The conference is now recorded. Welcome to the Wacker Chemie AG conference call for year 2023 results. At the moment, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Now I hand over to Joerg Hoffmann, head of investor relations.
Thank you, operator. Welcome to the Wacker Chemie AG conference call on our full year 2023 results. Dr. Christian Hartel, our CEO, and Dr. Tobias Ohler, our CFO, will take you through our prepared slides momentarily. The press release, our IR presentation, the annual report for 2023, and detailed financial tables are available on our web page under the caption "Investor Relations." Please note that management comments during this call include forward-looking statements involving risks and uncertainties. We encourage you to review the Safe Harbor statement in today's press release, presentation, and our recent annual report regarding risk factors. All documents mentioned are available on our website. Chris?
Thank you, Joerg. Welcome, everyone. 2023 was a challenging year. We saw weak demand for most durable goods and in construction emitted a wave of prolonged destocking at most of our customers. Early last year, there were hopes for recovery in customer demand across the chemical industry, especially for the second half of the year, but that did not materialize, as we all know. Weak demand for chemicals has led to price competition in most markets. High energy prices in Germany, still overall high raw material costs, and low capacity utilization added burdens to our business. All of this meant that our 2023 results were far below the record figures from 2022. As we disclosed in our prelims at the end of January, full year 2023 sales fell by 22% to EUR 6.4 billion due to weak market environment.
EBITDA amounted to EUR 824 million, 60% less than the previous year, and net income came in at EUR 327 million. Even with the nearly EUR 600 million dividend payment and the EUR 707 million cash outflow for investments and acquisitions last year to drive growth in specialties and biotechnologies, we ended 2023 with a pretty low net debt of EUR 84 million. Strong cost discipline and our ongoing efficiency programs, as well as a release in working capital, supported the high gross cash flow of approximately EUR 940 million. Our net income and strong financial position are the basis for our dividend. In line with our stated dividend policy of distributing approximately 50% of earnings, we will propose a EUR 3 per share dividend at our upcoming AGM on May 8th. Looking at our sustainability initiatives, we have set ambitious targets and are making good progress towards achieving them.
By 2030, we intend to cut our absolute CO2 emissions by half. By 2045, we aim to achieve net zero emissions. I'm happy to report that our progress towards these targets is being recognized. SBTi validated our net zero target in early 2024, putting us among the first companies worldwide. Also, the CDP Carbon Disclosure Project recognized our efforts by awarding us top scores in the climate change category. Wacker's A rating confirms our leadership role in climate and environmental protection. The rating is the best performance in our corporate history so far. We are among only 346 out of 21,000 companies worldwide to have received this top score. Sustainability is a strong business case for us. We see it as a key factor for differentiation in a competitive market. Our customers seek ways to lower their footprints and seek long-term partners to provide sustainable solutions.
Now moving on to our guidance for this year. It's quite a challenge to predict exactly how economic trends will develop in 2024. Our main assumption on the guidance is that market conditions remain challenging, which is exactly what we hear from our customers. Now let's have a look at our segments. Silicones sees an improved order intake and better asset utilization. However, at this point, it is difficult to determine whether this is a sustainable development or not. Polymers benefit from seasonal improvements in Q1 but still face weak construction markets, especially in Europe. Consumer markets are better off allowing some growth in dispersions. Biosolutions focuses on integrating the ADL facilities in Spain and is preparing to ramp up the new mRNA plant in Halle. Polysilicon semi-business continues strong, but overcapacities in China are holding back solar pricing. Lower energy costs in polysilicon will benefit Q1 results.
Now, considering these factors, we expect group sales between EUR 6 billion and EUR 6.5 billion and EBITDA between EUR 600 million and EUR 800 million. CapEx will be slightly below what we invested last year. That was EUR 710 million. Although end markets are weak today, we continue investing to support future demand growth. We have confidence in our products and in our markets. The development work of customers continues at a strong pace. We need to invest today to support our customers' growth tomorrow. Our strategy is right, and we are firmly committed to our strategic 2023 growth targets. Our sales should increase to over EUR 10 billion with an EBITDA margin of over 20%. ROCE should be more than twice our cost of capital. Now, looking to the next page, we continue to make strategic investments for future growth despite the current weak markets.
