus shifts to filling these new capacities. This paves the way for lower CapEx going forward. Lower costs free up resources so we can invest in innovation, sales, technical service and marketing. We do this to drive specialties growth and to improve the financial performance and resilience of Wacker. Christian Hartel Operator, we're now ready to begin the Q&A.
Operator: [Operator Instructions] The first question from Christian Faitz, Kepler Cheuvreux.
Christian Faitz: My first question is, in light of the weak U.S. dollar, can you remind us of your hedging policies for transactional activities, i.e., where you produce particularly in the euro region, but for non-euro markets? And I guess, my second question is kind of null and void after your comments, Dr. Ohler. But I was going to try to push for some silver lining in terms of revival of demand post the summer lull. But again, let me know if this is null and void post your comments.
Tobias Ohler: Christian, thanks for the 2 questions and also for the comment on the second. I'll start with the first one. So our sensitivity to the U.S. dollar is that a EUR 0.01 change is worth about EUR 15 million in revenue and pre in EBITDA unhedged and our typical hedging is 50% for the exposure for a year out. So we are not hedging -- I mean, only to a very small extent, we're hedging longer term. And yes, the famous summer lull, I mean markets are difficult to read. What I can say is that the order intake has been really very poor since the start of May, and it has remained volatile and short term, and there's no improvement also throughout the entire month of July. So we are one month into the third quarter and summer continues, at least and also the trade discussion continues. So I would be happy to report any uptick also since the weekend, but we haven't seen that so far. So I think the overall market sentiment is that we have to, yes, maneuver through this volatile environment. And as I said before, we are doing everything. We are focusing on profitable growth also on the short-term opportunity, we try to catch as many -- as many orders possible in this environment. We are focusing on cash reducing CapEx and working capital. And for sure, we are working on cost. The market is not very benign in these days.
Christian Faitz: Yes. Control the controllables.
Operator: The next question is from Sean McLoughlin, HSBC.
Sean D. McLoughlin: I'd like to just understand a little bit the cash generation outlook, I suppose, for the second half and your levers. You've given us a very helpful indication of where you can effectively try to pull back on spending cash. I'm just wondering, could you, first of all, let us know what is a maintenance CapEx figure? What is the minimum CapEx that you can spend if you pull back? And is there any flexibility on any expansion CapEx that you're currently involved in, particularly if we don't see a rebound in EBITDA through the second half? That's the first question.
Tobias Ohler: So, Sean, Tobias here. I would start with the cash flow question and also give some early insight into how we want to develop the CapEx going forward. I mean, first of all, the cash flow generation in the first half of the year was around about negative EUR 300 million was poor, no question. And we are working towards a more balanced overall cash flow for the full year. And there are several levers that come into play. First, it's the program to reduce our accounts receivables. I mean, there will be also some help of seasonality, but there's also additional efforts in shortening payment terms. The second is inventory reductions where we have launched a program reducing inventories. And this means also beyond the polysilicon inventories. It is basically focusing on the other divisions. And we will invest less in the second half. And you also are aware that, we receive the CO2 compensation, that payment for the reimbursement for the CO2 cost, always in the fourth quarter. So all this together should drive us to a more overall balanced cash flow for this year. But still, that is not satisfying, and that's why we are looking into the CapEx needs for the years to come. We have completed many strategic projects. And as everyone is aware, we are also underutilized, so we can slow down significantly and move somewhere between maintenance CapEx, and some very few growth projects and strategic projects. And this would be then definitely below depreciation, significantly below depreciation level, which is about EUR 500 million that we see today. But I don't have a precise number for this going forward today, but we are working hard on getting it for some years to a much lower level given the realities that we face.
Sean D. McLoughlin: That's super helpful. My second question is on the competitive outlook for polysilicon in the U.S. Your U.S. peer is making what appears to be a strategic push to supply the U.S. market more aggressively. I'm just wondering how this might change competitive dynamics for semi and solar poly in the U.S.? And any update on the Section 232 probe as well?
Joerg Hoffmann: Sean, I'm not sure whether I got 100% the first part of your question on the competitive side. Could you repeat that, please?
Sean D. McLoughlin: Yes. Your main U.S. peer sounds like it's making a strategic push to increase supply in the U.S. for both solar and semi, if I've understood it correctly. And I'm just wondering, if you've noticed any change in the competitive dynamics in the U.S. market in general?
