Wacker Chemie AG

XETRA:WCH

Earnings Call Transcript 2021-Q3

[Operator]

Dear ladies and gentlemen, welcome to the conference call of Wacker Chemie AG. At our customers' request, this conference will be recorded. [Operator Instructions]May I now hand over to Joerg Hoffmann, Head of Investor Relations of Wacker Chemie, who will lead you through this conference. Please go ahead.

[Joerg Hoffmann, Head of Investor Relations]

Thank you, operator. 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 our annual report. All documents relating to our Q3 2021 reporting are available on our website. Chris?

[Christian Hartel, CEO, President & Member of Executive Board]

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 stays tight, 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 3, you 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 4 in the presentation. Yesterday, we have just announced the acquisition of a 60% stake in specialty silane manufacturer SICO Performance Materials. 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 organofunctional silanes in China. The company achieved sales of EUR 54 million in 2020, displaying very strong growth. SICO operates very profitably and generate a positive cash flow.The transaction closes the 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 6 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 chemicals businesses saw strong demand and polysilicon benefited from firm and rising pricing. These developments carry into 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 EUR 1.2 billion to EUR 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 EUR 100 million to more than EUR 400 million this year.So to sum it all up, Wacker looks to achieve a record result this year despite significant headwinds. We have a great team with a 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 who will take you through the Q3 financials and the outlook.

[Tobias Ohler, CFO & Member of the Executive Board]

Thank you, Chris. Welcome, everybody. As preannounced, 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 EUR 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 EUR 330 million and volume improvement contributed EUR 136 million to the overall sales growth.Gross profit came in at EUR 486 million, significantly higher than the prior period. Again, the main drivers were price and volume effect supported by strict cost control. Our Shape the Future program is on track and will deliver over EUR 100 million in savings this year.The operating results increased from EUR 81 million last year to EUR 341 million in Q3. Our tax rate was 25%. Q3 net income was $249 million or EUR 4.90 per share.Our balance sheet, on Page 8, improved further following higher discount rates for pensions and the higher earnings contribution to equity. As a result, shareholders' equity increased by EUR 943 million since the end of last year.And moving now on to Page 9. Silicones increased sales beyond the already strong Q2 and came in at 24% over last year. Sales were EUR 680 million with an EBITDA of EUR 161 million. The quarterly EBITDA margin moved up to 24% as specialties rose and standard products benefited from better pricing. Demand for our products continued 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 silicones industry now faces a global imbalance in silicon metal. Prices for silicon 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 silicon metal will last. In light of this development, we announced 30% price increases in 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 a low double-digit percentage rise in sales, combined with an improved EBITDA margin over last year.Polymers saw a 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, and the typical mid-summer slowdown did not come this year. The combination of better volume and pricing surcharges buffered the effect of rising raw materials.We report sales of EUR 469 million with an EBITDA of EUR 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 majeures, our procurement team was able to avoid major production disruptions in Q3. In some markets, access to raw materials remained difficult, constraining volumes in Q4.Raw material in polymers remain higher for longer than experts had initially anticipated. We have announced up to 20% price increases to cope with this 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 full year sales of about EUR 1.6 billion. EBITDA should come in close to our 16% target margin.Biosolutions generated EUR 78 million with an EBITDA of EUR 11 million. We continue to see strong demand for our biopharma and bioingredient products. Our full year outlook for the segment is unchanged.Demand for solar and semiconductor product in polysilicon continues strong. Tightness in both markets supported a strong performance. In addition, ongoing cost reductions helped the strong result. Q3 sales came in at EUR 409 million, with an EBITDA of EUR 201 million. Like in our chemical businesses, we see headwinds developing for the polysilicon industry in general from the shortage of silicon metal and rising power prices. Despite this, we have upgraded our outlook and now expect full year sales of EUR 1.5 billion with an EBITDA margin of about 40%.Let's move on to Page 13 now. We saw a very strong cash conversion in the third quarter. Net cash flow reached EUR 426 million. Our year-to-date net cash flow has reached EUR 765 million compared to around EUR 700 million for all of last year. Strict cost controls and active working capital management supports the solid cash conversion in the quarter and year-to-date. Our net cash position climbed to EUR 538 million at the end of the quarter.On Page 14, you will see the summary of our group guidance. We updated our annual sales and EBITDA guidance for the full year in mid-September. Since then, headwinds from raw materials and energy costs have increased from more than EUR 300 million to now more than EUR 400 million. As Chris said, we now see us reaching the upper half of our EBITDA guidance range. In addition, we upgraded 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.

[Joerg Hoffmann, Head of Investor Relations]

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

[Operator]

[Operator Instructions] We have the first question. It's from Andreas Heine, Stifel.

[Andreas Heine, Managing Director]

It's actually first on silicon metal and energy. Could you elaborate a little bit how your supply contracts are defined? Are they -- let's say, if it comes to volume and do 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 silicones and in polysilicon, obviously?And you have your own backward integration to some extent. Doesn't it make sense to rethink whether you increase this portion? Or do 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 or to other metrics in the energy equation? And then lastly, on polysilicon with 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?

