Wacker Chemie AG

XETRA:WCH

Earnings Call Analysis

Wacker Chemie Navigates Market Challenges, Adjusts Expectations for Polysilicon

In Q3 2024, Wacker Chemie reported group sales of EUR 1.4 billion, reflecting a 6% decline year-over-year, amid weak demand, especially in construction and automotive sectors. Group EBITDA remained stable at EUR 152 million. Chemicals and Biosolutions segments showed robust performance, with Chemicals EBITDA rising by 23% to EUR 155 million. However, the outlook for Polysilicon weakened due to lower solar-grade sales, with revised guidance expecting sales of around EUR 1.1 billion and EBITDA between EUR 150 million to EUR 200 million. The company aims for a full-year EBITDA between EUR 600 million and EUR 800 million, focusing on high-margin specialties to bolster profitability.

Wacker Chemie’s Resilience Amid Market Headwinds

In Q3 2024, Wacker Chemie AG demonstrated financial resilience, achieving group sales of €1.4 billion, down 6% year-over-year. Despite challenging market conditions impacting demand in various sectors like construction and automotive, the company saw positive performance from its Chemicals and Biosolutions segments, indicating its ability to navigate volatility.

Segment Performance and EBITDA Growth

The combined EBITDA from Wacker's four operating segments reached €198 million, reflecting a 17% year-over-year increase. However, the group's overall EBITDA remained essentially unchanged due to weaker contributions from the Polysilicon and Other segments. Notably, Chemicals EBITDA rose to €155 million, an impressive 23% increase from last year, driven by a surge in specialty silicones sales, which also benefited from improved raw material costs.

Chemicals and Silicones: A Path to Stability

Wacker's Silicones division reported sales of €727 million, an 8% rise year-over-year, with EBITDA doubling to €109 million due to enhanced specialty volumes. Looking forward, the company expects Silicones to maintain a low double-digit EBITDA margin for the full year, though margins are still targeted to improve beyond current levels.

Polymers Facing Challenges

Conversely, the Polymers segment experienced a 7% decline in sales, amounting to €365 million, primarily because of raw material price shifts. A temporary force majeure from a supplier affected profitability, leading to an EBITDA of just €46 million. Wacker plans to target a 15% EBITDA margin in this segment for 2024, aided by geographic transformation and product upgrades.

Biosolutions Showcasing Strong Growth

In the Biosolutions segment, Wacker reported remarkable growth, with sales of €100 million, an increase of 29% year-over-year, bolstered by the new mRNA facility. The company is optimistic about integrating new investments and expanding product offerings, aiming for over 25% EBITDA margins in the future.

Polysilicon and Future Growth Expectations

The Polysilicon segment, which faces ongoing challenges due to reduced solar-grade volumes, reported sales of €209 million, down 39% year-over-year. Wacker has updated its full-year sales guidance to around €1.1 billion, with EBITDA expected between €150 million and €200 million. This revised outlook reflects lower production levels and a cautious approach as the market awaits antidumping duty outcomes.

Financial Health and Strategic Positioning

Wacker's balance sheet remains strong, showcasing €1 billion in liquidity and €4.6 billion in shareholder equity. The net working capital rose by €370 million compared to last year, primarily due to increased inventory in Polysilicon. Notably, the firm plans to continue investing between €500 million to €800 million annually, focusing on profitable high-margin growth areas.

Outlook and Strategic Initiatives

Despite the challenging economic environment, Wacker reaffirmed its full-year EBITDA guidance of €600 million to €800 million, targeting the upper half of this range. The executives emphasized the importance of being dynamic and adaptable in response to market conditions, indicating a strong commitment to cost management and portfolio reviews to enhance margins.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, welcome to the Wacker Chemie AG Conference Call Q3 2024. I'm Alison, call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions]

At this time, it's my pleasure to hand over to Joerg Hoffmann, Head of Investor Relations. Please go ahead.

[Jörg Hoffmann, executive]

Thank you, operator. Welcome to the Wacker Chemie AG Conference Call on the 2024 Third Quarter Results. Dr. Christian Hartel, our CEO; and Dr. Tobias Ohler, our CFO, will take you through our prepared slides momentarily. Press release, our IR presentation and detailed financial tables are available on our web page under the caption Investor Relations.

Please note that management's comments during this call include forward-looking statements involving risks and uncertainties. We encourage you to review the safe harbor statement in today's press release, the presentation and the 2023 Annual Report regarding risk factors. All documents mentioned are available on our website. Chris?

[Christian Hartel, executive]

Welcome, everyone. Wacker is performing well in challenging markets. Despite considerable headwinds, we achieved a strong result in our specialty business, and earnings in Chemicals are clearly higher than last year but remain below our target. As we discussed on the last call, it is still too early to speak about a broad-based recovery yet. Demand remains particularly weak in construction and automotive. Overall, customers continue to be cautious, and this is having an impact also on us.

In the third quarter of 2024, group sales came in at about EUR 1.4 billion, down 6% year-over-year. The combined EBITDA of the 4 operating segments was EUR 198 million, up 17% year-over-year. Group EBITDA is essentially unchanged versus prior year due to the Others segment. As a reminder, the Others segment EBITDA is largely defined by the CO2 charge, which will be reversed in the fourth quarter.

Now Chemicals EBITDA came in at EUR 155 million, that is up 23% year-over-year and 4% ahead of the previous quarter. Sales for the specialty silicones was markedly higher than the previous year, and volumes remained at a high level achieved during the preceding quarter. This improvement has supported the strong earnings recovery over the past year. EBITDA at EUR 109 million is 2x higher than a year ago and sequentially higher due to maintenance in the second quarter.

