Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wacker Chemie AG (WKCMF, Financial) reported a sequential improvement in chemicals EBITDA, which came in at EUR 149 million, up 17% year over year.
- The company successfully completed a planned turnaround in silicones ahead of schedule, leading to positive demand for specialty silicones.
- The new mRNA facility in Halle was completed ahead of time, tripling the site's capacity and securing a standby fee until 2029.
- Polysilicon EBITDA increased to EUR 55 million from EUR 43 million in the previous quarter, supported by lower energy costs.
- Wacker Chemie AG (WKCMF) confirmed its full-year guidance, expecting EBITDA to be in the upper half of the EUR 600 million to EUR 800 million range.
Negative Points
- Group sales were down 16% year over year, coming in at EUR 1.5 billion.
- Second-quarter group EBITDA was EUR 160 million, 37% lower year over year.
- The other segment incurred higher costs, with a negative EBITDA of EUR 45 million in the second quarter.
- Polysilicon sales declined 23% quarter over quarter due to significantly lower solar-grade volumes.
- The market for solar-grade polysilicon outside China is experiencing uncertainty due to anti-dumping and countervailing duties investigations in the US.
Q & A Highlights
Q: Can you provide a bit of color on each segment's outlook into Q3, particularly silicones and cash flows?
A: For silicones, we expect EBITDA to be comparable quarter over quarter but clearly up year over year. Polymers should see stable demand into Q3 with some regional variations. Biosolutions will benefit from the standby payment, and polysilicon should continue at similar production levels to Q2. Cash flow in the second half should be better than the first half due to seasonality.
Q: What is your production plan for polysilicon in Q3 given the uncertainty in Southeast Asia?
A: We plan to maintain production at similar levels to Q2. The uncertainty from anti-dumping and countervailing duty discussions will eventually close, and we expect demand for US-compliant polysilicon to continue growing.
Q: Can you provide more detail on the biosolutions segment and when it might return to normal profitability?
A: We achieved a major milestone with the new mRNA facility in Halle, which will support better results in the second half of the year. We are focusing on filling new capacities and improving profitability. The second half should see improvements across all biosolutions plants.
Q: Are polysilicon numbers supported by advanced payments from customers not honoring volume commitments?
A: No, there are no special items in the second quarter polysilicon numbers. The figures are not influenced by advanced payments.
Q: How do you handle pricing in specialty silicones given the patchy demand?
A: We are looking to raise prices selectively in certain applications and regions. It is a tedious process, but we have shown in recent years that we can successfully implement price increases.
Q: What scenarios are baked into the polysilicon guidance, and what is your base case assumption?
A: Our guidance range for polysilicon EBITDA is EUR 200 million to EUR 300 million. We assume Q3 will be similar to Q2, with the final quarter defining where we end in the range. The guidance does not include the tax credit from the Inflation Reduction Act.
Q: What needs to happen for customers to have sufficient confidence to enter new polysilicon contracts?
A: Customers need clarity on the preliminary ruling for countervailing duties and anti-dumping duties. Once they have a clear understanding of the potential duties, they can adjust their production planning accordingly.
Q: How do you account for polysilicon inventory, and is there a risk of write-downs?
A: We account for inventory at the lower of cost or market price. From today's perspective, we do not see a likely scenario where we would need to write down the inventory.
Q: How do you see the supply side of commodity-grade silicones?
A: We focus on specialties, where we see good demand. There are some announcements of new capacities in China, but our core business and strategy are centered on specialty silicones.
Q: What is the durability of stored polysilicon, and how do you manage inventory levels?
A: Polysilicon can be stored indefinitely without quality degradation. We do not foresee a need to reduce production due to inventory levels, as we expect the uncertainty in the market to resolve and demand to pick up.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
