Dear ladies and gentlemen, welcome to the conference call of Wacker Chemie. At our customers' request, this conference will be recorded. As a reminder, all participants will be in listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulty hearing the conference, please press star key followed by zero on your telephone for operator assistance. May I now hand you over to Joerg Hoffmann , who will lead you through the conference. Please go ahead, sir.
Thank you, operator. Welcome to the Wacker Chemie AG conference call on our full year 2019 results. Dr. Rudolf Staudigl, our CEO, and Dr. Tobias Ohler, our CFO, will take you through our prepared slides in a minute. The presentation is available on our webpage under the caption Investor Relations. Before we begin, allow me to point you to our safe harbor statement, which you'll find at the beginning of the slide deck. Dr. Staudigl?
Ladies and gentlemen, welcome to our conference call on the full year 2019 results. As expected, 2019 was a challenging year for our company. The main factors dampening our operating performance were substantially lower average prices for solar-grade polysilicon and price declines for standard silicones. These trends noticeably slowed group sales and EBITDA. On balance, price effects reduced group sales by EUR 365 million. Sales came in at EUR 4.93 billion, down 1% versus the previous year. EBITDA was 16% lower at EUR 783 million. It included insurance compensation of EUR 112 million for the damage related to the 2017 incident at our U.S. site in Tennessee. Contrary to our assumption at the beginning of 2019, solar-grade polysilicon prices did not recover in the second half year. After adjusting our price outlook accordingly, we recognized an impairment charge of EUR 760 million on our assets.
The impairment not only impacted EBIT, it also weighed on the group's net result, where we posted a loss of EUR 630 million. Despite this, the supervisory and executive boards will propose a moderate dividend of EUR 0.50 per share. This is also a sign of confidence about the years to come. Looking forward, 2020 will be another, again, very challenging year. On top of the slowing economies comes additional uncertainty due to the coronavirus. At present, it is unclear how seriously the coronavirus's impact will affect economic growth and our business. The situation is changing rapidly and continuously. At this time, we cannot reliably predict the impact of the pandemic on our business and our results. Hence, that is why our guidance for the year does not factor in the coronavirus impact. The current situation is that our production plants are running.
In China, we have seen sales in chemicals down by some 20% over prior year. We face certain restrictions for shipping of our products to customers, but lack of supplies has not been much of an issue. So far, these issues in China were all manageable. The virus continues to spread globally as we have seen in recent weeks, and containment measures will certainly add completely new challenges, which are impossible to assess at this time. These could impact logistics, chains, operations, and global demand. We highlighted this in our risk management systems as a risk of highest category with a potential impact of more than EUR 100 million. Excluding any potential impact of the coronavirus, our operations are likely to benefit from slightly lower raw material and energy costs. Overall, we expect full-year sales on a group level to rise by a low single-digit percentage.
For EBITDA, though, we anticipate a decline. Earnings will be supported by lower costs as mentioned, but be negatively affected again by lower average prices for polysilicon and price declines for standard silicone products. While EBITDA is expected to be lower, we expect to generate significantly higher net cash flow this year. Tobias?
Welcome. I now will walk you through the presentation and then cover segment guidance for 2020. Starting with page three, our chemicals continue to grow faster than GDP. Group results have contracted over the past few years, being held back primarily by polysilicon. With an 18% margin in chemicals, we are clearly above our 16% target. This shows that our specialty strategy is paying off. On page four, please note that our gross profit includes insurance payments for the 2017 Tennessee incident, compensating for lost income in prior periods. A significant impact on gross margin was also the decline in prices year-over-year, mostly concentrated on polysilicon and less on silicones. We were able to partially offset these with lower raw materials, cost reductions, and efficiency measures. Other operating expense includes the impairment of polysilicon assets, as communicated in December.