Now in Polymers, consumer-related binders are performing well, with strong growth in packaging applications from the plastic to paper trend. However, the regional demand dynamics for construction-related binders are unchanged. We continue to be held back by sluggish demand in Europe and China, but see stronger growth in other regions around the world as we drive the transformation to higher-quality building materials. EBITDA in Polymers declined quarter-on-quarter to EUR 46 million due to a primarily supplier force majeure.

In Biosolutions, the new biopharma site in Halle provides us with a strong foundation for further growth. Setting up a completely new facility and meeting the highest quality standards in short time underlines our capabilities in realizing complex investment projects.

Polysilicon. Our resilient semi business supports results while uncertainty in solar weigh on total volumes sold. As we highlighted on the last call, the antidumping countervailing duties petition in the U.S. targeting cell and module manufacturers in Southeast Asia create a situation where customers are in a bit of wait and see mode. In the beginning of October, the preliminary CVD investigation results were released, and now the industry is awaiting the outcome of the antidumping duties at the end of November this year.

The timing of these investigations have been delayed somewhat, and customers may likely wait -- await the outcome of these investigations before normal order patterns resume. Yes, uncertainty remains in solar, but we are convinced that the U.S. will be successful in its reshoring efforts. It will remain a premium market. Substantial module and cell capacities are being built. These capacities will need to meet U.S. import restrictions. As a U.S. compliance supplier, we have a unique position to leverage here.

In Polysilicon, our focus is on semi. We are preparing to commissioning our new hedging line in Burghausen after fully testing the site virtually with a digital twin. The new line will enable the next generation of chip production and strengthen our leadership position in the industry. Wacker is the benchmark for quality, and it's unique in the market, producing semi products at 2 sites. This provides our customers with security of supply and support our high market share.

Now looking to sustainability. At Wacker, our efforts target lowering the footprint of our operations and enabling and improving the performance of sustainable products. We are committed to reaching net zero by 2045 and have shown good progress towards achieving this target. One area we must address is unavoidable CO2 emissions from our silicon metal production in Halle in Norway. In the first step, we have already sourced renewable energy, and we are now looking to substitute fossil-based reductions with bio-based materials. This change would greatly reduce our financial risk exposure to carbon credits, especially as free allowances are gradually phased out.

To achieve net zero, we need to be even more ambitious. We are investigating carbon capture, for example. We just completed the pilot study demonstrating the feasibility of capturing CO2 from our silicon metal emissions. So we can do this. However, what we need is a proper regulatory framework to make these types of innovative solutions reality and ultimately, a finally convincing business case.

Now coming to Page 3, and please let me quickly summarize the main takeaways from our recent Capital Markets Day in Burghausen. We confirmed the key financial and sustainability targets for 2030. We target EUR 10 billion in sales and EBITDA margin of more than 20% and ROCE that is 2x our cost of capital. Our strategy continues to evolve and adapt.

With this, we wanted to highlight that we no longer have a specific growth target for volume mix in Chemicals. We are now clearly focused on margin mix and profitable growth. We will continue to invest in specialty growth and production efficiency. We are addressing the right trends and are focused on innovation, regionalization, portfolio management and cost efficiency programs. Those are the levers we pull to drive sales and get our margins back on target.

Page 4, our segment targets focus on profitability and ROCE. In Chemicals, we target an EBITDA margin above 20% and with a ROCE that is more than 2x our cost of capital. We are away from that today, but we have delivered this before. We will get back there by focus on high-margin specialties and regional opportunities. By rigorously applying a stringent portfolio management process, we focus on the right products and markets. The volume transition from standard to specialties in silicones is done. Now we need to shift towards more value within the specialties to a stronger, more resilient, more profitable and higher margin portfolio.

In Biosolutions, we target an EBITDA margin above 25% and a ROCE clearly above our capital cost. We are setting up the foundation for future growth today. We have invested in new sites. We have made acquisitions to extend the product portfolio and capacities. Now we need to integrate and fill them.

In Polysilicon, we target an EBITDA margin above 30% and a ROCE that is more than 2x our cost of capital. We have a clear focus on the attractive semi business with upside in solar. We are growing in semi. Our mix continues to improve. And with that, sort of the resilience of our business. To maintain resilience, you need to be robust, you need to be flexible. You really need to have a toolbox. With our established Shape the Future and WOS efficiency programs, we have a systematic approach here. But there's more. We have digitalization and automation. With advanced process control and AI, we leverage our deep data pool. We measure, we learn, we become more efficient, and we do that continuously.

Also, we leverage regionalization. Our new excellent hub and silicone site in the Czech Republic helps us reduce costs and drive efficiency. By driving specific initiatives in each of these 3 main areas, we aim to achieve savings of more than EUR 200 million annually.

Coming to Page 6. For the next few years, we expect investments to be in the range of EUR 500 million to EUR 800 million per annum. We are looking at smaller individual projects, nothing big upstream. Why such a wide range, you may ask yourself? Because we have a diversified portfolio. Depending on how markets develop, we can accelerate or slow down. But it's not just about growth. It is about highly profitable growth. Of our 4 segments, we have competing projects. This gives us the ability to be selective. We will only deploy capital in the most attractive areas.

Page 7, our strong balance sheet. That is the foundation. It's the basis for growth and the basis for dividends. We have a very clear capital allocation priorities, growing the company and paying dividends while maintaining resilient financials.

So to wrap it up and before I hand over to Tobias, as you saw in this morning's press release, we confirmed our full year guidance. We continue to expect EBITDA to be in the upper half of the EUR 600 million to EUR 800 million range. Even though today's global economic trends remain challenging, we continue to invest in our future. I'm convinced that we are well positioned, and we remain committed to our 2030 targets. With our committed team and our innovative products and solutions, we enable the megatrends of today.