[Tobias Ohler, CFO & Member of the Executive Board]

Andreas, Tobias, I'm taking the first 2 questions on silicon metal and energy. From the headwind that we see in this year, and we updated our number to more than EUR 400 million in 2021, I mean the majority comes from VAM, 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 curtailments in China, which led to silicon metal pricing, yes, gaining momentum right now to a quite a natural situation. But with respect to the impact on us, I can say that around 1/3 of our demand is captive in Norway. And the rest is sourced externally. And yes, we have a quite broad supplier portfolio. We are one of the largest buyers in silicon metal and the supply portfolio ranks in the region, Europe, all Americas, that's South and North America and then also Asia Pacific.So with respect to our contract structure, 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 as a player with a significant portion of backward integration and a 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 silicone as you have noted 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 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, yes, hedging strategy. So we are not exposed to the spot market. So I could say that roughly 50% of the -- also of next year is already secured, both for electricity and gas. And the remainder is open, needs to be seen how that develops over time. So that market is, yes, 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, yes, pricing level, which gives us mid-single -- mid-double digit -- sorry, 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.

[Andreas Heine, Managing Director]

And on polysilicon in the market?

[Christian Hartel, CEO, President & Member of Executive Board]

Okay. On the polysilicon, yes, Andreas, this is Chris. So I mean, what we see today is a -- throughout the year, a very, very strong demand 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. 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.

[Operator]

The next question is by Jaideep Pandya, On Field.

[Jaideep Mukesh Pandya, Analyst]

I have 3 questions, actually, 2 then linked to polysilicon and then 1 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 U.S. 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 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?

[Christian Hartel, CEO, President & Member of Executive Board]

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 U.S. 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 U.S. 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.

[Tobias Ohler, CFO & Member of the Executive Board]

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 EUR 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.

[Operator]

The next question is by Mubash, Citi.

[Mubasher Ahmed Chaudhry, Vice President]

It's Mubasher Chaudhry from Citi. Just 2 quick questions, please. In silicones, you talked about the force majeures 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?

[Tobias Ohler, CFO & Member of the Executive Board]

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 1:1, 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 2 weeks ago.

[Operator]

The next question is by Markus Mayer, Baader Bank.

[Markus Mayer, Lead Analyst of Chemicals]

I have 2 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 3 questions.

[Christian Hartel, CEO, President & Member of Executive Board]

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 organofunctional 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 EUR 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.

[Tobias Ohler, CFO & Member of the Executive Board]

With respect to silicon metal, Markus, as I mentioned before, roughly 1/3 is captive and 2/3 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 U.S. And then we have Asia Pacific and part of Asia Pacific is a rather small portion from China.

[Christian Hartel, CEO, President & Member of Executive Board]

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, [indiscernible] 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 details on this at our Capital Markets Day in December.Is that a benefit which we can serve to the customer? Definitely, and it goes 2 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 the lowest worldwide. And therefore, that itself is a benefit, which we also actively sell to our customers and which generates also a very high interest in the market. And if you then combine it with even greener energy, I think that 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.

[Markus Mayer, Lead Analyst of Chemicals]

May I sneak an added question on this? Of course, currently, compared to the historic levels, polysilicon prices are up massively, but more long term speaking, could you think a situation where then kind of polysilicon product, which is more produced and green energy could have a premium compared to others, which are then more produced than electricity, which is coming from fossil-based resources. Is this something you can think of?

[Christian Hartel, CEO, President & Member of Executive Board]

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 it's 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, the 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. If it's a real premium, I think we have to see, but there is definitely a growing demand for it.

[Operator]

The next question is by Thomas Swoboda, Societe Generale.

[Thomas Swoboda, Research Analyst]

I have 3 questions, please. Firstly, on siloxane. 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 planned 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 siloxane capacity? So that's number one.Number two, pushing into a very similar direction and it's on your captive on your own silicon metal production. I'm 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 a kind of a summary of that. I mean, there's 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?

[Christian Hartel, CEO, President & Member of Executive Board]

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 in overall, expansion, allowing more or, let's call it, specialty raw materials to be produced, which are really hard to buy on the market.

[Tobias Ohler, CFO & Member of the Executive Board]

Thomas, and your question on silicon metal, our backward integration in Norway. Yes, we would 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 Markus' 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 the question to Chris about [indiscernible] to me about silicon metal and it ties 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 the Capital Markets Day in March.

[Operator]

The next question is Sebastian Bray, Berenberg.

[Sebastian Christian Bray, Analyst]

I would have 2, please. The first is on the silicones segment. Are customers prebuying 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 were some production problems in China. And then there was -- I think what was then guided to be about EUR 100 million of overearning in EBITDA. I suspect that this time is different. But why is that the case?The second question is on the Biosolutions segment. Could you remind me of why the increase in sales is so much higher than the increase in EBITDA? And is this something that you could imagine reverting, i.e., having more increase in EBITDA for an increase in sales next year?