Why do we have the confidence to do this today? Well, without Wacker, there would be no energy transition. Our polysilicon provides the starting material for high-efficiency solar systems. Wacker Polymers enable smart construction to make buildings more economical and sustainable. Wacker silicones are essential to e-mobility. They make electric vehicles more reliable, efficient, and safer. Together with automobile manufacturers and tier-one suppliers, we constantly develop electromobility solutions. And without Wacker polysilicon, there would be no artificial intelligence and no digitalization. Half of the world's computer chips contain our polysilicon. In Biosolutions, we enable advanced medicines. Our product range extends from pharmaceutical proteins to plasmid DNA and mRNA-based ingredients to vaccines. With the investments detailed on this slide in silicones, Polymers, Biosolutions, and polysilicon, we are sending a clear message to our customers. We will be there to meet their future growth needs.
People, markets, and molecules are the basis of our success and foundation for future growth. We invest in people and continue to grow our global workforce. With our new colleagues in Spain and expanding our capacities worldwide, Wacker now has around 16,400 employees. Of these, 10,600 work in Germany and 5,800 at international locations. Last year was quite a challenge. But despite strong headwinds, the team cooperated to achieve good results in challenging markets. I want to thank the entire team from Wacker for their outstanding work in 2023 on behalf of the entire board. Great job. We invest in the regions for the regions. Our strategy is to stay close to our customers and capture growth opportunities worldwide. Our global production and technical centers setups are unique in the market.
They allow us to interact daily with customers to develop solutions for individual market requirements and to drive our specialty business. We invest in molecules that enable sustainable solutions. We focus on specialties that enable resource-saving technologies. To further strengthen our market position, our investment focus is expanding capacities, developing new solutions for customers, and enhancing our processes and procedures. To this end, we cooperate closely with customers, scientific institutes, and universities. Our portfolio of patents contains about 3,300 active patents worldwide with 1,200 pending applications. Our investments in people, markets, and molecules paved the way for sustainable and profitable growth. We remain the architects of our success with passion, spirit, speed, and confidence. Now to Tobias for details of our results and additional segment guidance.
Thank you, Chris. Welcome, everybody. Looking to the profit and loss, 2023 sales came in at EUR 6.4 billion, down 22% year-over-year. The main drivers for this decline were lower prices as well as volume and mix effects. Prices alone resulted in lower sales of over EUR 1 billion. High energy and raw material costs combined with destocking and the effects of underutilization left their mark through the figures. Gross profit halved compared to last year, and the margin decreased to about 17%. EBITDA declined to EUR 824 million in a continued weak demand environment. Earnings per share contracted to just over EUR 6. We are responding to these headwinds with increased cost discipline. We are reviewing new hires very carefully, implementing measures to reduce overall costs, and streamlining processes. Our balance sheet shows strong financials with about EUR 1.4 billion in liquidity.
Our net working capital position in the balance sheet decreased by approximately EUR 330 million through 2023. Last year, we achieved a meaningful reduction in inventory, mostly driven by our efforts to reduce stock levels. In addition, lower prices from raw materials also supported. Shareholder equity was EUR 4.6 billion after a record dividend payment of about EUR 600 million in 2023 and net income of nearly EUR 330 million. At silicones, full year sales decreased to about EUR 2.7 billion, down 21% year-over-year. The sales development primarily reflects lower ASPs and weak demand for specialties. Silicones EBITDA came in at EUR 236 million, roughly a quarter of our result in 2022. The key headwinds were the low prices, demand-driven adverse mix effects, asset underutilization, and high trailing raw material costs.
For 2024, we expect sales in silicones to be similar to last year with all regions at the prior year level. We see volumes for specialties increasing, with the headwinds from destocking coming to an end. ASPs, however, will be lower year-over-year following the low exit rates in Q4 2023. Silicones has seen an improved order intake so far, supporting sales and asset utilization . Later in the presentation, I will address current trading and expectations for the first quarter. Polymers reported full year sales of about EUR 1.6 billion, down 21%, mainly driven by lower prices and volumes. ASPs followed the decline in raw materials last year as end market conditions, particularly in Europe, remained weak. Against this backdrop of declining raw materials, EBITDA was supported by positive net pricing benefits.
This enabled us to expand our margin to 16% last year and report an EBITDA of EUR 253 million. For 2024, we see sales in Polymers declining by a high single-digit %. Volumes in dispersions are expected to be slightly higher, while powders should be stable. Average selling prices will be lower than last year. Regionally, we expect growth in Asia, while Europe will remain under pressure. While net pricing was a benefit last year, it may turn negative this year. All told, the EBITDA margin should come in at approximately 15%. Beyond the seasonal volume improvements in the first quarter, Polymers has not seen a pronounced demand recovery in construction-related applications. At Biosolutions, sales were slightly up at EUR 337 million, driven by strong growth in biopharma and the first-time consolidation of ADL.
