Wacker Chemie AG (WCH) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to the Wacker Chemie 2022 Capital Market Day. We're excited to have you all here. Looking forward to a very interactive day. And with this, let me hand you over to our CEO, Dr. Hartel.

Thank you. Thank you, Joerg. Welcome, everybody, ladies and gentlemen, to our Capital Market Day. It's great to see you in person. I think it's a great opportunity for us today to engage with you, and thank you very much for your interest in our company. These are not easy times, tough times. We see unprecedented situation with war in Europe going on now more than 4 weeks to the end of February. We see a lot of suffering in the Ukraine that filled us with grief, horror and anger. Our hearts are with the people in Ukraine. We all hope and pray that this war will end soon, very soon. Of course, we do see some political and economical consequences already, talking about energy prices, for example. And that will affect us all here in Europe and probably in the rest of the world. So today is an important day for WACKER. We will present our new targets for this decade, our targets till 2030. And by presenting them, we show you that we listen to our customers. We listen to our investors and the analysts. We listen to you. And we listen, of course, to ourselves, what we can do. And in December, we published already our, I will call it, our first exclamation mark on sustainability targets. And today, that is the second exclamation mark, if you want. It's about growth and profitability targets. And today we will set course for the next years to come for this decade till 2030. So let's get started, and I would like to have in mind presentation, the aspects of where do we stand, what we achieved, where do we want to go, and of course, how do we get there. And yes, 2021 was an exceptional year. It was a record year. And yes, it is a challenge to build up on a record year the plan for the future, but we did and we will discuss it today with you. So accelerating proven successes and maintaining resilience, that is our strategy for 2030 going forward, the story of today. And I can tell you that every word has been carefully chosen. Accelerating proven successes, so accelerating, we want to have more speed. We want to grow faster than in the past. And proven successes, that stands for -- it's not about visual thinking or dreaming, but it's about what we achieved in the past we want to accelerate in the future, but we have been successful in these stories. And maintaining resilience that means financial stability and also attractive profitability. And Tobias will talk more on this part. So creating tomorrow's solutions. That's the slogan we have since years and decades. That's the slogan that inspires us, that drives us forward and I think you see that combination that makes WACKER different. It's that combination of great people we have, of great products and solutions, which we offer. It's all and everything for our customers everywhere on this planet and it's about great assets and offerings, and I truly believe it's that combination that makes us different and also to many of our competitors. And we are driven by a common purpose. Our solutions make a better world for generations. And many people -- many companies have a slogan, have a purpose, but I think this one fits extremely well to WACKER. Our solutions make a better world for generations, and I would like to give you an example on this. Our products play a major role in fighting climate change and it's a huge contribution to the renewable power industry. And you all know that our annual production of polysilicon could capture 450 million tons of CO2, if you replace conventional electricity production. And that's over the lifetime of a solar cell. So we have a big contribution for making this plan a better world. Where would digitalization be without WACKER? Today, it's almost every second computer chip is built with polysilicon from WACKER. Smart construction, you'll hear about this later more from Peter. Smart construction without our products, almost unthinkable. And we have more and more enabling technologies for our customers that are based on renewable raw materials. And of course, last but not least, biopharma, health and well-being, the big megatrends where we build our reputation in the last years and the last decade where we want to grow and contribute. So we did our homework and we do our homework on our own sustainability targets, of course. We talked about them in December. But I think what also makes WACKER different is that our products enable our customers really big scale, big time to become more and more sustainable. Last year, we had our Capital Market Days for the divisions of BIOSOLUTIONS and POLYSILICON. And for BIOSOLUTIONS, you all remember we had very promising and very ambitious targets set out, EUR 1 billion from BIO. And for POLYSILICON, we are clear #1 in the semi and high-end solar market. We will talk about this again, but today is also new on the chemical side for SILICONES and for POLYMERS where we have a very strong market position, and we want to accelerate the growth stories we have here. And that end makes the whole picture for the group complete: biosolutions, poly and the chemicals. So coming to the targets, and I don't want to wait till the end or wait till the middle of the presentation, but showed right in the beginning of that presentation. So what are our targets? We have targets on growth. We want to achieve more than EUR 10 billion sales in 2030. But the very important target is to almost double, 1.5 to 2x historic growth on volumes. We have ambitious targets on profitability, this time we also introduced ROCE as a target measure for us. A target measure, which also guides us on the topic of investments going forward. And you know our target on sustainability. All of these, I think, ambitious and I think also attractive. Now let's start with a little wrap-up, if you want, on the part of proven successes. And I said it before, it's proven successes should stand for -- this is not only visual thinking, but is something we achieved in the past and we want to build on to this. We started the so-called leverage phase in 2012. And leverage phase, you may recall it was very much about investing below depreciation. It was about attractive margins -- gaining attractive margins and about cash generation. And I think we did our homework on this. And if you look at chemicals, the transformation into a truly specialty business very much so for the SILICONES, but also for POLYMERS has been achieved in the time frame. And also we set the foundation for the growth of our biotech business by acquiring several companies, different sites, and gaining reputation in the market with competence. So well respected from our customers. And of course, for POLYSILICON with a clear high-end focus on polysilicon focusing on the high-end markets, but especially focusing on the semi market and in the last years doubling our capacities and volumes in that segment, and there is more to come. If you dive a little bit a bit deeper into each segment, and let me start with SILICONES. And as we mentioned, the transformation to a specialty supplier, in our view, has been completed. Silicones, I think, are the best material on this planet. They are so versatile and you can use it for almost every application you can think of. The success from SILICONES comes from performance. And if you talk about the performance, what is essential for performance is you need expertise. Expertise and customer proximity, otherwise, this performance will never get to the customer and will never be a success in the market. We truly transformed ourselves into the fully integrated player for specialties in silicones and that means that standard products, and you can see that on the slide here, the share of standard products declined over last year's very strongly. Standards play no strategic role anymore. And Robert will elaborate in the session a little bit more on this, but I can tell you that, yes, we do sell some standard products, but that is mainly for big customers that have a big portfolio of specialty products. So it's just an addition. And what are standards for us? Standards are typically products, which are siloxane plus 1. And standards are typical products, which you can replace easily. And we focus very much on the standards now. In the past, we have a growth factor of 4% to 5% in volume, which we will increase. I think what's also amazing about silicones is the sustainability factor. So yes, it is energy intensive to produce silicones, but typically, you get 9 to 10x the CO2 payback if you use silicones. So we grew our business and we grew our margins in SILICONES, proven success. Diving a little bit more into the POLYMER business. Transforming construction industry into smart construction is one of the big topics, and the other one is performance-based substitution of other polymer systems. We are the world-class leader in this segment, and there is so much more to do. We are clear #1 product-wise, but also capacity-wise and we can show an impressive growth over the last years and also an impressive growth in Asia. We're offering customized solution. Customized, meaning tailor-made for specific customers and that is specialty strategy. The growth in the past was about 4% to 5% organically in this segment. And as you can see, we grew the business strongly, and we retained attractive margins. Coming to BIOSOLUTIONS. Biopharma and bioingredients business, as I mentioned, the last year was really the decade of setting the foundation. We acquired several companies. We acquired a site in Spain also for our bioingredient business. So we built a strong foundation to accelerate our growth. And what is even more important, we built up a strong reputation in the market. And we jump-started with new technologies like mRNA technology, which just we did just more than a year ago and I think also in mRNA. Although the CureVac story didn't be that successful because of other reasons, not of us, we are seen as a player in that segment of mRNA. And I think that speaks for us and it speaks to our customer proximity to convince our customers that we have the right technology and that we are the right partner going forward. And you can see here also the growth and the share of our bio business, biotech business and biosolutions. Coming to POLYSILICON. In POLYSILICON, we definitely had tough years behind us, but we always believed in that business and we worked hard that we can believe in that business. We did everything to make it a success story and for most it's really day-to-day hard work on reducing the cost structure. And I think that's a very impressive picture, and you all know this picture what we achieved here and we will not stand still and work further on our cost. And the second real success story, I think, was our very concrete shift to semi applications. So in semi, we doubled the capacities in the last years. And as I mentioned, we have more than or about 50% market share in this segment making every second computer chip based on our material. And the semi shift also reduced the volatility in the business and on the earnings. And we will further work on pricing mix and portfolio and cost. And you see here the development of the last years. So our proven successes, leverage phase completed. That was my story just a few minutes ago. So let's talk about this and give it a little bit more evidence and flavor. So one of the targets was to gain attractive margins in our chemicals business over the past. And here, you can see, I think we did a lot of improving our margins for the chemicals business. And yes, I mean 2021 was a record year, but also if you take the years before 2017 to 2021 as an average, you can see an impressive increase in our margins for the chemical business. And also, you can see on the -- we talk about the ROCE targets, also an impressive development for ROCE for our chemicals business in the last years. So the leverage phase also resulted in a strong financial foundation. And again, we don't only want to look at 2021, but also the average years before and you can see a very strong trend if you look at the cash flow and the same is true for our net cash position, which strongly improved over the last years. So I think with that, I would like to conclude this part that we could prove we have success stories -- we have proven success stories and we maintained resilience. We built our resilience, strong foundation, to further grow from. So ladies and gentlemen, we are ready to see for the next step, accelerating for growth going forward, switching gears. And we talked a little bit about switching gears, I mean, is that the right picture? I mean switching gears. Do you have a gear in an electric car? Luckily I found in very fast electric cars, you do have a gear like in the Porsche Taycan, you have at least 2 gears. So switching gears, I think, still is a good picture going forward. So we want to accelerate our growth and we want to do value growth. So where do we want to go and how do we get there? And the key message here is there's a clear customer demand, there's a clear customer pull for this strategy. It's not that we sat together on a green table and said, what could be a nice growth rate. It's the growth rate, which we deducted really from the talks with our customers and the demand for products, which they need. And for chemicals, sustainability is a very strong driver next to innovative and customized solutions. And yes, we do need to invest more, and we will come to that a little later in order to meet this demand. So chemicals -- investing in chemicals will give us a strong financial return, but it will also give a strong CO2 or sustainability return, if you want. For BIOSOLUTIONS, we set the foundation for further growth and there's a very strong pull in the market. We see a lot of strong market opportunities. And also here, we want to invest more and we want to do more on acquisitions bolt-on. And for poly, we want to further strengthen our semi position. We believe there will be strong growth in the semiconductor market and this will also be accompanied by more investments than in the past, but very much focused on the highly attractive semi market segment. And I think -- if you talk about semi, I think what is really important is -- it's the same story for chemicals and for BIOSOLUTIONS. It's all about customer proximity, which makes the difference. You cannot become the leader in the semi market without having a very strong customer interaction and customer trust. And that's the reason why we believe it will be very hard to copy WACKER in the semi field. So sustainability is a key value driver for us, we talked about it, and you all know that at least 2/3 of our portfolio is either directly enabling our customers or supporting our customers with sustainability technologies and helping them to achieve their targets. It's about saving water, reducing CO2, using renewable raw material. So it's an integral part of our business model and it's really right back to the roots of this company more than 100 years ago when we started with hydropower in Eastern Bavaria with hydropower cheap electricity making new sustainable products out of that. Last year, we joined also Science Based Targets. We joined the race to zero also to underline, to really show our commitment to sustainability. And this year, we also give our clear commitment to the TCFD disclosure program, which we really believe is a good thing to be part of and which we really believe will bring us forward. Now let's dive a little bit into these segments, and we start with the chemicals division. And as I mentioned, silicones are the best man-made material on this planet, I believe. And what drives us here is about performance, it's about sustainability and the customer pull. And as an example here, you see a picture of a cartridge, cartridge made with renewable raw materials, which is very much sought after from our customers. So a very strong customer pull. And by the way, the reason why I give you this example is cartridge business is an excellent example of the shift from standard business to specialty business. In the past, we and other companies sold truckloads of polymer fluids and somebody else made a cartridge business out of that. Today, we sell very little of these products in tankers, but we sell the cartridge. We make the cartridge. And it's either WACKER label where WACKER is on the cartridge or we do it for customers like Sika or like [indiscernible], which is then a private label business moving from standards to specialties. I think it's impressive example. It's all about performance. Just one example here hydrophobic cement, something we invented together with a customer in India, which gives a better performance in humid climate areas and also this product helps to save energy in the process. I think another a good example of specialty strategy combined with sustainability combined with customer proximity. Renewable energy. You probably know the example of the windmill. In windmill, you have about 100 kilogram of fumed silica into it. Fumed silica we call HDK. And by the way, HDK is the product we produce ourselves. We are the only player in the market with own HDK technology, and we leverage both divisions from POLYSILICON and SILICONES with their waste streams and out of that with our own technology we make HDK. And that's something really unique in the market, which gives us benefits on the cost side, which gives us benefits on the ecological side. And then, of course, the trend of e-mobility. Electric vehicles use typically 4x more silicones than the combustion engines. So that's the good news. I think we are well positioned here. And it shows another good thing: the trend we do with our customers. In the past, we have been primarily a Tier 2 and Tier 1 supplier with our silicones. With electro-mobility, we moved up the ladder and are now a supplier directly to the manufacturing -- to the OEMs of car manufacturing. And I think, again, that shows you need customer