Joerg Hoffmann: Okay. Yes, I mean, we also saw the announcement. To my understanding -- and again, I mean, for the details, of course, you have to ask them not us -- my understanding is they are going forward in the value chain of solar using existing capacities for polysilicon to enter the field of wafers of cells and ultimately modules, which I think is a sign of a belief in the solar market in the U.S., which we are also still propagating. I think the U.S. market, there are some uncertainties now with the big beautiful bill, for example, on the solar outlook, but we are still pretty confident that the U.S. PV market will remain relevant as solar is the cheapest and most scalable form of energy production in the world and also in the U.S., and the demand of energy is definitely rising. So, from that perspective, I think these announcements show there is an opportunity also in the U.S. market for PV. On the semiconductor side, I mean, as Tobias stated, we are running pretty well, pretty good. We inaugurated our new etching line in Burghausen just 2 weeks ago. It's running really on track. And that's one of the reasons why we're expanding the capacity there. And it ensures that we remain the quality leader in this segment, which is our prime target segment, the semiconductor area. Then your second part was, is there an update on the Section 232? Well, I mean, the 232 investigation that is one of the recent trade investigations that also Tobias was referring to. Currently, I have to say we need to assess these investigations, and also the outcome of these investigations, which is not yet defined. And upon that, we can see how that moves further.
Operator: The next question is from Thomas Wrigglesworth, Morgan Stanley.
Thomas P. Wrigglesworth: First question, if I may, is there's been quite a mixed reaction from the industry as to the statements around policy support, both from the EU and/or what might be happening in Germany. I'd be keen to get your take as to where you see the basis for optimism in those statements and what you think can change and will change and how quickly? The second question I have is around polysilicon. Clearly, things are bad on the solar side and could improve on the semi side. But obviously, if we assume the EUR 100 million base run rate, are there temporary factors in there that you're having that are allowing you to make that level of profitability, i.e., it could -- outside of a change in -- massive change in costs, could it get worse? Or is that genuinely a floor level that you could just leave it alone at this point and it would run at EUR 100 million? Or is this a business which could still see further pressure because contracts might roll off that aren't renewed or pricing on the solar side is reset lower? I'm just trying to get a sense of the kind of the floor of earnings for that business, whether the current environment improves or not?
Joerg Hoffmann: Okay. Thomas, let me start with the first question on the policy support from the EU and from Germany. And definitely, you hear me talking positive on what's going on in recent months. On the EU side, there was the chemical industry strategy package and meeting with Ursula von der Leyen, which we also participated. And you can clearly see and feel that, there is much more openness for supporting this enormously important industry for Europe. So, the understanding is definitely there. And also, if you talk, for example, on the German industry power pricing, there has always been a long discussion with the EU Commission on regulatory approvals for that. That is now has been developed under the state aid framework for the clean industrial deal. And I think that's a massive move forward. Now, you hear me also saying, what I always say with politics, a great first step, great signals, great movement, but we needed to be finalized and we needed to be signed and implemented to really see these effects. And same is true on the German side with, again, industry power price. We are now also in a phase where we also bring in our input to politics to hopefully work out something which would be beneficial for the industry and hence, for Germany and for Europe as I'm still convinced this energy question could be really a game changer for the European economy and for the German economy. So you hear me positive with a little caution on the implementation side.
Tobias Ohler: Thomas, Tobias here. On the polysilicon question with respect to profitability, so we guided for this year that we would end around EUR 100 million. And as you can see from the numbers, we had around about EUR 60 million in the first half of the year. So, there's EUR 40 million left to come to that number divided by 2 for the quarter. So, as I said in the speech, so we are assuming that we are running at a similar level going forward. But as I also said, there is uncertainty. I mean, we are not knowing how the solar market is developing. So, it could move up, it could move down. And I think it's not a good use of time to speculate on that today. Our core -- and this is my emphasis -- is the semiconductor strategy going forward. And we have invested in that. We are seeing substantial growth year-over-year. We would continue to see that in next year and the years to come. If that was the only business, we would adjust capacities accordingly. But there's no need to think about that today because the solar could have an opportunity. And there are questions around this, whether that would be an opportunity or not. So, I think we can adjust accordingly and in any case of the developments.
Operator:
Q - David Symonds:
David Symonds: So, the first one just on the guidance in silicon. So, you've mentioned that you're not seeing any improvement yet in July. But if I look at the silicones guide, I think it actually implies a step down in the third quarter, even considering the -- taking out the one-off in 2Q. So, can you talk a little bit about what you're expecting for silicones for the rest of the year and what's underlying the guide?
Tobias Ohler: So the guide is basically assuming, as you said, no improvement, and we had a one-off boost, low double digit from the insurance compensation in the second quarter. If you take that out, you come to a number for the third quarter, which is somewhat lower. And then, I mean, as there is volatility in the market, we would assume some seasonal slowdown in the fourth quarter as it is quite typical. And from that perspective, we come to a number that is close to our prior year number. It could accelerate. We don't assume that. I mean, as you know, in that environment, it could also become worse. We don't assume that neither. So that's why we point towards a performance which is close to our last year's performance.
