© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Dear ladies and gentlemen, welcome to the conference call of Wacker Chemie AG. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Jörg Hoffmann, Head of Investor Relations, who will lead you through this conference. Please go ahead.
Thank you, operator. Welcome to the Wacker Chemie AG Conference Call and our Q2 2020 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 web page under the caption Investor Relations. But 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 second quarter and half year 2020 results. Q2 was an unprecedented quarter for us just as for everybody. The full effects of the pandemic hit the world. Our sales came in at EUR 1.1 billion, which was 15% below last year and 10% lower than in Q1. Volume declined in the wake of the pandemic and lower prices for solar polysilicon and standard silicones contributed to this. EBITDA was down sequentially and compared to last year for the same reasons. Lower volumes due to the pandemic and pricing for solar polysilicon and standard silicones is lower too. Overall, EBITDA in Q2 was EUR 105 million, about half of what we earned in Q2 last year and about 40% lower than in Q1. Yet despite these headwinds, we generated a net cash flow of EUR 137 million, substantially up from last year. The pandemic has affected businesses around the globe, triggering a global recession. As a supplier in a broad range of industries, we were severely hit accordingly. The chart on the top left corner on Page 3 shows how volumes developed in our chemicals businesses. BioSolutions saw a little impact from the pandemic. Silicones saw significantly lower volumes in May and a steady recovery in June. At polymers, the contraction was more severe in May, but the improvement was more dynamic as construction demand reached prior year levels. Silicones benefited from this construction demand in our silicone and hybrid sealants business, and polymers in our dispersible powders business. On another bright side, we saw good demand for products involved in medical or hygiene applications. Our solar polysilicon business remains challenging in Q2. As the pandemic slowed installations, demand for polysilicon was lower. Also, pricing for solar polysilicon declined even further, challenging our competitors and us. Semiconductor-grade polysilicon, on the other hand, saw continued strong demand. Over the last months, we focused on protecting our employees and customers' health while keeping our business going. Across the entire company, we have, of course, implemented hygiene and distancing rules. We also adjusted our guidelines and business travel and the use of home offices pragmatically to the developing situation. In selected parts of our business, we use short-time work arrangements to meet lower demand. Strict cost controls helped to reduce SG&A and R&D costs and also supported cost of goods sold. We focus on generating cash and improving our liquidity. We implemented detailed programs to address all parts of working capital. At the same time, we have adjusted our CapEx plans for this year, down to below EUR 250 million. The pandemic highlights the need to continue with our efficiency program, Shape the Future. This program, which started already in November last year, aims to save costs by about EUR 250 million annually by 2022. We see good progress. We currently discuss our plans with the employee representatives and are looking to resolve the negotiations soon. While we do not expect major personnel cost savings in 2020 yet, cost savings in indirect spending should yield already EUR 50 million this year. In this area, we have identified over 1,000 actions. Looking across our businesses, it seems like we hit a low point in May. Since then, operations recovered in June to varying degrees. Tobias will walk you through our trading updates and performance reviews in a moment. Given how much uncertainty we face over the coming months, we don't believe that it would be helpful to guide for the year. At this time, it is unclear to what degree and how fast our businesses we will recover or whether a potential second wave of infections triggers new shutdowns. Please understand that in light of all of this, we do not provide detailed full year guidance. What we can say, though, is that we expect sales and EBITDA margin in 2020 lower than last year. On the other hand, we expect cash flow to come in higher than last year. Tobias?