We wrote off EUR 760 million in asset values following the subdued price expectations for solar-grade polysilicon. The impairment reduces our ongoing annual depreciation by about EUR 100 million. The result from investments declined mostly following a decrease in Siltronic earnings. On page five, our balance sheet shows the effects on equity of both the impairment and the increase in pension provisions following lower discount rates. We voluntarily injected EUR 70 million into the pension fund in late 2019. Improved net cash flow increased liquidity to EUR 545 million. This is about EUR 160 million more than at the start of last year. Combined with unused credit lines of EUR 600 million, we are solidly financed. As we move on to the segments and segment guidance for 2020 now, please note that my comments on outlook will not cover coronavirus effects, as Rudi already explained.
Silicones on page six saw sales decline by only 2% as the effect of the 2018 market tightness rolled off. This led to sharply declining prices and lower volume growth from inventory control measures at our customers. As such, the industry returned to a more normalized operating environment over the course of the year. 2019 EBITDA margin came in at 19.5%, reflecting a good sales mix while prices in standard products declined sharply. Overall, the last year was strong in consumer-focused businesses, but soft in industrial applications. For example, in automotive and plastics. At silicones, we expect sales for 2020 to climb again by a low single-digit percentage. EBITDA should come in at the prior year level. We grow specialty volumes coupled with lower prices in standards. Let's move on to page seven. Polymers recovered profitability last year as sales increased by 3%.
Higher volumes and favorable exchange rate effects drove this improvement. Segment EBITDA improved by over 30% to EUR 194 million, following higher sales and lower raw material costs. At polymers, we expect sales in 2020 to grow by a low single-digit percentage. This should be supported by higher volumes in both dispersions and powders. With raw material prices slightly lower and thanks to productivity increases, EBITDA should rise slightly. Biosolutions on page eight reported an increase in sales by 7%, while EBITDA increased by over 30%. The improvements here reflect higher sales driven by our biopharma business and better utilization at their facilities in Amsterdam and the two sites in Germany. In 2020, we expect biosolutions to increase sales by a high single-digit percentage. Again, the main impetus is coming from biopharma. Consequently, both EBITDA and the EBITDA margin should be substantially higher than last year.
At polysilicon on page nine, strong volume growth was overcompensated by significantly lower prices for solar-grade polysilicon. As a result, sales declined by 5% year-over-year. On top of this, Germany's high electricity costs impeded earnings. Despite all these headwinds, we made good progress on cost reductions and volume and mix improvements. EBITDA totaled EUR 57 million, down 21% year-over-year. Adjusted for the insurance effect, EBITDA was -EUR 56 million. Through the year, inventory valuation adjustments weighed additionally on EBITDA. In polysilicon, we expect 2020 sales to rise slightly, up by a low single-digit percentage. An improved product mix will drive growth as we shift towards high-value products. Cost savings should offset lower average polysilicon prices. Adjusting for the 2019 insurance compensation, EBITDA of this year should be on par with last year. EBITDA and others amounted to EUR 22 million, down from EUR 71 million in 2018.
The decrease was mainly due to lower equity income from Siltronic. Now, some words on cash flow and net financial debt. Please see page 10 for this. Gross cash flow in 2019 was positive at EUR 605 million. Siltronic's dividend payment of EUR 46 million lifted gross cash flow. Working capital increased by 3% as trade payables declined following reversals from year-end effects in 2018 and lower investment spending and payments falling due at the year-end of 2019. Trade receivables and inventories declined by a total of about EUR 80 million. Net of tax, the inflow of the insurance compensation was largely offset by the payment of EUR 70 million to the pension fund. Nevertheless, net cash flow increased by nearly EUR 100 million to EUR 184 million. We ended last year with a net financial debt position of EUR 714 million.