Now to Tobias for further details on our results.

[Tobias Ohler, executive]

Thank you, Chris. Welcome, everybody. Looking at the P&L. Sales during the third quarter of 2024 came in at EUR 1.4 billion, down 6% year-over-year. The lower sales were driven by Polysilicon, with significantly lower solar-grade volumes sold. On the other hand, Chemicals and Biosolutions both delivered higher sales, benefiting from higher volumes in silicones and higher biopharma sales.

The third quarter group EBITDA was EUR 152 million. While unchanged year-over-year, the underlying performance of the 4 segments showed different dynamics. Chemicals and Biosolutions both showed a strong year-over-year improvement, while the contribution from Polysilicon was lower. The EBITDA loss in the Other segment was also higher. So altogether, EBITDA was on par, but again, very different dynamics at play here.

Now looking at the last line items in the profit and loss. Including the contribution from Siltronic, the results from the investments were EUR 7 million. Net income was EUR 34 million. This equates to earnings per share of EUR 0.56. Our balance sheet shows strong financials with EUR 1 billion in liquidity and EUR 4.6 billion in shareholder equity. Net working capital increased by about EUR 370 million compared to the end of last year. This primarily reflects the higher inventory in Polysilicon and the sales development in Chemicals with respect to accounts receivables and lower trade payables.

On Page 10. At Silicones, sales in the third quarter of 2024 were EUR 727 million, up 8% year-over-year and slightly ahead of the preceding quarter. At EUR 109 million, the third quarter EBITDA was 2x higher than last year's results. This was primarily due to high specialty volumes, lower raw material costs and better plant loading. The sequential improvement was supported by the second quarter turnaround, which has held us back somewhat, and a better mix.

Our Silicones outlook for 2024 is unchanged. We expect a low double-digit percentage EBITDA margin for the full year. Overall, specialty volumes are at an improved level, but margins still remain below target. And as Chris mentioned, we are taking a granular look at our portfolio with a clear aim to focus on high-margin applications where we have the ability to win.

Sales in Polymers were EUR 365 million, 7% below last year, mainly driven by lower prices moving with raw material prices. Compared to the previous quarter, volumes were a bit weaker. The total volume sold of dispersion and powders is comparable year-over-year with good demand from consumer-related binders offsetting weakness in construction-related polymers. EBITDA at EUR 46 million is below our expectations. This was mainly due to temporary force majeure from an important European ethylene producer. While we were able to quickly pivot to return to suppliers to keep volumes, this came at a higher-than-expected cost.

For 2024, our full year outlook is unchanged. We expect an EBITDA margin of around 15%. Transformation and regionalization are important growth drivers for polymers, with only around 25% of global construction binders modified so far. These dynamics support growth in areas like Middle East and Asia and helps offset continuous weakness in Europe and China.

At Biosolutions, sales during the third quarter were EUR 100 million, up 29% year-over-year and on par sequentially. Sales and EBITDA were primarily supported by growth in biopharma. We opened the new mRNA facility at the beginning of June. So this quarter is the first full quarter to reflect the reservation payment. Our full year outlook for Biosolutions is unchanged. As Chris spoke about, we are setting up the foundation. We have made substantial investments and acquisitions to extend product portfolio and capacity, and now, we need to integrate and fill them. All of this comes with upfront costs and low utilization rates at the start. We make these investments because we are confident that we are on the right path.

Polysilicon reported sales of EUR 209 million, 10% lower quarter-over-quarter and 39% year-over-year. The primary driver was a significantly lower solar-grade volume sold. Our semi business is resilient. Sequentially, EBITDA decreased to EUR 29 million, primarily on lower volumes sold. We have updated our full year outlook for Polysilicon. We now expect sales at approximately EUR 1.1 billion, with an EBITDA in the range of EUR 150 million to EUR 200 million. This guidance excludes the IRA benefits we expect to book in the fourth quarter.

We have lowered our full year guidance due to the ongoing uncertainty in the solar market. Against our previous expectations, the outcome of the antidumping investigations has been pushed back somewhat, with the preliminary results for the AD duties now not expected before the end of November.

Now let's look at our net financial position. In the first 9 months of 2024, we generated a gross cash flow of EUR 52 million. Gross cash flow was held back by investments in working capital, investments in inventory totaling approximately EUR 250 million. Cash flow from investing activities was EUR 457 million. The main investments were increasing our capacity for silicone specialties and our capabilities in semiconductor-grade polysilicon. After the dividend payment of EUR 149 million during the second quarter, we ended the first 9 months with a net debt of EUR 772 million.

Before we start with the Q&A, let me summarize. Wacker is well positioned financially and strategically. We are addressing the right trends with the right solutions. We are in a better position today. We have made substantial investments. Our asset base is stronger. We have a better regional exposure. Our specialty business is performing well in a challenging market environment. Yes, we know it is difficult with the current economic cycle. The environment is not static. So we need to be dynamic ourselves. We have a high focus on cost and on portfolio management to get margins back on target.

Operator, we're now ready to begin the Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Thomas Wrigglesworth, Morgan Stanley.

[Thomas Wrigglesworth, analyst]

First question, please, is around the Silicones margin. That's obviously stepped up in the third quarter, but are we in now -- is that the maximum level given the economic environment that we think this business can achieve? Or is there more to do in '25, i.e., is the third quarter a good run rate to think about 2025 profitability in Silicones?

