Earnings Call: Q1 2017

Apr 27, 2017

Dear ladies and gentlemen, welcome to the Interim Report on the 2017 of Baca Chemie. At our customers' 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, who will lead you through this conference. Please go ahead, sir. Thank you, operator. Welcome to the Wacker Chem EAG Q1 twenty seventeen conference call. My name is Jorg Hoffmann, and I'm the Head of Investor Relations. Joak With me are Doctor. Kurov Scharzinger, our CEO and Doctor. Silviets Koehler, our CFO, who will take you through the presentation in a minute. The presentation is available on our webpage under ww.bacher.com under the caption Investor Relations. Before they begin, please have a look at the Safe Harbor statement, which you'll find at the beginning of the deck. With this, let me now hand you over to Doctor. Staudigl, our CEO. Doctor. Staudigl? Ladies and gentlemen, welcome to our Q1 twenty seventeen conference call. Today's quarterly report represents an important step in the history of our company since the IPO in 02/2006. We are now in a minority position at This is the result of a process that began with the Siltronic IPO in 2015. Since then, we have worked towards the change in our portfolio, leveraging the improving valuation of Siltronic. Today's deconsolidated accounts show our results in following our strategic intent of concentration in our chemical operations and the so called Verbund operating system that is our foundation. Wacker is now less cyclical, less capital intensive and more focused on our core competencies in chemical materials and application development than before. We have world leading positions in all our businesses. Our business is geared towards sustainability and capital efficiency. Our capital intensity stays low over the next year, and we expect strong cash flow generation. And on top of this, we continue to grow faster than the chemical industry. In Q1 twenty seventeen, we report Teutronic as discontinued operations. As you know, we reduced our stake to 30.8%. For the time being, we intend to hold the shares and continue to participate in Siltronic's growth. Excluding Siltronic, we reported sales in Q1 of €1,200,000,000 7.6% over last year on a comparable basis. Our EBITDA improved even more by 12% to €229,000,000 This was mainly driven by the improvement in our chemicals businesses and the lack of ramp costs in polysilicon, which we incurred last year. CapEx for the quarter was €47,000,000 or about half of what we spent last year in Q1. In the course of the Siltronic share sale, we recorded cash proceeds of €438,000,000 These contributed to the decrease in our net financial debt to six eighty seven million euros Before we get the question, let me say here that the dividend for the 2017 financial year will be decided at the Annual General Meeting next year. As Tobias will discuss in more detail, we have seen a very strong performance in silicones and good volumes in polymers. Both have announced price increases in light of rising raw material costs. Polysilicon produces at fuller rates, but we have added to our strategic inventory position in Asia. As we have previously communicated, we intend to set up a virtual presence in Asia with this closer to our customers and with shorter lead times for deliveries of polysilicon. Expectations for our business segments, polymers, biosolutions and polysilicon remain unchanged compared to guidance given on the last call. However, we now believe that silicones might be even a bit better than last guided. Adjusting for special income, we see full year EBITDA for the group decreasing by a mid single percentage as compared to last year and excluding special income. This confirms our last guidance given at the full year conference call. Tobias, please. Thank you, Rudy. Let me start with the Siltronic transaction and the main points regarding the deconsolidation of the business. Please note that under the accounting standard of IFRS V, we have restated the P and L and cash flow, but not the balance sheet for 2016. Before we go into actual results, let me quickly point you to the main changes. Since we no longer meet the control hypotheses under IFRS, we now consolidate our share in Siltronic equity. The key effect is that our P and L no longer contains Siltronic items in all lines Going forward, our quarterly share of Siltronic's net income and other effects relating to this position are shown as results from investments in joint ventures and associates and are part of EBITDA and EBIT. Given guidance on this line item, however, is a bit premature as we have not concluded the purchase price allocation. I expect to be able to provide more clarity in our next call on this. However, this quarter is different because the transaction that triggered the consolidation change happened in Q1, we are showing a new line income from discontinued operations. This position includes the net sum of the proceeds plus revaluation effect on the remaining stake minus the net asset value of Siltronic. While our balance sheet for 2016 is not restated under IFRS five, the balance sheet for Q1 twenty seventeen and beyond no longer includes assets and liabilities attributable to Siltronic. New