Siltronic Aktie

Hello, everyone, and welcome to the presentation of Siltronic Q1 2026 Results Conference Call. Please note that this call is being recorded and streamed on Siltronic's website. [Operator Instructions]. At this time, I would like to turn the conference over to Stephanie Malgara, Senior Manager, Investor Relations at Siltronic. Please go ahead.

Thank you, Cynthia. Welcome, everybody, to our Q1 2026 results presentation. This call will also be webcast live on siltronic.com. A replay of the call will be available on our website shortly after the end of the call. Our CEO, Michael Heckmeier; and our CFO, Claudia Schmitt, will give you an overview of our financials, the current market developments and our guidance. After the presentation, we will be happy to take your questions.

Please note that management comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. All documents relating to our Q1 2026 reporting are available on our website.

I now turn the call over to Michael for his remarks.

Thank you, Stephanie, and a warm welcome also from my side. Given that we released our '25 financials only 6 weeks ago, today's call will be relatively compact while, of course, covering all material developments since then. Let's start with a broad overview of our development in the first 3 months of the year. Claudia will provide a more detailed breakdown in just a moment. As expected, Q1 was a soft start into the year. Sales came in at EUR 307 million, significantly below Q4 '25, which had benefited from delivery shifts. In line with the lower sales level, profitability decreased sequentially. The EBITDA margin was 21.2% compared to 23.3% in Q4.

EBIT also decreased to minus EUR 52 million compared to minus EUR 34 million in the previous quarter. CapEx totaled EUR 48 million in the quarter with a continued focus on our 300- millimeter [indiscernible] business. At the same time, cash payments for CapEx significantly exceeded this level. Consequently, the net cash flow remained negative at minus EUR 89 million and net debt increased to EUR 936 million compared to EUR 837 million at year-end 2025. Claudia will now provide a more detailed overview of the financials.

Thank you, Michael. A warm welcome from my side as well. Let's get straight into the details of our Q1 '26 results. As Michael pointed out, Q1 marked a soft start to the year and sales came in as expected at EUR 307 million. The strong quarter-on-quarter decline is less a reflection of a sudden change in underlying demand and more a matter of comparability. Q4 was not a clean baseline as it was notably lifted by delivery pull-ins from Q3 '25 and early '26. This phasing also influenced the quarter's product mix, which weighed on the sequential comparison.

Foreign exchange by contrast was not a meaningful factor with the euro-U.S. dollar exchange rate largely stable at EUR 1.17 versus EUR 1.16 in Q4. Turning to the cost side. I would like to highlight the particularly strong contribution from hedging activities in the first quarter. In total, the net FX result and gains from hedging and oil price component in electricity supply contracts amounted to EUR 11.4 million compared with EUR 2.7 million in the prior quarter. These effects were a key factor in largely offsetting costs that are typically recorded only in the first quarter.

In line with the lower sales level, EBITDA decreased to EUR 65 million, translating into an EBITDA margin of 21.2% compared with 23.3% in Q4. Correspondingly, EBIT declined to minus EUR 52 million in Q1. Net income amounted to minus EUR 67 million, following minus EUR 53 million in Q4 2025, which had included a write-down of deferred tax assets. Let's turn to the key developments on our balance sheet, which continues to show a solid and healthy structure. By the end of March, total assets amounted to EUR 4.7 billion, slightly below the EUR 4.8 billion reported at year-end 2025.

Property, plant and equipment remained largely stable as depreciation exceeding additions was largely offset by the appreciation of the Singapore dollar against the euro. Working capital developed as expected. Inventories and trade receivables increased by roughly EUR 50 million in total. By contrast, cash and securities declined to EUR 448 million from EUR 534 million at year-end, also reflecting planned elevated cash outflows related to previously incurred capital expenditures. As a consequence of these CapEx-related payments, trade payables decreased by EUR 43 million.

Prepayments remained almost unchanged as did the equity ratio, which stood at a solid 42%. CapEx in Q1 '26 totaled EUR 48 million. The previously mentioned payments for investments amounted to EUR 110 million year-to-date, exceeding the reported CapEx level by more than EUR 60 million. For the full year, we continue to guide for CapEx in a range between EUR 180 million and EUR 220 million. As previously communicated, cash outflows for CapEx are expected to significantly exceed asset additions also for the full year.

Let's take a closer look at our debt situation. As illustrated in the bridge, net financial debt stood at EUR 837 million at year-end 2025. In Q1, operating cash flow was under pressure, reflecting the expected buildup in inventories and trade receivables and amounted to EUR 21 million. This was not sufficient to cover the planned CapEx-related cash payments.

As a result, net financial debt increased noticeably to EUR 936 million, driven by temporary timing effects. We, therefore, expect net financial debt to improve over the course of the second half of the year. Let me briefly conclude with a comment on the composition of our financial debt. Unchanged compared with our full year presentation, total debt stood at just under EUR 1.5 billion at the end of the first quarter with roughly EUR 130 million remaining undrawn. The maturity profile illustrates that repayments are well spread over the coming years. For 2026, we anticipate repayments of around EUR 100 million.

As already mentioned, we closed Q1 with approximately EUR 450 million in cash and securities. Together with our undrawn revolving credit facility, this provides a solid level of financial flexibility. In addition, our balance sheet includes short-term prepayments of around EUR 33 million with around EUR 15 million scheduled for repayment within this year.