Without the EUR 120 million change from IFRS 16, the lease accounting, net financial debt would have stayed at last year's level. Let's move on to the outlook on page 11. For 2020, we expect a low single-digit increase in sales at group level. We currently see full year EBITDA, when adjusted for the insurance compensation received last year, at mid-single digits below 2019. This group guidance takes into account some of the economic uncertainty, which was already discussed at the very beginning of the year. We also expect equity income from Siltronic to be lower than last year. Both effects have been considered in the line others. On further guidance elements. From the lower depreciation level, group net income should rise substantially. Net cash flow is expected significantly higher than last year. Net debt should come in substantially lower than last year.
As I already mentioned, our guidance explicitly excludes the coronavirus's potential effects on economic growth and on our business. In our risk management system, we consider the risk of the pandemic to be high. The impact on our earnings is categorized with potentially more than EUR 100 million. Please bear in mind, this is not a calculated number. This is not guidance. This is a risk management category in a situation of high economic uncertainty. In case this risk materializes in such a category, it is possible that adjusted EBITDA could decline by a double-digit percentage versus last year. Now, just looking into Q1 2020, we expect first quarter group sales of around EUR 1.2 billion, down somewhat year-over-year. First quarter EBITDA should be substantially higher than for the same period last year. Lower inventory valuation effects and operational cost improvements support our earnings in Q1 2020.
Let me hand you back to Rudi.
Ladies and gentlemen, we have spoken now a lot about the coronavirus, but we are also concerned about general trade risks and other negative macro effects. While 2020 looks to become challenging, our company is well-positioned to weather these challenges. We have a sound balance sheet, leading market positions and industry-leading technologies. I'm convinced that we are on the right path. As we move forward, I see Wacker Chemie becoming more specialized, more stable with lower overall capital intensity and growing market shares. Let me highlight our strategies to explain my level of confidence. As a global producer of silicones, we will continue increasing our share of high-margin specialties to generate profitable growth. For standard products, the division's focus is on being a full range supplier with global reach in achieving cost leadership.
Polymers is pursuing growth by concentrating on the trend toward value-added construction materials and actively promoting related industry standards. Using the advantages offered by VAE dispersions and dispersible p owders, we aim to replace conventional technologies and tap new application areas. At biosolutions , we are focused on expanding biotech activities and acquiring new customers. To this end, the division is leveraging its extensive expertise and its facilities for making biotech products on an industrial scale. At p olysilicon, despite the difficult market conditions, we remain firmly convinced that this business has a very good future. First, the market will continue expanding strongly. Combating climate change will make a huge global increase in photovoltaic installations indispensable. We expect newly installed photovoltaic capacity to amount to between 135 GW and 155 GW globally in 2020. This assumption, of course, does not contain any potential corona impacts.
Second, there is a clear trend towards highly efficient monocrystalline solar modules, which in turn require high-quality polysilicon. That is exactly what we make. And we already lead the market for cutting-edge semiconductor poly. Third, we have a concrete plan to further reduce our production costs. We already lowered them by 1/3 between 2014 and 2017 and are again targeting more than 30% by 2021. Yet, with all these strategies playing out, unfortunately, operational excellence alone is not enough. We also need to take a hard look at our indirect costs and administrative setups to make Wacker more competitive for the future. Our so-called Shape the Future project focuses on cutting costs significantly and on making our business structures and processes leaner and more flexible. We have set ourselves ambitious targets through to the end of 2022. Overall, we want to save around EUR 250 million in annual costs.
To achieve this, we are concentrating on both lowering non-personnel costs and on cutting more than 1,000 jobs, mainly in the non-operational areas of the company. Most job losses will occur in Germany, which will account for around 80% of the total. We are currently examining, reviewing, and refining the options we have identified for optimizing our organizational structure. In parallel, we are creating a blueprint for our company's future structure and define the measures needed to realize it. We want to complete this step by the middle of the year. After that, the implementation phase will begin. In 2020, we do not expect major benefits from this program yet. At this point in time, non-recurring costs for the program cannot be quantified so far as they will be determined by the precise measures we will take. We expect to be able to update you on the program by June.