is the equity asset that reflects our remaining share in Siltronic at the last transaction values. Therefore, including the proceeds, total assets did not see much of a change. The net debt effect is straightforward. The cumulative inflow of proceeds from the two share transactions is partially offset by the deconsolidation of Siltronic's net cash position. We have summarized the key changes on Page four. I understand that the numbers might still look somewhat confusing at first sight, but it is going to become simpler going forward. If you have more questions on this, please touch base with our IR team. If you now take a look at our today's reported P and L on Page five, we see that sales grew by 7.6% following strong volume growth in all segments and price decline. Despite the higher depreciation and increasing raw material costs, volume growth led to a higher gross margin. Profit before tax in the quarter increased by 26 to about €50,000,000 Contributing to this was a higher gross result. The income from discontinued operations in Q1 was €635,000,000 Contributing to this gain were: number one, all of Siltronic net earnings in Q1 number two, the difference between the net sales proceeds and book value for the 21% stake sold and number three, the revaluation of the remaining 30.8% stake held by Wacker. This line in the P and L remains unchanged now and vanishes in 2018. Going forward, the contribution from Siltronic will be included in the line results from investments in joint ventures and associates. But for Q1, there is still no effect here. Our tax rate in the quarter came in at 37%, reflecting a low pretax result and non tax deductible losses in some subsidiaries. For the full year, we are looking at a 30% tax rate. The tax effect on the sale of the Siltronic shares was insignificant at about €1,000,000 Our balance sheet on Page six shows now a position of €519,000,000 in non current assets, representing our 30.8% share in Siltronic. Pension liabilities are down to €1,600,000,000 This was mainly due to the deconsolidation of Siltronic with pension liabilities of €371,000,000 A smaller effect was the increase in the discount rate to 2.07% in the first quarter. Prepayments related to polysilicon contracts decreased from €245,000,000 to €223,000,000 I'm now moving to Page seven in the presentation and start discussing segment performance and outlook. As indicated previously, Silicone saw a good cost performance in Q1 based on strong demand in all regions and continued mix shift towards specialties. Demand was such that we saw tightness in some product groups. Gelicones recorded €556,000,000 of sales in Q1, up 13% over last year. EBITDA increased by 22% to €107,000,000 resulting from high plant loading, good cost performance and an improved product mix. The EBITDA margin in silicones increased from 17.9% to 19.3% in Q1. Our outlook for the full year has improved. We now expect a high single digit increase in full year sales and EBITDA. We expect to continue to benefit from a good product mix and cost performance. The business has announced price increases to face rising input costs in methanol and silicon metal. Polymers saw strong growth in volumes as prices further declined. Sales were up 7% to three zero seven million euros with very strong demand in powders. EBITDA contracted to €52,000,000 representing a 17% margin. While volume growth supports results, the big headwinds come from raw material prices. Our view into 2017 for polymers is unchanged. We continue to see mid single digit sales growth for the full year with typical seasonality and earnings held back by raw material cost inflation, especially as VAM, ethylene and acetic acid costs rise. To counter these effects, the business has announced price increases and dispersions as competitors made similar announcements. We confirm our previous guidance of a significant decrease in EBITDA with full year EBITDA margins in Polymers over our 16% long term target for the Chemicals segment. BioSolutions saw sales growth to €51,000,000 an increase of 4%. With some products operating at capacity levels, the Q1 result was supported by a good performance from farmer agro campaigns and good demand from nutrition products. EBITDA was essentially at last year's level of €11,000,000 For the full year, we continue to expect here an EBITDA contribution of about €30,000,000 with integration costs from the acquisition in Spain expected later in the year. Polysilicon saw Q1 sales of €268,000,000 We shipped less in Q1 this year than last year, adding into inventory. Reported EBITDA was up 79% to €71,000,000 year over year, but down sequentially. Bear in mind that in Q1 twenty sixteen results included ramp costs of €30,000,000 while the Q4 twenty sixteen result included special income of €13,000,000 Solar ASP came in actually higher than last year and was sequentially over Q4. Our outlook for 2017 here is unchanged. We still see EBITDA excluding special income somewhat over 2016 as we continue to focus on cost reduction efforts. Despite our efforts to reduce lead times to our customers by adding inventories, we expect sales volume growth year over year, yet the lower ASP will largely compensate those