With this, I will hand back to Michael.

Thank you, Claudia. Let me summarize our current expectations across end markets looking into 2026. Compared to the estimates we presented in mid-March, the overall outlook remains positive with some shifts between different application segments. First, we now expect an even higher growth rate for servers, nearly 44% year-on-year. This growth is clearly driven by the strong AI momentum and continued investments in data center infrastructure. Propelled by this AI-driven demand, we see initial indications that some customers are revisiting their midterm volume commitments to enhance supply security. At this stage, these are early signals rather than a confirmed trend, but they may have implications for inventory levels.

Conversely, the outlook for smartphones and PCs has further weakened. The key reason is the ongoing tight supply of memory chips. With memory availability being prioritized for AI-related server applications, unit volumes in other end markets are constrained, which is particularly weighing on smartphones and PCs. We continue to expect growth in the automotive industry, but at a reduced rate compared to last year. Industry is assumed to improve from a low base.

Overall, this results in an estimated pre-inventory growth of around 7% of total wafer area consumption in 2026. Let's conclude today's presentation confirming our guidance for the full year 2026. As we mentioned a few weeks ago, we expect the business environment to remain challenging. Headwinds from FX, price pressure outside LTAs and the ongoing weak 200-millimeter business weigh on our performance. Additionally, the closure of the SD line will impact the full financial year for the first time.

Geopolitical uncertainties related to developments in the Middle East currently have no direct impact on our business and end markets remain robust. That said, we continue to monitor the situation very closely, and it could affect the broader cost environment, which includes energy prices. We've taken measures to mitigate parts of these risks, including hedging where applicable, but we still anticipate potential uncertainty. In addition, we assume higher freight and logistics costs.

2026 sales are guided in the mid-single-digit percentage range below the prior year level based on a euro-U.S. dollar exchange rate of 1.18. In comparison, without FX effects and without the impact from the SD closure, we expect sales to be around prior year level. Our EBITDA margin guidance is between 20% and 24% -- depreciation is expected to increase significantly in 2026 due to our investments in the 300-millimeter business. We guided between EUR 490 million and EUR 520 million, and therefore, EBIT is expected to be significantly below the previous year. We see CapEx to be between EUR 180 million and EUR 220 million. As cash payments for CapEx are expected to exceed this level, we expect net cash flow to be in the range of the previous year.

With this, we conclude our Q1 '26 results presentation, and Claudia and I are happy to take your questions. Thank you very much for your attention. Cynthia, please open the Q&A session.

[Operator Instructions] The first question comes from Daniel Schafei with Citi.

Good morning. Thank you very much for taking my question. So I just wanted to come back to your end market expectations, and it's great to see that you have adjusted them, especially for smartphones and PCs. I'm just trying to understand what drove the kind of basically the server demand increase from the 28% in the sense that if I still see that there's some downside to smartphone projections from the kind of decreasing 10% growth, is there still some upside to the server projections in your opinion? So basically, on what grounds have you increased this from 28% to 44%, -- what was driving this? Is there room given that it's a very dynamic target and in general, the end market is increasing quite rapidly. Can we expect some further improvement there?

So thank you, Daniel. I understand your question, why is AI even and server demand even stronger than and such stronger than initially anticipated? And could there be even more further upside. So what we see is, of course, that particularly in the memory segment, the memory chip manufacturers prioritize and they feed more supply into the server area. And that's driven by the continued strong build of hyperscalers and by the CapEx road maps being confirmed or here and there even being upgraded further. So this looks very robust and very strong. Is there further upside? Maybe there could be a small further upside. However, some of those, particularly memory chips are limited by capacity constraints at the chip makers. So it means even though there could be an underlying stronger end market demand from the AI drive, it might be difficult to fulfill this. So therefore, we would say, yes, there could be further smaller upsides this year. But due to the capacity constraints, it could be limited. It could be dampened on the chip level side. As a general remark, we also have to have in mind when we talk about smartphones that the minus 10% is a composition, it's a melange of unit and content. And we see maybe on the unit side, even a bit further dampening, which is compensated by the mix effect as those smartphones that are still being built tend to be more higher level, more advanced smartphones, which also have more silicon content in there. So we always have to have in mind this mixture between unit number effect and the silicon content effect. So what we show with those minus 10% is a composition of both.

Perfect. That's very clear. And just to also follow up, I mean, it's great to see that server end market demand is doing so well. Just historically, I remember that usually the Japanese peers were claiming quite strong market share within that segment. especially on this kind of more advanced wafer capabilities. In your opinion, do you see this gap narrowing from here on? Yes, do you see kind of further share gains from your side in this segment?

I would say there are no tremendous changes. I mean you're referencing a bit to the market share question. We see a pretty stable market share development. So that means there's no slight shift in either direction, but I can reconfirm what we discussed a couple of weeks ago that we are well positioned, that we have a clear strategic focus on leading edge. So that means on advanced logic and on the high-bandwidth memory segments. So here, we are pretty well represented. And then some tiny details here and there could depend, of course, on more customer mix rather than on application mix in the sense of server versus other. It would be more the customer mix and the customer exposure that could create here and there some, let's say, particular differences on a quarterly basis.

The next question comes from Constantin Hesse with Jefferies.