We continue to see weak demand for our established products, as seen in our chemical segments, silicones, and Polymers. EBITDA came in at EUR 7 million and continues to be held back by upfront costs from the new mRNA facility in Halle and integration costs from the ADL acquisition in Spain. For 2024, we see sales about 10% higher than in 2023, with a significant improvement in EBITDA. Bioingredients and biopharma will drive sales growth. The new mRNA facility will be ready by mid-year. This will trigger the reservation payment as part of the German pandemic preparedness program. The new mRNA facility drove the step-up in CapEx in Biosolutions last year. In this year, CapEx will be lower, with its scheduled completion by mid-year. Polysilicon saw full year sales of EUR 1.6 billion, with an EBITDA of approximately EUR 320 million.
Sales declined by 30%, while EBITDA decreased by some 60%. The key driver here was lower solar-related sales. Throughout 2023, we saw production-related volume declines and falling prices for solar-grade material. In addition, persistently high energy costs in Germany continue to burden our results despite some yearly improvements. Volumes in semi are resilient despite higher prices. Our investments in polysilicon will increase our semiconductor capacities by well over 50% when the new facility is completed in 2025. We see an ongoing price differentiation based on product origin in the solar market. About half of our solar volumes today reflect the outside China price. The other half is priced at legacy contract terms related to the Chinese domestic price. As a reminder, these contracts run out by the end of the year. We have been working to convert these legacy contracts to the outside China price.
This would allow us to participate in the higher module prices achieved with our material. In 2024, we expect polysilicon sales to be between EUR 1.3 billion and EUR 1.6 billion. We expect volumes to be above the prior year's level, while the selling prices for solar grades will be lower on average. EBITDA is expected to be between EUR 200 million and EUR 400 million. Mix and, as we all know from history, pricing will drive our results while we focus on continued cost reductions. Polysilicon sees in Q1 some relief on energy costs, supporting earnings, while sales should stay at Q4 level. Let's move on to others on page 12. Some details on accounting for the CO2 compensation. Please note that the CO2 compensation scheme leads to lower quarterly group EBITDA during the first year's three quarters.
Since the compensation payments are issued only after the government has budgeted them, we cannot account for them as receivables before Q4. Nevertheless, we credit the expected compensation to the segments through the three quarters to provide a true and fair view of the actual segment performance. Offsetting this is a debit against others, and this gets cleared in Q4 when the payment arrives. Now, a word to modeling the full year 2024 in others. An EBITDA of -EUR 20 million seems reasonable. According to the 2024 consensus figures for Siltronic, we do not expect a meaningful at equity contribution from them in this year. Now, let's look at our net financial debt. We generated a gross cash flow of EUR 936 million in 2023, substantially higher than our reported EBITDA due to a release from working capital.
Following strong investments, the ADL acquisition, and a historically high dividend payment, we ended the year with a very low net debt of EUR 84 million. As usual, we provide a trading update on the first quarter when we present our annual report. For Q1, we expect sales to be about EUR 1.5 billion, with an EBITDA at the level of Q4 2023. That means at about EUR 135 million. In detail, we see sales and EBITDA in silicones coming in sequentially higher, driven by better order intake, higher volumes, and better asset utilization. Bear in mind that our upcoming plant turnaround in Nünchritz will be holding back results in the second quarter. Now to Polymers. Sales and EBITDA are both expected to be sequentially higher, driven by seasonality. At Biosolutions, our work towards the startup of the new mRNA facility continues to generate upfront costs.
We see lower customer project finalizations in Q1 in biopharma, impacting sales and earnings. At polysilicon, sales are expected to be comparable to the preceding quarter, but with a higher EBITDA as we see benefits from lower energy costs. Before we start with the Q&A, let me summarize. Wacker is well positioned financially and strategically. Our development work with customers continues as we expand and improve our specialties portfolio. We are investing in growth now to increase capacity once the cycle improves. We look to the future with optimism.
Operator, we're now ready to begin the Q&A.
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. The first question comes from the line of Jaideep Pandya with On Field Investment Research. Please go ahead.
Apologies, there's a problem. Mr. Pandya, can you hear us?
Yes.
Thank you.
Can I say can I start?
Of course . Sure.