gains. I'm moving now on to Page 11. Our net financial debt changed substantially following the deconsolidation of Siltronic and the strong operating cash flow in Q1 to a level of €687,000,000 After cash flow from investing activities of €59,000,000 net cash flow changed from minus 10,000,000 in Q1 last year to €53,000,000 in Q1 twenty seventeen. Adjusting for Siltronic, working capital for continuing operations increased by €119,000,000 to €1,200,000,000 in Q1, largely following the seasonality of accounts receivables. Page 12 summarizes our updated guidance for the full year 2017. We essentially keep our guidance at the level of our last call but are seeing some upside in silicones. Looking into Q2, we see a number of effects in play. Overall, we expect to maintain volume momentum in chemicals. Polysilicon should pick up as our inventory build slows. We see raw materials up, most pronounced in polymers but also in silicones. With this, let me hand you back to Rudi. Thank you, Tobias. We moved into a minority position in Siltronic this quarter, as we explained. Now we can focus on our chemical look, our Fubunds manufacturing system and power of our portfolio, operating integrated silicon sites and increasingly looking for synergies between polymers and silicones that combine organic and inorganic chemistries in unique ways to benefit our customers. Looking into current trading, our portfolio shows significant strength. Silicones see very high utilization and manage product tightness in some areas. Polymers look to increase prices amid strong demand and rapidly rising raw material prices. Biosolutions sees strong demand for its pharmaceutical products and works to integrate the new site in Spain. Polysilicon, on the other hand, benefits from the solar market's increasing orientation towards high efficiency, but pricing stays under pressure. We continue to focus here on the high quality segment and look to further decrease our costs. Our cost position evolves continuously with very good progress in Tennessee and a great position in our Chairman plants. Looking into the full year, our guidance is overall unchanged, except for the upgrade in telecoms. We are confident about our market position in all divisions as well as our capabilities, including our cost reduction potentials. We now see a full year EBITDA at a mid single digit percentage lower than last year's comparable number. With mid single digit sales growth, we grow faster than the industry and will generate substantial cash in line with our strategy. Thank you. Operator, we're now ready to take questions. We will now begin our question and answer session. The first question is from Andreas Heine of MainFirst. Please go ahead. Yes. Thank you. Thanks for taking my question. I would like to ask some on the polysilicon. Looking on the sequential view from Q4 to Q1, So obviously, volume is quite significantly down, and it seems that also the average sales price is down. So to come up with these earnings, you have published the unit costs have declined considerably. Is that only due to these accounting issues that you have built up inventories? Or is there also some efficiency gains considerable efficiency gains behind this? And then to understand the price movement from Q4 to Q1, which I expect to be rather flat. If you look on the spot prices in China, they obviously have increased sequentially quite a bit, which is not reflected or seems not to be reflected into your numbers. Could you give some flavor what the moving parts were from one quarter to the other, at least in qualitative terms that we haven't seen this price increase? And you have already elucidated that the volume in the second quarter will be higher than the first quarter. Are you done with what you intended to do in building up the strategic inventories in China? Or is that just due to the fact that demand is now so strong that you have to deliver this and cannot anymore increase inventories? And then a little puzzling, and that's the last question, I'm afraid, on the EBITDA. So if you have increased the EBITDA in absolute terms on a like for like basis by €25,000,000 and your outlook suggests that it goes down in absolute terms by €45,000,000 so that means €70,000,000 decline from where we are now so for the coming three quarters. Could you make a little bit the bridge from the increase you have in the first quarter to the decline on the full year number, please? Andreas, thanks for the question. Let me start with the volume or with the inventory build. I mean, just as last year when prices were down, we also increased volumes in inventory in Asia in order to be much more flexible in servicing our customers with material. It's a voluntary decision from our side. And of course, we always plan to use times of lower prices to build this inventory because, of course, when prices are high, we want to sell at those prices. But to make it very clear, we could have sold all material. It's not that we were forced to build inventory. Material is sought after. And so I think it was a strategic decision to do that in order to be more flexible in customer service. Are we done yet? I would say not quite. But it certainly depends on the