Earnings Call: Q4 2017

Mar 13, 2018

Dear ladies and gentlemen, welcome to the Wacker Full Year twenty seventeen Telephone Conference. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Jorg Hoffmann, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir. Thank you, operator. Welcome to the Wacker Chemie AG Conference Call on Full Year twenty seventeen. My name is Joach Hoffmann. I'm the Head of Investor Relations at Wacker. With me are Doctor. Odoch Staubigle, our CEO and Doctor. Tobias Ola, our CFO, who will take you through our presentation in a minute. The presentation is available on our web page under www.wacker.com under the caption Investor Relations. Before they begin, allow me please to point you to the safe harbor statement at the beginning of the deck. With this, let me now hand you over to Mr. Staudigl, CEO. Mr. Staudigl? Ladies and gentlemen, welcome to our full year twenty seventeen conference call. We ended the year with a result well above our original expectations. With sales of €4,920,000,000 we achieved an EBITDA of over €1,000,000,000 2017 saw a major change in our portfolio. The deconsolidation of Siltronic in March marked a watershed moment in the history of our company. Chemicals now make up three quarters of our sales. Our focus is clearly set on driving further growth in these segments. CapEx targeted to expand our strong business positions will provide the basis for sustainable superior performance. On a group level, though, we plan to keep CapEx below the declining depreciation levels over our planning period. As many of you expected, this should result in strong cash flows over the next years. We intend to share this cash generation with our shareholders, as you can see in our dividend proposal. We will propose a dividend of €2.5 per share with a €2 bonus at the Annual General Meeting in May. Rocket Chemie is financially strong. We met or exceeded our guidance last year. We delivered a strong performance in 2017 with over €1,000,000,000 in EBITDA and great progress on cost and efficiency programs. Also, including the proceeds of the Siltronic transaction, we have cut our net financial debt in half. The dividend proposal displays the two components of our dividend policy. On the one hand, we are committed to payout around 50% of net earnings. And additionally, we will use dividends as a tool to manage our leverage towards the target range of 0.5 to 1x EBITDA. And most important, the increased dividend proposal also reflects our optimism regarding the future development of Wacker Chemie. In our core businesses, we saw last year an exceptional drive in silicones as market tightness benefited our operations in the second half of the year. I think it is remarkable that this segment from 2014 to 2017 grew sales by 27% and doubled its EBITDA contribution to over €440,000,000 This is the success of our combined strategy of cost leadership and specialty focus, generating above industry growth. Polymers coped in 2017 with higher raw materials. Also, here, we saw volume growth at high levels with some price increases agreed late in the year. From 2014 to 2017, sales grew here by 19% and EBITDA by 34. On Page three, you see the overall strong performance of our Chemical business with profitability well above target margin of 16%. As we see ample opportunity for organic growth, chemicals will be the clear focus of CapEx for the next years. We suffered a setback in polysilicon with the incident in Tennessee in early September last year that shut down our new site. Despite this, we performed exceptionally well with our German plants achieving record cost levels in Q4. We now plan to ramp our Tennessee operations up again in Q2, getting to full production towards the end of Q3. In the course of 2018, we expect to be fully reimbursed by our insurers for the financial impact following the incident. Yet 2018 will not be without challenges. The world faces complications in international trade. We find the recent news flow on this topic disturbing. Our position on trade remains solid. We believe in the power of free trade, allowing companies to compete on their capabilities and provide customers with best performing products at attractive prices. Recently, imposed tariffs on silicon metal imports into The U. S. And attempts to create similar hurdles for trade in Europe are late concerns. Our reaction to these attempts to curb competition in silicon metal is that we will continuously expand our backward integration into this key raw material. Our ongoing expansion in Norway is a part of this drive. Looking into 2018, we see raw material inflation over 2017 and expect headwinds from currencies. In total, we expect low single digit growth in sales as we are capacity constrained in our biggest segment, silicones, and we plan with somewhat lower prices in polysilicon. Full year EBITDA for the group should come in higher than last year by mid single digits as some volume growth, better pricing, cost performance and equity results support earnings. With this, let me hand you over to Tobias. Welcome to our full year 2017 call, ladies and gentlemen. Since we pre released our numbers over a month