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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] I now hand you over to your Joerg Hoffmann who will lead you through this conference. Please go ahead, sir.
Thank you, operator. Welcome to the Wacker Chemie AG conference call on our second quarter 2021 results. Dr. Christian Hartel, 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. Before we begin, please allow me to point you to our safe harbor statement, which you'll find at the slide deck's beginning. Chris?
Thank you, Joerg. Ladies and gentlemen, welcome to our call on the second quarter of 2021. We again reported strong sales growth, ending the quarter with EUR 1.5 billion and an EBITDA of EUR 327 million. The strong momentum that began in Q3 last year has continued throughout the quarter. We saw volume gains in essentially all segments, compounded by a mainly price-driven significant improvement in polysilicon and an excellent performance in our chemicals business.We continue to make good progress on achieving our ambitious 2030 sustainability targets. Just recently, we won the VCI Responsible Care competition in Germany and Saxony for optimizing our integrated production system in Nünchritz. This improvement leads to annual CO2 savings of over 30,000 metric tons.On Page 3, you see an overview of the key markets we are serving with our 4 businesses. Combining leading market shares in these attractive key markets with a high degree of specialization and customer focus is what differentiates Wacker. An important driver for all these businesses is their strong foundation in product and process innovation. And let me share some insights with you here.At silicones, it's all about specialties. Here, we uniquely combine specialty product innovation in close cooperation with our customers. And another strength is our process innovation, which is mainly focused on the rather complex mid and upstream parts of our supply chain, but also on efficient downstream operations. Product innovation at polymers addresses specific regional needs and provides sustainable product solutions, while process innovation enables us to support our fast-growing markets.At our recent Capital Markets Day, on Biosolutions, we presented an ambitious growth target. Here, we aspire to grow sales to EUR 1 billion by 2030 with an attractive EBITDA margin of over 25%. Both product and process innovations strengthens our growth opportunities in the BioPharma and the BioIngredients segment. At polysilicon, we see growing demand for semi-grade polysilicon and rising specifications for high-end solar. Both product and process innovations, primarily in cost reductions and productivity gains, drive our performance.Now let me run today through two examples of our silicones and polymer businesses on the next slide. So you know that silicones serves a broad set of markets. Our largest key market in silicones is the construction market, reflecting around 1/3 of our sales in 2020. Here, we offer a growing number of specialties and higher-end applications. And we demonstrate strong growth. Over the last 5 years, specialties volumes in construction grew at an average rate of about 9%.What I think is a great example of specialty growth driven by product innovation is the so-called GENIOSIL STP-E product class. These are unique hybrid compounds, bridging organic polymers with highly reactive silanes. And these silane-modified polymers are highly versatile, yet easy and safe to use, offering clear performance and environmental benefits, and this is what we leverage.Through continued innovation, we expand to reach a number of applications for this innovation -- innovative product class. And this is true, especially, for the construction applications. And these advantages amount to our convincing unique sales proposition. Our alpha-silane technology is world leading, and we also have a strong IP position on that. Demand for these products is strong, and our hybrid products saw double-digit growth rates over the last 5 years, substantially outgrowing the industry. And hybrids are low siloxane as the polymer backbone is not siloxane anymore, but it's replaced by an organic polymer.So that is exactly why we are in the process of building a dedicated facility that will be good for order already next year. This unit will have enough flexibility to meet the growing demand in the future. And it's just one great story of our silicones specialty strategy.Slide 5. Construction is the largest market in polymers. It's about 55% of our sales. It's about commercial and residential buildings. It's about renovation and it's about infrastructure. Average volume growth over the last 5 years in this segment was about 8%, with the highest growth rates in tile adhesives and external thermal insulation composite systems. Let me talk a little bit about the latter one.Amplifying the underlying growth of the smart construction materials industry, our global climate initiatives, such as the EU's Fit for 55 initiative. This initiative focuses on the energy performance of buildings and the climate proofing of the building stock. And as you all know, it is rather ambitious. Buildings account for 40% of Europe's energy consumption and 36% of the carbon emissions. Currently, only 1% of Europe's assist in building stock is renovated each year. Renovation rate in the EU will have to double to meet the EU's energy efficiency and climate objectives through 2030. And obviously, we expect a