And secondly, on the Polysilicon business, I wonder if you could talk to the kind of growth that you might expect in the semiconductor business? As you ramp up the new plant now, will you look to shift volumes in '25 that you would have sold in Poly for solar into semi as a result of the new ramp up?

[Tobias Ohler, executive]

Thomas, Tobias here. On, yes, your outlook for silicones for 2025, it's -- I know that it's too early, and you also know that. But definitely, that quarter was much better, but not yet at target level. So we benefited from much higher silicone specialties volumes, better plant loading or also stable pricing. So we stick to our guidance for this year, where we say we have low double-digit margin for the full year at around EUR 2.8 billion in revenue. If you take the first 3 quarters together, we are at 13% on average. So given the slowdown just from the normal seasonality for Q4, we expect to come out a bit below that 13%. So take just 1 percentage point off that, so you're at 12% for the full year.

I mean, it is a significant improvement against that poor year of last year, '23. But it's still a way towards, yes, mid-cycle, I would say, and also still a way to our target margin level that we have, which is 20%.

[Christian Hartel, executive]

Okay, Thomas. And on your second question, this is Chris. Growth in semi with our new plant, as we communicated several times, so the ramp up of this plant is in a good process. We tested it already virtually, and we will see first volumes getting out of that plant by next year. So -- and that will help us to fuel the growth in semiconductor for our customers. And if you look longer term, significant volumes of this plant are already under contract. Because keep in mind, semi business typically is rather long-term oriented. And I think I also mentioned in the previous call that we even have some contracts which go into the 30s already. So a big volume, again, of this plant is already under contract.

The ramp depends also a little bit on the qualification time that our customers demand. And -- but they're very optimistic that this plant is a key pillar of our semiconductor growth strategy.

[Operator]

Our next question comes from the line of Matthew Yates, Bank of America.

[Matthew Yates, analyst]

I'd like to follow up on Thomas' question about what's happening in Silicones because there's not an awful lot of disclosure here. If you remember, at the CMD, we had a brief discussion about the sort of the bubble chart that conceptually illustrated the strategy around mix. So I guess Q3 was the third time this year that numbers have come in a bit higher than you originally guided. I would have thought part of the move to specialties is intended to give you more visibility from that customer intimacy. So can you just elaborate a little bit more on why the volumes or mix ultimately came in better than you might have thought?

And then I'm going to ask sort of the same question, Thomas. But as we think into 2025, you've got a lot of new projects starting up all around the world. Can you just elaborate a little bit more on the incremental profit contribution or ramp-up of these various plants that you have and that journey back to your midterm margin aspirations? Is 2025 quite a significant stepping stone on that journey?

[Christian Hartel, executive]

Okay. Matthew, this is Chris. Let me start with your first question on Silicones. And yes, indeed, I mean, what we said at the CMD and what I also did in my introduction here, we converted Silicones to a specialty business. So standards are not really playing in a big role for us anymore. And now we go into the second phase of specialization, if you want, looking at improving the margins and the quality of the business within that specialty segment.

And yes, you are right, there is typically more customer intimacy, but there is also a broader range of products. So from that perspective, the transparency is not changing greatly. And also, it's not changing from 1 day to another. So that means the expectations we had for the third quarter were also a little lower. But because of a better mix overall, what customers ordered improved our margins. And then -- Tobias, yes?

[Tobias Ohler, executive]

Yes, I mean for adding to your question with respect to your 2025 picture. We made some progress on volume recovery in specialties, and that helps our profitability level in this year. I think if you look at volume numbers, you get to something around 10% year-over-year, which is significant, but we are not there yet. So we still have investments that have free capacity. And for next year, definitely, we would expect also from the project, as Chris mentioned also, and from some further recovery in markets and other volume growth supporting us.

But are we in a position to have that visibility? No, because order patterns remain very short. And if you look at the economic indicators for next year, you can read everything. But it's not about a bullish environment that, yes, analysts are talking and writing about. So we need to see how we progress. And as we said, we look at the overall portfolio at a much more granular level, and that will support profitability over time.

[Matthew Yates, analyst]

Can I just follow up on that? So when you took the investment decision on these various projects, whether that's Charleston or the Czech Republic or China, how much confidence did you have or could you have in ramping those projects, particularly in a macro environment in the interim that seems to have deteriorated, hence, you're now focusing more on value over volume? Is the risk here that next year, you've got a significant addition to the cost base and actually margins go backwards because you wouldn't be able to fill up these plants?

[Tobias Ohler, executive]

No. Timing-wise, some of the plants are not ready for shipments next year. So the Czech Republic project is still in the midst of the, yes, investment. So there will no -- so there won't be any additional costs from underutilization. But yes, I mean, capacities, I mean, Czech Republic and China and U.S., they have, yes, room for further growth. And that's why we are confident that we can grow the business. Because of all the investments that we also talked about at the Capital Market Day.

[Christian Hartel, executive]

And also, I mean, Matthew, maybe to add to that. I mean, it sounds a little bit blunt now, but I mean, the world is never black and white. And when -- at the time when we decided for these investments, there was a huge demand. So -- and we essentially -- we sold out. And therefore, the demand is absolutely there, and there might be a short-term lesser demand, so to speak. But the demand in these product groups, which also fuel, in many cases, it fuels higher performance. It fuels sustainability. We see that trend being absolutely intact. And that's why we remain very positive on these investments we did.

[Operator]

The next question comes from the line of Andreas Heine, Stifel.

[Andreas Heine, analyst]

I have basically 3 questions. The first is on prices in Silicone. So you mentioned the main driver was volume and mix, but not prices, but there were price increases announced for the third quarter. Does that just take more time that we see them? Or was it impossible to push them through? That's the first question.