Yeah. Yes. Hi. Thank you for allowing me to ask. Just on polysilicon, just want to understand the underlying assumptions here for the China price, and then how is your negotiations going on with your customers to shift them to the international price.
On the semi-grade, what is the outlook or expectation for you to gain some of the volumes, which one of your key competitors in Canada might not be able to service given they're shutting the plant? So what is the outlook for semi-grade this year, both on price and volume? That's my first question. And the second question is on silicones. Can you just give us your assumptions on utilization this year and also on what do you expect for specialties in terms of pricing, volume? How do you think the spreads will look? Because your guidance sort of implies a decline in EBITDA, but your start to the year is still pretty positive. So just wondering to square that because obviously, the market in China is actually improving. So do you expect actually the market to go down in the second half?
So if you can just clarify your guidance in silicones. Thanks.
Okay, Jaideep. This is Chris. I will start with the first question on the polysilicon. You asked for the differentiation between the in-China and outside China pricing in our negotiations. So I mean, as we stated also last time, we said we converted about half of the contracts in the solar space to a non-China pricing, and the remaining 50%, these contracts with customers are running out by the end of this year. We are in negotiations with our customers to find an agreement before the time frame. But as you can imagine, these are lengthy and intense discussions, and there's actually nothing to report today already on any news. The pricing difference, I mean, you could see the differentiation between the non-China and inside China is significantly. I assume that there will stay a differentiation between these pricing.
How exactly how big that will be, I think that's always the challenge on the polysilicon pricing itself, which is, by the way, also one of the reasons why we have that range in our EBITDA for the guidance on polysilicon. On the semi-grade, you asked for the outlook. We are positive. We are very positive on the outlook on polysilicon. We got also a lot of requests for new volumes for contracts even beyond 2030 as we ramp our new capacity in Burghausen for the etched material . So positive on this. And then specifically, you said there was a comment press release from a competitor shutting down facility. It's a certain material for the float zone where we have also a high share in the market. The material is well sought after in the market. So from that perspective, also a positive outlook for us.
I cannot comment on our competitor, what are the reasons for shutting down the plant. But overall, I think this is also a positive aspect for us.
Jaideep, on silicones, Tobias here. Our assumptions with respect to the guidance in 2024, basically, we assumed some increase in specialty volumes. We assume also that average selling prices year-over-year will be lower. That comes simply from the low exit rates that we see in Q4, I mean, both for standard products and for specialties as well. That equates to the revenue despite the volume growth to be at a similar level compared to last year. With respect to the momentum that we see in the market, yes, we see an uptick in demand in the first quarter, but that uptick has not been that even. So January was better than February.
Now, March is again better than February. But to remind you, last year, January, February, and March increased sequentially. And then April was completely different. So we don't have customers telling us much about the second half of the year. But as I said also in the speech, yes, the Q1 is a good start for silicones again, but in the second quarter, we have a turnaround. And in general, we have, as we said, flat economic development as an underlying assumption. And I think no one really is bullish about GDP improvement. And we haven't read anything in the press about better end markets, and we are not getting that feedback from our customers. So that's why, yeah, we have that baked into our numbers.
Just one follow-up if I can. Just on the EUR 400 million upper-end polysilicon guidance, Chris, are you expecting any improvement in the domestic China price to hit that number, or that domestic China price around sort of the $10 mark or $8-$10 mark remains the same irrespective for your EUR 200 million or your EUR 400 million lower upper end of the range?
Well, I mean, as I said, Jaideep, I mean, the main lever for having this range is on the pricing. But we're actually not really predicting the poly prices. I hope you can understand that as we've seen in the past, it's so volatile. It will be the biggest lever overall, and it could be both of these prices, as you mentioned. Yeah. And that's the reason for that upper range. Yes.
Thanks a lot. Thank you.
Sure.
The next question is from the line of Chetan Udeshi from JPMorgan. Please go ahead.
Yeah, thanks. I was just wanting to talk about your silicone margin assumption for 2024. I think you are guiding to about mid-single-digit margin for full year. This is despite the fact that you're actually saying the specialties volumes will improve. In theory, the mix should be getting better. Maybe there is a level of conservatism, as Tobias, you mentioned previously. I'm just curious how much of this is structural because we've seen two years of very tough margin in silicones. Last year, we thought some of that was temporary because of the lagging benefit from raw material prices or higher raw material prices. Now that should be clearly getting better, but yet the margin guidance is weaker. I'm just curious, how are you thinking about the structural dynamics in the silicones market?