Can you hear me? Yes. Perfect. So the first one is just quickly on pricing because the overall comment is that there's still pricing pressure. But on the previous call, we had already heard that pricing in 300-millimeter legacy has stabilized. So I just wanted to confirm that, that's still the case and that pricing pressure is coming primarily from 200-millimeter. That's the first question.

So thank you, Constantin. We didn't say that the pricing has stabilized. We said we have a few examples of reasonable spot prices in 300-millimeter outside LTAs -- so that's a statement I could reiterate. So in terms of pricing, overall, pretty unchanged. We see a stable situation in the LTA framework, which covers around 2/3 of our business. We see those positive indications, some spots getting more reasonable in 200-millimeter outside LTAs, but we also see an ongoing pressure on 200-millimeter. And that's, of course, the area we also have far less LTAs. So in general, unchanged to what we said 6 weeks ago.

Great. Then, Michael, if I may ask. So I mean, looking at the demand and the inventory situation as of today, how likely would you expect another shipment postponement, meaning another capacity utilization cut or production cut, if you will, given the current situation. Is that something that -- because what I'm trying to figure out here is, look, I think it was -- the bottom had been reached at some point last year. The bottom continues to drag. But as data center demand continues to be strong, leading-edge demand continues to be strong. I'm just wondering, is there still a likelihood that we could see another production cut during 2026 from an overall perspective?

Yes. Thanks, Constantin. I think in general, the short answer would be maybe we don't expect any further cuts or major kind of changes. But let me differentiate a bit by the application segments, also particularly relating to inventory. I think both in memory and logic, in the meantime, we can say we are back to very normal means healthy inventory levels. And we indicated in the calls that some customers even start taking off on discussions to secure even more, let's say, midterm demand. So that's, I think, a good sign and it's a good part of the coin. On the other side, there is still the power segment where we have to reconfirm that inventory levels are still pretty elevated. So that's a bit more difficult segment still. And as you know, that is particularly heavy weighing on 200-millimeter. So overall, I think back to normal, we wouldn't expect further disruptive cuts or changes this year with a little maybe caveat around power, which is still, let's say, far behind inventory depletion compared to the other 2 segments. That's great.

Then the next question would be, look, given the stronger-than-anticipated demand for leading edge, right, which was clearly outlined here by the server demand in your presentation, -- could we potentially see an anticipated or like an earlier-than-expected requirement for further CapEx in Singapore because of that additional demand that is coming through? Or is everything going according to plan?

I mean we're not only providing leading edge out of Singapore. We provide leading edge also out of both our German factories. So it means in terms of overall footprint, we feel pretty well set for the time being. And then, of course, as we always said, we took down the ramp speed of Singapore last year and the year before compared to initial plans. We did speed that up a little bit in the meantime. And then we would consider further ramping Singapore, and that's what we always said according to market demand. So if this is continuing, of course, we would still continue ramping what we have and in parallel, then prepare for more capacity as required. Currently, we feel pretty well set there with the new keys have been low for quite some time in our German footprint and with the capacity we generated already in Singapore. And in that spirit, we would ramp what we have and prepare them for the next one as required.

Thank you, Michael. And the last question, maybe over to Claudia, just on the debt situation. Look, and this is a question that's really based on -- from today's point of view, right? If what we see today continues to be the case, it feels to me that the net debt level is basically peaking as we speak. I just want to make sure that the -- because I think you only have EUR 127 million left or dollars left in that revolving credit facility in Singapore. And I just want to make sure that, that level is enough for any potential disruptions or any potential working capital moves during the different quarters that are still upcoming.

Yes, we are pretty convinced that our liquidity reserve, which includes EUR 450 million in cash that we have right now, plus EUR 130 million out of that revolving credit facility gives us enough flexibility for any unforeseeable in the future. But as we mentioned, we are convinced that the net debt level will decrease over the second half of the year. So there's no -- from our point of view, there's no concern.

The next question comes from Robert Sanders with Deutsche Bank.

Yes, good morning. I have 3 questions, if it's possible. First question would just be on FabNext. Is it fair to say it's roughly 10% of revenue this year? Or could it be much higher? That would be my first question.

Second question would be, is when can we expect FabNext to become accretive to EBITDA margin given the sort of relatively limited scale today, but ramping? And the third question would just be, I noted, obviously, in the past, you've explored specialty wafers such as silicon carbide, then you pulled out of that. I think in the past, you've worked on SOI. Given this photonics boom and this data center boom seems to be passing you by to some degree, is there a scenario where you could make SOI wafers without Soitec IP? I think in the past, you've looked at it, GlobalWafers claims they can do that without Soitec IP. So just interested if you're exploring more specialty ways of playing into this data center. Thank you.

We are, of course, a bit reluctant to comment about details what is the revenue contribution out of FabNext and whether it's already margin accretive. What I can say is, of course, we have a very smooth ramp in the meantime. We had around mid of last year, all major customers being qualified. So we have the freedom to get volumes in there and kind of preferentially loaded. That's always what we said. You also hear us talking less about ramp costs. So that's a clear indication that we see volumes going up, fixed costs being more reasonably diluted. So that's what I can say around FabNext without giving out any, let's say, competitive relevant information right now. With regards to your second question, -- you're absolutely right. We decided quite some time ago not to venture into silicon carbide. So no change on that one. We also have currently no considerations or even plans to go into any SOI activities. And in terms of those new technology, we still have a small-scale team working on gallium nitride, where we feel there could be a potential opportunity for us. But currently, we don't see the demand and the market model. But in terms of those 3, gallium nitride is the only one which we're covering right now with a small R&D effort.