Thank you, Rudi. Welcome. I will now take you through the presentation and provide you with the current trading update for each segment. Please note that I will comment on Q2 performance and not on year-to-date results. I will begin on Page 4. As expected, Q2 sales declined year-over-year. Gross profit contracted to EUR 135 million, following lower fixed costs absorption, as well as price declines in solar polysilicon and standard silicones. You will recall that we announced short-time work for some of our businesses. While this lowered personnel cost, it does not address fixed cost coverage of equipment and infrastructure. Polysilicon, for instance, reduced 1/3 of its capacity in Germany since May. Our SG&A benefited from strict cost controls. Quarterly SG&A and R&D were down 7% sequentially, and about 13% under last year. The other operating result was slightly negative as last year's other operating income saw a positive contribution from settlements. Earnings per share came in at EUR 0.07 for the quarter, benefits from deferred taxes. I'm now moving on to Page 5, the balance sheet. We continue to manage the business for financial stability. Net debt decreased to EUR 573 million. During the second quarter, we issued EUR 300 million in Schuldschein loans, replacing USD 130 million of higher interest debt. We remain solidly financed with cash and securities of about EUR 850 million and an additional EUR 600 million of undrawn credit lines. Interest rates declined again at the end of the quarter. And with lower plan assets, this led to an increase in our pension liability under IFRS. Adjusting for the deferred tax asset, we now record pension liabilities of about EUR 1.9 billion. As we move on to the segments, please note that we are only providing a trading update today. As Rudi already explained, it is still not possible to give an accurate forecast for 2020. As indicated when we last spoke, the second quarter became much more challenging than Q1. Many of our markets dried up. Lower raw materials and first benefits from cost reductions as well as measures like short-time work helped our results. Still, they were not sufficient to compensate for lower volumes and price pressure in some large businesses. Sales at silicones, on Page 6, declined by 18% over last year and about 10% sequentially. After a slump in May, we saw silicone sales recovering slightly in June. In silicone standards, prices recovered somewhat towards the end of the quarter. Specialties in China grew year-over-year, while other markets were trailing. During the second quarter, we pulled forward scheduled maintenance and had some units adjusting output for weak volumes. Automotive and textiles remained soft. However, markets like release coatings, defoamers and industrial coatings showed resilience. Q2 EBITDA in silicones was EUR 68 million, a significant contraction versus last year and prior quarter. Key factors here were lower volumes with lower fixed cost absorption, scheduled maintenance work, as well as price declines in standards. Updating current trading silicones, we saw markets picking up somewhat in June. And now essentially moving sideways to slightly up. Orders in Germany and China are flat versus prior year, while other markets are still weak, such as Brazil or India. So recovery is there, but not strong. At polymers on Page 7. Sales declined by 16% year-over-year and about 10% versus Q1. Pandemic effects led to an initial reduction in volumes. Like in silicones, May was the weakest month of the quarter with a severe contraction of shipments. By June, however, volume for construction applications were already almost back to prior year levels. All our units reported significantly improved utilization rates at the end of the quarter. Q2 EBITDA came in at EUR 59 million. EBITDA benefited from cost discipline and firm prices. Looking at the current trading in polymers. We see continued positive development in sales to the construction and renovation industries. BioSolutions on Page 8 saw a strong demand for its biopharma and cyclodextrins business. Sales increased by 3% over last year and stayed at the Q1 level despite a weaker gum business. Higher volumes and positive mix effects supported EBITDA in Q2. Also, Q2 benefited from a special item in a customer project of about EUR 4 million. Looking at the current trading in BioSolutions, we continue to see high demand in cyclodextrins and have a growing project pipeline in biopharma. This development should support further sales growth. Although in Q3, there should be an impact consequentially lower product mix. On Page 9, polysilicon. We saw weak volumes and prices in Q2. The pandemic led to a grinding halt of solar installations in most global markets, putting the solar industry under severe strain. Demand for semiconductor materials, though, remained strong, mostly driven by strong demand for 300-millimeter wafers. Q2 sales came in at EUR 153 million, 10% below Q2 last year. Sales declined month-by-month as prices and volumes shrank through June. Consequently, EBITDA in Q2 came in at a disappointing negative EUR 35 million. Inventory valuation effects and lower fixed cost absorption accounted for the majority of the loss. Current trading in polysilicon provides a very different picture. Beginning in early July, we saw volumes pick up substantially. The demand surge reflects new policies in China and the high level of competitiveness of solar power generation as markets come out of