Given that clearly, as we can see, you are not putting any brakes on your strategic capital expenditures in this business. The second question was just looking into your order books. You mentioned some comparison to last year, but does your order book today suggest that things will worsen into Q2? I mean, any color as to how you see your order book at the moment, especially for the month of April, because I guess you might be starting to fill your order book now for Q2 slowly. Thank you.
Chetan, yeah, I would start with a second question and then go back to the first. The order book, as I said, in March is better than in February. I mean, that is not only orders for March but also for April. But we still see customers ordering very short-term.
So we don't have any view on how our orders or how is demand in general in the second quarter. That's point number one. Second is to your margin guidance and what we convey with our mid-single-digit margin. I mean, just remember in fourth quarter and third quarter, we had 6%-7% EBITDA margin. As we describe the guidance, we see an uptick in specialty demand, but we do not get back to full utilization of specialties. I mean, we have been running full for two years, and we are investing for more demand, but this volume that we account for is not full utilization. So we are not back to normal with the year 2024, by far not. But we believe in the markets, and that's why we continue to invest.
We continue to invest to get out of bottlenecks in the intermediate products, get out of bottlenecks in the downstream. And silicones CapEx will be similar or even a little bit higher than last year. So we have full confidence in the overall prospects of our business. And also in respect to the margins that comes out of the silicones business where we are clearly stating a 20% rate. And I think we have to keep in mind that 2021 and 2022 have been exceptional years, especially for the silicones business. And now 2023 was a weak one, and 2024 also looks like a weak one. If you take the average of that, I think that really shows that we don't talk about structural change in the silicones business.
It's just a very low, a long time of very low demand in the end markets that results in a single-digit margin for us.
Thank you.
The next question is from Andreas Heine with Stifel. Please go ahead.
Hi. Yeah, thanks for squeezing my questions. I start with polysilicon. If I take the lower end of sales and the lower end of the EBITDA, then costs, give or take, go down by roughly EUR 200 million. How much of that is cost efficiency, and how much is the silicon metal and electricity price? Or in other words, do you expect that it can go down even lower going into 2025 when you have on the full-year base, hopefully, lower electricity prices? And also on polysilicon, have you baked into your guidance the IRA support you get for the $3 per kilogram? That's on polysilicon.
And in silicones, I just want to confirm the increase you have in capacities in basically all the three regions, mostly in downstream, that is still able to be fulfilled with the upstream capacities you have. So you don't need any additional investments in your upstream. And maybe then the last also sorry, that's the third one. CapEx, you are now running at a high CapEx level of EUR 700 million. Most of the projects you mentioned are coming to an end in 2024 and 2025. Will after these two years, CapEx drop again to a level, let's say, EUR 400 million, or is to reach the 2030 targets, a run rate in this magnitude of EUR 600 million-EUR 700 million necessary? Thanks.
Tobias, a very complex one at the start with policy.
I think we always shy away to give you precise cost deviations because, I mean, then you can easily then equate to the assumed selling prices. I can confirm that we have lower energy costs, which will support, but as Chris said, I mean, we are hesitant to give any outlook on polysilicon prices. For the IRA, that has been a very specific question. I can say we have not baked that into our guidance. We will include it when it really has confirmation from the tax authorities after we would be filing later in the year. As you know, it's a new program, and we will report and keep you updated. I jump back to the third question on CapEx. So we had seen the EUR 700 million in last year. We say this year it would be slightly below that level.
But as you rightly said, there's a lot of larger projects ongoing that come to completion. So we have the potential to reduce it from 2025 onwards, but I'm not there yet to have a number for that. I would not go that low, as you said, the EUR 400 million. That sounds not yeah, that sounds not right. For our plan to really come to the 2030 targets, it's more in the range of, say, at least EUR 500 million. Okay. Okay. Andreas, your third question then on the silicones. And as you rightfully said, there are a lot of capacities coming on the downstream side, so the specialty business in essentially all the regions. And really key of that strategy that we follow in silicones, the conversion to specialties, is that we do not need an additional upstream investment.
We are looking to convert more and more of siloxane into specialties. That's the reason for these investments also, I mean, next to the customer demand, obviously. So therefore, clear answer here, there is no need for an additional upstream investments to fill these downstream capacities.
Thanks.
The next question is from the line of Sean McLoughlin with HSBC. Please go ahead.