ago, I will stick to a few comments on group financials and present the segment outlook before we dive into the Q and A. For a start, let's have a look at how we performed last year on Page four. As you see, we pretty much hit our last guidance. We reported over 1,000,000,000 in EBITDA. Our net cash flow was actually kept at prior year level. And including the Siltronic proceeds, we cut net financial debt in half. So in summary, 2017 was another strong year for Wacker, instilling us with confidence for the future. Moving on to the P and L on Page five. Sales growth was dominated by volumes. But in the second half of last year, price improvements also kicked in. Nevertheless, overall, 2017 was slightly pricing negative for us. Despite this and rising raw materials, our gross margin increased to 19.4%, largely a result of successful cost reductions and better plant utilization. Other income did not see special income from canceled prepayment contracts. Electronics good result raised income from investments in associates to €44,000,000 And as depreciation declines, EBIT increased by over 25% to €424,000,000 Income from continuing operations, which is our yardstick for dividends as Rudi explained, increased by about 40% to €250,000,000 Earnings per share from continuing operations went up to 4 point euros 8 per share. Our balance sheet on Page six changed as Siltronic exited the portfolio. Please note that our 2016 balance sheet was not restated. Total assets are now at €6,800,000,000 Pensions were down €490,000,000 to €1,600,000,000 From the deconsolidation of Siltronic and asset discount rate in Germany rose to 2.09. Moving on to the segments. The slides are relatively self explanatory. Let's focus on the outlook for the segments. One word of caution though on currencies. Given that we hedge on a legal entity level, our segment results will be presented with the full impact of currency moves. This is important as some segments may experience bigger effect on a quarterly basis than the FX effect on group level of less than €5,000,000 in EBITDA for a €01 change in the U. S. Dollar to euro exchange rate. In Silicones, we expect low single digit percent growth in sales, but with an expanding EBITDA margin as we run our capacities flat out. Please note that this outlook includes an adverse accounting effect from IFRS 15, which eliminates about €40,000,000 in sales compared to last year. We see EBITDA in silicones rising by mid single digit percent from positive pricing despite increases in silicon metal and currency effect. Silicon metal appreciates following Chinese environmental reforms and tightness for graphite electrodes. Looking more broadly at the business, we see great opportunities to further develop silicones. We have improved our business considerably over the last few years and now see room to further expand and solidify our market position. This is why we are looking at higher CapEx in silicones for the next years. CapEx will increase from €140,000,000 in 2017 to about €230,000,000 This step up in CapEx follows the communicated expansion in Fumed Silica and Silicon Metal as well as considerable downstream and debottlenecking activities for our growing specialty business. We also look at ways to expand our existing siloxane capacity to meet our growing needs for this material and to better service our customers' growing businesses. Overall, this may increase CapEx for growth in silicones a bit further in 2019 and 2020, but group CapEx would stay below depreciation as previously communicated. On Page eight, in Polymers, we look to a mid single digit percent sales growth in 2018, largely driven by volumes as our markets and applications continue to grow nicely. EBITDA will be hit by higher raw material prices and exchange rate. Our pricing initiatives are successful and supportive, but may not fully compensate for raw material inflation. We look at an absolute EBITDA in Polymers at the level of last year despite a scheduled maintenance for a major production unit in the second quarter. Recent increases in raw materials provide an additional challenge. BioSolutions on Page nine expects an EBITDA below €30,000,000 with a mid single digit percent sales growth. Growth is largely in nutritional products. Additional opportunities come from biopharmaceuticals. We are making progress on the integration of our new fermentation asset in Spain with plant overhauls and reviews complete. As we take on the full workforce and begin operations, we will initially see somewhat higher costs holding EBITDA in the segment back. The market for polysilicon continued to see strong growth. Semiconductor demand is strong and global installations are driven by the cost efficiency of solar power. The appendix to this presentation on Page 19 shows where we see solar PV growth in 2018. We see the PV industry as fundamentally healthy with a clear growth trajectory. For our polysilicon business, we remain conservative view on pricing and we calculate with lower average prices for 2018. With sales volumes constrained to the last year's level, this implies a high single digit percent decline in sales. Absolute EBITDA, however, is