their shutdowns. The ongoing technology shift towards higher efficiency mono puts certain grades of polysilicon into higher demand than before. A competitor's unplanned accident and some capacity closures have tightened supply just as the market began to take off. Price indices for polysilicon have reacted to this. Prices increased substantially from their low point in the second quarter, but still, by far, do not capture the value of the material yet. We would ramp our plants in Germany stepwise, depending on further price development and COVID-19 uncertainties. We're now looking at cash flow and net financial debt on Page 10. Gross cash flow in the second quarter increased to EUR 184 million, more than twice the amount we generated in Q1. Our efforts to reduce costs and optimize working capital are paying off. Net cash flow for the quarter was EUR 137 million. Cash flow from investing in second quarter was down over 50% to EUR 47 million. We tightly controlled spending on new projects. So full year CapEx is now expected even below EUR 250 million, just enough to cover maintenance in our most promising new ventures. Our net financial debt declined to EUR 573 million by the end of June, putting us in a very solid financial position. While the outlook remains uncertain and the potential for a second wave of a pandemic looms, all our segments are seeing progress in their cost positions. Essential work on innovation continues. And project work with customers is now increasingly executed online. As discussed, all our segments are recovering or improving as we speak. Some are seeing faster more dynamic improvement and others are lagging just because of the sheer breadth of their market portfolios. We now believe there's a good potential for a better performance in Q3 than in Q1.
Ladies and gentlemen, as Tobias just said, current trading provides some encouraging signs. Although probably a bit too early to call, it looks like all our segments are seeing underlying improvements. The recent news in polysilicon does not change our view on what needs to be done to become more profitable. We continue to work hard on our aggressive cost reductions and are not letting up. The current speed of innovation in solar is breathtaking. Many suppliers are now offering modules producing 500 or even 600 watts. These substantial technological improvements remind me of the early days of the semiconductor industry. To achieve ever better performance, the quality of every ingredient needs to get better and better. A migration towards more and more advanced solar cells is intact. These advanced cells will be made on bigger wafer sizes with appropriate [ stoffing ]. In order to produce the necessary crystals, there will be more and more polysilicon needed in specifications close to semiconductor type quality. This is where and when our material in the semiconductor experience we have will be of high value and will be appreciated. Silicones, with its wide market portfolio and broad regional profile, experienced a slower recovery than polymers with a more narrow market focus. Silicones sees a series of capacity announcements with some uncertainty as to what eventually gets built. But the message is clear, commodity products stay under competitive pressure. Therefore, our focus on growing the specialties business is the right move. We have the proper setup, the right products and the right market access to succeed further, and we will. In polymers, we experienced strong growth in volumes as emerging markets are transitioning into advanced building materials. Successful cost initiatives, large, competitive, capacities and the right level of market support solidify our market-leading position there. And last but not least, BioSolutions begins to deliver on biopharma. We have the right toolbox to participate in the CDMO market and are scoring important customer wins. Expect us to nurture this business further. One recent development that I'm particularly optimistic about is the EU's new Green Deal. The European Union is determined to become the world's first climate neutral continent by 2050. Every industry sector will have to contribute, drawing on record sums of public and private sector funding. The Green Deal will bring about a step change in the amount of CapEx deployed to reduce carbon dioxide emissions. Most likely, you have read about this, but what you may not know is how the deal is a major catalyst for carbon dioxide abatement technologies enabled by Wacker. Our technologies help reduce emissions in the sectors that are responsible for about 75% of the EU total emissions. With our broad exposure to diversified end markets, Wacker has meaningful exposure to this long-term trend. As a result, we stand to benefit from higher investments in our markets over the decades to come. Ladies and gentlemen, Q2 was a difficult quarter. Things appear to become brighter as we move on. To me, it was impressive to see how, throughout the company, employees took the initiative during this difficult time. Using online tools and pragmatic approaches, we kept the business going and kept supporting our customers despite lockdowns. These actions show the spirit of Wacker despite hardships, making things possible for the customer, delivering a tremendous cash generation and staying on course for the important projects that will enable us to perform on a higher level in the future. Our presentation ends here. We will now begin with the Q&A session. Operator?