substantial demand growth in this area in the future.A key driver for our competitiveness in polymers is process innovation. We've just awarded the Alexander Wacker Innovation Award for a novel process for producing VAE. This innovation substantially increases the productivity of our units, enabling faster growth at reduced specific CapEx levels. We are deploying this new technology at our expanding Nanjing site in China, but we will also roll out these improvements across our global assets.In summary, we run world-scale, highly efficient and very competitive assets. Continuous innovation supports our market-leading positions in highly attractive growth markets. Beyond innovation, what also differentiates Wacker is the capability and the commitment of our team. Our team demonstrates great operational flexibility in the face of many challenges. Take, for example, the Nanjing expansion, increasing the reactor and the dryer capacities there. Despite the pandemic and the travel restrictions, our German and Chinese colleagues work hand in hand and are doing an excellent job.In closing, I really would like to thank and recognize our global team for their efforts and dedication. It really makes me proud to be the CEO of such a great team. Given our position and capabilities, Wacker is in a unique position in the industry. We expect to see growth rates well above the chemical industry as we leverage our strength.And now I would like to hand over to Tobias, who will take you through the Q2 financials and our outlook.
Thank you, Chris. Welcome, everybody. Q2 was a strong quarter, and we are above pre-pandemic levels. This quarter highlights where the strong EBITDA, our good margin and the very strong cash generation.On Page 6, our P&L. Gross profit came in at EUR 374 million, more than twice as high as last year and substantially better than in 2019. The main drivers were price and volume effects supported by strict cost control. Our Shape the Future restructuring program is on track. We benefit from indirect spend savings already substantially, and the first personnel cost savings are coming through. The P&L includes the Siltronic dividend in other investment income at the amount of EUR 18 million. Net income was EUR 179 million or EUR 3.60 per share.Our balance sheet on Page 7 shows cash and securities of EUR 1.6 billion as our cash generation continues strong. Following higher earnings and lower pension provisions, our equity ratio improved to 31% or EUR 600 million higher than at the year-end 2020.Demand for silicones on Page 8 remains strong with high volumes for specialties and a margin of over 20%. Sales came in at EUR 650 million with an EBITDA of EUR 134 million. We are operating at capacity limits, and our teams have done a great job in managing this demand surge. We are working hard to address the strong demand from our customers with higher CapEx and an acceleration of projects underway. We have increased our outlook for the full year to low double-digit sales growth and an EBITDA margin higher than last year.In polymers, on Page 9, strong volume growth in powder and VAE continues. Volume gains and pricing surcharges helped dampen the effects of unprecedented increases in raw materials. Sales came in at EUR 404 million with an EBITDA of EUR 52 million, slightly better than expected. Prices for VAM remain extremely high, and we need to continue to share the burden with our customers to ensure the high level of supply requested from us.Looking into the full year, we now expect a low double-digit sales growth in polymers. Our growth was especially strong in tile adhesives and insulation materials. We expect EBITDA to come in below our target range of 15% to 18%, with surcharges only partially offsetting a substantial burden from raw material in the second half.On Page 10, Biosolutions saw sales of EUR 71 million with an EBITDA of EUR 11 million. Higher volumes as well as mixed effects and better pricing improved the result. We see high demand for our services and solutions in BioPharma and BioIngredients, our two focus areas. For the full year, our expectations for Biosolutions remain unchanged.Polysilicon, on Page 11, continues to see strong demand from semiconductors and high-end solar. As prices moved up substantially for solar products, sales increased to EUR 353 million with an EBITDA of EUR 149 million. Inventories are at very low levels as demand keeps strong. We remain focused on our cost reduction efforts and are well on track to meet our targets. Polysilicon now looks to over 50% sales growth with an EBITDA margin of over 30%. We see a strong third quarter like Q2, but we still model Q4 with caution.Looking to Page 12. With a quarterly net cash flow of EUR 208 million, our net cash position was EUR 150 million at the end of the first half. Despite significant sales growth of 26% year-to-date, our working capital only saw minimal investments. Our net cash position is over EUR 100 million higher than at the end of Q1, despite our dividend payout and increased CapEx.On Page 13, there's the summary of our guidance. We confirm our sales and EBITDA guidance for the full year from mid-June. We see full year sales of about EUR 5.5 billion and an EBITDA between EUR 900 million and EUR 1.1 billion. In addition, we now also update our guidance on net cash flow, which we see coming in at prior-year levels. Also, we updated our ROCE guidance and now expect it clearly above our cost of capital of 10%.With this, back to Chris.