David Symonds: Understood. And then my second question, I was surprised to see -- you mentioned cost-saving measures. I was surprised to see that employee numbers actually increased in the quarter by around 70 positions, I believe, in all divisions, except for biosolutions. Will the cost savings measures include some OpEx savings as well as the CapEx savings?
Tobias Ohler: Definitely, we would be looking at that, David. And I mean, the increase in this year is basically also for the ramp of new capacities. Just take our semiconductor investment for polysilicon that had to be manned. And for that reason, we had seen a slight increase for all the strategic investments. But going forward for looking for cost savings, we look through the entire P&L going from operating costs down to the functional costs below the gross profit. And yes, that would also include potential reductions in the numbers.
David Symonds: Understood. And if I could possibly squeeze one more in. It's coming back to Thomas's question on polysilicon and the sort of the trough rate, if you like. My understanding is you entered short-time work in polysilicon in October last year. And usually, this is a 12-month measure, I believe, unless of extreme circumstances and you could extend that to 24 months. So in the guidance, have you assumed that you're going to be bringing those people back to work? Or is the assumption that the short-time work will be extended to 24 months?
Tobias Ohler: So that is a super detailed question. We do have some flexibility here how to maneuver through this regulatory framework. And we are definitely running, I mean, at very low utilization today. And as we said, we are trying to balance the low demand with our production, and we will do the best to optimize here.
Operator: The next question from Matthew Yates, Bank of America.
Matthew John Peter Yates: I'd like to follow up on a few points that have been raised already. I guess, firstly, maybe to continue on David's theme about the increase in the cost base. If we look at silicones, obviously, you've invested a lot of money in new capacity. Thomas referenced that in the context of depreciation that the plant is now starting up. How much additional fixed cost or operating costs are you now carrying in that business? Because I would imagine, if your revenue is flat, your utilization is, therefore, significantly worse than it would have been a year or 2 ago before you had that additional capacity. So how much is that weighing on, particularly if we thought about EBIT margins rather than EBITDA margins? And then I've got a follow-up after.
Tobias Ohler: Matthew, Tobias here. That is very detailed. I don't have a precise number on that. But fundamentally, you are absolutely right. It is weighing on gross profit that we are having new capacities coming with depreciation coming with fixed costs, coming with staff, and we are not fully utilized yet. And that is one of the reasons also why gross profit has not moved towards the right direction in this year. And as I mentioned in -- one of the questions before, we are actually looking at that, trying to address that going forward.
Matthew John Peter Yates: Okay. Second point, I'm not sure if it was yourself or Christian, who made the statement earlier about there's no need to think about closures today because so they still might have opportunities. I guess, I'm wondering at what point does your patience run out on that view where you have to take a more radical measure, whether that's even feasible, if there's too many interlinkages with the rest of the portfolio? And just on the Section 232 point, sorry if this is more of a legal or a political question, but Section 232 has transformed the steel market in the U.S. into one of the most profitable markets in the world. And so when I see them launching a Section 232 investigation on poly, that conceptually sounds quite interesting. But what is your understanding as to the difference Section 232 could make versus what's happened so far around sort of the AD/CBD rulings, which frankly haven't achieved anything? And when it says polysilicon, its derivatives, is your understanding that this also covers things like wafers and modules? Because I guess importing polysilicon isn't actually the issue in the U.S. market. It's these more downstream form factors, if you will.
Joerg Hoffmann: Okay, Matthew. So your second question that was on the decision on the poly demand, and I think it's very much what Tobias already elaborated on. I mean, at the moment, we are running at a low utilization rate. we have an EBITDA of about EUR 100 million, and it's not a greatest number for sure. But I think there is still that opportunity out there, as I mentioned, on the solar market. And as long as we see this opportunity on the solar market, also driven by regulation, there is a potential for us to have an attractive market. And as long as we have the opportunity for an attractive market, I think it makes no sense to idle or shut down capacity. So that would be kind of, if you want a decisive point for taking that decision. And as I said, we don't see it right now. Now, on the Section 232, I mean, the U.S. Department of Commerce is currently initiating quite some of the Section 232 investigations to secure the supply of strategic raw materials for national security purposes for the U.S. And as you mentioned, indeed, one of the last one was polysilicon and its derivatives. So you also asked for the derivatives. It has not been, to our knowledge, have officially defined in the announcement. What we assume is that it may refer to wafers and ingot cells and modules in the solar supply chain, and also to wafer and ingots and potentially chips not yet assembled into electronic devices. And as you rightly stated, the import of polysilicon per se is not really the big issue because there is not much of an import today to the U.S. So what could be kind of an impact? That's kind of what I hence or what I from your question. Well, first of all, I think we have to analyze the investigation in itself and then, of course, the outcome. But I think it's kind of fair to say that if there would be a truly effective 232 on polysilicon and its derivatives that it would help us to economically produce polysilicon in the U.S. and potentially also in Europe. So that could have a positive impact definitely. But again, we have to see it's not yet closed, and it's not yet finalized the decision on it.