[Operator Instructions] And the first question is from Andreas Heine, MainFirst.
Yes. And I'd like to ask the question around the comment you made about Q3 being in earnings higher than Q1, and I would like to understand where that is coming from. I guess that it includes to quite an extent improvement in polysilicon with the reversal of the writedowns you have done, now neutralized by writing them up again. That's the first question. The second, also on polysilicon, you refer to having reduced the operation rate to 70% in the German plants by having a very strong order income as of beginning of July. All plants now back on full utilization rate. And then one question on timing. When do you see these higher prices in polysilicon affecting your sales? In former years, it was, as you were referring that it takes 6 to 8 weeks to transport volume from Europe to China. But now you have quite a lot of inventory buildup in China. So I would expect that you immediately would benefit from the higher price we have seen in July. These are my questions.
Yes, Tobias here. May I start with your first question on the Q3 performance. There's a couple of reasons. I think the first is we do not expect or assume the May, which was a low point, to repeat. That's number one. And the second, I think we see different dynamics for the improvements. And I think the most markedly definitely is in polysilicon. So this should support Q3 result, as you mentioned. I do not want to quantify potential reversals in inventory valuation because those very much depend on -- then on the average prices achieved. It's not valued at spot prices at the end of the quarter. So -- and we do not have a number on that anyhow.
On the, let's say, the customer support that is necessary right now. Of course, it helps a lot to have inventory in certain hubs in Asia. And so we can deliver material much faster than in the past. I mean if we would need to deliver from Germany, then of course, it would take some time. And -- but -- so this is certainly a benefit for our customers. No question. And as we watch how the market develops, we certainly would be able to increase our output accordingly, but we really watch the development of the markets very, very precisely before we make the wrong actions.
So we basically have not increased the production from the Q2 level. So still at the 70% of the German capacity.
Yes. I mean, basically, what I was trying to say that we are very careful there.
The next question is from Charlie Webb, Morgan Stanley.
Afternoon, gentlemen. Two for me. And apologies if I missed anything on the call, I took a little time to get on. First on the silicones turnaround, just can you help us understand -- it sounded like you had some maintenance, you pulled forward the turnaround into the second quarter. Can you help us understand maybe what was the impact on EBITDA? Or what was the impact on volumes as a consequence of those turnarounds? So just so we can understand what the real kind of demand and volumes would have been or the earnings would have been or margins would have been. And then just on the poly inventory. Again, I understand maybe you can't give forward-looking comments in terms of what the implications were, but just can you help us quantify what the negative effect was in Q2? That would be very helpful.
Charlie, on the first question on silicones, you noticed that EBITDA was markedly below prior year and prior quarter. And I think the most significant effect came from lower utilization and fixed cost absorption. And those -- that goes hand-in-hand with some scheduled maintenance work, which we deliberately extended. So you have the lower fixed cost absorption plus additional costs in that type of situation. And in addition to that, also standard prices were lower. So -- that is the sequence of the effects if you rank them by magnitude. The second question on poly inventory, there was a significant effect. If you take the minus EUR 35 million negative EBITDA in the quarter, the significant effect from inventory write-downs, we do not quantify that, but it's a, yes, significant portion.
The next question is from Martin Jungfleisch, Kepler Cheuvreux.
I have 2, please. The first one is on polysilicon. Now that prices have recovered a bit and you may end up in positive EBITDA territory in the near term, do you see a risk that the planned layoffs in polysilicon may not lead to some challenges on the workers' council side in the future? And then the second question is on your silicones margins. I was a bit surprised by the low margins in the quarter despite [ quarter abiding ] also the help from lower raw mats. Was this impact only driven by lower volumes and standard pricing? Or do you also see price pressure in your specialties? So I'm wondering if we should assume the return to 16% to 18% or so margins in the third quarter if volume returns. Or do you see significant pressure on margins also in the third quarter?