expected to surpass last year following good progress on our aggressive cost reductions and insurance compensation. We expect full utilization again and see Tennessee coming back online in the second quarter. Before we move on, we need to address the nature of the insurance compensation for the Tennessee incident. The purpose of this insurance is to make us whole again. In other words, to put us into a financial position as if the incident had not occurred. To that end, we determined jointly with our insurers the damage of the plant, the cost to rebuild the asset and the amount of foregone profitability. In that sense, the insurance compensation is for the additional cost and for the earnings we would have had without the incident. As you can see in the notes of the annual report on Page 166, we received an advance payment from our insurers in the amount of $100,000,000 after the end of the reporting period. These funds are an advanced payment on future settlement. They are a strong indicator that the insurers recognize our claims. However, as an insurance adjustment will take appropriate time, the exact timing of the P and L recognition for the compensation is yet uncertain. Page 11 covers our cash flow bridge. As you can see, we more than halved our net financial debt in the course of last year. Leverage by year end was below 0.5x EBITDA and such outside our target range. Page 12 shows our guidance again in more detail. Please note our expectations on net cash flow, which will be clearly positive, but declines with higher CapEx. You should also note expectations of higher earnings per share in the wake of lower depreciation, contribution from associates and a positive underlying profit trend. With this, let me hand you back to Rudi. Yes. Thank you, Tobias. We have started a digitization drive throughout the organization, which should result in better operating efficiencies and enhanced customer experience. Our focus is on continuing cost reductions, where especially Polysilicon made great steps forward to our targets in the last month in the new business development in Chemicals. 2018 started well with strong demand in Chemicals, net positive pricing and a good performance in polysilicon. For the first quarter, we now expect sales of about €1,200,000,000 with an EBITDA clearly above last year. This concludes the presentation today, ladies and gentlemen. Thank you for your attention so far. We'll now be happy to answer your questions. Operator? Please dial 01 on your telephone keypad to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it's your turn to speak, you can dial 02 to cancel your question. The first question is from Goufried Goufried Goufried Goufried. Your line is now open, sir. Hello, guys. Thanks for taking my question. Just a question around the insurance claim, if I may. Are you likely to recognize in your EBITDA this year the portion of the insurance claim that compensates for loss of earnings and the cost to fix the plant? Or is it just the loss of earnings? You. It's Tobias speaking. It's both. It puts us in a position as if the incident hadn't happened. And so it covers both the plant rebuild and repair and the business loss that occurred from the volumes that we lack to serve our customers. Okay. Sure. And are you able to give us a kind of a range, maybe not specific numbers, but at least a range as to what the portions are in these two brackets? No. We don't want to do this. I hope for your understanding first, I mean, we didn't give any split for 2017 as we didn't recognize much, and we will not do that for 2018 at this moment as the plant is not running yet, and the insurance adjustment is still in the process. So I hope for your understanding. Next question is from Sebastian Bray from Berenberg. I would have two, please. One is on the extent of integration and or other costs to be absorbed in BioSolutions. What impact in EBITDA terms does this have for 2018? And secondly, the Polymer Q2 shutdown for 2018, if this didn't occur, what would be the impact on EBITDA, I. E, how much higher would Polymer EBITDA for 2018 be versus 2017 in guidance if the shutdown were not occurring? Thank you. So Sebastian, I take the two questions. The BioSolutions impact on the integration of the new side, I would qualify it as a mid single digit euro million number impact on profit. And for polymers plant maintenance, I mean, that is something that only occurs, I mean, every three to four years. So it's a major overhaul of the production unit. And this is a double digit low double digit number, 1,000,000. Thank you. And so are there any again, on one off and ramp up costs, does the insurance cover the cost of ramping back up the Tennessee facility? Or is there any margin impact above basically what we already would have in the model if the accident hadn't occurred for the cost of getting this facility back online and running by about September 2018? So the overall sense of the insurance, it could put us as if the incident hadn't happened. So that includes also the process until we get back to full capacity as we were running full capacity when the incident happened in September. Thank you