Got it. Just one quick follow-up. The FabNext is predominantly polished wafers and minority Epi. Can you confirm that?

No, it's actually both. We brought the 300-millimeter epi technology for the first time to Singapore and the ramp of FabNext comprises both Polish and Epi.

The next question comes from Florian Tree with Kepler.

I have a question on, let's call it, the quarterly or sequential improvement coming over the year. So the first question would be, are you -- can you quantify the impact or pull in impact on the Q1 numbers into Q4 last year? And is it fair to assume that we should see sequential improvements here every coming quarter from here? Or is it really a step-up in demand potentially at the end of the year to meet this mid-single-digit decline?

Yes. Thank you, Florian. We do not -- and I think we must not quantify the details of those revenues that have been moved from Q4 last year -- from Q1, sorry, this year into Q4 last year. I think I can just reiterate that we currently communicated our Q1 numbers. We have a very clear full year guidance in place. And if you do some math, of course, you can estimate about the potential increase of revenue in the consecutive quarter. You will easily come to the conclusion that we do not see explosive growth from that calculation, but that it's more a smooth further growth over the year.

The next question comes from Gustav Froberg with Berenberg.

You talked a little bit about the indirect impact from the conflict in the Middle East, rising energy costs, et cetera. Could you maybe give us a bit more color on the evolution of costs on that side or coming from anything that may be an exogenous shock. I note as well your margin guide is obviously kept flat despite sort of you alluding to some potential cost increases. So are you able to save any costs anywhere else? That's my first question.

This is Claudia. Yes, regarding the cost, we see 2 corners right now where we see some cost pressure, I would say, that's in electricity cost, especially in Singapore, where we have an oil price component in our contracts, and we see some increases in freight costs. Regarding the electricity cost, as you know, we have hedging in place in Singapore. We do some hedging using derivatives. And in Germany, a certain share of power procurement is secured up to 2 years in advance. So regarding electricity, we feel quite comfortable with our hedging that is in place.

We see some cost increases in freight cost. But on the other side, we also see that the dollar is a bit stronger right now than we anticipated. Right now, it's 1.17 versus 1.18 that we assume in our forecast. So this should, let's say, offset the assumed price increases, which are not too big for this year.

Okay. Super. And then a question on cash flow as well and your sort of balance sheet side of things essentially. Do you feel comfortable with the current rate of cash burn, assuming nothing changes in your operating environment versus sort of Q4 last year, Q1 this year? Or does your plan for the balance sheet and the cash flow side of your financial envelope need to change unless there's a material pickup in H2?

Yes. Please keep in mind that Q4 was impacted by a lot of special effects also regarding the cash flow. And all the developments we saw in Q1 in cash flow were as were expected. So the increase in inventories and trade receivables was expected and also the cash outflow for the CapEx-related trade payables. So this is all included in our guidance for this year and the net cash flow guidance is that we expect the net cash flow in the range of the previous year. So you can assume that there are shifts between quarters and they are planned and they are expected because we do some, let's say, financial management that's very obvious in every company, we do some financial management. But we expect the cash burn situation to improve, especially in the second half of the year. So we feel very comfortable with our guidance and with the development we saw in Q1.

Great. And that assumes no pickup in the underlying business. You still expect better cash flow?

Yes, -- of course, we assume a pickup in the underlying business because our sales guidance says that we expect not Q1 times 4, but a bit higher. So the rest of the year should improve in coming from sales. So with that also, we will also see an improvement in our operating cash flow.

The next question comes from Martin Jungfleisch with BNP Paribas.

I just have 2 quick follow-ups. The first one is really on pricing, right? Can you just talk about what part of your 300-millimeter contracts would potentially be eligible for price hikes over the next 12 months when the situation would allow for that? So is that kind of all contracts out of the long-term agreements, which has been, I guess, like 20% or something like that? And then when these contracts, 300-millimeter contracts expire today, are these renewed at flat pricing? Or is there already some leverage on your end to lift prices in these kind of contracts?

So I mean, as we -- and thank you, Martin, for the question. As we said, no major LTAs are expiring in the course of this year. Whenever something expires, of course, it's our freedom to conclude a new one or not to include a new one. And we would only do so if, of course, pricing and other conditions are favorable for us. Currently, a very small portion is eligible for renewable from that perspective is not a huge topic. And what we indicated in the speech today is that we see now customers talking about maybe more midterm volume demand. So I think we could come to a situation where this overall LTA framework can continue to be very robust and be very beneficial for us. And I think I can say that's a statement for the overall wafer space. We feel this symbiosis between customer and wafer manufacturers is working pretty well and robustly.

Okay. So when you would sign new LTAs, you would only do so at a higher pricing than previous contracts. Is that the right assumption?

It depends on the segment. In some areas, there are new LTAs up for potential discussions. So we currently don't see any major price discussions in new LTAs.

Okay. And then the other question is also a follow-up mainly on capacities, right? So just is it possible for you to grow 300-millimeter wafer volumes, so output by like mid- to high single digit this and next year, which is kind of I guess, market demand without you adding any capacity? So can you basically cater to market demand this next year without adding any capacity?