proximity. You need the trust of your customers to be a direct supplier to an OEM. So a few examples of where do we want to go to achieve our growth targets. And also here, you have the chance later to discuss more with Robert on these. We want to become the #2 in North and Central America. We see there is an opportunity in the market. We see a strong pull from our customers to stronger growth in North America. And therefore, we will invest also more in North America. On the top left, you can see our new Ann Arbor R&D center and regional headquarter. We will open it just in a few weeks from now. And below that, you can see our site in Tennessee, where we will invest more on the silicone side to grow the business. We want to become #1 in HCR in heat-curing rubber, a big product group, by the way, which consumes 30% HDK of fumed silica where we have an advantage because we produce it in-house. And also it's not a coincidence you see an application here in the medical field. Also from the markets we serve we believe there's a strong -- a very strong opportunity. We are #1 in India. We want to stay #1 in India and we want to grow our business strongly in India. And we just recently opened a new site on the East Coast of India, also here a strong focus on HCR, for example. And yes, Asia. We want to strengthen our position in Asia, and you all know about our acquisition with SICO organofunctional silanes. I think that's a very convincing step of broadening our technology portfolio, but also broadening our regional presence in the region here, especially in China. Now coming to POLYMERS. POLYMERS is a lot about customized solutions and proximity to our customers and that is specialty strategy. It is very much driven by sustainability topics and we have a lot of climate -- global climate policies like the European Green Deal. We have a lot of insulation, for example, of -- and the housing sector will be addressed. 40% of the CO2 emissions of Europe are coming from the housing sector and we believe, with our solutions, we can offer a lot. And we see it from our customers a strong pull and Peter will give you impressive examples of this in the later session. There are trends like plastic to paper where we see that our products have advantages. Our products are waterborne, which gives a benefit on the sustainability side and this trend also helps us. And we keep inventing new products like this aerated motor which uses less sand, which uses less cement, which is easier to carry so less CO2 in the transportation. So where do we want to go for POLYMERS? We want to grow our business. We want to expand our business. The regional presence, more investments in the regions. And we want to leverage also on the pricing power, which especially last year, I think, was a great success story for us. It was driven by raw material price hikes. I think we established now a very good understanding of how we can better position our products and our pricing in the market. So these investments will be very rewarding in our view based on the performance material we sell. Going forward, we expect, same like SILICONES, an organic growth of 6% to 9% volume-wise, both in SILICONES and POLYMERS. And yes, in order to meet these growing demands, we need to do more. We need to invest more. And that's a clear statement here. We want to double our CapEx compared to the [indiscernible] last years to more than EUR 400 million in chemicals per year. We believe that's a brave step. Brave, bold, but it's not exaggerated. And always keep in mind, we have a ROCE target, which will guide us here. And we will have more resilient and diversified portfolio, and Tobias will talk about it later, and very limited upstream investments and upstream investment are solely limited to growing our specialty business. So here are the targets. For the chemicals, faster growth, bolder moves and higher profitability and ROCE as a clear investment rule or investment guidance, if you want. Now coming to BIOSOLUTIONS, and biosolutions is an extremely fascinating field for us and I'm excited about it. Susanne is excited about it and she will also give you more details later. And it's a huge potential, we believe, we can grab in biosolutions with the basis we built up in the last years, in the last decade. There are big megatrends, of course, like the advanced medicine and I mentioned our jump-start into mRNA technology. And although it's not yet official by the German government, but you might have seen some of these press releases, maybe a little bit too early press releases from the German government, but it's somehow out in the market. Again, it's not yet 100% official. But of course, we've been very excited that we've been picked as a deep player in the mRNA sector for the pandemic preparation plan by the German government, I think which speaks for the expertise and the competence that we built up in recent years. And yes, there is this big trend of CDMO business of outsourcing in the market where we see ourselves rightly positioned. And yes, the other big trend and the other big opportunity, not to forget, next to biopharma is bioingredients, where we do interesting projects very much also with partnering, not so much on our own. But just to mention the artificial meat cooperation we have with Aleph Farms on growth factors for growing these cells, vitamin B7 with Biosyntia. And there are more projects, which we cannot disclose today maybe, but we are working on them. So the clear target is EUR 1 billion from bio. That is certainly ambitious and that also needs strong support from the investment side and also from the M&A side, and we talk about EUR 80 million of investment approximately per year in this segment. It will be about expanding our sites in Leon in Spain for the bioingredients business, fermentation-based materials, ingredients for our customers. But it will also be about expansion in Amsterdam for vaccines, proteins, San Diego for plasma DNA and for Halle in Germany for mRNA. And as I mentioned, we rely also on strong collaborations. We have a collaboration on the lipid nanoparticles with CordenPharma, which helps us to broaden our portfolio. And I mentioned about B7 -- vitamin B7 with Biosyntia. Coming to POLYSILICON. And here, Tobias we'll also be afterwards ready for your questions and ideas. I think we are perfectly positioned in that high-end field of polysilicon. The digitalization drives the chip demand, and we do expect double-digit growth rates also for the next years to come. So it's a fast-growing market. And I mentioned the customer interaction is absolutely essential in that segment. You don't get 50% market share by chance. You get it by hard work, by performance and by convincing your customers. And therefore, it's definitely hard to copy. The solar trend will definitely accelerate and continue because it's the answer for fighting climate change, and we positioned ourselves in the very high end of these solar applications. And we will see more and more solar coming to the world. By the way, below here, you also see some small solar cells. So every spot on the planet is ready for solar. And we have a very good sustainability footprint for our products. And I think this is something, which will definitely also pay out. And it's also because, to mention it again, because of our [indiscernible] structure. We have silicones, we have polysilicon and we have the HDK, the fumed silica and this gives us a benefit cost-wise and sustainability-wise. So where do we want to go with POLYSILICON? We doubled the volumes in the past on the semi side and we want to double the volumes again. This doesn't come for free. It comes with an investment -- with a higher investment of about EUR 100 million per year here for the next years to come. But here again, there's a clear guidance for us on margin and on return on capital employed. So the group targets for 2030 here, I can click that through. I think it's definitely ambitious. I hope it is clear. And I hope -- I believe -- we believe it's convincing and attractive targets. And this is our commitment for the years to come. The first exclamation mark was our targets on sustainability, on our own footprint. We want to use our own CO2 footprint by 50% till the end of the decade. That is definitely ambitious, clear, and I think, also convincing and we are working on it. And you can see on the right-hand side, a few examples that it's not just text. It is really facts and action that are combined with it. Here for Nanjing, Holla or Pilsen just a few examples to mention, and this will continue. And again, today, I would like really to send our commitment to the TCFD disclosure project. So that brings me to the end of my part. We've set ourselves ambitious and attractive targets: faster growth, bolder moves and higher profitability. I'm truly -- I'm convinced that WACKER is a great company with great people for a great future. And I would like to thank you for your interest in that company, and we will all achieve this while maintaining resilience. And here, I hand over to Tobias. Thanks.