development of the market and the pricing. But we still could use some more inventory in the hubs. And your question was whether there were efficiency gains. Yes, of course, there were efficiency gains. We are working on improvement every day, every minute. That's certainly a good thing and the benefit or something we are benefiting from. In terms of pricing, yes, I mean, it's prices developed positively in over the time if you compare with the fourth quarter. And but you always have to keep in mind that because of the long lead time, there are some delays in applicable pricing. Andreas, your question on the full year guidance, basically, what changes over the course of the year is that the raw material price increases will kick in later, especially for silicones, where we have not seen big increases yet in the first quarter. Also for polymers, where we have seen substantial raw material price pressure already in the first quarter, we see more increases over the course of the year. The next question is from Patrick Rafaisz of UBS. Thank you and good afternoon. First on the inventories you built in polysilicon. Does that in any way impact your margin if you sell down these inventories? How do I have to think about accounting perspectives maybe from selling these inventories? Then secondly, you mentioned for polysilicon ongoing cost reduction. Some of your Chinese peers are talking about another $2 per kilo cost reduction potential for their own production. How big would you quantify your reduction potential on a per kilo or per tonne basis? And then on polymers, you just mentioned that actually you haven't seen the full impact from raw materials yet. When would you say you'd expect to see the worst quarter where the three is maximum with you now actually already implementing price increases? Was that Q1? Or will it maybe be more Q2 or Q3? Patrick, to start with the last question, polymers. From what we see today, first quarter was not the quarter with the highest price pressure in raw materials for polymers. So we expect second quarter to be higher. With respect to the margin effect of the inventory build in polysilicon, yes, it's for sure, it's slightly positive because if you just do the calculus, you don't show the sales. And that's why it typically slightly improves the margin if you build inventory in a specific quarter. Which means that once you sell down the inventories, you'll have a weaker margin in Q2, Yes. For That is I mean, in one quarter, if you add, you have a higher margin. In the quarter when you sell from the inventory, you have a lower margin. That's how it works. On the cost reduction potential, of course, there is always this talk about we reduced by such and such, we reduced by such and such. We have never really participated in this contest, but we have really succeeded in cost reduction. And what we do is I mean, there are many ways you approach this. First, of course, you want to improve personnel productivity, for example, through improved process controls. You want to reduce maintenance costs. You are working on supply costs. Then you work on all various process parts from silane synthesis via purification all the way to deposition and conversion. And there are continuous efforts ongoing. We there are new ideas every day to simplify the processes, and we have a program in place called the Wacker operating system that is a very systematic approach to cost reduction, not only in polysilicon but also in the chemical segment. And I think we have really gained a lot from this effort. And of course, there's one additional method or effect that one can also keep in mind. It's the effect of the chemical loop systems. Systems. I mean, our polysilicon plants are part of this Verbund or chemical loop system. Polysilicon production is connected the silicones, for example, is connected to the fumed silica production. And sometimes, have improvements in these connected process parts that also lead to improvements in polysilicon. So it's a very complex task, which is approached every day. And this is why we are very confident that we stay on the absolute front of the cost curve. The next question is from Chetan Udeshi from JPMorgan. Yes, hi. I had a question. You mentioned you've started raising prices, but when do we see the impact of that in your numbers? Is it more second half loaded? Or could we see some impact from that even in second quarter of this year? And then how would you see the demand situation at the moment in short term? Have you seen any destocking activity? Or did you believe there was any or there is any restocking at the moment, which could result in, say, some short term correction later into the year? So to the price development in chemicals, we have announced price increases for both silicones and polymers in March. And so it is a fair assumption that those effects will be more in the latter part of the year, not in Q2 yet. With respect to the order entry, we feel very strong in both silicones and polymers still in the second quarter. So a very good momentum. I think if you look at it from a broader perspective, all chemical companies report very high volume growth in the first quarter. So I believe there is some