very much. Next question is from Chetan Udeshi, JPMorgan. Your line is now open. Yeah. Hi. Thanks. Again, just wanted to clarify a few things around that insurance payment. So did you say you received $100,000,000 or €100,000,000 And will all of that be recognized in EBITDA for this year? That's the first question. And second question was, just looking at your guidance on silicones EBITDA growing mid single digit year on year, I mean, on what it seems at the moment, the pricing is going up quite materially in Silicones. So are there any other offsets besides probably the known FX impact, which is also impacting the sort of EBITDA growth in silicones? And probably if I can squeeze one technical question on FX, can you split out what is the impact from FX? You said zero one is less than €5,000,000 impact on EBITDA. How much of that is in Polysilicon? And how much is in Chemical divisions combined? Chetan, for the insurance advance payment that we received beginning of the year, I mean, this is for everything. I mean, it's advance payment for both the rebuild of the damaged equipment and for the business loss. And it's in U. S. Dollars, so not euro. And so you cannot as we also have the cost for the rebuild, you cannot say it's one:one EBITDA. So that doesn't work like that. But we cannot give any more details on that at that moment. The Silicone's guidance shows a mid single digit increase, and that is despite headwind from FX. Silicones is we don't give the FX sensitivity for all the divisions, but it's the biggest sensitivity of the group. And if you take together that together with the headwind from increasing raw material costs, we see higher silicon metal prices. For example, I think the overall price increases that we see on our sales side overcompensate that by far. So that's why we come to that guidance. Thanks. And can you give what is the sensitivity on polysilicon side in terms of FX? It's less sensitive as we bill in Europe. Thank you. Next question is from Andreas Heine, Main Street. Street. Your line is now open, sir. Yes. It's Andreas Heine from Main Street. I have basically three questions. So just to confirm, you say Q1 is substantially higher in earnings. Excluding the insurance payments. And could you explain a little bit also your net debt outlook? I guess that includes still prepayments coming down. Looking into the current portion of the prepayments, they show 60 something million. And maybe also what you expect as what you have in net working capital outflow this year was pretty high. Last year, was 125,000,000. Should we look at a similar number also for 2018? And last but not least, on your EBITDA guidance, you said that in the Polysilicon, you will have the same volume as in the year before. In the annual report, you were referring that the lost volume from the Tennessee plant is six kilotons. So that would imply that you had 74 kilotons last year. To get to the same amount, you would have to have an even faster ramp up than only reaching full capacity in Q3. Could you elucidate on this guidance, please, as well? Andreas, for the first quarter, that was your first question. I mean that excludes insurance recognition. So we would see EBITDA significantly higher, which you could argue is something like 10% above prior year, excluding this effect from the insurance. The second question, yes, the current portion of prepayments is around €60,000,000 and that is something that we would also see in the net financial debt. So we show net financial or the net cash flow excluding this prepayment effect, but in net financial debt that those €60,000,000 would miss. That's right. Exactly. And then for understanding our cash flow, I think it's a fair assumption that the net working capital moves of 2017 are a rough guidance also for 2018. So you can work with a similar number. For Paul and Sagan, I hand over to Rudi. It's very hard to really predict such a ramp up. So we just take some assumptions. Of course, we will be very careful in order to make sure that we reach the necessary quality of the product as fast as possible. And the reaching the quality as fast as possible, for that, we could compromise one or the other ton of polysilicon. So it's just a rough estimate. But the annual capacity, once the facility will be running at the capacity we want it to run to is something like 20,000 tonnes. And yes, you are right. If we lose this year the same amount as last year, then we should be able to produce 14,000 tonnes. I'm pretty optimistic, but there is no guarantee yet. But I think we should come close to that or exceed it. Next question is from Alexandra Throom from Morgan Stanley. Just one from me. Could you please help quantify the expansion in siloxane capacity? And then also clarify if this is within your CapEx guidance? We are evaluating an expansion in siloxanes right now. And if we look up to, let's say, 2020, the expenses are certainly within the guidance. Thank you. Sure. Next question is from Martin Jungfleif, Kepler Cheuvreux. Your line is now open. Yes. Hi, good afternoon. Two questions, if I may. First one is on polysilicon on your cash cost position there. At the CMD in