Operator:
Q - Chetan Udeshi:
Chetan Udeshi: First one is just -- I mean your comments suggest we should probably be looking at third quarter broadly in line with second quarter, except for that one-off in silicone. Is that right? So, EUR 100 million EBITDA. Or can it be even below that, do you think in Q3? The other question was just going back to this power price discussion in Europe. I'm just curious if, let's say, you get a subsidized EUR 50 per megawatt hour price in Germany for electricity. Is that a material tailwind for you? Because I think you do already get some sort of subsidy in Germany already, maybe mainly on CO2 cost compensation. But I'm just curious, is EUR 50 a big tailwind for Wacker, if you were to get it?
Tobias Ohler: So, Chetan, Tobias here for the question on the Q3 EBITDA. And I think your calculation is, I mean, sort of, aligning very nicely to my messaging. Q3 is similar to Q2. I mean, we would see some pluses or minuses in the various segments. Insurance compensation would be a minus for silicones. For polymers, we had a turnaround slight plus, biosolutions similar, polysilicon, no real change. I said EUR 40 million for the second half, so maybe EUR 20 million for each quarter. So, I think if you take others, our -- and this then leads over to Christian's answer to the second question, others is normally burdened by the CO2 compensation offset, which is EUR 40 million. So overall, a similar number for EBITDA for the third quarter, that's how we see it today.
Joerg Hoffmann: Okay. And Chetan, on your second question on our pricing discussion in Europe, yes, I mean, as I mentioned, I think the good news is that the EU Commission is willing to accept something like this in Germany. And it's under the CISAF agreement, this chemical industry -- sorry, the Clean Industry Act State Aid Framework, and what we know so far, there is a proposal out, which as you mentioned, is a EUR 50 that will be the lowest level. There are some caveats into it, like it is only for 50% of the procured power. And also, you have to kind of reinvest 50% of that. If you would keep it in that kind of original idea, I think the effect for us would be not really big as you mentioned because we have other means today. But we see it more as a starting point of a discussion with also the German government and the EU Commission because if you have -- if you implement a new tool, which brings exactly the same like the old tool, probably the necessity is not that high. And therefore, we would go into discussions to make something more meaningful out of that.
Operator: The next question from Tristan Lamotte, Deutsche Bank.
Tristan Lamotte: I was just wondering if you think that the reported plans to close down underutilized Chinese polysilicon capacity, if that's actually likely to take place and if the mechanism that's been proposed, whether that mechanism could actually work? And say this does go ahead, where do you think prices in China could go? And could that really be enough to bring those prices up to the much, much higher ex-China price that you currently transact at? And then the kind of follow-on from that is, does this China supply side reform actually matter for you at all?
Joerg Hoffmann: Okay, Tristan, very good and not simple question to answer. First of all, let me say, I think that in general, if there are measures in place that reduce overcapacity in the world, that is per se positive. Now, your question was, does it work the concept which we hear about in China? That's something I cannot answer today. It's an interesting concept, I would call it. It has some ideas on reducing, I think, the capacity of about 1 million tonnes, which is substantial nevertheless, and that goes then into the second part of your question. Today, we talk about a 3.5 million tonnes of capacity. So taking out one is significant, yes, but it would still leave 2.5 million tonnes in the market which would be enough for 1,000 gigawatts of solar. And keeping in mind that I think last year's installation was more in the range of 500 to 550, you could still call that a significant overcapacity. But nevertheless, I think it's the right move. And also what I hear since the beginning already of the year is that the Chinese government is very much keen and interested in doing something on it. I think it is seen as a challenge. And whether you call it anti-involution, which is a difficult word, some call it the red race or some call it cutthroat competition, I think every measure that reduces is positive. Will this first step, this announcement lead to similar prices to the outside China index? I'm not so sure about that, especially in the short term. And is it beneficial for us? I mean, today, we don't really sell much volumes to China, but I think it would have an indirect effect, which is positive increasing price levels of polysilicon for solar.
Operator: The next question from Sebastian Bray, Berenberg.