Although the overall economic environment currently poses major challenges, we look ahead to the future, thinking and acting for the long term. That is reflected in our capital expenditures. At around EUR 350 million, they will be lower than last year. The spending focus is on expanding our plants for intermediate and downstream products at our chemical divisions, particularly for our specialties business. Here, we focus CapEx on lower capital intensity projects with higher profitability. We have many advantages, an attractive portfolio, a strong presence in the world's key markets, divisions with leading market positions, and our innovative new products and technologies. We will use these strengths to drive the company's growth in the years ahead. Thank you very much. Our presentation ends here. We will now commence with the Q&A session. Operator?
Ladies and gentlemen, if you would like to ask a question, please press zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial zero two to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question. The first question is from Patrick Rafaisz, UBS. Your line is now open.
Thank you and g ood afternoon, everyone. First, a couple of questions around cash flow. With working capital actually slightly up in 2019, what should we assume here for 2020? Any relief on the cash flow here? Secondly, pension liability, as you described, increased as a result of lower discount rates. You planning any top-ups here as well in 2020? Then, third question on the Q1 guidance. Does that also exclude any effects from corona, or is that built into the Q1 guidance as we're already in the middle of March now? Thank you.
Patrick, Tobias speaking on the cash flow question. I think we assume some slight improvement in working capital, especially on the liability side in 2020, as we have a specific program ongoing, e xtending our payment terms. On the pension question, as you know, the low-interest-rate environment most likely will continue for long, so w e will see some effects on the balance sheet again end of Q1, as far as I have the latest numbers on discount rates. We do not plan a top-up for the pension scheme in 2020. That was an extraordinary top-up in last year. Can I exclude that for the future? No. Do I plan for that in 2020? Definitely not.
The third question on the Q1 guidance, I think we are almost through. I think the first two months we have in the books. We have some visibility, at least on the top line, how we will end. The EBITDA, we guided for higher. This was mostly also a reflection of the first two months that we have in the books. What will happen the next few days, we don't know. For that reason, I mean, in the middle of March, in this situation, I cannot exclude any coronavirus impact that we can't see today. For the time being, it was not meaningful. We are just 20% below in China in revenue, which I think is decent. We ran throughout the first two months fully in China also. There's a minimal impact so far, but I don't know what will happen the next two weeks.
Okay, thanks for the clarifications.
The next question is from Tom Wrigglesworth, Citi. Your line is now open.
Good afternoon, gentlemen. Thank you for my opportunity to ask questions and your presentation. First question is on polysilicon. With the continuing internal focus on self-help and improvement, when do you think, based on current prices, you think you might get to EBITDA break even for that business? Is that something that could be exit rate 2020, something achievable or possible in 2021? Your thoughts there would be helpful. Then, just a little more on the color on the cost-saving program that you have for head office. Could you give us a split of what might be the, you know, I got EUR 250 million, which isn't all labor, c ould you help break down what the components are in that saving program? Do you expect a linear progression in the savings through to 2022, or is it going to be more 2022 heavy than 2021? Thank you.
On the polysilicon, we are making progress on the improvements. The good thing is that prices seem to stabilize at this point, at least for monosilicon fit material. It's a good development altogether. To make a precise forecast at this point in time is really very difficult, but t he trends are okay.
To the question of the efficiency program, the EUR 250 million target is roughly split 50/50 between personnel and indirect costs of procurement. Regarding the progression, I would assume, yes, on the personnel side, most likely it would be more end or tail-loaded with respect to the savings towards the three-year timeframe that we have. For the indirect spend, I would definitely assume a much faster progression. I think we will have more details in June when we target to have our Capital Markets Day.
Thank you. Just as a quick follow-up on the polysilicon. I guess my question is, are there any more cost savings to come through yet in polysilicon or further levers that you could pull to help improve profitability?