September, you mentioned that you expect another 30% reduction in cash costs from 2017 to 2021. Are you still on track to reach these savings? And could you possibly comment on how the focus on monotype polysilicon, also the incident in Tennessee may affect this target? And second question is on your backward integration in silicon metal. How much of your total silicon metal needs do you currently source from Holler? And how much will this approximately be when you have finished the expansion there? We still expect the same on the cost reduction in polysilicon, and we are on track. The incident in Tennessee did not get us off track. And in terms of the backward integration, it will certainly increase over time. But we cannot predict the details because we are doing one significant step right now. We are certainly planning another significant step. So it will come over time. This is not something that can be done within two years. And right now, we or let's put it this way, when our existing expansion is completed, we will be around onethree of our capacity of our demand. Okay, great. Thanks. Next question is from Laura Lopez, Baraheleva. Your line is now open madam. Good afternoon. Thanks for taking my questions. Firstly, your outlook you mentioned in BioSolutions that food and nutritional supplements will be the main growth drivers. And what about the custom manufacturing business? So I also expected this to be an important growth driver after you recently announced a long term contract with a pharma company? Or is this maybe something more for 2019? And secondly, on Siltronic, do you have any timing yet for the divestment of your remaining part? So the share price is currently at all time high and it has a good visibility for the next twelve months at least. So it will be interesting to know your view on that. And thirdly, on the VAM pricing environment, so in the second half, there's several ramp ups in ethylene. Do you think this will also have an impact on them and prices going down as a result? Well, let me answer the question on first. Siltronic is very successful on the market. And I think the IPO was the right thing to do and was very successful. The continuation of the share price growth was good. We have sold a major portion of Siltronic at a very good level. And I think it's very good to have Siltronic as a minority portion in our portfolio. So there is there are no efforts right now to sell further shares of Siltronic. For the van price, you rightly observed that there's an increase now in the first half. I mean that basically comes back to plant shutdowns in also of acetic acid, which is the key precursor of material for VAM plant shutdowns in The U. S. And higher gas prices as in winter, the Chinese deduce gas to heat in order to reduce pollution. And that has an effect quite a significant impact in gas pricing. And this led to higher citric acid prices. And so that's why we look right now at elevated price levels for VAM and let it be that the gas prices normalize or that plants come back on stream or as you said that ethylene capacity is added, I think that should ease van pricing in the second half of the year or at least in 2019 going into 2019. And for the biopharmaceuticals, we announced a new contract. And we also flagged that we would be growing in this segment. But so far, we are pretty much capacity constrained. So we would we are looking into additional capacity in that area. But yes, we cannot I mean we have a great technology, but we would need much more capacity. Thank you. Next question is from Tom Rusert from Citigroup. Your line is now open, sir. Good afternoon. Thank you very much for your presentation and taking my two questions, if I may. The first one is, I'm sorry for being for having a basic question, but your appetite to increase your vertical integration into silicon metal, what's the driver behind that? Longer term, do you think that the merchant market could become tighter if China starts to export less silicon metal? Is that the primary issue? Or is there a quality driver that mandates you backward integrate? And secondly, just on silicones, siloxanes. Are you hearing of any major capacity additions coming into the market, new greenfield capacity that's potentially set to come on stream? On siloxane, yes, there are one or the other Chinese players who are talking at least talking about, let's say, some grassroots investment, but that remains to be seen. On the silicon metal, I mean, the driver for to increase our, let's say, independence of the merchant market is because of the behavior of some of the suppliers. We don't want this to become a political game. Okay. And with the okay, understood. Do you think that there is a threat to the global supply and demand balance then, noting that China is obviously one of the largest exporter of silicon metals? Do you think that's given it's a high energy intensity, high coal intensity export, do you think it's vulnerable to a change in their appetite to export in the longer We don't expect this to be a reason. I mean, certainly, more stringent requirements on environmental issues could add a little bit on the price