Welcome. And great to see you in person. I'm really excited as Chris is and perfect handover. We talked about resilience, and I brought you 2 definitions of resilience. Number one is the capability of a strained body to recover its shape after deformation. And the second is the ability to recover from or adjust easily to misfortune or change. And I think we have clearly proven resilient and that through many decades. As you know, we are -- WACKER is than 100 years old. That's the company and the leadership team as we are here present in London today, we are ambitious and full of energy. And now the ambition is to accelerate proven successes. But it is crystal clear that we do have 1 boundary condition, 1 commitment that is at maintaining resilience. And all this even is more important today than before. And I mean we are living in a world of, I would say, unprecedented volatility. As we all know, COVID is not over yet, might be in London here but definitely not in China. There's more and more demanding regulation. Supply chains are under severe stress since -- almost 2 years now. Raw material and energy markets are at absolutely new highs. And what nobody could believe just a couple of weeks ago, there's war in Europe, a terrible war just very close by. But for WACKER, maintaining resilience is about active management. And therefore, dimensions covering this in our business. This is number one, our supply; number two, our sales; number three, our cost; and number four, our balance sheet. So how to manage supply in volatile times, how to mitigate price volatility. First of all, you need to accept the challenges. You need to have a toolbox in place for that. And you need to have a toolbox in place for that for long-term setups mitigating volatility. And our long-term strategy is go from LTAs to hedging, but we also backward integrate, if required. And then you need to adjust also with short-term actions for mitigating volatility. So our short-term actions encompass tactical buying or e-auctions or we also use artificial intelligence, for example, in energy hedging. But going backwards is definitely important. And just look at silicon metal as an example, I would say, as an excellent example. I think it's a typical bolt-on acquisition of WACKER. We bought it in 2010, I think, at a decent price and we made it better and we made it bigger. So we bought it at a decent price. We made it better. We made it bigger. And I think it's exactly what we are after in acquiring such an asset. We wanted to have supply stability and we wanted to have value creation. And if I look at our benchmark costs in Europe for silicon metal production, I could tell you that we are contributing about a 3-digit million euro performance in 2022. So it's about value creation. And looking ahead, that's a great site that we will continue to expand. There's room for expansion and it's a great site that we will eventually make CO2-neutral, which is an important pillar in our path forward towards neutrality. So now look to sales. Pricing power is crucial. Pricing power is crucial to protect financial performance. And I would to draw your attention to 2 proven successes here. And they're different, but they show the same conviction and ambition that we have. First, POLYMERS. We were faced with unforeseen hikes in raw material prices at the end of first quarter, beginning of second quarter last year. And that was in the midst of the contracting season. And we reacted immediately. With the surcharges, we talked about that, we adapted those. And that was so effective that our EBITDA last year was almost flat. Almost flat in absolute terms despite the key raw material doubling in price. That is POLYMERS. SILICONES also was faced with unprecedented raws. That was at the end of the third quarter, beginning of fourth quarter, silicon metal and energy. But that was -- and that's the difference, ahead of a contracting season. And we, again, reacted immediately and we announced pricing -- a strategic price increase of about 30%. That was so effective that the first quarter where we still enjoy also trailing effects from raw material and energy prices brought in last year, we will see an excellent performance in the first quarter even overcompensating that headwind. And I think in both divisions, it's clear we are price leaders and we do this for a stable financial performance. And we want to have stable financial performance because we want to continue investing to serve our customers' needs. So a bit on specialty pricing, true specialty pricing goes hand-in-hand with customer relationships. And the customer relationships, the long-standing customer relationships, are the basis for value-add pricing and specialty pricing gives you the desired effects you love to see in financial performance, get a higher stability and a higher predictability of your sales. But in more volatile times, you also need to adjust the specialty pricing. And we do this. We go for shorter contract durations. We even have specific raw material and energy clauses or temporary surcharges, as we discussed, or we do something what is not entirely typical for specialty pricing, we even go formula-based if required. And we do this for the resilience of the business. And we do this because adjusting our pricing models flexibly is to compensate inflation. Now to cost management. Cost control is key at WACKER, and we are continuously focusing on cost management. First look at the overall cost structure of the organization. And here, I would point out the Shape the Future program. That is our efficiency program that we launched at the end of 2019. And in the midst of the first lockdown of the pandemic in 2020, we developed the actions to come up with the savings. This program focuses on indirect spend and on lower head count. We have achieved EUR 160 million in savings last year. There's EUR 200 million ahead of us. And the target is around EUR 250 million in next year. I can tell you that we are on track in this program. And this program focuses on all nonoperative financials, but we also have a long-standing focus on operational efficiency. We talked so often about the rigorous cost road map in POLYSILICON. I think you should not forget that this is under the umbrella of what we call the Wacker Operating System, WOS, which also encompasses chemicals and biosolutions. And we have this program established now for more than 15 years, 15 years of proven success in delivering savings year-over-year in a very consistent way. So putting all together supply, sales and cost results in our balance sheet. The status at the end of last year, at the end of the leverage phase is I want to point out 3 items. During the leverage phase, we reduced our capital intensity, comes with investing below depreciation level that you can see. Point number two is we have rigorously managed our working capital, as you can see from the KPI. Just recently, we made great progress also on the DPOs. And third, all this resulted in a position of about EUR 2 billion liquidity at the end of last year and more than EUR 3 billion in equity. So all in all, we have a strong balance sheet. And this strong balance sheet is, first, proving our financial resilience, but it's also a great starting point. It is the foundation for pursuing our growth ambitions. And that's where we want to go. Going forward, we want to focus on 2 items: highly profitable growth, not just growth, highly profitable growth; and shareholder returns. I don't need to repeat what Chris just presented. You have seen the new targets for 2030 for EBITDA margins and ROCE. You will wonder so how do we operationalize this for the next 5 years? And how do we get there? And what will be our key actions and interim ambitions? So first, on chemicals. We have seen that both silicones and polymers are full specialty suppliers. They have proven resilience. And now you see a strong market pull, both from our innovation and from the sustainability trend. And we want to focus on further regionalizing our supply chain, and we want to do earning accretive bolt-on acquisitions. The target is to grow -- to grow stronger and that growth should come from volume and mix and that growth should accelerate as Chris presented. We are targeting at a speed factor of 1.5 to up to 2x our historical growth rate. And for sure, this needs to, yes, be nourished by higher CapEx. We are going for CapEx doubling in chemicals to historic numbers to more than EUR 400 million per year. But we are investing and watching out for our ROCE, which should continue at more than 2x cost of capital. So our target and our governing ambition for chemicals is highly attractive growth for the next years. BIOSOLUTIONS is at a different stage of development, as you know. It's still the smallest segment. But we also have a foundation here to be an established partner with proprietary technology. So we can focus on investment in innovation with CapEx of more than EUR 80 million per year. We will focus on our established sites. And for M&A, the clear message is we will remain disciplined. We will watch out for early-stage bolt-on acquisitions. So if you put everything together, organic growth should be about 2/3 of our growth trajectory and inorganic about 1/3. ROCE in this phase will still be below cost of capital as we are investing and we are just forming