I mean we continuously add still CapEx to Singapore. We said it very clearly. And that means also still some machines coming in, which, of course, will have incremental benefits for capacity. Overall, we don't feel capacity is a constraint for us as we're coming from, on the one side, low Ts in the Germany footprint, as you know. And as we did build the building and the infrastructure and the gas supply and everything in Singapore already, and have a first wave of cleanroom machines installed there, which gives us room to further ramp according to market demand. So for the time being, we feel pretty well set. And then, of course, we will, as always stated, continue to ramp according to the real market demand.

Okay. Great. That's helpful. And then just one final question maybe on those costs. In the release, you noted these hedging gains of around EUR 11 million. Were they already offsetting costs incurred in the quarter? Or are these, I guess, higher costs coming in the coming quarters and you have a gain upfront?

Yes, regarding the hedging gains, I tried to convey that in the speech. Q1 is always burdened by expenses that are more pronounced in that quarter or that only occur at the beginning of the year. So they are only recorded at the beginning of the year, for example, let's say, labor accruals or expenses related to property. And those hedging gains and the FX result we recorded in Q1 more or less offset those expenses. Can we expect further hedging gains in the upcoming quarters? I don't know. But what I know is that those, let's say, extraordinary Q1 expenses, they won't occur in the upcoming quarters.

The next question comes from Veysel Taze with Bankhaus.

A few questions. The first one would be around the first Q performance. What was the underlying growth in Q1 when we really take a year-over-year comparison, take into consideration the FX headwinds, the small diameter shortfall and then the volumes which were pulled from Q1 to Q4 last year. Did you see an underlying growth in Q1?

I think both Q1 this year, as Claudia already explained, particularly in the cost side and particularly Q4 last year on the top line side were, I think, very special quarters. So to compare them on a like-to-like basis is very difficult and would require us to strip and detail a lot of effects and to become super transparent. So I'm a bit reluctant to comment here, but we see that the underlying volume picture is a healthy one in Q1 this year, and we see that it's exactly according to plan and guidance.

Clear. And then the second one on the utilizations, alluding a little bit to the previous question for my colleague. What we see right now is on the industry level for the 300-millimeter, the utilizations are probably hitting low 90s, high 80s. I was wondering -- and that's typically in the industry an area where customers want to discuss long-term or midterm volumes, want to make sure that they get the volumes, and that's always a good momentum for price increases going forward. I was just wondering if your 300-millimeter utilizations at this stage are substantially different than the industry utilizations, like the low 90s or around 90%?

We have indeed, in the meantime, decent 300-millimeter loading, but we also have a way to further grow capacity very short term, as I explained. So from that perspective, yes, 300-millimeter loading is becoming attractive and coming to a level where -- and that's what I said in the call, where first customers now are looking into midterm volume demand patterns. And that's, as you say, it's a very good indication. It's a good, let's say, atmospherical change, which we also anticipate. On the pricing side, I wouldn't go beyond the statement which we made 6 weeks ago. We have those first few examples of more reasonable spot prices again in 300-millimeter that was very, very different some quarters ago. So we have those sentiments. We have those indications. We don't see a major trend change already, but the atmosphere in those conversations now is a different one. That's definitely what I can say.

Great. And then on the memory market, I mean, I understand that customers are -- the memory vendors are prioritizing shipments to the higher ASP area in the AI server market or server market in general. But PC and smartphone, taking into account that the second half of the year is the much stronger volume part of the year. And at the end, consumers will ask for those products, smartphone and PC, and we are seeing higher semiconductor content DRAM, et cetera. And let's say now this demand will be particularly on the memory side, will be served from Chinese memory vendors for maybe not the very high end, but mid-range and phones and PCs. If the volumes comes more from Chinese vendors, does that change your shipments or your volumes because now those smartphone and PC vendors are getting their volumes from Chinese vendors.

So for us, in the first glance, we are, let's say, to quite some extent, agnostic because we serve all major customers. And as you know, of course, we also do business in China. So I think there could be indeed 2 effects. There could be if there's really PC and smartphone demand picking up and manifesting from end consumer side, of course, then the prices will be paid and the memory chips might be more competitive again compared to the server demand. So that could indeed happen. For us, we are agnostic to details of those, let's say, customer mix effects. As I said, we also, I think, very well positioned in advanced technologies. So every effect that would drive high-end PC or high-end smartphone, we would also clearly be a benefit as we are focusing, of course, on those advanced technologies, namely leading edge and high-bandwidth memory.

Can I squeeze one more on the 200-millimeter and particularly on the auto and the power part of the business? I mean I understand inventories at auto chip vendors are still at high level. They are burning down inventories, but still it's too high. But I was wondering in 200-millimeter, particularly I always historically thought you are strong in the power part of this. And we see a lot of demand also from AI data centers for low-end power products for servers, et cetera. And I was wondering why are you not seeing this demand in your 200-millimeter market? And related to that also, it gets obvious that the Chinese 200-millimeter wafer producers are in the main market and competitive products. Is that also related a little bit to the potential ASP pressure you're feeling? I would not say market share loss, but ASP pressure that the issue in the 200-millimeter is rather from the ASP side.