of or cost of the Chinese producers, which could be translated into some higher prices. But I think with everything that's going on in this market, we believe that long term, we are much better positioned if we control our costs for metallurgical silicon by our own. Very clear. Thank you very much. Thank you very much. Actually, there are no questions. A new question arrived from Katja Filtek from Bank. Also from my side, just some follow ups on your guidance. In Polysilicon, your guidance of a slightly improved EBITDA for the full year. Does this include any profit contribution from the insurance? Or is that a kind of conservative way of first hand excluding that? And then also related to that, do you plan in polysilicon to add inventory during 2018? So do you plan here in adding inventory in Asia, which might not be sold in 2018? Then secondly, on your guidance with regards to Siltronic, would it be fair to assume that you are taking the Siltronic guidance, which is out in the market? Or is there an additional element of conservatism within your guidance? And then lastly, could you just share with us your currency assumption for the U. S. Dollar and renminbi, which ratio you're currently using for today's guidance? Thank you. I'll start with the first question on poly guidance. And as I said before with respect to the insurance, we should not talk about profit contribution from that. We are compensated for the business cost, and we are compensated for the cost of rebuilding the equipment. So that's why we would not split it out. We will be put at if the insulin hadn't happened. And so I mean, it includes this component. And yes, we are I mean, the key element of the guidance is that we are conservative also on the price assumptions. So we calculate with lower prices, and we need to see what happens. But as we typically say, we do not engage in big price forecasting, and that leads to a slightly higher EBITDA for the segment. And as part of this also, yes, we would use opportunities to increase back again our inventories at the Asian hubs as we want to be closer to our customers. For Siltronic, the second question, we do not put into that anymore intelligence. We take the consensus of Siltronic and then we take the 30.8% share of income and deduct from that the depreciation on and amortization on the purchase price allocation. And this is roughly €5,000,000 a quarter. And then you come to what we use as number. And the FX ratios, you're taking the current ones or the average ones from 2017? Yes, sorry. No, we sorry, I missed that. We take $1.25 in U. S. Dollar. And for the RMB, I would need to come back to you after the call. I don't have it right in front of me. But if you put that together, I mean, FX, it's quite a move from €1.13 to €1.25 And if you add the headwind from raw materials, you come up with €100,000,000 number around that that we need to compensate in this environment. And so it's less on the FX side, more on the raw materials side, but this is all compensated within our guidance. Thanks. That's very helpful. Thanks for clarification. Next question will come from Patrick Rafaisz from UBS. Your line is now open, sir. A few follow ups. Unfortunately, one more on the insurance payment. Can you confirm that the earnings contribution from Q4 from the insurance plan will be included in 2018 numbers? Or would you restate that for 2017? That's the first question. The second question is a follow-up on silicones and the mid single digit EBITDA guidance. That does seem pretty conservative given the way I read your Q1 guidance is already a very strong start to the year with potentially double digit growth on EBITDA here. So what's your thinking on the slowdown in the next three quarters? And then lastly, on the CapEx guidance beyond 2018, where should we think and what ranges should we think about given the ongoing expansion plans? Is it still 400 to €500,000,000 or at the upper end, in the midrange? Patrick, first question on the insurance recognition of Q4. This would be part of 2018. It would not be restated. But as I said before, please understand that we stick to this that we cannot split it out as the plant is not running and the insurance adjustment is still in the process. But it would not be restated in 2017, for sure. In silicones, I think the trading environment is just fantastic. And we would need to see what that gives us over the course of the year. So as we said, we see it very positive right now in the first quarter. Yes. And on the CapEx, as we said, we have increased the CapEx this year by a little bit over €100,000,000 because we see tremendously positive opportunities, especially in silicones, projects with a very high ROI or very low payback time. And this is why we are increasing our investment. Of course, we if this trading condition continues, we really might want to, yes, be able to benefit from that. And if it's necessary to stay at that level of investment, then we can do it in a very profitable way. And this is why, for the time being, we see that level. And as we said, we want to be below depreciation up until 2020. This is another upper limit for us. So this is