a resilient business with highly attractive growth prospects. So POLYSILICON, we are leveraging our strengths. We are just focusing on investments in semi and cost efficiency. And different to the other segments, we don't have a volume target per se, but we have a target to rather increase the semi share. The key is the portfolio shift to semi. And that's where we are investing about EUR 100 million for the next years. And for solar, I mean, and any opportunity that arises from the shift to renewables and the massive investments and also the discussion about potential regionalization opportunities, I mean we are the biggest player outside China. We are uniquely positioned. We are here already. So in any case, if there is a value chain reestablished for solar in the Western Hemisphere, we are one strong pillar of supply. So the target is ROCE above cost of capital and a clear strategy going forward is under the premise just focused on value. So with respect to financial leverage, you all know that we had a stringent target in the leverage phase, which was in the corridor of 0.5 to 1x EBITDA. And I think this was all in line with the rationale of the leverage phase, which was about deleveraging and improving our financial resilience. And now, I mean, after the pandemic year 2020 where we had a strong focus on liquidity and a very strong cash flow, 2021 with a new record set, we are even in a net financial asset position. And we definitely have a strong balance sheet, as I showed, and we have a strong starting point. But going forward, we have flexibility -- so we could go up to 1x EBITDA, and we would have sufficient headroom to pursue our growth ambitions, and again, the boundary condition at maintaining our financial resilience. So going forward, what are the priorities for capital allocation? In fact, we have 2. Number one is growth; and number two, it's shareholder returns. And then there's another one, I wouldn't call it a priority, it's more a necessity. It's our pensions, which I will also cover briefly. So our investment portfolio is geared towards growth. We are in a strong position and I think we have a good challenge to have the demand pull from our customers. And that's why you can see that the majority of our CapEx will be geared towards high-return growth. There will be also a component for cost and efficiency just to ensure our competitiveness. And we will have a portion as maintenance of business increased by the focus on sustainability. But the clear focus is on high-return CapEx -- high-return growth CapEx, and that means 4 things to us. Number one is we are accelerating the chemical capacities, in particular, in all regions. And there, again, that's the idea of resiliency. We want to invest close to our customers and we want to shorten our supply chains. Number two is we want to and we will manage a diversified portfolio of downstream projects. Number three is, as Chris said, we are talking about upstream CapEx only for specialty growth. And number four, we are not talking about one thing. There's no major greenfield investment. And I assume that you might need some illustration of our investment portfolio to get a better feel for it. We are talking about roughly 40 major projects for the next 5 years. And the other size of double-digit million to low triple-digit million and there's only one, which is larger, but none is larger than EUR 400 million. So if you look at that portfolio, it's obvious that as our investment is strongest in chemicals that we are talking here about 30 projects and then another 10 in both, together, BIOSOLUTIONS and POLYSILICON. So we are talking about 40 projects . 40 projects means 40 decisions to be taken. I think that's enough to juggle. That's enough to steer flexibly depending on the return, depending on the urgency also of the customer pull. And depending also, to be frank, on the resources available to manage such a portfolio as engineer resources are also not greatly available. So in other words, I mean, it's a great portfolio of opportunities. And we have the ability to choose and prioritize, and we will do this in managing our hurdle rates in the sense that the chemicals continue to earn more than 2x cost of capital, which I think is an unmatched performance in the industry. And we are really, as management here is present today, we are really looking forward to with exercise. Second priority for growing the business is M&A. And I think it's easy because it's simple, it's similar to the past. Look at the successful track record of our acquisitions in biopharma, bioingredients, also in specialty silicones. I mean going forward, the only difference is we want to do more in number and in size, but the approach will remain the same. So for BIOSOLUTIONS, we will focus on early-stage assets. We don't want to spend too much for big sales, for too expensive targets. We want to remain disciplined and we will remain disciplined. We want to create our own synergies with the acquisitions. And that means -- if you look at top line and earnings, we will see lagging effects of those acquisitions on sales and earnings. For chemicals, it's a bit different. Here, we want to strengthen our market position with focused both on M&As or we want to extend the value chain. But fit is important to us, not any chemical. It needs to fit to what we are doing today. And here, we rather look at more established businesses and profitable businesses. And ideally, as you can see from the SICO specialty silane transaction that we are going to close in the second quarter this year, it should be immediately earnings accretive. So much for growth as priority. Now to shareholder returns, the second priority. We are here for growing the company, but at the same time, we are here for shareholder returns. In 2016, we defined a new dividend policy. For the past year, we have proposed a dividend of EUR 8 a share, which is -- it was a record year, which is a record dividend. And it's simply based on our dividend policy of around 50% payout of net income. It's based on our strong liquidity at the end of the year of EUR 2 billion. And it's based on the confidence in the future. And the very simple message going forward is we will continue with our dividend policy. Last but not least, in this case, last and least, if that works in English, a short update on pensions because we have talked often about it and now we have reduced some of the risks. We paid EUR 250 million in a newly established CTA at the end of last year for so far unfunded pension obligations that was deducted from our net cash flow, which was still a record cash flow with EUR 760 million. These EUR 250 million create a new plan asset, and this shortens the provisions one to one. In addition, we achieved end of last year an agreement with the workers council in Germany. We will modernize our system to a fully funded defined contribution system, and this will be relevant for our new employees and everybody willing to switch over to it. And for all who are still in the legacy system, we will introduce new options for capital payouts. And when this all gets implemented in the second half, this will further reduce pension liability. So our pension deficit, as you can see, has reduced from EUR 2.6 billion to EUR 1.8 billion. And allow me some modeling pension as this is a complex topic. I mean, obviously, pensions are debt. IFRS discount rates are -- or were around 1 percentage point. So much lower than cost of capital. I mean if you do your modeling, deducting financial debt one to one. I think it's -- from the enterprise value, it's pretty clear and straightforward. But deducting pension debt, I think you need to take into account that the equity effect of the pension deficit is reduced by deferred tax asset, which is calculated again at a different discount rate. We provide the details for the deferred tax asset because not what you see in the balance sheet is deducted from equity, but the pension obligation minus the deferred tax asset is deducted from the equity. So we provide those numbers. And the net pension deficit is just EUR 1.5 billion, as you can see on the chart. So all accounting and modeling aside, pension liability will reduce further and there's moving factors to this. First, with the increase or potential increase in interest rate, there's a sensitivity of each 0.5 percentage point increase would reduce the pension deficit by EUR 0.4 billion. And in addition to that, with the modernization of the pension system I discussed, we will expect another EUR 0.2 billion reduction at the end of this year. So over time, pension should become a smaller burden. We might still need to fund some of the legacy systems obligations with top-ups, but it's clearly manageable and it's not a priority. So putting all together. While accelerating our proven successes, our focus is on maintaining resilience. And we have a clear focus on capital allocation: number one is to grow the company profitably, and number two is shareholder returns. I think this is the targets that we have run through before. And this is our motto, creating tomorrow solutions, that is -- has been established for years. But our purpose is our solutions make a better world for generations. That's why we are working here for this company, why it is so exciting. And we are looking forward to your questions.