On your first question on polysilicon, I do not quite know what you mean. I mean we have no issues with the workers' council. And the project, Shape the Future, where we want to reduce redundancies, has no impact on the polysilicon capacity. There's no connection with that at all.
Okay. But then if you may end up in positive territory, you may not -- you don't see any challenges on that side that you -- there would be some...
So -- no, no, no, not at all, not at all because the project Shape the Future goes across the whole company. And let's focus more on, let's say, administrative areas rather than production. I mean what's -- the effect of this program will be the total reduction of our cost level in the company across all divisions, all administrative areas. This is not because polysilicon.
And your question on the silicones margin. I think everybody should bear in mind that the second quarter 2020 was a very special quarter for everybody. It was a COVID-19 quarter, with a huge drop in volumes. And that's why to extrapolate margins from that is, I think, not possible. As I mentioned before, we did everything to control cost. The biggest impact on profitability came from the fixed cost absorption and maintenance. And then also, there was an impact from lower standard prices. But short-time work, I mean, it helps to reduce personnel costs, but it doesn't dilute the fixed cost of the infrastructure and equipment. So going forward, it very much depend on how volumes recover with our end markets that we serve. And then I think you're very much back to the question on how does the overall economy recover over the next couple of quarters? I think that's it.
Okay. And then do you see any price pressure on the specialty sides? Increased price pressure on specialty side?
There's no discussion about prices in specialties. It's more about the volume that needs to recover. So that is not an issue.
Next question is from Markus Mayer, Baader Bank.
Too many questions from my side. Firstly, again, on polysilicon, can you give us kind of a sensitivity analysis on the price change or potentially further price change versus against your earnings there, given the new cost structure after the efficiency measures. And the second question would be on the CDMO segment or end markets. Given currently the strong demand there, do you still want to grow there organically and by acquisition? Or is this acquisition window currently closed?
On the first question, of course, the sensitivity is, of course, is high. I mean every additional dollar, euro or RMB, you get, polysilicon goes -- or improves directly the results. So it's certainly positive to see these price increases. But let me add here at this point, I mean we, of course, do not know exactly what happened there in -- at our competitor's site in the Xinjang province because they have a different understanding of transparency compared to us, but that's fine. We just hope that none of their employees have been hurt. Because the pictures we saw that were on the Internet for a few hours did not look nice. And I really want to make that point, we really feel with the people there and their families. So it's -- yes, we always have that in the back of our mind. On the CDMO, of course, I mean, I think we are very well underway, growing that business organically. On the other hand, just like in the past, if opportunities open up, we are ready to make acquisitions, but not to a degree that would be outrageous pricing or something like that, especially in these times, you have to be careful about that. I remember a time when the -- everybody was investing in specialty chemicals and prices called for companies were just enormous and many acquirers suffered quite severely by paying too high prices. So we are not entering into any adventure there, not at all. But if good opportunities come up, we certainly have the means to participate in that business. Just like we did in the past when we acquired the Jena, Halle and the Amsterdam facility.
Yes, Tobias, again, I just want to clarify because I actually might have this misspoken something in one of the answers before. There was a question about potentially better performance, Q3 than Q2. And I explained the drivers for that. #1 was we do not expect the May to repeat, and then we expect polysilicon to improve. And then I must have said that Q3 could be better than Q1. That's not what I meant. Q3 could be better than Q2. So just to clarify that. And sorry for the confusion. Thanks.
It is from Thomas Swoboda, Societe Generale.
I have 2 questions, if I may. First, already a follow-up on what you just said, the discussion on how Q3 could be against Q2. In an earlier question, you were discussing your assumptions for polysilicon. I just want to make it clear -- or could you just make it clear whether you bake in a positive revaluation of inventories in polysilicon in your comments for Q3? Or this is not considered in your comments about a better performance in polysilicon in Q3 versus Q2? So that was the first question. The second question is on silicones, if I may. Mr. Staudigl, you have mentioned about this new capacities that are plant. I think you meant the new siloxane capacities, which are flying around already since a while. I'm just wondering if you could give us your thoughts about how do you think those new siloxane capacities would impact the specialty segment. I think the commodity segment is pretty much clear for most of us. But how do you think additional siloxane capacities to affect the specialties business going forward?