restocking in general going on in the industry because end markets cannot grow that strong across the entire year. But that's nothing specific to Wacker that is across the entire industry. Understood. Can I just follow-up with one question on polysilicon? Does the company have any plan B on that business? Because you guys have hoped for EBITDA margin in this business of more than 30%, but unfortunately, the pricing dynamic only becomes worse as such every year. So do you have any plan B for investors on what you could do to sort of bring this business back in profitability? Because eventually, still a loss making business on EBIT level. Well, I think this is a wrong assumption that it will be a continuously loss making business. I think it isn't. The I think the demand for polysilicon will grow continuously with the application of renewable energies, solar energies. And right now, we even see the application of photovoltaics even without all the positive effects of energy storage. So I think there is a future. Of course, we certainly saw some overinvestment in some parts of the world. But this will not it cannot continue in the long run. I mean we saw similar effects in the silicon wafer business. At a certain point, these investments stop. And then and we always said it will be a normal chemical business. And I think this is a good chemical business for Wacker to be in because with all the connections with our other chemistries. So at this point, I do not see a need for a plan B, whatever that might be. The next question is from Andrew Heap of Berenberg. Hi, thanks for taking my questions. Firstly, could you just clarify on your full year EBITDA guidance declining mid single digit? Is that including any contribution investment for the remaining nine months? With respect to your first question, Andrew, the Siltronic contribution from the equity result is not yet included in the guidance for the full year because, as I said, we have not done the purchase price allocation on the Siltronic business. And I will provide some update of this in the next conference call. So as this process is still ongoing, so it's excluding any effects from Siltronic. The second question on the utilization rates. We are basically running at the limit in polysilicon and silicones. And we are running also very high utilization but still have some buffer for adjusting also to the seasonality of the business in polymers. And so very strong utilization across the board, I would say. On polysilicon inventories, of course, there is a sort of a natural limit to the inventory, and this is what's needed to cover a basically up to two months delivery time to Asia. And to building to build such an inventory in case we really go so high, it would not worry us because the material does not deteriorate if it's properly stored. So there is no not a lifetime on the material. But of course, I mean, we are always careful with inventory, of course, because of it's an allocation of capital. But think we have to weigh the benefits of having a low inventory to use less capital and the benefit on the other side to improve our customers. Okay. And could I just ask one quick follow-up question? Could you give any comments I know it's coming around to that time of year again with the decision with MOFCOM on yourself? And also give any thoughts on the relationship with MoffCom and the South Korean polysilicon as well. Our relationship with MoffCom is very good. And as I said last time, we do not expect any change in our opportunity to supply our Chinese customers with excellent material. The next question is from Gabriel Gutrault of Macquarie Securities. A couple of questions from me. So firstly, the polysilicon ASP has obviously fallen quite dramatically since you guided us on the 2017 outlook at the time of your full year results. You're very hard to understand. Okay. Can you hear me now? Is that better? Yes. Much better. Yes. Okay. So the polysilicon ASP has fallen quite dramatically since you last guided us at the time of your full year results, but guidance in the Polysilicon division has remained unchanged. Are you expecting a correction in the spot price in the coming in the short term? Or was this reduction in the price something that you already factored in, in your full year results? That's my first question, and perhaps I'll follow-up afterwards. Well, I mean, even last time, I think we were careful with the guidance. I mean, some of you have even published that we are too conservative, but I think we were careful because of potential pricing effects in polysilicon. In the meantime, as of this week, actually, we saw even a little bit of an uptick of the so called PV insights spot price index. And we expect demand to be fairly strong over the year. And so and we have seen these cycles in pricing in the last two, three years. And I mean, these cycles could go on. These are I always call them microcycles, and this is not unusual in a still immature industry. And we try to keep that in mind when we formulated our first guidance in March. Okay. All right. Second question is on your net cash flow guidance. This time around, you your outlook is substantially lower than last year at €361,000,000 And I think last time around, you were guiding to a flat year on year move at €400,000,000 Is the difference here Siltronic or something else? Yes. The difference is basically Siltronic, which is, I think, they published also today and was guiding for a very strong cash flow. And then it's what we already forecasted for the polysilicon that we would strategically build some inventory close to our customers. And so it's a little bit more working capital. But our guidance for CapEx is consistent. So it's at the level of €360,000,000 well below depreciation, which is at 600,000,000 Okay. So just to confirm, the net cash flow figure that you show on Slide 12 of €361,000,000 in 2016 does not include Siltronic or does? The $360,000,000 does not include Siltronic. Okay. Yes. So you're guiding On a lower like for like basis, you're guiding lower now for cash flow? Yes. Okay. And my final question is on FX. If you could give us an update Yes, on it is because we built inventory. Yes. That's fair clarification. Final question is on FX. Could you give us an update on your U. S. Dollar exposure? And how much of the recent move in the euro strengthening is a headwind for this year? I wouldn't say that there's a headwind from the recent move. I mean, if you compare year over year, the U. S. Dollar is still a bit stronger. And yes, with respect to the sensitivity, the change from the deconsolidation is that Wacker as a group is less sensitive than before. Our sensitivity is by zero one change in U. S. Dollar, it's roughly €10,000,000 in revenue and €2,000,000 in EBITDA. Okay. But the euro has strengthened against the dollar since you must have formed when you were formulating guidance in 2017 for 2017, the euro certainly strengthened. So has that changed your that clearly had an impact on your guidance. I'm just curious to know what your thoughts were there in the terms currency. I think it's not significant. And our forecast for the exchange rate that we apply is one point zero. So we are still below that. The next question is from Sean McLoughlin of HSBC. One remaining question. It's on silicones. I'm just trying to understand, with the price increases you're putting through yet the pricing pressure that's coming from the higher raw materials, can we expect then effectively a margin squeeze in Q2? Secondly, on the demand side, how much of the incremental growth are you seeing through market share gains? Or how much of that, just latching back to a further question, is driven by restocking? To the first question, silicones actually will see substantially higher raw material prices in the second quarter from the spike in the methanol prices. And as I previous before said, the price increases that we announced for the business will be more in the second half of the year. So from that perspective, we will see a net squeeze in margins over raw materials. And terms of market share increase, within one year, you normally do not gain a lot of market share. Market share inches up a little bit all the time when you do a good job. And we're trying to do a good job in servicing our customers and providing excellent materials. In silicones, we have certainly gained quite some market share over the last few years. But market share gain is not a significant contributor in to our guidance for this year. So if I could just explore that further. So it sounds to me then that you are aware or thinking that there's an increasing level of restocking among your customers that is driving this higher outlook. Yes. I mean, restocking certainly plays a significant role, as Tobias potential for price increases this year, as we explained. This is because some base material shortage that occurred because capacities at some competitors were decreased or shut down. And this offers opportunities to come to pricing levels in silicones as they were in the past. This is an effect. And in addition to that volume growth in silicones, I mean, it's typically above GDP. And as the overall economic environment slightly improves and also emerging markets, yes, are in better shape in this year than last year's, I mean, that's this all can have a triggering effect on silicon consumption. So we see a very strong demand in Asia, but also in Europe and in The Americas. The next question is from Thomas Swoboda of Societe Generale. Three questions, if I may. First, a very quick one. Your Siltronic stake, you have always said you want to exit in the midterm. Is there any change to that? Should we expect further decreases of stake this year? If you could specify that, that would be helpful. Secondly, Polymers, if I take the midpoint of your group guidance and the midpoints of the segment guidance as you have given and assuming that Siltronic is not in the guidance yet, Polymers EBITDA for the year could be some $20,000,000,210,000,000 euros EBITDA. You say Q2 should be down on Q1. Should we then assume that we see a stronger recovery in H2? Does this make sense? And on Polysilicon, a little bit more strategic one. In the past, you have mentioned you should be able to achieve a 30 margin in this business. Not really sure if you said in every year over this cycle. Anyhow, my question is what would you