Just a quick housekeeping item before we start with the Q&A. There's microphones on every table. So please, when you ask a question, we would appreciate if you could get up, if you could state your name and affiliation. And if you could stick to 1 question at a time, that would be nice because then everybody gets to have a turn. So let's start the Q&A. Here's one. Yes? Markus?

Then maybe I start. Markus Mayer, Baader Bank. On your ambitious targets, of course, it might be hard to give a phasing, but nevertheless, we will be interested from model reasons, of course. How this phasing might look like if, I guess, this will be not a linear trend as you have to invest first to get the growth then more back end loaded, but nevertheless, would be interested to hear some thoughts from your side.

Yes. I could give you my comment and then maybe some more modeling hints from Tobias. Already this year, I mean, our investment budget will be around EUR 550 million to EUR 600 million. That's what we published. So it's stepping up already. So from the investment portfolio, you could rather call it linear, I would go. I mean, as Tobias mentioned, in BIOSOLUTIONS, there is also what we've shown on the slide a little delay on that. But I think for the chemicals, it's fair to assume it's a kind of linear thing. Yes, Sebastian?

It's Sebastian Bray of Berenberg Bank. Could I ask one on the POLYSILICON CapEx, please? The EUR 100 million referenced in the slides was said to refer to semi. And the press release today indicated it potentially referred to the POLYSILICON segment as a whole. Can I just double check, could you remind me of the maintenance CapEx of the POLYSILICON segment? And is the EUR 100 million guided for the next 4 or 5 years in addition to this? Or does it refer to the total CapEx for this segment?

I mean -- better details. I mean the overview is -- the EUR 100 million is very much focused on the semi side. There'll be some also, of course, on the maintenance of business, but it's much lower. So yes, EUR 30 million to EUR 40 million. Yes.

Just to double check, if I say EUR 140 million for the next few years for that segment, am I -- is it reasonable? Or am I warm or -- okay.

But the key message is really the investment. The higher investment amount for the years to come. It will be focused very much on the semi side. I mean that's the key message, and that's the EUR 100 million.

Capital allocation would be impacted by proceeds from Siltronic or if that's well go into the...

No. I mean, as Tobias pointed out, I mean, we have a very strong liquidity. We have a strong balance sheet. So we can -- we are in a position to finance all these investments. So the -- there's no correlation with the Siltronic proceeds. We will still continue this and follow this strategic decision to get out of Siltronic, but there's no rush in doing so as we have a very strong financial foundation.

Sorry. And any proceeds would be continue with the capital allocation plan of M&A and growth followed by returns.

Wouldn't change it. Yes. Wouldn't change it.

Charlie Webb, Morgan Stanley. Maybe just one on SILICONES. You kind of pointed out in the slides earlier, 2012 to 2021, obviously, a meaningful step-up in profitability and that very much coincides obviously with your increasing specialization, but also with the underlying market also improved a lot in SILICONES. So just trying to disaggregate how much of that improvement to where we are today in SILICONES profitability would you put down to the specialty push versus the improvement in the market dynamics as a whole because -- maybe good to get a sense on how you see that's going to evolve from here because obviously a lot of questions out there. Are we at peak profitability in SILICONES as a whole, downstream benefiting from tight upstream versus strategically you pushing down the specialty route.

Well, I can't give you an exact calculation on the business, the Excel sheet you probably want to have on that. What I can tell you is the growth we've seen, both the growth and the rise in profitability in our side was extremely much driven on the specialty side. The year 2018 had a -- you can call it maybe special effect because of very high prices for silicones. It's also on the standard side. But showing with our slide, I mean, with the 85% now of being specialties, the exposure to the standard market is not really that relevant anymore. So it's really driven by specialties in the underlying market.