Sebastian Christian Bray: I have 2, please. The first is on polysilicon inventory. I'm thinking about the rate at which the company would like to reduce this or would be able to reduce this inventory. And could we end up with a situation where the EUR 200 million, EUR 300 million of excess inventory that's currently on the books just stays there for 2 or 3 years if the market conditions remain unchanged? The reason that I'm asking this is that with an eye towards 2026, I'm thinking, well, there might be a recovery in the segment. The cost could go down. There's some government support, but there's still the underlying issue that the current level of production is not really making a dent in the inventory pile. My second question is on the other line. Could you give us an idea of what the underlying number is now ex-Siltronic, assuming that the group utilization doesn't really improve? Is it about minus 50 to minus 60 a year?
Joerg Hoffmann: So I give it a try, Sebastian, on the poly inventory. I mean you have seen us reducing utilization throughout the year and keeping inventories in check, and that is following the soft demand that we have experienced throughout the year. And as we mentioned before, we would continue to adjust accordingly. So given the uncertainty in the environment, we could reduce quickly if there's a demand hike, and then we would -- as those products are already close to customers, we would sell it quickly. If that doesn't happen, we would continue to adjust production. And even if we would have the inventory for longer, I think I come to it, I mean, there is -- there's no degradation. I mean this product is of quality for years, and we would then have to wait longer and be patient until we can sell it off. But rest assured, we would adjust capacities accordingly and utilization. On the second question on the other line, we mentioned that our overall guidance for the year is, I think, minus 40 million from a lower utilization. It used to be minus 20 million. But given the overall, I mean, lack of absorption of infrastructure costs, we have set it at minus EUR 40 million. And then you have that effect between the quarters, Q3, Q1, Q2, we have that offset for the CO2 compensation that gets reversed in the fourth quarter, as you know. The Siltronic result, to be clear, is not part anymore of the others line as it was before, and we have adjusted that also for the comparable numbers for last year.
Sebastian Christian Bray: That's helpful. If I might follow up on the inventory point. So I imagine that the utilization of the segment is around 40% or so at the moment, although I appreciate you might not want to give a number. When we talk about the balance of protecting EBITDA versus clearing inventory, is it possible that this utilization rate could go lower in your view or the company would be more minded to protect its EBITDA level?
Joerg Hoffmann: It goes back to last year where we consciously decided from the uncertainty point of view to rather continue production at a higher level, thus protecting EBITDA and taking a strategic stock position. In this year, it's different. We adjusted production accordingly. So also taking the burden of the low utilization into the EBITDA, but protecting cash and keeping inventories despite the weak demand environment in check, and that would continue going forward.
Operator: We have a follow-up question from David Symonds, BNP Paribas.
David Symonds: Just a couple more on Siltronic, if I may. I think there's been a bit of a rumbling in the market that they could, at some point, look to raise equity. I'm not expecting you to speculate on that, obviously, but perhaps you could comment on whether you would look to -- whether you want to maintain the current level of stake in Siltronic, whether you would do that through any kind of process by them?
Joerg Hoffmann: Well, I mean, David, there's no real change in our strategy regarding Siltronic. I mean we decided a couple of years ago to reduce our share in Siltronic, which we still believe is a good company, no doubt about it. And we had this good deal on the table with GlobalWafers, which has not been approved by the German authorities, unfortunately. So there's no rush for us now to sell off any material stakes in that. We are open for discussions. But to be honest, I think geopolitically, it might be world is not getting become easier. And so we see it as a valuable financial asset. And again, no rush to sell off anything.
David Symonds: Okay. Understood. And then just on the value of the stake, I think the implied stake value from the market cap is now considerably below the balance sheet value. What would trigger a write-down on that? And now that you've moved Siltronic from the earnings line, I assume the write-down would still go through your earnings as opposed to through the financial line, but maybe you could confirm that.
Joerg Hoffmann: So we did an impairment test at the close of the half year, and we performed the valuation of our shares. And based on the forecast cash flows, we determined that there's no need to adjust the valuation at this point in time. And yes, for sure, we would have to repeat that exercise at the year-end. But you're right, David, it would definitely still affect our P&L, but would not go through the EBITDA or EBIT line in the P&L.
Operator: That was the last question. I would like to turn the conference back over to Mr. Hoffmann for any closing remarks.
Joerg Hoffmann: Thank you, operator. Thank you all for joining us today and for your interest in Wacker Chemie. Our next conference call on the third quarter 2025 results is scheduled for October 30. As always, don't hesitate to contact the IR department if you have further questions. Thank you.
Operator: Ladies and gentlemen, the conference call is now over. Thank you for participating. I wish you a very nice rest of the day.