Yes, of course. Continuously, we are making progress on cost savings. There is still something to come. I mean, this is what we even forecasted up until 2021. Of course, assuming that we can run our plants fully or can continue to run our plants fully, that means that the necessary installations have to take place. So far, it looks good, but again, unfortunately, this year, things are open for various assumptions right now, especially since it looks like right now, China h as difficulties really delivering the materials, the solar modules, to the respective markets, just from a logistics point of view.
Understood. Thank you both very much.
It looks good. So far, it looks good. If everything goes as normal as it can be, I think we are making significant progress.
Clear. Thank you very much.
The next question is from Sean McLoughlin, HSBC. Your line is now open.
Good afternoon. Thank you for taking my questions. Firstly, on the EUR 100 million from coronavirus, how have you tested for this? Can you give us just a little bit more detail on some of the underlying assumptions and whether you consider this figure to be cautious or, let's say, a realistic figure? Secondly, on the Tennessee plant, just wondering, what is the outlook for effectively switching to more semi grade and less solar sales here? How far advanced is this thought process, and ultimately, how important is this to your p olysilicon division EBITDA returning positive? Thirdly, just if you could specify whether you have seen to date any disruption to production to date as a result of coronavirus, both on the supply and on demand side? Thank you.
On the polysilicon question, maybe first. Of course, it's important to us that Tennessee is also qualified for semiconductor materials, and it is. It's with, by far, the most customers. It has been approved, I mean, it's the latest technology, newest polysilicon production facility plant in the world. I mean, fit for semiconductor applications. Yes, one or the other qualification is missing, but the trend is very clear. By the way, it's not missing because of lack of quality. It's missing simply because these things have to really work through at the customers. Just a question of time. So far, we have not seen any production disruptions. There were some logistical difficulties, some difficulties in available raw materials, but we could all work through these issues.
Yeah, no significant impact at this point, but we cannot guarantee that this will stay as it is because a s you can see, Volkswagen is announcing closure of productions, et cetera, et cetera. The whole corona issue will have an impact on the global economy, and we are part of the global economy. We are trying to do our best, but we cannot guarantee anything at this point in time.
Maybe that is also a good handover to the EUR 100 million question on the risk assessment for the coronavirus. As we said, we cannot reliably predict the impact of the pandemic, and I think nobody can today. For such, you have to bear in mind that this is part of our risk management system that we have categorized the corona risk as likely, which is the highest category, the possible financial impact as high, which is also the highest category, and that is more than EUR 100 million. This is not a calculated number in any sense. It's not guidance. It's just a risk category. It reflects the high level of economic uncertainty that is arising from the virus and the shutdowns of public life in many countries, which is happening right now.
It also reflects potential challenges in the supply chain and in operations, which we don't see yet, but which would come if we run short of a raw material, or if we are hindered to run our operations as normal, or if some of our customers are hindered to run operations as normal. That's why it's a risk category, but it's not a number where we have a spreadsheet for.
All very good. Thank you.
The next question is from Thomas Swoboda, Societe Generale. Your line is now open.
Good afternoon, everybody. I have two questions, please. Firstly, on the guidance. I'm still trying to get my head around it and I'm wondering if you could help us with some few more details. On Q1, you're saying a substantially higher EBITDA. There were obviously some one-offs which were not disclosed in full last year. My question here is, is the increase just because of those one-offs you mentioned? If you could share with us, without saying the numbers, obviously, I don't want to push you too far, but i f you would consider those one-offs you had in Q1, which is the inventory revaluation and the force majeure costs that you had in silicones, would Q1 be down year-over-year on your guidance or f lat or up possibly? That's the first question. The second question, hopefully a little bit easier, on polysilicon.
What visibility do you have on polysilicon in 2020? Obviously, assuming that you can run your plants normally, no huge disruptions from corona, d o you need pricing to get there to turn breakeven or slightly profitable towards the end of the year? Or is there a lot of things you cannot control to make your guidance in polysilicon? Thank you.