the range that I'm seeing. Okay. Can I just quickly follow-up also on polysilicon, the guidance? You're assuming slightly lower average selling prices. Does that mean you're assuming today's spots in your planning? And also, wouldn't you argue that's a bit conservative given the slide you're showing with expected new installations of solar plants in 2018 and given that there's no capacities coming on stream in the first half of this year? Well, I don't think we are known for aggressive forecasting. So, yeah, I agree that it's conservative the the the things we are seeing right now. But it's Okay. I think it's better it's better to be on the safe side. Next never know Thank you very what the trading question is from Thomas Swoboda from Societe Generale. Yes. Good afternoon, gentlemen. I have three questions, two on silicones and one on polysilicon. On silicones, just to understand the situation a little bit better, is your current growth currently already constrained somehow by siloxane availability? So does it mean that you're currently mainly expecting to grow via the price and mix and and not not volumes? And the second question on on siloxane is or on silicones, I'm sorry, is the expansion, the potential expansion in siloxane. Could you give us a rough idea, direction at least on how long would it take you to expand capacity via brownfield? And how much headroom would it give you? I know it's a little bit complicated, but an indication where this expansion could be going to would be very, very helpful. The third question on on polysilicon, it's it's regarding your your competitor, GCL. There there was a press statement saying that the technology provider, TVA, Tepla, has transferred technology or sole technology to GCL regarding semiconductor manufacturing capabilities. I understand that to to produce semiconductor wafers, you you need you you need a high quality polysilicon. And and and the question I have for you is, do you see in the market high quality polysilicon coming from producers who were not able to master this great just recently? Is there a change in the market marketplace? This is the question. To begin with the last question. Well, we certainly do not see a big change in the whole environment in this regard, but I understand that the competitor you mentioned is doing more and more monosilicon growth for photovoltaics. So they probably would need the high quality polysilicon by themselves. So I not see that on the market. But it's probably better to ask them than ask about them. On the siloxane, even a brownfield project takes, I would say, two years once it's being started. And in case we decide to do that, and of course, we are able to do something like that, it certainly would be per thousand nine credits. And presently, to your first question, of course, the growth is by price and mix. We are certainly constrained in raw materials. On the other hand, of course, we also do, let's say, small scale debottlenecking projects all the time. So there is some raw material adder every year, but not big scale. Next question is from Andreas Heine, MainFirst. Your line is now open, sir. Thanks a lot for my head on question. Could you share with us how you see for your own polysilicon business is split from mono to multi, so you produce the same volume this year than last year according to your guidance. Do you think that the split of the high end material to the low end material will change within your portfolio? And maybe you can shed your light how your split is of the high end and to the low end, so mono to multi compared to the market split, please? Our share of mono is certainly higher than the market split. I think it's around 55%, 60% to 40%. Yes. It was in 2016, it was 55% of what we sold to the solar segment was, for us, was mono, and the market at that timing was just 25%. But our share is growing. So this year, we'll certainly be around 60% mono. And this mono, that is excluding semi. So semi comes on top. Yes. Yes. Share in semi is probably around it's going up right now. But overall, I think we are at 30%. That is 30% market Not for us. 30% market share for semiconductor capable polysilicon. And then also referring to what you said in the PV installation, which is going up even on the low end quite considerably. And having in mind that the market share of mono has increased in the last few years, I would expect this to continue. How do you see then the supplydemand situation for the mono business in 2018 and 2019? Well, the demand is high for for this application. Yeah. It's growing strongly. The question is whether that is whether there lots of interest. There's lots of interest by there is lots of interest for monosilicon producers for our polysilicon. And do you see that other players are catching up in getting to this high quality? Or is that less the case? So we hear a lot of announcement that basically everyone is able to produce this quality, but I'm not sure whether this is really representing what you see in the market. Well, I really prefer you speak to them. Next question is from Oliver Schwarz, Warburg Research. First question is regarding the likely or not likely