The second, in your regional description, you talk about growth in Europe and in Americas. But obviously, a decline in Asia, which I guess is exclusively due to Polysilicon. How would look -- how would the Asian region look for the Chemical business? So if you just talk about the Polymers and the Silicones business in Asia. That's the second one.

And the last one, in Biosolutions, as far as I remember, you have usually seasonality that with the fulfillment of projects, Q4 is usually the strongest. Is that also what we will see this year? So is that getting somewhat stronger for Q4?

[Tobias Ohler, executive]

Yes. Thanks for your questions. I would start with the first 2. First, on pricing in Silicones, they were flat largely quarter-over-quarter. And I think that is a good sign because we see higher demand, and we have stabilized that pricing also in specialties. Don't forget that year-over-year, we still have a negative, both in the standard pricing and in the specialty pricing, just from the lower levels outgoing the -- last year in '23.

So going forward, yes, for sure, there must be the ambition to increase prices, also to pass on some of the cost inflation that everyone faces in the market. And it will become easier as soon as order patterns also stabilize and we have a better outlook for longer orders. I think the industry is sort of -- in -- yes, all players are in the same situation, and we are trying to invest in that.

With respect to the regional development, obviously, you pick that the strongest decline comes from Polysilicon in Asia. So if you look at Polymers, we see growth outside China. But given the construction weakness, China is down. And for Silicones, we do see growth in specialty silicones, which is very pleasing because in China -- because that is our focus also. Also given the investment that we are putting into the site.

On the standard product side, as you know that this is not our main area. So we don't care too much. It's about availability of volume, and then prices are still pretty poor in China. And I think other Asia is also, there is some growth for Silicone.

[Christian Hartel, executive]

Well, there's actually -- maybe I'll step in here because I just came back from India. And so the Indian economy has been quite an interesting opportunity for us. And especially if you talk Silicones, but also Polymers. There's a lot of transformation going on in these markets trend to higher quality products. And specifically, Silicones India is one of the regions where we are the #1, ahead of all the competition of very successful stories since 25 years, our joint venture there with a very kind of regional approach. So also a good growth rates and profitability here in India.

Now coming to your third question on the Biosolutions. And maybe let me give you a general statement. Of course, it's our smallest division at the moment, which means the fluctuations in numbers percentage-wise are typically the highest. We came out with a strong Q3 with a roughly 14% EBITDA margin.

What is so -- kind of a little tricky to predict on a quarterly basis is, as you know, Bioingredients and Biosolutions is primarily a project business, where the payment depends on the final qualification step at the customer, which is not always in our hands. And therefore, this tends to fluctuate. And from that perspective, you cannot really make the statement that the Q4 is always the strongest.

[Operator]

The next question comes from the line of Sean McLoughlin, HSBC.

[Sean McLoughlin, analyst]

I'm wondering if you could help me just thinking about this bottom up? And looking at your top line guidance range, I mean, we're about EUR 700 million below at the 9-month stage, yet you're guiding to the 6% to 6.5%, which suggests kind of flattish or nearly faster at the midpoint. If I sum the EUR 2.8 billion in Silicones, 1.1 in Polysilicon, I add 1.5 in Polymers. I add, let's say, 400 in Biosolutions. I'm still not getting to the bottom end of that guidance range. I mean, what am I missing here? And how should we think about seasonality in Q4 across the divisions?

[Tobias Ohler, executive]

Sean, Tobias here. Yes. The midpoint is a challenge. It would really mark a very strong fourth quarter. So we kept it as a general range. And yes, I think you picked the right segment numbers. I think to us, important when putting together the guidance is looking at the EBITDA, where we have a range of EUR 600 million to EUR 800 million. And here, we clearly confirm that we see us in the upper half of that range.

[Sean McLoughlin, analyst]

And if I may, then just thinking through into 2025, I mean, how should we think about your views on top line evolution through next year?

[Tobias Ohler, executive]

Sean, I think it's just too early to put it all together. As I discussed, we haven't seen mid-cycle yet in Chemicals. And in Polysilicon, we have uncertainty that could resolve. And Biosolutions, we would expect further progress. But we stick to our approach that we look at the numbers when we have better visibility after Chinese New Year, and we will publish guidance in end of February, beginning of March as always.

[Sean McLoughlin, analyst]

And just the last one, if I may. Just specifically on CureVac. I understand you may have settled, and I know that litigation has been ongoing for a long time. Maybe any comments here?

[Christian Hartel, executive]

Sean, as we said in the past, I mean, typically, we don't comment on specific customer relationships.

[Operator]

Next question comes from the line of Chetan Udeshi, JPMorgan.

[Chetan Udeshi, analyst]

I have a few questions, actually all on Polysilicon this time. I was just wondering, did you comment on IRA benefit? How much have you actually assumed in your guidance? If not, can you just help us understand how much have you assumed in your guidance? The second question was you talked about cutting production in Polysilicon in Q4. I was just wondering, is your production now aligned with the volumes that you are selling in the market? Because we've seen -- like Tobias, you mentioned EUR 250 million of inventory buildup. I mean, should we expect another buildup? Or are you actually thinking now, there should be some reduction in Q4?

The other question, I was just confused with your guidance on Polysilicon because even if I take the low end of your guidance, it sort of implies the Polysilicon EBITDA is flat versus Q3. And we just heard from you that you are cutting production, which, in theory, should be a headwind to your earnings. So I'm just curious why the Polysilicon EBITDA is not lower in Q4 versus Q3, of course, before the IRA contribution? Maybe I'll stop here for now and come back if I have a follow-up.