Thank you, Tobias. So ladies and gentlemen, before we begin with the Q&A session, please take a closer look at the picture on the slide. It shows two of our growth areas. Here, it's one of our employees in the Biosolutions division working on plasmid DNA. And the tubing, you can see in the picture, was produced with a specialty elastomer also from our Wacker silicones division.So Joerg, handing over to you.
Thank you, Chris. Operator, we are ready to begin with the Q&A now.
[Operator Instructions] The first question is from Chetan Udeshi of JPMorgan.
A couple of questions. Firstly, it seems the visibility that you guys have today is relatively high as regards to third quarter. I know you guys haven't provided any guidance, but can you maybe give us some more color on how you see Q3, both from top line and earnings perspective, for each of your key divisions, whether you want to talk sequentially or year-on-year basis. I guess, year-on-year is going to be up, but any commentary on a sequential basis that would be useful?And the second question was more on Biosolutions. Now with the news flow around CureVac, et cetera, can you maybe remind us of the key milestones that we should be watching for or should be expecting in terms of the progress in scaling up this business to the targets that you guys provided a couple of months back in terms of the revenue?
Chetan, Tobias here, and I hand over the second question to Chris later. So on the Q3 momentum, your question, I definitely can confirm that we had a good start in Q3. So sales in July were strong as they were in June. And I would observe it or describe it now more as a really broad-based momentum continuing. It's less the recovery from the pandemic anymore. So we see strong momentum across all divisions.So from today's perspective, I mean I think it's hard to assess a summertime slowdown, which we have seen in other years. But overall, a very good start into the third quarter. I mean I know that we have provided some outlook also at the height of the pandemic when there was a major uncertainty in the market. But at this point, we really would focus on the full year guidance and not just on the next quarter.
Okay. So Chetan, thanks for your question that was on the CureVac situation. I mean, obviously, I cannot comment on the situation for CureVac and their approvals on the market. You have to ask these guys yourself. What I can tell you is, I mean we have a contract with CureVac, which we also reported in a joint press release earlier this year. We stick to the commitments in that contract, but I cannot disclose any individual commercial details on that contract.What I can say is it follows standard template for the CDMO business, which we are in, and we stick to our commitments and prepare for the commercial launch. What I would also like to add is really, I mean this is one customer and it's one contract. But I think the mRNA technology is really leapfrogging into the future. And -- I mean you probably read also just recently, companies working on vaccines for flu, working on malaria medicine and also the great field of cancer drugs where I think mRNA will play a great role in the years to come.So we believe in that technology. We believe in our value proposition as a CDMO, providing also mRNA technology. So we are expanding also currently our capacities here in Amsterdam for both mRNA, but also our classical protein business.
That's useful. And if I just follow up there. So I think leaving CureVac aside, like what would you think we should be expecting in terms of like progression towards that EUR 1 billion sales? So is it more a 2-year, 3-year journey before we see a step-up in this business? Or do you think it could even happen ahead of 2 to 3 years in terms of going from where we are today in terms of sales to say EUR 200 million maybe next 2 years? Or how should we think about that progression to EUR 1 billion?