rebuild of inventories in polysilicon. Given that you're planning for a similar volume in 2018 compared to 2017 as you're still under the influence of the Tennessee incident. How likely is it that you are able to build up inventory already in 2018, given that you just stated that the demand for polysilicon applications is rather strong? And obviously, you might be able to sell even more than you currently produce. How likely is it for you to build inventory in such an environment? And that takes me directly to my second question because you stated to a question of Andreas Heine before that net working capital development in 2018 might be likely to the moves we have seen in 2017. In 2017, we saw the depletion of the inventories that you had for Asian customers in Polysilicon due to the Tennessee incident. If you are now talking or not talking, rebuilding of those inventories, how would that align with the statement regarding net working capital movement? And lastly, perhaps, also in that connection, given that you have you are now at the lower end of your net debt of the bracket of where you want to have your net debt, given that you are looking at increase in EBITDA and much stronger in the net result. If I look at your 50% cash out of net income as dividends and you're likely to and you want to perhaps remain at the lower level of your net debt target, how likely is it that you would exceed the 50% cash out to investors in dividends in the upcoming years given that you're still looking for a positive development and free cash flow generation in 2018 and most likely beyond that year? Maybe one word to the rebuilding of the inventory. There are always two aspects. First of all, of course, the more material we have from Tennessee, the easier it would be to rebuild some inventory. Sometimes we make a strategic decision not or you can also call it a tactical I mean, not to sell the product into the market right away and rather put it into inventory in order in our hubs in order to be able to be more flexible and provide faster delivery to certain Asian or Chinese customers. Sometimes, you might see this type of inventory build up. But when the market is strong and the prices is high, we also and the demand of our customers is there, they're eager to get materials, and of course, we deplete the inventory. So it's really a flexible instrument that we are using. And of course, the faster tendency comes up, the easier it is to use it as a flexible instrument. And that's why I mean, the net working capital guidance, I mean, it's not only about the inventory. I mean, it's we have the attempt and the target to put some more into inventory, but we need to see how we can achieve that. Yes. On the dividend, as I I don't know whether I mentioned it in the press conference today or whether I already mentioned it here because it was a similar question. It's the I think the answer is very simple. We will decide and, of course, discuss with the Board on the dividend by the end of this year at the latest. Our dividend policy, however, remains intact, but we want to pay out around 50% of the net profits. And everything else is decided later. Next question is from Chetan Udeshi with JPMorgan. Just a follow-up on silicones, where you said you are capacity constrained this year. And I guess some of your competitors might be capacity constrained as well. Historically, silicones in terms of end demand has grown more like 5% or even somewhat higher. And we are in a good sort of macro environment this year. So I mean, do you think there is, at the moment, some sort of substitution happening away from silicones if major suppliers like yourself can't meet all of the demand? And if so, what are the other chemical chains that could substitute silicones in some of the applications? And after the CapEx increase this year, do you think you'll be able to revert back to the old six to 7% volume growth? Or would that take a longer time, of course, depending on how the macro does? I think to assume, let's say, a 5% plusminus growth in silicon in the long run is certainly a good assumption. And that will remain intact certainly for the foreseeable future. There is in the when you look at the applications of silicones, there is not very much opportunity to replace silicones by something else. There are a few pockets of applications, for example, at the very low end of sealants, But this is not something that would reduce the supply constraints. Just a little, maybe. I think growth is much stronger than, let's say, freeing up siloxane by replacing it at the very low end. Understood. And will you be able to grow for 5% to 6% volume terms beyond, say, this year after you add more capacity, etcetera? Yes, absolutely. This is why we are investing. Understood. Thank you very much. There are no further questions. I will hand over to Joerg Kaufmann again. Thank you, operator. Thank you all for joining us today and for your interest in Wacker Chemie. We're looking forward to further discussions with you as the quarter progresses. We will be back with a conference call on Q1 on April 26. Goodbye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.