I start with your very difficult Q1 question. I would say, and I give you a little bit color on the segments, i f you take the chemicals, silicones is a bit down against prior year, and that comes from the price decline over the course of 2019, which certainly now for the year-over-year comparison, especially at the beginning of the year, is a burden. In standard prices, I mean. The polymers division is up. If you put the two together, maybe you come to a similar result as last year. And guiding for a higher Q1 overall comes from polysilicon. We are burdened in last year by inventory valuation effects, and a s Rudi said, we made progress on the cost roadmap, so t hat gives us an improvement year-over-year in polysilicon. That's why overall, we see us, for the time being, significantly up against last year.
And so.
For polysilicon.
Yeah.
For polysilicon, the overall guidance 2020, we said we still expect some lower average prices, and w e try to balance that with our cost improvements. So, I would not say, from the guidance that we calculated, we said exclude the insurance from last year, then we are on par with last year. We are not at breakeven yet for the full year.
But.
On pricing?
If prices stay flat and we continue with our cost reductions, we have a very good chance to have a positive development.
Perfect. If I could follow up on Q1. You're basically saying that without the inventory revaluation, and despite some headwinds from corona in Q1 so far, your base business is more or less flat?
Yes, still in a tougher environment. Yes.
Yeah. Perfectly understandable.
Yeah. That's an operational achievement. Bear in mind, prices in silicones have decreased throughout 2019. We are comparing really a much more challenging environment and still come in with a decent operational performance.
Yeah. Obviously, the price burden will decrease over the quarters. Perfectly understandable and extremely helpful. Thank you very much.
The next question is from Andreas Heine, MainFirst. Your line is now open.
Yes, thanks for the opportunity to ask question. I start with polymers. The oil price is at EUR 30, and raw materials being that low had caused record high earnings when we have seen the oil price coming down last time. What is different this time, as you have only guided for a slight increase? On polysilicon, maybe you can shed some light on how the pricing in semi is. I know it's more robust, of course, but everyone who wants to earn money in the polysilicon business has probably an interest to increase the market share. Has that caused any price pressure, or are really prices completely flat? Then, on the coronavirus impact, of course, nobody knows exactly what comes out, but y our businesses are probably affected in a much different way. I would not expect that solar is very much dependent on the global GDP.
I also expect biosolutions not dependent on this. Maybe a little bit different with semi, polymers, and silicones. Maybe you can highlight a little bit for the various businesses where you see lower and where you see higher risks.
Okay. Andreas, I start with the polymers and oil price question. We have put together a raw materials forecast before the sharp decline of the oil price in, I think it was last week, Monday. You start to forget how close that was. It was Monday last week. We haven't baked that into our raw material forecast as part of our standard main process in procurement, but y ou should bear in mind that ethylene prices and costs have been pretty low already. There is a connect between oil and ethylene, but it needs to be seen how that calculates through into our own raw materials in polymers. We have baked in some slight decline in polymers, but as we all know, yes, there's also some formula prices that will then lead to lower sales prices. Yes, it could be a situation where we benefit from lower raw materials in that division.
On polysilicon, a ll the new polysilicon plants, except for our Tennessee plant, are definitely not able to produce semiconductor-grade polysilicon. If competition, new competition, wants to be qualified for semiconductor polysilicon, they have to upgrade their plants very significantly. They need lots of new investments. This will certainly have a very stabilizing effect on the semiconductor polysilicon prices, at least for the years to come, I would say. Of course, if somebody wants to dump material in that segment, that could have an impact, but those who want to make money will certainly support the price level we have there.
For the coronavirus impact on the chemical divisions, you already said poly and biosolutions, that's not your question, it's about silicones and polymers. Silicones is a broad, diversified business which serves a lot of different applications. It's a global business, and as we always said, it's GDP-driven, so t here will be an impact, but it will not be just a single segment that can have a tremendous impact. I think it is to be considered as a rather defensive division in such an environment. Polymers, as we know, a good portion of it is construction industry, and we are in modern construction, in high-quality materials. So, it's not only new builds, it's also renovation.