Thank you. Two questions from me. Firstly, just on Polymers. You sound quite comfortable with a 15% margin guidance despite the higher input costs. I mean, how material could this headwind become? And I guess, more importantly, how quickly could that become material? And I guess I know that Polymers is not such an asset-light, sorry, it's not just an asset-intensive. So is it just a question that actually, you're already quite shielded from cost increases?
Sean, we assume that raw materials don't move that much from current levels. So we do not see with a strong demand recovery our inputs, yeah, going up. I think we have some protection in some part of the business with formula pricing. In others, we don't have that. And then we would need to, yeah, come back to the practice again that we had shown and demonstrated in 2021 when we hiked prices. But I think this needs to be connected then also to a demand environment that allows price increases again. So from today's perspective, we assume no significant pickup in demand. We also assume no significant change from raw materials. But yeah, with the environment, some price decline against last year with a net spread. And yeah, this is how we come to the 15% margin for 2024.
Yeah. Thank you. And secondly, on polysilicon, just thinking about some of the outages you've had through the last year, I mean, should we assume that we are now at kind of a full capacity utilization through the year, both German and U.S. sites?
Well, I mean, John, this is Chris. So I mean, typically, you have plant maintenance in that complex polysilicon space on an annual basis. And so therefore, this is something which is quite normal. Last year, we did not have full utilization, and we had some outages, especially on the U.S. side. We are working on these, and I'm making good progress. And so therefore, we expect from today's perspective to have also slightly higher volumes available.
Thank you.
The next question is from the line of Sebastian Bray with Berenberg. Please go ahead.
Hello, hello. Good afternoon, and thank you for taking my questions. My first one would just be on energy costs. Where are we in 2024 relative to pre-pandemic group energy costs for Wacker, and how much incremental tailwind could arise for 2025 if current hedging rates prevail? If you cannot tell me the absolute energy assumption for 2024, could you please let me know what the historical energy cost was in 2023? My second question is on the U.S. plant issues in polysilicon. Can I just confirm the base case assumption of the company is that the reliability issues will be fixed by the end of March? And when we talk about reliability issues at the moment, I'd assume that the plant is producing something. It's just operating at a materially reduced rate. Is that right? Thank you.
Okay. Maybe I start with the last question as we just talked about the plant.
As I said, I mean, last year, we had some outages. That was also weather-related, especially in the first quarter. We are fixing these, and we saw good progress last year. You said fixed issues by end of March. I don't know why you come to that exact date. I think this is something ongoing. And as I said, there are regular maintenance shutdowns, and such a plant is a complex thing. And yeah, we do everything to run at a reasonable rate at these sites, at all the sites, not only specifically in the U.S. On your question on the power pricing, maybe let me start, and then maybe Tobias to jump in. Now, if we talk about 2024, what happened since this crisis and the war in Ukraine, which mainly drove the energy cost in Europe?
So what happened in 2021—sorry, in 2022—we had roughly about three times the energy cost compared to the pre-war level, so to speak, level. So three times. Now, last year was more about twice to the pre-war costs. And this year, we see another decline, but we are still not—definitely not—on the pre-war energy costs in 2024. You may refer, I mean, with your question to some comments in some German magazines like the Handelsblatt who said prices on electricity came down to pre-war levels. But if you read that article carefully, you will find out it is more based on a small- to medium-sized consumer of electricity. And in that case, the equation is right because, as you know, the EEG, the energy tax, was stopped last year, and that gave a big benefit to all the consumers of electricity.
We, as Wacker or as other high-energy-intensive companies, we have been anyhow we are not paying this EEG. So therefore, we haven't had that benefit of abolishing it. That's the reason why today, we still don't have the same or the low electricity pricing as we had before the war. Second, not to forget, people, when they talk about electricity pricing in Germany, often look only at the wholesale price. And there we saw definitely a decline. And that is definitely also something which is beneficial to us. But this is only part of the equation. I mean, there are other parts of the electricity bill like the grid fees where there have been some increases in this year and other positions. So therefore, that means, as I said at the beginning, in 2024, not yet on the level before the war. You asked for hedging.
We are actually hedged about 80% for energy in 2024 and about 50% for next year.
That's helpful. Thank you.
The next question is from the line of Thomas Swoboda with Societe Generale . Please go ahead. Mr. Swoboda , the floor is yours. Thomas? Mr. Swoboda , your line is open. You may go ahead with your question. Mr. Swoboda is not answering. We will move on to the next question, I guess.