[Tobias Ohler, executive]

Chetan, Tobias here. So I'll start with the first question on the IRA. So according to the U.S. IRA program, we will receive USD 3 per kg. And important, that we produce and sell starting in 2023. So produce and sell. So we are possibly talking about 2 years. So we expect to receive that payment and we expect to receive that both for semi and solar production volumes. Language covers both. But please remember that when looking at our nameplate capacity and we published that years ago, it would be 20 kg. This was on solar volumes produced. So our total production volume and, respectively, also the sales volume, is lower than that nameplate capacity for 2 reasons. First, we have maintenance and had this ongoing in the last year and this year for plant upgrades. So we were by far not running full.

And second is we have focused on semi volume production. And as you know, and we have talked many times about that, that takes a much longer reactor time and the output is lower just due to our mix strategy. And so if I put it now together and then I come back to that language, we have to produce and sell the volume. So '23, we have produced -- we have sold some volumes that were produced in 2022. And in '24, we will have produced some volume that we will not be able to sell.

So if you sum it up, we come to a ballpark number that we booked around about EUR 30 million in Q4. And we will book that later in the Polysilicon segment. But today, it's not part of the segment guidance as we focus here on yes, on operational performance, but we have considered that number when we talk about the upper half of the range with respect to EBITDA for the total group. So much for the IRA and then -- continue.

[Christian Hartel, executive]

Yes, I continue -- this is Chris, on the production question, Chetan. And yes, indeed. So we have lowered our Polysilicon production in Q4 and also started short-time work in the beginning of October at the German sites. And as you know, I mean, short-time work and there is a government program in Germany, it allow us to adjust the utilization rates in line with the demand requirements without reducing your actual headcount, it helps to relieve at least to some of the personnel cost.

So how did we do this? And we also have to take into account the -- keep in mind, if I wouldn't structure that we have in our sites. So the Polysilicon is linked also with silicones. That is 1 part.

And the other part, obviously, is the end demand for the material. And currently, we are in Q4 running at a utilization rate of about 2/3 because of that lower demand. And still for this Q4, I think we have the antidumping -- preliminary antidumping ruling at the end of November '24. And I guess this will also play a role on what -- how the demand will develop. And that's the reason why we adjusted it to this 2/3 because there is a chance to sell also volumes after this November '24, when demand might pick up depending on the ruling. So we need to have that kind of flexibility here and also being cautious on the inventory buildup.

And maybe that also then goes to your question on the guidance. So the lower end of the Poly guidance, that would reflect a continuation of Q3 the performance with low demand and the upper end is defined by potentially higher volumes in solar. And we could do this because we send the material to our hubs in Asia. So we could be rather quick shipping that material to the customers. And that is an option that would define more the upper end of the segment guidance for Polysilicon.

[Chetan Udeshi, analyst]

But do you expect the working capital to come down significantly in Q4? I mean there is always a seasonality, but also it depends a bit on whether you will choose to build another inventory in Polysilicon or not in Q4? Just curious.

[Tobias Ohler, executive]

That really depends on the volume that we can sell towards the end of the quarter. I mean, it could come down. But it -- and I can confirm that with the lower utilization rate that we are running in the production from the Verbund perspective, we will definitely not continue to build working capital at the same pace as before. And I think putting that together, there might be a relief, but definitely a significant draw on further cash flow.

[Operator]

Our next question comes from the line of Konstantin Wiechert, Baader-Helvea.

[Konstantin Wiechert, analyst]

Maybe I'll start with a follow-up again on the Polysilicon. Just to clarify here, you just said that on the lower guidance, and you implied sort of a sequentially stable development, right? So I don't really understand how that moves with the EBITDA guidance and your top line guidance because it would assume that the lower EBITDA guidance, we would see another slight decline in EBITDA, but at the same time, the lower end of the sales guidance would imply sort of a 70-plus percent increase in sales. So just some clarification on that, how that moves?

And then if I may, and I hope I didn't miss that one. On the Polymers, maybe if you could break down the moving parts in that division a bit more? Because I understand that your supplier, OMV, declared a force majeure for about a week in August and that you were switching to source from the international pipeline system during that time. But I mean, first of all, have you switched back to the OMV supply by now? And then also, was that the only item that was impacting the performance in the third quarter? Or was there anything else? Because you pointed out towards sort of a weaker construction volumes, as I understood it. But it also seems that polymers in general are lagging a bit behind the performance that we see from Sika, or to a lesser extent, also from Saint-Gobain. So maybe on that.

And maybe if I may squeeze in the third, just to add on the semi volume in Polysilicon. We've heard again about investments being delayed. So you talked about volumes being secured by contracts. So could you give us maybe a bit more color on the phasing over the next 2, 3 years, how we should think in terms of increases in volumes there?

[Tobias Ohler, executive]

Konstantin, Tobias here, starting with the first question on Polysilicon and Q4. I think you could argue that the guidance on sales, approximately EUR 1.1 billion is also a bit rough. I think I attached that also to the overall group guidance for sales, EUR 6 billion to EUR 6.5 billion. Our focus is on EBITDA. And we wanted to give you a picture with lowering the guidance that with a delay in the AD/CVD case ruling that we would continue our sales volumes until there is a pickup in demand at similar levels than in Q3.

That doesn't mean that we are selling to outside China customers, but lower volumes, and these are based on contract prices. So we have slowed down production which comes with a little bit of underutilization, as Chris mentioned. And this would then -- if we continue similar sales levels, Q3 into Q4 for the entire quarter, this would lead us to an EBITDA which is then a bit slightly below the Q3 level, and that brings us to the EUR 150 million.

If we start selling, we could end up at EUR 200 million, as we said, as we have shipped volumes to our Asian hubs. And we have seen months where we had sold in the spot market, something like we have 5 kilotons just from 1 month to the other. It really depends on how the market develops in the final months after the release of the preliminary duties in end of November.