Well, I mean what we said in the call on the Capital Markets Day is a EUR 1 billion we want to reach by 2030. And obviously, it will not be kind of a linear path. I'm pretty sure that it won't be, but I can't give you now exact milestones. I mean we have been evaluating and we are evaluating currently also M&A options. We are evaluating options for getting new contracts with customers and they will come in step by step, but it's kind of pretty hard to predict when that will materialize, but we remain very optimistic about the opportunities we see in that area.
The next question is from Jaideep Pandya of On Field Research.
The first question is really around silicon metal. Can you just explain to us how -- what is your competitive position? How backward integrated are you in silicon metal? And sort of do you see this really a key sort of point of differentiation between Chinese versus non-Chinese players given the fact that silicon metals has been sort of on an upward trajectory in China in recent times?The second question is really around semi-grade body. Obviously, the sister company, Siltronic, which will leave Wacker soon to GlobalWafers announced a big greenfield expansion recently. Could you just explain to us what are your growth plans volume-wise with regards to semi-grade material? That's my second question.And then just the third question really is sort of around polysilicon. Sorry to ask or bring this up now. But when we think about sort of the n-type market, can you just put us -- put this in context? How big is the n-type market today? And what are the growth plans?And then just -- sorry, it's sort of tagged to this. When you think about the value chain in poly, looking at the political issues, it seems like wafer guys in China are trying to sort of get hold of non-Chinese non-Xinjiang polysilicon. Is that the case? Yes or no? And if so, what has been the incoming for you in recent months?
Jaideep, Tobias here. I'll start with the silicon metal, your first question. We have seen silicon metal trending up, but we see that as a temporary phenomenon, I would say. But overall, our approach to silicon metal is that we have a decent portion in backward integration. We have roughly 1/3 of our demand in Norway, which is a low CO2, highly cost-effective plant, where we just had the investment a couple of years ago. And the rest, we have a broad setup for supplies across the globe, mostly in Europe, but also South America and other Asia.So we work on that market as a buyer, and we have a broad set also of different contract types. And we are ready also to invest further in backward integration if we see the need because our infrastructure allows for additional capacity there.
Okay. Jaideep, then I will answer your second question on the Siltronic and wafer demand. And yesterday just recently published -- announced an expansion of their 300-millimeter capacity in Singapore. I would say this is very much in line with what you can hear from the market for demand growth for the wafers. I think Gartner just published for the next 3 years, a growth rate of 37% overall, almost 40%. So there is a strong demand for wafers as there is a strong demand, obviously, for microelectronics.And part of your question was, so what are the growth plans for us. Of course, we want to keep and we want to grow our market share in semi-poly. Almost every second computer chip today is already made with Wacker polysilicon. And of course, we want to grow with that. And we also believe that going forward, the requirements based on the quality will rather increase, and we see ourselves pretty good positioned in that. And that might lead to some kind of -- some investments also for enabling to follow that growth.Polysilicon, you asked for solar, the n-type market share. So what we see today, that is about 10% of the market. There are some forecasts, which I found on -- from ITRPV. They say that it might be 25% in the year '25. So -- but this is also in line what we hear from our customers, strong demand in growing n-type. And -- yes.And fourth question, Jaideep, that was on polysilicon from China, if I understood correctly. And is there a stronger demand for material outside of China. Yes, also, we see that in the market. I mean that customers also ask for material outside of China. And of course, that would be an interesting opportunity for us to follow up.
The next question is from Andreas Heine of Stifel.
Three questions, if I may. The first is your comment on poly. If I look and everyone probably does that, and every week's prices and we are already mid-August and you always have a delay until prices hit your own P&L so that would mean that Q3 prices are almost set for you and they are significantly higher than Q2. So whether I am wrong in assuming that Q3 earnings in poly will not be significantly higher than Q2? And that's the first one.Second, referring on what you just said on silicon metal and your good CO2 [ flipping ] in Norway now made the case that they are very happy to be backward integrated for sustainability reasons. Would that be a reason for you also to think about your sustainability targets and in that regard, are kind of forced to have your own backward integration?And the last question is also on n-type and referring to what you just have said. I do not really understand why the move from p-type to n-type is so much slower than it was from multi to mono. Is there a reason why it takes so long that penetration rate goes up?