Operator, the next question is from Mr. Rikin Patel.
Thank you, sir. The next question is from Rikin Patel with BNP Exane. Please go ahead.
Hi. Good afternoon. Thanks for taking my questions. Just had one left. Could you possibly confirm whether you've included the payment from the German pandemic preparedness plan in your guidance and possibly quantify roughly what that payment may be, if so? Thank you.
Okay. Rikin, this is Chris. So yes, so the reservation payment for the second half of the year is included in the guidance. It covers our costs and also provides a margin. But I hope you can understand we are not able to disclose the exact amount.
Okay. Thank you very much.
The next question is from the line of Sam Perry with UBS. Please go ahead.
Hi there. Just one question, please. In Polymers, you just mentioned you're assuming no significant pickup in demand and also no significant change in raw materials. So the margin guidance for 15% on a full-year basis, is it fair to assume the best net pricing is going to come in the first quarter because of indexation lag, and therefore, Q1 margin will be above that of 15% of the annual guidance? Thanks.
Sam, this is Tobias. No, the net pricing is not just alone the first quarter. We see that throughout the year as we also in that overall weak demand environment, if you consider the construction industry, that there will be price pressure. And what was positive in last year would be negative in this year. For the first quarter, we see some seasonality. So we had seen that uptick, but we have no view beyond the first quarter so far. We do see volume growth outside Europe. While Europe seems to be most under pressure, we are convinced that with our product portfolio, that we have opportunities in Asia and also in the U.S.. And I think that I mean, 15% is a ballpark that is in such an environment, yeah, a positive result. I'm talking very much now about the dispersion powder business.
If I now move to the dispersions, here, we see some better volumes in the consumer business driven by paints and adhesives. And there, we do indeed have some contract structures that our pricing follows the raw material movement.
Okay. Thank you.
The next question is from the line of Sebastian Satz with Citi. Please go ahead.
Thank you very much. I've got a couple left on polysilicon, actually. First one is a high-level one, and apologies if I may have missed it. But I would be interested to hear how you think about the state of reshoring of the European solar industry. Is it all over in your view? You got the CO2 compensation from the German government. That's pretty much it. Or are there still any hopes that Wacker might either directly or indirectly benefit from any financial support that could be on offer here?
And then secondly is on the pricing outside of China. And I was wondering whether you could talk a little bit about the mechanism here. Is it all just supply-demand, or are there any benchmarks that the price would be referring to? And then lastly, where do you think is the risk of the U.S. potentially changing its stance on letting in material from China? And if such a scenario was to play out, would that actually imply some downside to your poly guide? Thank you very much.
Okay. Sebastian, this is Chris. Let me start with your questions on polysilicon, the high level, on the EU solar reshoring. Well, actually, you are right. If you look in the media, it's a less pronounced topic today.
I think a big change was that Verwaltungsgericht Urteil in Germany that put a lot of pressure on the funding of all of these government projects. Nevertheless, and that's what we hear, there are still talks going on on a solar package or Solarpaket 1. In Germany, there is some talk on a resilience bonus scheme, which means that instead of the idea would be instead of subsidies or CapEx support, it would mean that if there is a module with a fully fledged European footprint produced, including the polysilicon, that these modules would get higher prices for the energy generated. And therefore, they can have a higher price in the production process, meaning that people would also buy polysilicon or wafers from Europe. So therefore, it is still ongoing. Our situation or our position is very clear on that.
What’s missing now in the value chain is not so much the poly but more the wafer guys, the second step. As long as there is no demand or customers investing in this technology, I think there’s also no need for us to expand on capacities. On our capacities, we always made a clear comment. Key point would be an attractive, plannable, internationally competitive power price. That is something which currently, we don’t see in the market. Long story short, I think there’s still going on something also on the European level, especially on the aspect of resilience, but it did not materialize so far in attractive conditions for us. Second question you had on the pricing, outside-China price, what are the drivers for this? Yes, it is mainly supply and demand.
As we know, there's a lot of capacity for polysilicon in the world but very limited capacity for non-Chinese polysilicon. And that is driven by U.S. regulation, namely the UFLPA, Uyghur Forced Labor Prevention Act, where you need to prove that your material is free of forced labor. One of the best ways to do it today is that you show that essentially, the module never touched Chinese ground by buying polysilicon from the Western world and producing it somewhere in Southeast Asia. And that's limited, and that's the reason for this price differentiation.
Mr. Satz, are you done with your question?