[Christian Hartel, executive]

Okay. And Konstantin, your second question on the Polymers force majeure. Have you switched back to MB, yes, we did switch to MB already. But maybe to better understand the effect which we were facing, so yes, there is an external supply, also pipeline for ethylene. But typically, this is kind of a limited volume. So it doesn't fully replace a OMV shutdown. It replaces only part.

So -- and we use ethylene for 2 things. We use it, first of all, for our dispersions, which is an integral part of that molecule. But we also use a big share of ethylene for our VAM production. Now in cases where there is a force majeure on ethylene, typically, what we do is we try to, obviously, to run our Polymers business, so the dispersions and subsequently, the powders. And we reduce our shutdown, the VAM production.

And that's what happened also in this case so we could continue to buy ethylene at a higher price to run Polymers, but we had to buy also volumes on VAM on the spot market, which was the impact also which we saw on the results. Next to an underutilization, obviously, of the VAM plant and both these factors were the main drivers for less-than-expected profitability on the Polymers.

Second question you had on semi volumes for Polysilicon. Yes, as I said, I mean, typically, we have multiyear contracts, some of them going until the 30s already or into the 30s. And typically, what we also mentioned in couple of calls is we have a high market share in this segment because we deliver the best quality of material from 2 sites now approved by the customers. And therefore, we're not disconnected from the semi overall demand, but typically, our material goes in the higher-end applications. And also, we are typically the higher share supplier, which means that we don't face these cyclicality of the semiconductor business as might be some of our competitors.

[Konstantin Wiechert, analyst]

Okay. And just to clarify, any color regarding Polymers and the sort of lagging performance in comparison to sort of your customers?

[Christian Hartel, executive]

Yes. Well, as we said before, we see a little bit a mixed picture for our Polymers business. Now the dispersion business, which goes in many consumer applications like adhesives for the plastic to paper trend, which you can see when you get your Amazon deliveries at home, it's all paper now, that is actually a growing opportunity for us. It's a growing business to dispersions. Whereas the powder business, which is mainly into construction industry, is not growing, and that might be what you referred to when you hear comments from Sika or also on Saint-Gobain, that is this construction industry, which is lagging behind.

[Operator]

The next question comes from the line of Jaideep Pandya, On Field Research.

[Jaideep Pandya, analyst]

Yes. First question, I just want to come back on the IRA benefit. Tobias, you mentioned about the rule. So just as an average, it feels like you've produced and sold 10 kt of volume for the relevant IRA benefit. I guess your capacity is almost 2x of that, maybe around 17 or 16 kt? So question really is, are you -- were you selling more semi volume in '23-'24 from Germany? Because I guess your semi demand is higher than 5 kt a year, roughly speaking. And if so, how much were you selling out of Germany? How much are you selling out of the U.S.? If you can give some qualitative color around it.

And the second sort of follow-up to this is, have you been selling any solar volumes from the U.S., plugged to the U.S. solar customers? The second question sort of goes back to Chetan's question in terms of the appetite for your customers after November '24. Could you see a situation where you suddenly see your international volumes going back to what they were originally before the whole CVD investigation started? And also on top, you finding a new customer for China volumes? Or is your base case in your EUR 200 million upper end EBITDA that you just see demand normalizing for your international market and really, the new business that you will win will have to really come only in 2025?

And then my last question on Silicones. Could you tell us with regard to specialties, what sort of end markets have seen a meaningful improvement and which end markets are still struggling in the context? And then also, in terms of pricing, have you seen stabilization in prices? Or are you starting to see some momentum in specialty in prices as well?

[Tobias Ohler, executive]

Tobias here, Jaideep. To your questions, I could take the first and the third. With respect to the split and level of detail that we provide by plant, I mean, obviously, Burghausen is a much bigger plant than Charleston. And we run semi at both sites. And obviously, we are producing and selling still more semiconductor material from Burghausen than from Charleston despite that strategy change also to pivot that production to semiconductor.

But in addition to semiconductor, we have some solar volumes from the Charleston plant, and we sell these also to customers outside China. We are allowed to do that, which is part of our strategy for the solar business anyhow. And we continue to sell at -- yes, to those customers outside China.

The third question on the Silicone specialties, as I said before, we have seen pricing stabilizing. And I think that's a good -- yes, base now going forward, as I discussed before. With respect to the segment, the recovery in volumes that I also mentioned year-over-year, it is broad-based, but we also faced some weaker segments as everyone else for us. Also, automotive is weaker. Construction remains weak. But in the details, we also have some construction segments that are picking up again. I mean, as you know, our Silicones business is a GDP plus business. So that's why any recovery is always broad-based.

[Christian Hartel, executive]

Yes. And also, I mean, another example would be for kind of medical equipment wound care. That is actually a growing segment. It's not the biggest. But I mean, as Tobias said, it's a broad range of -- really broad range of applications for the silicones. Jaideep, maybe questions on the -- coming to the question Tobias already started to answer, are we selling volume -- solar volumes to U.S. customers from our Charleston plant? Not really because they are not really significant U.S. customers on the solar side. We do have talks. There are a lot of announcements going on, on the wafering side, but these capacities are not yet kind of ready to take material. I guess that will probably take until '26, I would expect so that we can sell solar volumes to U.S. customers. What we do in the meantime is we do sell them to customers outside of China.