[Tobias Ohler, CFO & Member of the Executive Board]

Sebastian, on the silicones situation and where our customers are prebuying, I would say, it's just not possible to prebuy because we are fully sold out. We have not more to sell, and we are fighting at the limit of our operations. So it's just impossible. I think orders are high, potentially, yes, also from the fear that prices would increase further. But as we can't confirm the orders as 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 development also in biopharma and bioingredients. We have the long-term target 2030 and to make it a EUR 1 billion sales and 35% EBITDA margin business. And for next year, I think it's -- as for the other segment, it's too early to give you any indication.

[Sebastian Christian Bray, Analyst]

If I may rephrase the question on Biosolutions, can you give an idea of the magnitude of the P&L cost or headcount-related figures for that business now versus, let's say, 2 or 3 quarters ago? What I'm picking out here is if this is a case of a business that's been bought on the D&A side, and there's some integration cost, but everything is fine or is it there some heavy-duty P&L investing going on here that's going to take 2 or 3 years to work through before margins start to inflect?

[Tobias Ohler, CFO & Member of the Executive Board]

I mean I can't give you the specifics, 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.

[Operator]

The next question is by Rikin Patel, Exane BNP Paribas.

[Rikin Patel, Research Analyst]

Just 2 follow-ups from me. Firstly, on the biopharma business. You announced in mid-September that Wacker will no longer produce for CureVac. Could 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?

[Christian Hartel, CEO, President & Member of Executive Board]

Okay, Rikin, I'll take 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 canceled 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 are looking with high motivation on finding new projects. And there are already some. It's not yet ready to talk about, but we do see some opportunities.

[Tobias Ohler, CFO & Member of the Executive Board]

Rikin, 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 headwind coming, and we act aggressively in passing it on to our customers. But it's, yes, too early to really do the equation on what does it mean for next year.

[Operator]

Next question is by Chetan Udeshi, JPMorgan.

[Chetan Udeshi, Research Analyst]

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 trend goes -- sorry, trend growth today in Q4. Is that the right impression that I'm getting?

[Tobias Ohler, CFO & Member of the Executive Board]

Yes.

[Chetan Udeshi, Research Analyst]

And then what about...

[Tobias Ohler, CFO & Member of the Executive Board]

I would say -- Chetan, I would say, yes, because I mean, our orders are high. We also hear about a slowdown in automotive. What we can say, for example, to that segment, a lot of the trends also with e-mobility 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 broad-based GDP-type in silicones. I think we see strong demand, as we said before, in polymers. We are talking about construction, which is 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 very good order book, I think. And there is tightness in polysilicon. I mean I don't need to talk about that.

[Operator]

The next question is by Sean McLoughlin, HSBC.

[Sean D. McLoughlin, Associate Director of Clean Technology]

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 hint 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.

[Christian Hartel, CEO, President & Member of Executive Board]

Okay, Sean, let me take these questions. So you asked on essentially what are we doing with the money. And I think we pointed this out already at our last call pretty clearly that our main target is accelerated growth. So we want to grow that 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, the numbers will go up.M&A, we always said we'll take -- we'll 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. We will take the same prudence in taking a decision. And for M&A, it's all about, is that a technology which helps us? Is that a product portfolio, which helps us on specialty growth? And is it something on a regional perspective that will help us? And these 3 criteria are 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 2 points, as you mentioned, is, of course, the dividend, 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 a 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.

[Tobias Ohler, CFO & Member of the Executive Board]

Sean, Tobias here. I can add that to the question about demand destruction. I mean we have seen financials of our customers that are, yes, even improving sequentially. So that -- I think that's not the case if there's demand destruction.

[Operator]

The next question is by Jaideep Pandya, On Field.

[Jaideep Mukesh Pandya, Analyst]

It's just really around where Wacker is today. You are 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 the sort of 3- to 5-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 the 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 renegotiations in semi grade pricing as well next year?

[Christian Hartel, CEO, President & Member of Executive Board]

Okay. First question, Jaideep, on the -- yes, I mean -- clearly, yes, I mean, we set 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 years coming up. 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'll look at is if there are -- if price hikes in raw materials are well covered in these contracts, and if that would not be the case, then we would also renegotiate these cases.

[Operator]

The next question is by Eleanor Seddon, UBS.

[Eleanor Seddon, Analyst]

I just got 2 at the moment. The first one, we've touched on it a little bit earlier with regards to one specific segment. But more generally, I understand perhaps inventories are low across your customer segment. 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? And if you have any view on how long that demand can sustain, that would 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 Biosolutions 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 comments.

[Tobias Ohler, CFO & Member of the Executive Board]

I would start -- Tobias here, with the first question on low inventory levels at our customers. 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, so running also at capacity at the limits of supply.

[Christian Hartel, CEO, President & Member of Executive Board]

Okay. And the second question was on the announcement which we had on the Prokarium. So I mean it's a contract for microbial immunotherapies for bladder cancer patients. Is that the action 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.

[Operator]

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

[Joerg Hoffmann, Head of Investor Relations]

Thank you, operator. Thank you all for joining us today and for your interest in Wacker Chemie. Our next installment 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.

[Operator]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.