So I think you're absolutely right. couple -- in the last 2 quarters or so, also the power chip manufacturers again got more positive and we're highlighting particularly also their business opportunities in powering data centers. And we also anticipate that. So we have still between that, those statements and those businesses picking up. And our the wafer side of things, there is on the one side, the usual 6 months delay and in addition, the elevated inventories. So therefore, we -- and the wafer industry doesn't see it yet is maybe a good statement. And then in addition, you're right, we always said that the Chinese wafer manufacturers let's say, the technology capability and so on are stronger, the lower the diameter of the wafers. And of course, in 200-millimeter, they are more present and more advanced and far more advanced than in 300, and that could be another effect.

So what I want to say is it's the normal demand supply cycle here we see, which is still hanging on in power inventories. And there could be an underlying, let's say, China effect as well. So for us, 200-millimeter is, of course, already with the 300-millimeter growth already a small segment in the meantime, but we still see that the demand is picking up once the manifestation of the demand from the power and AI side is driving through the power chip manufacturers to the wafer industry, then we should also see demand to pick up again.

[Operator Instructions] The next question comes from Harry Blaiklock with UBS.

The first is just on one of your peers reported yesterday and were kind of unexpectedly quite positive on their wafer segment. And some of the commentary that they were giving was that customers are kind of rushing for inventory, wafer inventory. And then there are some customers asking for kind of longer and potentially higher volumes in LTAs. You've kind of mentioned about customers trying to secure medium-term demand. So I wonder whether -- I know you obviously can't comment on anything to do with your peers, but those conversations with customers around LTAs, lengthening them and medium-term demand, wondering whether you are also experiencing something similar or whether you can comment on that at all?

Yes. Thank you, Harry. And we're always a bit reluctant to comment on, as you highlighted already on individual competitor statements. But I can confirm, and I think I did already that we also feel this more positive tonality in atmosphere in conversations with customers about the volume scenarios and so on. So we are not so vocal about it as we really would love to see it more in our books also, not only in, let's say, atmospheric and tonality indications. But definitely, we see a change in atmosphere there. And then maybe more general remark, if you compare, let's say, Japanese players with us, you have to always have in mind in terms of operational development, the FX difference. And of course, we, as wafer manufacturers have different customer portfolios and some product portfolio differences as well. So if we take all this together, I think we'll be pretty much in line with the sentiment from other players we're also anticipating.

Got it. And then I just wanted to clarify on your pricing comment. I know like over the past year, you've been saying that pricing pressure is more severe in 8-inch and 12-inch has been stable in LTAs and maybe down a little bit in spot market. I know you're saying that it's in 12-inch, it's now more reasonable. And I just wanted to know kind of what does that mean in terms of -- is that just the price declines that have stabilized? Or you seeing any price increases coming through outside of LTA?

Yes. I'm a bit reluctant to go into more details here, but your general statement is correct and unchangedly correct. Price pressure is indeed more pronounced in 200-millimeter as we discussed earlier in the call. That's maybe not a surprise. In 300, we came out of a phase where the non-LTA part was also under certain price pressure. And now we have, in the meantime, some first examples where that is easing and looking more reasonable. So again, I wouldn't declare a trend change or a significant uptick yet, but we have those first examples where we can look a bit more positively on outside 300-millimeter LTA pricing.

Okay. Perfect. And maybe one last quick one. I know you say that you don't have any major LTAs coming up negotiation this year. But next year, are you able to comment on that?

.So you're right, nothing major is expiring this year. Our big LTAs that have all been concluded in conjunction with the FabNext. -- they are, let's say, very long-term LTAs. We have some of them running until 2030. We have 80% of our capacity in Singapore covered with these long-term LTAs -- and then, of course, we look at LTAs as a sort of portfolio. We always said we want to have around 2/3 of the business in those LTAs. And in that context, of course, there could LTAs be expiring next year, while we also even last year concluded new LTAs. So it's a kind of rolling ongoing thing. And let me reiterate, if conditions are not good, nobody will force us to do new LTAs. So it's really up to our discretion that even we experienced in very soft market conditions, there's always a segment or a technology where new LTAs are concluded. So we have to look at this as a kind of portfolio as a rolling thing. And again, the big ones are rock solid in 2030 and with historic volume shifts, which we reported some of those volumes even have been added to the end of the contract, which, in fact, would prolong some of those initial time frames.

There are no further questions. At this time, I would like to turn the conference over to Stephanie Malgara.

This concludes our Q&A session. Thank you for joining us today. We'll release our H1 2026 figures on the 30 July. On this slide, you can also see our next IR event. Thank you, and have a good day.

This concludes today's call. Thank you for your participation. You may now disconnect.

Hello, everyone, and welcome to the presentation of Siltronic's Full Year 2025 Results. Please note that this call is being recorded and streamed on Siltronic's website. The call will also be available as an on-demand version later today. Your participation in this call implies your consent with this.

At this time, I would like to turn the conference over to Stephanie Malgara, Senior Manager, Investor Relations at Siltronic. Please go ahead.

Thank you, Cynthia. Welcome, everybody, to our full year 2025 results presentation. This call will also be webcast live on siltronic.com. A replay of the call will be available on our website shortly after the end of the call. Our CEO, Michael Heckmeier; and our CFO, Claudia Schmitt, will give you an overview of our financials, the current market developments and our guidance. After the presentation, we will be happy to take your questions.

Please note that management's comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. All documents relating to our full year 2025 reporting are available on our website.