Then you had your question on the solar volumes going back to historical levels once the antidumping investigation is over. Well, yes, I mean, I think also what we said the last time, there is a temporary uncertainty because there's no clarity on the antidumping ruling. We have clarity on the countervailing, at least preliminary. And here, I would comment, at least for the Tier 1 producers, the CVD are in a moderate frame of numbers. But now everybody is looking at how the antidumping duties will resolve. It will be end of November. Depending on what the outcome is, there could be demand already in the week after if these numbers are low. But it's hard to predict. And that's the reason why we prepared with our production on this 2/3 operational utilization level not to build up more inventory, but to be able also to flexibly deliver materials.

[Jaideep Pandya, analyst]

Just 1 more follow-up for Tobias. What sort of guidance will you give for the CO2 credits this year, given now we are very close to you getting the monies?

[Tobias Ohler, executive]

We always said that we are between EUR 150 million and EUR 200 million, that range. Take the midpoint, and we will get that in Q4. And we have accrued for that in others and already given the credit to the segment, and that will reverse once the payment is received in December.

[Jaideep Pandya, analyst]

So you've accrued it at a midpoint, right? Just to be clear, that was my question.

[Operator]

The next question comes from the line of Sebastian Bray, Berenberg.

[Sebastian Bray, analyst]

I have 3, please. The first is on the theme of the quantum of the size of the Inflation Reduction Act tax credit received for '23 and '24 in Charleston? The second is a question about Polysilicon volumes more broadly, and the third is on Biosolutions. I'll ask them in turn.

So my understanding -- correct me if I'm wrong. EUR 30 million, I assume it's your rather than dollar tax credit for 2 years of production, at a facility that had nominal capacity of close to 20 kilotonnes a year. I can't remember any commentary around Charleston being heavily underutilized as a facility in 2023, which would suggest that I've misheard or something else was going on in the background here. But can you just confirm Charleston was operating at something like 25% of its nominal capacity for the last 2 years? Or have I misunderstood something?

[Tobias Ohler, executive]

No, that's misunderstood, Sebastian. Tobias here. We have always said that we are running the Charleston plant now on a semi mix. We have qualified it and we have a unique position now for semiconductor customers to have 2 sites, 1 in Germany, 1 in the U.S. That mix shift leads to a much lower nominal capacity that you can run at the plant due to the longer reactor times required. And we have also said that in '23, for all this upgrade and for some maintenance, we were not running at full production. We are not disclosing specific numbers on utilization, but I think it's all in line with what we had said before.

[Christian Hartel, executive]

And Sebastian, this is Chris. Keep in mind, for the IRA, it is volume produced and sold in that time period. And also in 2023, we did sell some volume, which we produced in '22, which is not eligible to the IRA. So that also gives you some better understanding on that.

[Sebastian Bray, analyst]

That's helpful. And my second one is to continue the theme of Polysilicon. If we can -- the earliest that you mentioned for receiving clarity on tariff policy was the end of November, I believe it's the 29th announcement from U.S. Department of Trade and Commerce, but there's no guarantee that the Asian customers then turn around and say that we're going to start producing again. How plausible do you think it is that effectively these volumes take until the second half of next year to really start coming back?

[Tobias Ohler, executive]

Sebastian, Tobias here. I think we've covered that with a guidance range also for the year that if the markets don't pick up after that end of November release of the other duties, we would come out at the lower and it would drag into next year. But we are confident that we will see installation growth in 2025. And we are also confident that there is demand for U.S.-compliant material. And if it doesn't recover quickly, it will recover later.

[Sebastian Bray, analyst]

That's helpful. And my final 1 is on the Biosolutions segment. I was thinking about the development of profitability in this business, which has started to improve. And looking at some of the biotech peers like Sartorius or Lonza, that looks as if that funding cycle is firming up. But the profitability of the business is still quite a bit below where it was pre-pandemic. And I'm not entirely sure that all of this is because of additional headcount. Has something happened in the legacy chewing gum resin or chewing gum base business, but still the largest fraction of the sales, to my understanding of that segment, but has impaired the profitability versus where it was pre-pandemic?

[Christian Hartel, executive]

No, I think, Sebastian, if you look at the business today and the global footprint that we have at Biosolutions, that is much different than pre-pandemic. So therefore, I mean, we added a significant amount of sites and production capacities and yet very experienced people that allow us for the future growth. And that is the main difference, I would say. And that is also affecting the profitability at the moment. The legacy business is -- it's not running a straight line, obviously. It goes with very much, the Chemical business, but it's really about new capacities.

[Operator]

Our last question for today is a follow-up coming from the line of Mr. McLoughlin, HSBC.

[Sean McLoughlin, analyst]

If I could just ask you what, in your opinion, would be a result -- a determination of the antidumping that results in your customers buying again?

[Christian Hartel, executive]

Well, in general, I would say that the lower it is, the better the outcome because it wouldn't influence versus the time before we had these discussions. If I look at the numbers for the CVD, if that would be a similar range, I think that will be positive.

[Sean McLoughlin, analyst]

Very clear. And 1 very quick follow-up. Just coming back to the growth of semi volumes in '25 and '26. I mean, how should we think about that evolution?

[Christian Hartel, executive]

Well, typically, as I said, with these long-term contracts, there is some flexibility on volumes. But typically, we have got the contracts with an underlying growing demand. And we are in the process of completing that investment in Burghausen, the so-called edging line that provides purest material you can produce, and this is the key ingredient for all high-end semiconductor chips. So we have firm contracts also for that volume. And that's why we are very positive also for the growth in '25 and '26 in semiconductor.

[Jörg Hoffmann, executive]

Thank you all for joining us today and for your interest in Wacker Chemie. Our next conference call on the full year 2024 is scheduled to take place on March 12 next year. As always, don't hesitate to contact the IR department if you have further questions. Thank you.