It's difficult to assess today, but it might be that the coronavirus has less of an impact on construction activity, and as such, it could be that we continue our path that we have shown historically. But it's early to say [crosstalk].
Yeah, of course, it's early. I fully understand your categorization. Looking into what you described, that again, the semi part has always some volatility if you have GDP changes. But on what you said, the EUR 100 million number looks very high. As you described, silicones being very diversified, very global, and growing above GDP, polymers going into construction, not dependent on short-term decisions, biosolutions probably not affected, and solar also not driven really by economic swings.
But as we said, we have all risk in there. We have the demand risk, we have the supply risk, and we have the operational risk. I mean, we definitely need to keep our large production sites up and running. These are integrated sites. If you are hindered in any kind, it will have a huge impact.
That's understood. Basically, as long as your sites are operational, the risk might be much less than this EUR 100 million. Is that fair?
We hope so.
Thank you.
Who can bet that we are not going into recession in 2020? The forecast will continue to change over the next couple of days. Somebody was, mentioned as conservative, taking down some digit points in percentage growth for GDP. Some halved it two weeks ago. We are more or less in a standstill mode for many countries right now. Nobody really knows, and w e neither.
Fair point. Thanks.
The next question is from Oliver Schwarz, Warburg Research. Your line is now open.
Thank you for taking my questions. I've got two that might be easier to answer than predictions on corona . Regarding your dividend policy, I guess the 50% of net profit target or politic has been shelved, judging from the EUR 0.50 per share dividend connected to your loss on the net income line. Going forward, could you elaborate a bit on your dividend policy? Is that more pegged to EBITDA generation, which is expected to be down year-on-year in 2020, or is that more pegged to your free cash flow generation, which might be up in 2020 if we, let's say, if you just negate the corona impact? Also, might that be affected by the one-off burden of costs resulting from your efficiency program, or is that also a one-off that's not going to affect the dividend payout?
Secondly, could you please expand on the bridge between the result of Siltronic and your at-equity result? Could you please put some more flesh to the bone in regards to how the at-equity result was basically compounded? Thank you.
Well, first on the dividend policy, it's not shelved. According to the dividend policy, we, and by the way, we said roughly 50% of net income. Yeah, our net income was negative last year, w e could have said there is no dividend this year, but o n the other hand, it makes a lot of sense to continue to pay a dividend even on a small scale, which we did in the past as well. For the future, there's no reason to change the dividend policy at this point in time.
If you should generate a negative result in 2020 on the net income line as well, might we expect a dividend similar to what we've seen planned to be paid out for 2019?
This will be decided then in probably January, February 2021.
Very clear.
It's not a major concern at this point in time.
To your question on the equity result, if I got it right. We have a 31% share in Siltronic, as you know. It's not that easy that you just take the equity result or the net result of Siltronic times 0.31, because you need to take into account that Siltronic also has a result attributed to minorities. You can only take the number from Siltronic attributed to Siltronic shareholders. From that, you need to deduct something that we guided for at the very beginning of after we deconsolidated. We need to deduct some EUR 15 million-EUR 20 million a year. At that time, we said roughly EUR 5 million a quarter for the depreciation on the difference stemming from the purchase price allocation at that time. Then, you come to the equity result that we show in our books.
Okay. Because there seems to be a bit of a swing from what was recorded in 2018- 2019, if my calculations are correct, the impact of this EUR 5 million per quarter or EUR 15 million per year was quite diverse when looking at 2019 and 2018 reported results from the at-equity line. That's basically what I'm looking at.
There's one more point, Oliver. In 2018, we had recorded other equity results in the silicones division from revaluations in some international joint ventures.
Okay.
It's not only the impact from Siltronic.
Okay. Can you confirm that 2019 basically is more or less solely the impact of Siltronic?