I now turn the call over to Michael for his comments.

Thank you, Stephanie, and a warm welcome also from my side. Let me start with the key messages of today's call.

2025 shows robust results in line with our guidance, even though the year was influenced by significant headwinds. Notably, FX effects, continued price pressure outside and queries, and the closure of our SD business.

Importantly, sales in 2025, excluding SD and FX effects were on prior year level, which highlights the resilience of our business. The momentum in Siltronic's end markets developed stronger over the course of the year, resulting in a rebound in demand for 300-millimeter products. This is also consistent with the broader industry sentiment, where AI drive has been particularly strong in memory. However, it is important to note that DRAM chip revenue is currently still decoupled from memory wafer demand. This means that the AI-driven growth does not yet translate into a comparable uplift in wafer volumes.

Let me now give you a broad overview of our financial performance in 2025. Claudia will then provide more details in just a moment. And at the end of the presentation, I will walk you through our '26 guidance.

Sales came in at EUR 1.35 billion which is down 4.7% versus the prior year. Our profitability remained robust with an EBITDA margin of 23.5%. Both figures are in line with our guidance. The EBIT margin fell to minus 2% coming from 8.9% in 2024. CapEx, again, remained significant with a continuous focus on our new 300-millimeter fab in Singapore. Compared with the previous year, however, we significantly reduced it to EUR 369 million. Consequently, the net cash flow improved compared to the previous year, yet it was still negative at minus EUR 85 million. Finally, net financial debt ended the year at EUR 837 million, up from EUR 734 million in 2024.

Let's move to the financials. Claudia, please.

Thank you, Michael. A warm welcome from me as well. I'm pleased to guide you through last year's results and highlight the key developments. Let's first take a closer look at our P&L for fiscal year 2025.

Our performance came in fully in line with our guidance and was supported by a strong fourth quarter. Sales reached EUR 1.35 billion, down 4.7% year-on-year. On the positive side, wafer volumes increased in 2025 and reflecting the global end market growth and with it a clear pickup in demand for 300-millimeter wafers. The decline was mainly driven by FX movements, pricing pressure outside LTAs, product/mix effects and the shutdown of the small diameters line, which explains roughly 1/3 of the year-on-year change.

Looking at the quarterly development. Q4 sales increased significantly compared to the soft Q3. This uplift was mainly driven by volume shifts from Q3 and early 2026 into Q4, as previously communicated. In line with the reduced sales level, EBITDA declined by 13% year-on-year to EUR 317 million. However, we were able to mitigate part of a negative sales impact through targeted cost reduction measures and fixed cost dilution from higher wafer volumes.

The EBITDA margin amounted to 23.5%, a solid result considering the challenging environment. It underlines our cost discipline throughout the year. EBITDA in Q4 increased by 31% quarter-on-quarter to EUR 86 million, driven by the higher sales level and the resulting positive FX cost dilution. Full year EBIT came in at minus EUR 26 million, corresponding to an EBIT margin of minus 2%. Besides the lower EBITDA, a key driver was the start of depreciation of major assets of the new Singapore fab beginning in August 2025. This also impacted Q4 EBIT significantly, amounting to minus EUR 34 million.

Net income for the year was minus EUR 78 million. In addition to the development of EBIT, rising interest expenses weighed on the financial result, reflecting the higher debt level. We also recorded a noncash effect in Q4 from the revaluation of deferred tax assets which had an impact on our tax result.

As Michael mentioned, excluding the SD and FX effects, sales in '25 were essentially in line with the prior year. This is a very positive message underscoring the resilience of our underlying business despite the challenging environment. As you know, Siltronic is significantly exposed to changes of the U.S. dollar versus euro. Over the course of the year, we faced notable FX headwinds as the dollar weakened to an average rate of 1.13 in 2025 compared to 1.08 in '24.

Regarding the SD closure, as communicated, the shutdown impact our top line in the low single-digit percentage range. This is illustrated in the bridge shown on this slide and is one of the key drivers of the year-over-year change in reported sales. Since we shut down the line in mid-'25, the effect is concentrated in the second half of the year. As a result, '26 will capture the full year impact of the SD closure for the first time.

Let me elaborate on FX, as it remains a key factor for Siltronic. As you can see on the left, our business is highly exposed to the U.S. dollar. In 2025, more than 80% of our sales were effectively U.S. dollar-linked, while most of our cost base is euro denominated. This explains why we are so sensitive to any exchange rate movements. To give you a sense of the magnitude, based on our '25 exposure in the euro-U.S. dollar FX rate of 1.13, a change of USD 0.01 would impact our full year sales by around EUR 10 million and our EBITDA by around EUR 7 million before hedging.

To manage this exposure, we apply a structured hedging approach. We combined operational and strategic programs, gradually hedging our expected net FX exposure up to 18 months ahead. This reduces volatility even though larger and more persistent currency movements cannot be fully offset.

Let's turn to the balance sheet, which continues to show a solid and healthy structure. At the end of '25, total assets stood at EUR 4.8 billion, down 6% year-on-year. Property, plant and equipment totaled EUR 3.5 billion. We saw a reduction of around EUR 140 million in this position largely due to the Singapore dollar depreciation. Working capital remained broadly unchanged. The decrease in trade payables was largely offset by a decrease in trade receivables and inventories.