Well, the way we think about it is the following. First of all, I think it's very important to know that our siloxane facility is certainly has well benchmarked cost positions. Even against potential newcomers and big plants in China. And so this is -- it's a really important thing. So as you know, we are still, to a certain degree, also in the standards business because we have more siloxane capacity that our specialties is up. We can sort of use more of our siloxane or -- I mean, if somebody comes up with a lower cost siloxane than we have, then, of course, we will be happy to use theirs and expand our specialties business there. And yes. I mean people, of course, will try to move more and more into the specialties business as well. But I mean, that's the task for the future to really be innovative and develop the specialties business faster than anybody else. And so I think there is no reason for pessimism on that side.
Thomas, to your question on the improvement in the third quarter over the second quarter in polysilicon. Now one is maybe starting the second quarter with minus EUR 35 million. So a very bad quarter, so to say. And then we see that volumes improve in July, and prices also, but throughout July, so not from the very beginning of July. And you should bear in mind that also our output is not at full speed in July. So it depends. Your question to inventory, I don't have a number for that. That will depend on the average price that we achieved in the quarter. And then on the actual level of inventory that we will have in the quarter. So there are many moving parts. And although I would definitely see an improvement I do not quantify today what would be the effect on the inventory valuation. So I hope you understand.
The next question is from Patrick Rafaisz, UBS.
Thank you, and good afternoon, everyone. 3 questions, please. The first one would be on your new CapEx guidance. And can you explain where exactly that you cut, and what should we pencil in for 2021 and beyond? And the second question would be around short-term working schemes that you mentioned and other temporary cost savings versus the additional cost of bringing forward maintenance in silicones. What was the net effect here in the second quarter? And then the last question would be on BioSolutions, and you sound very positive about the outlook here also for the CDMO business. And the question is, how long do you think you can grow at the current rate, and before you need to put more significant CapEx in the ground to maintain the growth?
Okay. On the new CapEx guidance, I think the original CapEx that we wanted to spend was around EUR 350 million to EUR 380 million. So we cut it by, let's say, around EUR 150 million this year. It's across the board. We assumed, and I think we are right in this that many capacities of certain products will need to be available simply later because the COVID-19 that we have a delaying effect on economic growth. And so we made some certainly tough decisions here and there to delay capacity. And -- but we watch the development of the demand very carefully. I think we have an excellent engineering group in place in all different divisions that can get up to speed very fast with the project. We still do a lot of, let's say, detailed planning on projects so that we can -- once the situation improves, we can get, yes, up to speed, extremely fast. That's the key. So maybe we have to play catch-up here or there. But I think it's certainly the right way to manage through a crisis like this. But we do not expect any, let's say, loss of market share or whatever because of this. But then I think it gives us a lot of security on the cash side, or the balance sheet side. And this was planning and as you can see from the cash flow, we are achieving that.
On your question on the balancing effect of cost savings and utilization on profitability, for sure, we did everything to reduce cost as much as possible. So discretionary spending is significantly below prior year. Also maintenance below prior year and short-time work arrangements do help save personnel costs. There's a tremendous effort to control costs, but the lower utilization outweighs that with deteriorated fixed cost absorption when you have limited sales demand. And for that reason, you have a negative effect on overall results in the situation of the second quarter.
And on CapEx and BioSolutions, we just announced a major additional project for the Amsterdam site, that sort of restructures the whole facility on the one side. On the other hand, it also gives us new capacity there. And we have even more ideas now or, let's say, plans to expand that site even further and through efficiency gains, et cetera, et cetera, we can continue growing in that business. And of course, we are looking at all kinds of, let's say, additional options to increase our capacity.