Maybe just kind of follow-up. I mean how would you say there has been a tangible benefit from the [ demerger ] of DowDuPont and what happened there in terms of splitting up the business. Have you, as WACKER, benefit in terms of taking market share? Has that improved your market position?

I think in a situation where companies merge or dismantled themselves, to some extent, you always have a chance in the market being the resilient, strong and customer-focused player.

Chetan from JPMorgan. I mean I was curious, I've seen these slides, market growth presentations in the past from WACKER and it was always thought to be more opportunities for the future. I'm curious like what is driving this 1.5 to 2x growth uplift target today because some of these opportunities were discussed maybe even 3 years back, 5 years back. And I'm just thinking, is it the current momentum that you see in your numbers, in your demand that is driving that uplift? Or you see tangible signs for the first time in 5 years that this 1.5 to 2x is more reliable today than was in the past. I'm asking this question because today, Q1, last year was strong across the board for the whole chemical industry. So you speak to any company today, they are all bullish. So I'm just trying to understand what is the difference here.

Okay. As we said, Chetan, there is a very strong demand we see from our customers. And I think what changed substantially in last years is the drive from the sustainability aspect. So it's the performance that has always been there. But I think also in that respect, performance is getting more and more important and silicones have an advantage to many other product groups in the world. But the topic of sustainability is really something, which grew much stronger in recent years. And that's the feedback we really get from our customers, both on the SILICONES side and on the POLYMERS side. And that's the reason why we definitely believe there is a higher growth rate to expect in the future. And you can discuss it also then with the divisional heads to get a firsthand impression on that.

Andreas Heine from Stifel. I would like to know -- understand a little bit more these upstream and downstream investments. So most of the investments you highlighted will be downstream. But if you grow the 6% to 10% in SILICONES, at one point you will reach your siloxane capacity. So what's the strategy on that? And it's, I think, kind of no-brainer in these markets to invest in silicon metal in Holla, which obviously is also upstream. Maybe you can highlight what your target is in being backward integrated into silicon metal. And lastly, also on this upstream/downstream in POLYSILICON, the EUR 100 million is quite an investment. My understanding is if you go to semi, then you can still use the semi reactors but you have to do some more purification or after-treatment or whatever it is. But also there, you probably have, at one point, then to invest in reactors or is that enough, this EUR 100 million to just have the after-treatment?

Okay. Andreas, maybe I'll start with the third question on the POLYSILICON. But again, you can also use the opportunity later to get more into details with Tobias on that. Yes, we do have enough capacity on the reactor side. And all these -- almost all of these are capable of reducing semi material, but the semi material needs also a purification on the outside of the material. So we can tweak the process to get poly material out of the reactor unlike many of our competitors. And then we have a second step of further purification, and that is mainly where that investment of the EUR 100 million will go into that. But for semi, we don't need to invest into new reactors to be -- your clear answer on that. First part was on the siloxane expansion. Yes, there will be a point in time where we do need more. I will rather call it specialty precursors and big part of that is siloxane. So I'm not afraid to use that word siloxane. But unlike in the past, the strategy for many companies also for WACKER more than a decade ago was focus on the siloxane and then see what you can do with it whereas now our clear strategy is, what is the strategy -- what is our specialty portfolio? And how much siloxane and other silanes and other byproducts, which you also need. So it's not just about buying siloxane, that wouldn't help. You need a bunch of chemicals and siloxane is the biggest part of it. But you also need to produce these others. And our calculation then is really when is the point when do we need them. And then we are also in a position that we don't need to make a big greenfield investment for that, but we are in the position that our existing sites we can debottleneck or call it a bigger debottlenecking, whatever you want to call it, but it's not a greenfield investment in order to get sufficient and stepwise volumes of these specialty precursors. Third part of the question was on Holla on silicon metal. And as Tobias pointed out, I think, very attractive for us in the past, a very attractive acquisition. And then we expanded it and it gives us now about 25%, 30% of backward integration. And yes, we are planning on expanding further both on the aspect of cost performance, we see now, but also on the aspect of sustainability performance.

And your target, how much percentage you would like to be backward?

A 1/3 is good. I mean we could do more. But I mean -- and I'm coming back to the portfolio of the investment opportunities and we need to manage this flexibly, so we can't do everything at the same time for -- I mean, our target maintaining financial resilience, maintaining -- yes, prudent in that sense. But we would definitely love to keep a share of 30% or 1/3 of our supply need.

[ Karl Cohen ] from Citigroup. If we take your low end of your chemicals target of, think, 6% to 10% and EUR 1 billion BIOSOLUTIONS by 2030, I think that implies a top line growth in POLYSILICON of about 2%. Is this a reasonable assumption? And presumably, if you're not building any more reactors, this is all going to be price mix driven. Is that reasonable?

I mean it definitely is more than EUR 10 billion for the group. The more is the -- I mean, the open end, I mean, it depends on -- I mean, the POLYSILICON division's performance, I mean, we are highly confident on that mix shift towards semi. And the financial performance is more or less also derived from that stability of financial value and that's why we are investing in that. And then the question is so what will be the earnings of the remaining fees, could be much higher as it is in -- as it was in last year as it is in this year. But I mean don't get too much into the modeling of what does it mean for POLYSILICON if you come from the group number, that would be my recommendation.

Okay. My follow-up just very quickly on your remaining technology in solar. What's your view of the technology? Are you stepping away from it? And why might that be? Is it the Chinese competitors might be catching up on n-type technology?

No, no, no. We are not stepping away from it. We have a very strong position in the high-end market of solar. We are seeing a strong demand. We are fully sold out. We're getting a price premium. I mean, that's something Tobias could also talk about later at the tables. And we are here. So -- but as we have experienced in the past, I mean, this market sees fluctuations, but we see a continued trend towards more installations. This year should be more than 200 gigawatt and the trend towards the high-end spectrum will continue. It will be n-type and n-type is closer to semiconductor and that's why we always say at the end of the day, solar could -- I mean if you think it through, could also become a sort of a design rule race and the purity of the starter material of polysilicon could be of vital importance. So -- but it's difficult to model, I would say.