Yes. Sorry. Just on the risk that the U.S. might potentially change its stance on letting produced in China? Oh, sorry. Okay. Yeah. You have touched the Chinese ground.
Well, I mean, essentially, that would be a risk. Now, the question is more how likely is it?
To be honest, I think if you look at U.S. politics and also between the discussions, Democrats and Republicans, I think there's just one topic where they are united, and that is being somehow against China. And therefore, I think the likelihood that they would make it easier for Chinese material to come into the U.S., in my view, is not very high.
Very helpful. Thank you very much.
We also have a follow-up question from the line of Jaideep Pandya with On Field Investment Research. Please go ahead.
Thanks. I would like to take a second stab at what Sebastian Bray was trying to ask on the energy cost. I think last year, you had, if I'm not wrong, an energy cost bill of EUR 653 million. The previous year was around EUR 830 million.
The stance you had, if I'm not wrong, in Q2 and Q3 was the hedging markets were pretty much shut. And now you say that you've hedged 80%. So I'm assuming you bought a lot of hedges in Q4. So just want to understand, if we are modeling a blended cost, should we use roughly Q4 averages? And therefore, it will be a meaningful drop year-on-year. And then just for 2025, again, are you aggressively hedging right now to fill 2025, or how are the hedging markets in that regard? And the second question apologies, Chris, on this, but just on Biosolutions and taking a bit of a step back and thinking, I understand you've put a lot of investments here, but when will we actually see the fruits of it? Because something or the other has been going wrong.
And weirdly, ever since you had that CMD on it, things have actually just gone the other way around. So when is this business going to go back to making sort of EUR 50 million-EUR 60 million? And then is there a path in the near term—when I say near term, the next two years—to get to EUR 100 million? Or you think, really, it is about life beyond 2025 for this division?
Tobias, on the energy, you asked very specifically, and I don't have Q4 numbers in front of me. But I can tell you, with the 80% hedging that we have for 2024, and if you just take the open portion at today's prices, yes, I can confirm that we would see a meaningful reduction against the, yeah, EUR 650 million that we had in 2023.
I think if you just take the ratio that was 10% on sales, I think we could, yeah, come lower by one or two digit percentage points. But I think it very much depends on how markets develop. For 2025, we are hedged 50%, but we neither take an aggressive, yeah, approach now to hedge more, nor do we stop. So we have a tradition to do the hedging to smooth out, I mean, huge spikes. Yes, we do have an opinion also, and we stopped hedging when the market was very, very high. But we will see how 2025 develops. It could give another relief against 2024 if those conditions prevail.
Okay. Jaideep, Chris here on your Biosolutions question. When will we see the fruits of the investments?
Well, I think the first milestone we will see by mid of this year when the mRNA Competence Center is up and running and getting the fees from the Pandemic Preparedness Plan. On the other business, I think we have been a little bit more optimistic, I have to say that, in the past. What we see now is that in some instances, the biotech business is also facing some headwinds, which haven't been so much in the past. There are a lot of smaller biotech that face financing issues, which leads to a less pronounced pipeline. But we truly believe in the capabilities which we invested in. And therefore, we believe it's a compelling business case. It might take a little bit longer. But again, as I said, we are also impatient for the profitability that comes out of that business.
By mid of this year, we should really see a first-step change.
Okay. Sorry, Tobias, if I can just ask on raw materials rather. If I'm not wrong, you said flat for the year, year-over-year. And again, that confuses me because I remember, at least for silicon metal, you were sitting on very expensive inventory through the year. You hadn't bought last year. So silicon metal prices have come down quite meaningfully. So is it you're accounting for inflation and VAM and ethylene, and therefore, you're sort of trying to be conservative and saying flat? Just wanted to confirm that. Thanks.
Jaideep, definitely. I was talking about segment Polymers, just about those raws, ethylene, acetic acid , and VAM. Yes, we do see a decline year-over-year in silicon metal, for sure.
Thanks a lot.
Operator.
Thank you, sir, please. Yes, thank you, sir.
That was the last question. I will allow Alex now to turn the conference over back to Mr. Joerg Hoffmann for any closing comments.
Wonderful, operator. Thank you. Thank you all for joining us today and for your interest in Wacker Chemie. Our next conference call on the Q1 results is scheduled for April 25th. Our Capital Market Day will be held in September at our main site in Burghausen, Germany. You'll get more information about this later as the year progresses. As always, don't hesitate to contact the IR department if you have further questions. Thank you.
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