If you go from 2019 to 2020, yes. But from 2018 to 2019, the two effects is the joint ventures, which we had only in 2018, and plus the effect from Siltronic.
Okay. Understood. Thank you very much.
Welcome.
The next question is from Laura Lopez, Baader Bank. Your line is now open.
Hi. Good afternoon. Can you hear me?
Yes, very well.
Okay, very good. I have a question on the mono polysilicon supply demand. It will be interesting to get from your side, how do you see that developing? You already mentioned a significant increase in photovoltaic installations in 2020 as possible, or what is targeted to come during the year. OCI is now out of the market. How do you see this developing? You have some of your other competitors also stepping up supply, but nevertheless, if the market grows around 20% and if the shift continues to improve, the amount of mono polysilicon needed is going to be rather high. Maybe from your side, how do you see the supply demand developing there? Then, I have a question on inventory levels. How do you see your inventory levels for Wacker Chemie, maybe in silicones and polymers? Will be very interesting to know.
Also on polysilicon, maybe in the first quarter, did inventories significantly also went up, as maybe caused by these more logistic disruptions that you saw? Last but not least, maybe on the other line, your guidance suggests that the other lines will be around -EUR 30 million in 2020 or significantly negative in 2020. If we take into account that for all of the other businesses, you expect a flat to slightly better EBITDA. Can you maybe, because I know you just explained the Siltronic contribution, but nevertheless, - EUR 30 million seems rather high, m aybe how can we come more or less to that number? Thanks.
On the polysilicon supply and demand, it certainly helps quite a bit that there is some reconciliation, how to say, yeah, a reduction of supply. On the other hand, some Chinese competitors continue to expand capacity. The question really is how fast they really do it, and how well they are equipped to supply the demand for mono silicon or monocrystalline fit polysilicon. I think the problem is that the Chinese competitors are so much state- supported in terms of subsidies as well as energy supply. On the other hand, I hope that they are more reasonable with the time progressing. On the other hand, there is still lots of demand for very high-quality polysilicon, which we are able to supply.
I think these categories sort of shape the demand-supply scenario, and there is simply a very good fit and very good place for our polysilicon in this scenario.
Okay, thank you.
The question on the inventory levels. We came out pretty low in inventories, both in the big chemical division, silicones and polymers. You're right, we will see in Q1 some increase from that very low levels. I would attribute that to at least some effect of that is that in China, we could run production full throughout the two months, but as we said, sales in chemicals, we are some 20% below prior year. That apparently would be a challenge to get also product to the customers and still slow demand that leads to some higher inventory. For polysilicon, it's that the start of the year is also hindered a little bit by the logistics challenge, as we discussed, so also inventory will be up. The question on the other line, you're perfectly right.
If you add up our segments and then come to the group, you see that other is negative. As we said, yes, this has the effect of a lower equity income from Siltronic, but it also has the reason that we baked into that guidance some level of economic uncertainty, which was already visible at the beginning of the year. Just take the trade risk, take Brexit, take the slowing economy. This is part of the others line as we have put together our guidance.
Okay, thank you. That's very clear. Maybe very, very shortly, on your fine chemical business, are you seeing these disruptions in the pharmaceutical supply chain globally could benefit that part of your business? Not the biotech CMO business, but the actual fine chemicals business where you supply some agrochem and also some products for the pharmaceutical industry. Do you expect maybe to start seeing there, again, a shift into more production in Western plants? Are you seeing any positive effects from that?
That could well be. We don't see that at the moment. On the other hand, we have high expectations for our biosolutions business in basically every segment. Maybe the chewing gum business is a bit slow, but all the others are doing very well. I think the age of biotechnology is just getting started.
Great. Thank you very much.
Thank you all for joining us today and for your interest in Wacker Chemie. We are looking forward to further discussions with you as the quarter progresses. We will be back again with a conference call on the first quarter results on April 30th. Goodbye.
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