Seb Satz from Barclays. Similar question actually also on the 30% POLYSILICON margin. Even in 2030, you're likely to still have a very high share of solar. And if I look at the margin target versus your past few years, it looks quite ambitious, bearing in mind where you are on the cost curve relative to some of your Chinese competitors. So could you give us just a little bit more detail on the mix by 2030, solar versus semi, and just the assumptions that you're making to get to such a high margin?

I think we would still sell the majority to solar just because of the limitations of the size of the semi market. But as we have described, our ambition is to double semi volumes, again, what we achieved over the last 5 years over the next -- I think, up to 2030. So to double it and then you get close to, I think, a good 1/3 of the capacity or almost half.

Almost half?

Almost half, yes.

And on the margin in solar and your position on the cost curve, how do you think about that?

I think we are an absolute efficiency leader. And for that reason, I mean, it depends on the factor costs. And I think we will continue, as we did, we focus on cost reduction. Also in a year as last year and this year when profitability is high, we rigorously reduce our cost that improves our efficiencies and there's more to go. We have the target to reduce by another 30%.

Thomas Swoboda from SocGen. A slightly different question there. Cash flow, you haven't mentioned it in your prepared remarks. You obviously have enough money to finance all what you have mentioned. But what is the general idea? Do you want to finance your CapEx and the divi from the recurring cash flow? Or is the plan to tap into your reserves from the beginning on?

I mean if you do the equation on the financial leverage, I mean we are right now in net financial asset position. And if we would move up and use that flexibility to go to 1x EBITDA, it's obvious that we would also increase our debt. But we are committed to a strong cash flow, but we have an ambitious CapEx program ahead of us. But we are also committed, as I said, the second pillar of our capital allocation is to pay a dividend in line with our dividend policy of 50% payout.

Here. Mike Schaefer, ODDO BHF. A question on your chemicals margin outlook. So you presented this on a combined basis for both chemicals segments basically. But there is also a structural element to POLYMERS where you see basically an upward trend in margins. I mean, it has been rather volatile over the past to pass through as a mechanical dilution effect, we all know about this one. But is there something which we should think about until 2030s in this segment?

We are also looking for improving our portfolio and mix in that -- that is -- I mean, what should drive us have chemicals in total at a margin of more than 20%.

And we see the opportunities in POLYMERS, as Tobias said, on the -- especially on the portfolio side, and Peter can talk more on this, especially if you talk about the dispersible powders. I think we're in a very unique position here and create value for our customers and that will have an impact also on the pricing structure.

But obviously, I mean, the value chain is a bit shorter and that's why it's more ambitious for polymers than for silicones. But on the other hand, the return on capital employed is highly attractive for everything. If you put it together, we have shown that we earn more than 2x cost of capital for that business.

It's Jaideep from On Field. I guess the first question is really the German government did not give you the green light on Siltronic, which means they think it is strategic. On the flip side, you're not getting any love on electricity prices compared to China. So I mean do you think that your bargaining power with the authorities has somewhat changed and EUR $0.25 even there, you ought to get some support from the government if EU is at all serious about not creating a second Russia situation on solar? That's my first question.

Okay. That's a difficult question, Jaideep. Yes. I mean the question is essentially what kind of leverage do we have against the German government. I don't know. But what I can tell you is that, of course, we do a lot not only on ourselves, but much more together with the association of the chemical industry in Germany on promoting competitive -- globally competitive power pricing because I think this is absolutely essential for the chemical industry, but also for other industry where Germany today has a very strong position, and this position is absolutely in danger if nothing happens. There have been clear statements before the elections and during the elections on the German government. They want to do something. They talked about the so-called Easter package, which should be disclosed soon because Easter is kind of coming. And there is -- they talked about a summer package. I think with this horrible Ukraine conflict, the whole thing speeds up, but I cannot because I don't know any details today. But I think my impression is at least that the German government understood the necessity to act here in order to really protect the biggest asset of the country of Germany, which is the industry.

And then just on semi-grade plans, which obviously at least I'm very happy about...

We also, we also.

Are you -- could you just say, are you -- when do you expect SUMCO to completely destock? And are you calculating your market share ex SUMCO or including SUMCO?

I think you need to ask SUMCO and maybe Tobias. But we will do that later at the tables. I think you hit a point the market was smaller because SUMCO had so much on stock, but we are happy to serve our customers. I think that is the simple answer. And any growth opportunities that are out -- I mean we are trying to follow with our investments.

The next question is from Rikin Patel from BNP.

Just a question on BIOSOLUTIONS. You've spoken about the CapEx and M&A synergies. But if I look at R&D, it's been fairly low versus other peers in CDMO the last couple of years. Should we be expecting a big step-up over the next, say, 5 to 10 years in R&D?

For BIOSOLUTIONS? Yes, definitely. I mean that's what we're doing. And also we -- we are building a new research lab in Munich at the consortium, the Munich biotech center, which is a clear commitment to investing more into R&D in that field, biosolutions. More to come.

As we are about to move into the second stage of today's CMD, the last question from Geoff?

Geoff Haire from UBS. Obviously, in the last 6 to 9 months, you've benefited greatly from the pricing power that you've had, particularly as raw material prices got up and some of that has been surcharges in silicones and polymers. When we get, hopefully, a normalization of energy prices and raw material price prices, whenever that may be, how much of that do you expect to keep? Because I'm assuming with the targets you're putting out of 6% to 10% top line growth, do you expect to keep quite a bit of it?

Well, I mean the 6% to 9% growth factor, that is based on volume actually. That is not including your mine volume and mix. That's not just -- that's not based on the pricing side. But to answer your question, I mean, we want to keep as much as we can and as much as we convince our customers and something probably good also to talk to our colleagues from the division. But keep in mind, typically, our products are just a minor part of the investments or the costs our customers have in promoting their products, and we will definitely focus on selling that performance aspect of it and therefore try to keep prices high.

Last question. Sean?

Sean McLoughlin, HSBC. Coming back to electricity pricing. I noticed there was a slide where you talked about more renewable PPAs. I mean, what is your strategy looking at your power procurement in Germany over the next 6 months, 12 months and out to 2013 (sic) [ 2023 ]?

I mean, as I discussed in one of the slides on maintaining resilience, I mean we have a clear hedging strategy for energy. So we have -- and that has been established since years. I mean we have a rolling hedging approach, which goes 3 years out. And obviously, the first year is hedged the highest level, then second lower and third lowest. And for the current year, we are hedged more than 2/3.

To all our guests on the webcast, thank you very much for the interest. This concludes today's presentation.