So Andreas, yes, we are already in Q3, and I can confirm. I mean as everyone is following the market, everyone can see that the demand is very strong today and prices are still at a very high level. But you also know from the past that we experienced quite some volatility. And that's why we still model the fourth quarter with caution and do not want to give now -- as I think the overall volatility in the market is out, not give a specific guidance on the third quarter, but I definitely can confirm that we had a very good start into it.And silicon metal, I'm not sure whether Chris would like to talk about it but backward integration is an option and also for saving CO2. We have it under our own control. We have, yes, a CO2-free source in electricity, and we can work on our process to also make it CO2 neutral using charcoal. And yes, I think Norway, with all the hydro power, is an ideal place for that.
Absolutely. I wouldn't really agree on your statement that we're being forced into that because I think we see an opportunity in it, and we have a good cost position also in Norway. So I would see more as an opportunity and not really being forced into that, but that's maybe more semantics.Your third question, based on transformation from p to n-type, why is it so slow compared to multi to p-type. Well, I mean, obviously, the best answer could give somebody who is producing the material. We are just the supplier of the raw material. But what we hear and see is that obviously, the process is more technologically demanding and therefore, the shift just takes longer because it also -- it takes know-how, and it takes more CapEx. So that might be from our view, the reason for that slower -- perceived slower turnaround.
The next question is from Markus Mayer of Baader-Helvea.
I have two questions, if I may. First one, again on the guidance. I understand that you modeled the fourth quarter with caution. But if I follow your guidance for the segment, then I basically have no idea how I could come to the low end part of the guidance. So maybe you can shed some light what must happen that you meet only the low end part of the EBITDA guidance? That would be my first question.And the second question is basically, again, on polysilicon and also the outlook may be above 2021. Do you see that customers are already trying to get more long-term contracts with you so that basically your demand, in particular for the U.S. market, is moving away from the spot market even further? That would have been my 2 questions.
So Markus, on the guidance question. You know us that we typically also have experienced some seasonality in the chemicals businesses. And I already mentioned that we have experienced volatility in polysilicon and our modeling approach. But overall, I would say, we have raised guidance in mid-June. And to answer your question slightly differently, if you take the first half just times 2, you will come to the upper end of the range. And with momentum continuing, we could see us also ending up at the upper end of our guidance range. So this is clearly possible. So...
And Markus, on your -- on the second question regarding long-term contracts for polysilicon. As Tobias pointed out, I mean we see -- we do see strong demand for currently really for our polysilicon products for the solar industry, and we also see more interest in customers coming to us and asking or negotiating for long-term contracts.
The next question is from Thomas Swoboda of Societe Generale.
Yes. I have two. I will take them one by one, if I may. Back to silicon metal. And I'm being cautious formulating this question on purpose. But given the discussion between the U.S. and China on imports from Xinjiang, you have been linked to one of the suppliers of silicon metal from China. I understand it's a small quantity. My question would be, how quickly can you eliminate those volumes in case this is correct with what I have been reading?
Thomas, the answer goes in a similar way as I talked about silicon metal just before. I mean we have a 1/3 of our demand in backward integration. That's pillar #1. And then we have super broad supplier portfolio and mostly focused on Europe, South America and other Asia. So we do not talk about details and individual suppliers, but we have a very solid setup there.
So basically, you're saying you should not be feeling any impact from the sanction on this supplier?
It's -- market prices are higher. So I'm a little bit cautious now in my answer. Temporarily, they are higher, and we have had -- also looking back to history, we have seen silicon metal price moving up and down. So if market prices move up, even with our broad contract portfolio, we would also have that headwind potentially. But I think it's too early in the year to talk about 2022.