need to achieve this margin? Obviously, you won this year, you haven't last year. Do you need Tennessee just ramped up completely and all the potential from this plant in terms of volume leverage, cost efficiency achieved? Or you actually would need higher prices than we see for polysilicon right now? Maybe on the last question, it's certainly our goal to be beyond 30%. We cannot promise that for this year. What do we need? We need, let's say, reasonable pricing and further cost reductions. And this is what we are working on. Right. You can achieve reasonable pricing through focus on the high quality applications. And yes, and then to further cost reductions. And these are ongoing efforts, and I think we will be successful there. Right. But you were saying in the current price environment, the 30% very, very difficult to achieve? Well, I mean, depends on how the pricing on the average develops this year, and that's extremely hard to predict. I'm not neither able nor willing to predict. That's fair. That's fair. And for Teutronic, certainly do not expect a further decrease in our share this year. That's very clear. And on polymers? And on polymers, you also need to take into account that this business has a little bit of seasonality, which has typically stronger second and third quarters. But you have to factor in, as you already mentioned, that the pressure from raw material prices is strong. And our compensation and increasing our own prices will be in the second half of the year. Right. But do you make this 200,000,000 roundabout? Does it make sense? Or is it too high? No. We keep our guidance as we communicated that we say it will be substantially below last year and that we will see a margin over the margin target of 16%. Right, right. I mean, the calculation is fairly simple unless there is something I'm not factoring in. But I will follow-up with IR. Thank you. The next question is from Paul Walsh of Morgan Stanley. I'm going to frame the taking all your other guidance into account equation slightly differently and look at the Polysilicon business. If I sort of run your guidance division across the chemical activities, I'm backing out something like $250,000,000 implied for Poly EBITDA this year, which is a run rate of about €60,000,000 for the remaining three quarters. Just want to know if that's roughly in the right ballpark. Secondly, just on Polymers and pricing. It's just an observation really. It's a good business, Polymers, and I'm surprised by the lack of pricing power that you seem to have in that business right now. I wasn't aware that it was a market that was so fragmented where pricing couldn't be managed with raw materials going on. So could you just help me understand exactly why you've not been able to price for raw materials and polymers where virtually every other chemical company is doing quite well on pricing at the moment. And just my final question, and this is not meant to be provocative, it's just to help me understand. In terms of the risk of a write down on any of the Poly businesses, I'm assuming that's not on the cards, but the rates of return are clearly lower than I think you would have anticipated. So could you just put my mind at rest around that as well? You can put your mind, Mette, for the last question on write downs on polysilicon. If I move backwards to the polymers question on pricing power, we have 25% of the business based on price index that moves with the raw materials, but the rest is more or less value based. So and then it depends very much on the supply demand situation because we bring value to our customers. It depends on how tight the market is. We have announced price increases in dispersions at our competitors, and that signals that we see some pricing power. But other contracts are, yes, based longer term. So we have semiannual or annual contracts. And only in very rare situations, we pull the hardship clause of the contract to renegotiate prices because it also goes the other way. So we see prices increase in the second half of the year. And we also have lowered our assumption for price decline in polymers. In silicones, we previously talked about slightly declining prices, and now we are seeing slightly increasing prices. So there is pricing power for our chemicals. And for your polysilicon question, we stick to the guidance that we say we should see a slight increase in EBITDA, excluding specials, over last year. The next question is from Oliver Schwarz of Warburg Research. Firstly, with the deconsolidation of Siltronic, the internal sales to Siltronic became external sales. Could you give us an indication of the impact of that regarding sales and EBIT when it comes to the polysilicon segment. Just to gauge whether that is the reason for the improvement in results anticipated for 2017 or whether there is an additional factor in there? And secondly, coming back to the question on inventory. What would be from your point of view, what would be an, let's say, optimal level of inventory that you would consider to be, let's say, in perhaps weeks of production, what you consider to be the one you would like to have over the cycle? Oliver, the internal external sales, that's right. But