Next question is from Sebastian Bray, Berenberg.
So I have 2 sets, please. The first is on the silicones margins. Previously, Wacker has put emphasis on the advantages of the silicon for bonds. That there is a synergy between production of polysilicon and silicones. I'm wondering if the reduction in polysilicon capacity, effective reduction, has any impact on the silicones margins. And as a follow-up to that question, what exactly was the effect of mix in the quarter? And in particular, I'm thinking of customers in harder times trading down from specialties into commodities because lower prices are available? Was this a factor? How did the volumes in specialty and commodity develop? My last question, I'll leave once these 2 are done.
Well, there is certainly quite some synergy between polysilicon production and silicones. But of course, the key is when you're working in a [ scenario ] like that, when you reduce the capacity on one side, it should not impact the capacity or the operation on the other side. And so there is no negative impact on silicones from reducing the capacity in polysilicon.
And on the question of -- specialties were suspended and trading down towards standards, the clear answer is no. If you look at the volumes, volumes were down for both specialties and standards in Q2 against prior year. But there is even lower in standards than specialty. So if you then consider that standard prices were below prior year, while specialty prices hold up very well, the product mix in sales it's stronger than compared to last year.
The last question I had was on the sustainability of the margins in polymers. The last time we had a raw material price collapse, there was a good year's worth of over earning before margins reverted back down to a lower level. Am I right in saying that the pricing negotiations typically take place in Q4 for this? And what is your sense of the likely directionality of margins moving into 2021?
So first of all, we not only have annual contracts. We also have quarterly contracts, we have half year contracts. So we try to maintain prices as good as possible. And the overall target is to keep profitability as high as possible. And profitability is and will remain a function of how much volume can we achieve, how is our cost position and what the price is for our products. So we will continue to do our homework, and we will try to develop that business as successfully as possible.
The last question is from Chetan Udeshi, JPMorgan.
I just wanted to see if there was any update on your BioSolutions business as regards to what we are doing for potential COVID-19 vaccine. And second question was just -- I think I heard at the beginning of the call, some mention about the mix in polymers being weaker in third quarter versus second quarter? Is that going to have a material impact? Or is it small?
What's the last question, Chetan? Was it on polymers or on BioSolutions?
I mean I might have misheard, but I think I heard a comment from you saying that the mix in polymers is going to be less favorable in third quarter than second quarter? Maybe I misheard it, but I just want to confirm that.
I think that was BioSolutions. We highlighted BioSolutions having a negative mix effect in Q3 against Q2. So essentially, Q3 will not repeat Q2 that's what I wanted to say.
And on BioSolutions, yes, I mean, the -- as you probably know, there are many, many different routes to a potential vaccine against the coronavirus. And the RNA route, or the RNA routes, I have to say, there are various routes, or DNA routes, which is not a precondition for the RNA routes, are many fold. And this is not the technology we are really very experienced in. Of course, we have excellent biologists and chemists and biotechnologies, and these technologies to produce these substances are not magic. I mean the people and the equipment, certainly can do something with that. But yes, we certainly do not have a lot of experience there. On the other hand, as you can imagine, we are looking into that, what it takes. And we are interested in potential projects, but this is not something that will let our sales explode in this year.
Understood. And maybe last...
I just want to maybe round that up a little bit. But the future of biotechnology is just beginning. And RNA and DNA technologies are extremely important for the future, and this is why we really started looking into that and did some R&D on that already. So our people know exactly what it means to be able to produce these products. So this certainly can be a very important part of our biotechnology business in the future.
Understood. Just one follow-up is, any guidance or color on how should we think about cash taxes this year and next year in cash flow?
I mean this year, we had in the first half, we paid very little taxes, and we even had a cash return in the first quarter. So there will be little taxes in 2020. And for '21, we do not have any guidance so far.
Thank you, everybody. Thank you for joining us today and for your interest in Wacker Chemie. We're looking forward to further discussions with you as the quarter progresses.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.