Right. I mean my question goes to a supplier who is on the sanction list and you have been linked to the supplier. So the question is really, can you eliminate this supplier from your suppliers list fast enough?
Thomas, same answer. We have a very broad supplier portfolio.
Okay. Okay. Fair enough. The second question, Tennessee, your silicones unit was down in Q2. Could you help us assessing the impact if possible? And when do you expect the facility coming back online again, please?
Thomas, we have -- you're right, we have one facility in silicones in U.S., we're just currently down. But if you look at it from a broader perspective on the divisional level, that has no meaningful impact on results.
Right. If I can risk a third question on electricity costs in Europe, do you have already any view on where the costs are going for you next year? And are you exposed to any of the -- directly exposed to any of the coal-fired power plants that are going online -- off-line, I'm sorry, soon?
We are not buying directly from individual power plants. So coal-fired power plants going out of the market wouldn't have an impact on us directly, but indirectly on market prices. We have seen, in the first half of this year, quite some increase in prices traded at the Leipzig electricity exchange. And as our approach to locking in electricity prices is a rolling approach, I think we see less of an impact from this in this year, but we potentially see an impact in next year. So there might be some headwind or there seems to be coming headwind, I would say, from electricity cost in 2022.
Could you give any indication of where this is going?
Not yet, sorry.
The next question is from Sebastian Satz of Barclays.
I have one question on silicones and to your earlier comment that your plants are fully loaded at the moment. I just want to understand how that will impact your ability to grow volumes both in the second half of the year, but also maybe thinking 2 to 3 years out, please?
Yes. I mean I can answer that, Sebastian. And it goes a little bit to what Tobias already said. I mean we have a network of production plants all over the world. And we are constantly expanding the capacities and making debottlenecking measures, which are obviously not always published because they're not a big thing to do. But on the other hand, it helps us to increase capacity step by step, and that will help us to get more material out to our customers also in the second half of the year.
So you would be able to grow in line with the market in the next couple of years?
Yes, definitely. I mean that's -- I mean it's, definitely, the cornerstone of our strategy going forward, absolutely. And there are a lot of projects going on already, and you will hear about more projects announced in the future.
The next question is from Rikin Patel of Exane BNP Paribas.
Just two for me. Firstly, on polymers. You mentioned in the pre-release and today as well that you've been able to put through surcharges during Q2 and that's opened the possibility of putting more through during Q3. With some of the raw materials there sort of leveling off or starting to trend down, how do you think about maybe keeping some of that margin structurally in 2022, assuming underlying demand stays pretty strong?And then secondly, just another one on polysilicon. You mentioned, obviously, the conservatism on Q4, but that Q3 has started pretty well. Just curious if you could give us an idea about how your plants in the U.S. and Germany are operating. If you could give us an indication of the utilization rate, that would be helpful.
So Rikin, on the polymers question and the surcharges, what happened to the raw materials in polymers was really unprecedented, and that's why we started with that approach of, yes, putting surcharges to our existing contracts for any volume taken by the customer. And we had 3 rounds of such surcharges effective and we will continue at those, yes, to recover a fair share and -- of the cost increase and have a sort of a burden shared between our customers and us from this raw material price hike. We have seen leveling of the raw materials and we expect some moderation. But we are flexible in our own pricing, and we will continue with the surcharges as long as necessary. And then eventually, we will also move into a new contract season. But overall, I mean we have always a portfolio of different contracts. So we have more annual contracts and we have shorter-term contracts. And from the effect of the raw material uncertainty, I think we will definitely have a particular focus on pricing tactics. But this would continue into the second half of this year.
Okay. And the second question on polysilicon, if I understood correctly, you were asking on the capacity utilization going forward for the second half of the year. And -- I mean, as Tobias reported already, I mean we are running low on the inventories for polysilicon as the demand is high. And so we keep our capacities running at full speed. And we work on cost road maps as well to improve cost position. And often, these effects go in with also maybe additional capacity coming up with more volumes getting out of the plants.