there's no effect explaining our growth against prior year because we restated the numbers of last year. And if you really would love to dig deeper into that and try to figure it out, you should compare it to the consolidation effect of the non restated account that we published in last year. And we do not give any details on, yes, the result impact for that. In terms of inventories, of course, what disregarding interest costs on the capital, you would want to have inventory that covers about two months of delivery time to Asia. But I'm not saying that we are trying to achieve exactly that. I think we have to balance it with all these effects. The next question is from Martin Nungflesch of Kepler Just two follow-up questions on polysilicon. The first one is on the monosci. I understood that you will focus now a bit more on the production of this higher quality monosci, but that this move will have an impact on total polysilicon output or volume as it takes more capacity. So I guess my question is what volume we should be modeling for 2017? Or in other words, if you would produce 100% monocyte polysilicon, what would be your total output at 100% utilization rates? And then secondly, on the semiconductor polysilicon. Could you give us an indication of where prices have moved recently? And where do you see the market moving as we have seen strong demand from the semiconductor business? And if you could possibly increase the share of this higher ASP semiconductor polysilicon sales mix going forward? For competitive reasons, we do not talk about pricing in polysilicon neither for solar nor for semiconductor. I hope you understand. And on focusing more on the mono side should have and has very little impact on capacity. Our nameplate capacity of 80,000 tons still remains. I mean the key is, of course, to continuously improve the quality in all its aspects without reduction in capacity. The next question is from Erkan Ichisek of LBBW. Hello. Thanks for taking my question. Two questions from my side. The first question is relating your sorry, disposal proceeds. In 2016, you had a payout ratio of roughly 50%. Can I apply a similar ratio for your disposal proceeds? That's my first question. No. The clear answer is that we will decide on our dividend at the next or we will make a proposal for the dividend for the 2017 at the next shareholder meeting in 2018. So there are no specific plans yet. Okay. And my second question is relating to your financial result. You posted a financial result of roughly minus €24,000,000 in Q1. Can we calculate with a similar run rate in the next three quarters? Yes, that's absolutely fair to assume the same number and take it times four for the year. The next question is from Matthew Hemscheval of Credit Suisse. Just following up on that question actually. Can you just give us an idea of how you want to use the balance sheet over the coming years, just given that your CapEx requirements are now relatively low and you're rapidly deleveraging, please? We updated our financial targets at our last Capital Market Day in 2016, and I would just like to reiterate the most relevant targets to answer your question. We purposely extended our leverage phase to at least 2020. That means the investments below depreciation. And we raised our dividend level to 50% of net income, and we set our target for net financial debt at below 1x EBITDA. And the net effect reduction of the net debt by €230,000,000 to $232,000,000 to just below €700,000,000 This is where we are. And that means we are at the target range of below 1x EBITDA, taking into account also our lower EBITDA without Siltronic. And as we said, for the Annual General Meeting twenty seventeen, we have made our proposal. And this proposal was made before we consummated the Siltronic transactions. And we will now take the time to review our financial position in the new group structure. And I think we demonstrated in the past that we adapt our financial targets quite timely to our overall financial situation and the business strategy. But it's certainly premature to speculate already today about any changes to our financial targets. There's no reason for that, not at all. But let me also reiterate here that we have no intention whatsoever to change our investment strategy for the coming years. The leverage phase will continue through at least 2020 as we focus on less capital intensive downstream investments in support of our specialty strategy. And we also always said, and I would like to reiterate that as well, if there are opportunities for, let's say, small scale acquisitions, just like we did in the past in the range of, I don't know, 10,000,000 to €50,000,000 we're always able to do that. Our balance sheet allows us to do it. And so this is, let's say, our financial strategy. There are no further questions. I hand back to the speakers. Thank you, operator. This concludes today's conference call. Thank you for joining us today and for your interest in Wacker Chemie. We're looking forward to further discussions with you at the point of practice. We will be back again with the conference call on our Q2 results on July 28. Goodbye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.