The next question is a follow-up of Jaideep Pandya of On Field Research.
Just really around sort of polysilicon. I know you're not going to like this question, but when you think about sort of the supply cadence that is coming through, at least from what I can track, especially even on the equipment furnace guys that provide furnaces to your competitors in Asia, it seems like tangible polysilicon capacity only enters the market in sort of Q1, Q2 next year.And really, if we had 700, 725 kt of polysilicon, it seems like the market could have absorbed it this year. So -- I mean I appreciate that you have a special crystal ball which is pointing to negative EBITDA in Q4, but why should polysilicon prices go down in your opinion? When I say -- I'm not talking about into perpetuity. I'm just saying for the next sort of 3 quarters, what is, in your scenario, that brings polysilicon prices down is really what I'm trying to ask.
I think, Jaideep, like that question and our answer is pretty straightforward. We model with caution. But I think your broader question was about the supply additions. And you have a view on it. I mean the market will require additional supply. We are not -- we are differentiating between supply also coming from established players and from newcomers. And you mentioned something about the furnaces, I think I didn't get it fully. But everybody knows that we will see also time delays in implementation of the capacity increases.So the overall market is -- the demand is really strong if you take everything together what is required to get to the CO2 savings. I mean there is a huge demand for additional PV capacity, and the market is preparing for that. Our customers are ahead in that respect. The wafer manufacturers, especially the n-type, and polysilicon also needs to add capacity.
And maybe to add to the comment from Tobias, I mean the capacity announcements, which you can read and which sounds huge. And as you said, I mean we have to find out whether they materialize in their time frame they really are published. But you also have to keep in mind that some of these capacity announcements are also replacement of old capacities with lower quality material coming out of that. And so that also has to be taken into the equation. It's a strongly growing market. We need solar to solve the problems, the energy problems of the world. So that trend is definitely intact and needs more capacity.
And just -- sorry to ask this. The second question I have, and I promise this is the last one, is even if I take away the Siltronic cash, you probably will end the year with more than $0.5 billion of cash. Now I know Joerg wants a massive salary increase, but what are you going to do with all this money?
Capital allocation is clear. We want to accelerate our growth, as we just mentioned, organic and inorganic growth. We have a clear dividend policy. And last but not least, we mentioned that we have an issue with the pension deficit and we're working on a pension reform, and I wouldn't exclude that we also allocate to this. But we -- your equation was pretty good. We see a strong year-end 2021 from a net cash perspective.
The next question is from Sean McLoughlin of HSBC.
Just a couple of follow-up questions on polysilicon, if I may. Firstly, around long-term contracts. Can you confirm you've actually finalized and signed long-term agreements or you're still in negotiation phase? And also given, I suppose, the lessons learned from the previous cycle of long-term supply contracts 10 or so years ago, how are contracts being structured? That's my first question.And secondly, I think more broadly, given the capacity that's coming online, how confident are you of keeping, let's say, your nose ahead of competition, especially in n-type?
Okay. I can -- Sean, I can take that question. I mean I'll start with the last question, how do we keep the nose ahead. That's what we actually do, our teams every day. They work on improvements every day, getting more material out of the existing plants and improving the quality and the cost position. So that's really an ongoing process and having dedicated teams that work on this for years and some of them almost for decades, I think it's also something which differentiates us from many of our competitors.And it might see, from a day-to-day perspective, only little incremental improvements, but they all add up at the end of the year. And so, I'm confident that our cost road map and cost and quality road map will be improving also in the years to come. So that keeps our nose ahead.And what you asked for the long-term contracts, whether they are in finalization or in negotiation, I mean it's also -- I would say, semantics. I mean we don't want to prolong these negotiations. But at the end of the day, it needs to be a good deal for us and, of course, for the customers. And I cannot disclose any details on individual contracts.
[Operator Instructions]
Well, everybody, thank you very much for joining us today and for your interest in Wacker Chemie. Please contact the IR department if you have further questions. This ends the call today.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.