Operational cash inflows, combined with a partial drawdown of our syndicated loan in Q2, did not fully cover CapEx payments and debt repayment. Consequently, cash and securities declined by approximately EUR 130 million to EUR 531 million, while financial liabilities decreased by EUR 35 million.

Finally, our equity ratio remained stable at a healthy level of 43%. As you can see, our CapEx has been significantly scaled back since the peak in '23, totaling EUR 369 million in 2025. At the same time, cash payments for capital expenditures amounted to EUR 380 million, slightly exceeding the invest level. Timing differences between CapEx and payments are influenced by factors such as the timing of asset additions during the year, completion of construction phases of specific payment terms, effects we have seen very prominently in previous years.

By the end of 2025, trade payables related to CapEx remained well above normal levels, driven by these timing differences. We expect this position to normalize in 2026, which will result in the corresponding cash outflows for past investments. At the same time, we will continue at a significantly lower investment level, as reflected in our 2026 guidance.

Let's now turn to net financial debt and the factors driving the year-on-year development. As shown on this slide, net financial debt increased from EUR 734 million at year-end 2024 to EUR 837 million at year-end 2025, a change of EUR 103 million. We generated a solid operating cash flow, underpinned by an exceptionally strong fourth quarter.

This performance was shaped by 2 key factors. Firstly, the high revenue level in Q4, and secondly, favorable working capital movements that provided an additional uplift to our cash generation. However, even net of the EUR 38 million received in Q4 as the final tranche of the FabNext investment grant, CapEx payments clearly exceeded the operating cash flow level in 2025.

Let me also provide a brief outlook on 2026 at this point. We expect a temporary and pronounced increase in net financial debt in the first half of the year, primarily driven by CapEx payments and working capital effects. Most notably is the substantial cash outflow related to the settlement of the CapEx-related trade payables described earlier. In addition, we anticipate an increase in days sales outstanding, temporarily tying up more cash. From this elevated starting position, net financial debt is expected to decline in the second half of the year.

Let me also briefly touch on the composition of our financial debt. At year-end, total debt stood at nearly EUR 1.5 billion, of which around EUR 130 million remained undrawn. The maturity profile shown on the right illustrates that repayments are well spread over the coming years. For 2026, we expect repayments of around EUR 100 million and interest expenses are anticipated in the ballpark of EUR 50 million. As previously mentioned, we closed the 2025 financial year with around EUR 530 million in cash and securities.

Together with the undrawn revolving credit facility, this gives us solid financial flexibility. In addition, our balance sheet includes short-term prepayments of around EUR 10 million, which we anticipate being returned in 2026. This figure is now markedly lower than previously expected, as a result of agreements with customers to defer certain refunds.

With that, let me hand it back to Michael.

Thank you, Claudia. Before we turn to our outlook for 2026, allow me to make a general remark. Our expectations for this year reflect the market conditions currently visible. They do not include any additional impacts from a further escalation or continuation of the ongoing war in Iran. Right now, we do not see a meaningful immediate impact, but are closely monitoring the situation.

Let me summarize what we currently anticipate across end markets in 2026. Overall, the outlook is positive. On a pre-inventory basis, we expect the wafer area consumption to increase by around 6% year-over-year in 2026, with servers clearly being the primary driver. After a very strong 2025, server-related demand is expected to continue growth, supported by ongoing AI investment and data center expansion. AI is pushing memory prices up, while at the same time, memory supply remains tight. This implies that capacity is being prioritized for AI-related demand, which is limiting unit volumes available for other end markets. Consequently, there will be a dampening demand effect for pieces and smartphones this year, especially in the lower-end segments which typically rely more on legacy devices and components.

In addition, it's not surprising the 200-millimeter remains challenging since inventories in some areas of the power supply chain are significantly elevated. We expect an almost flattish year in the automotive sector, while the industry segment should resume growth.

Let me provide some content on the memory segment, which is the current hot topic and is often discussed as the key beneficiary of the current AI momentum. As the chart shows, DRAM chip revenue is expected to grow significantly in 2026 even though demand for DRAM wafers is projected to rise by a much smaller rate of 6% to 7%.

Let me explain the major parts of this difference. First, the most important drivers are price and mix effects, reducing the original growth rate by more than half. With supply remained tight, memory chip pricing has increased significantly and the product/mix has shifted towards higher-priced products such as HBM. Consequently, revenue growth is huge even without a comparable increase in unit volumes.

Second, we've seen the increase in bits per wafer, which means customers can produce devices that store more data per chip without increasing wafer starts. Technological progress and higher density means that the larger big shipment does not require the same increase in wafer starts. As previously mentioned, memory fab capacity is essentially fully booked for 2026, as illustrated by the red arrow in the graph. Therefore, additional capacity, which many customers already announced, will take time to ramp and will not significantly affect the 2026 output.

And third, we still see a small inventory normalization in parts of the supply chain that continues to absorb some of the volume uplift. These 3 effects help explain how this very strong DRAM chip revenue growth translates into mid-single-digit increase in demand for DRAM wafers.

Coming back to the limited memory fab capacity. Bringing new capacity on stream takes time, typically around 1 to 3 years. Overall, the mid- to long-term outlook remains positive. Higher AI CapEx should increasingly support wafer demand, as investments in memory and leading edge are expected to expand capacity.

Let's take a look at the key factors that will influence our performance in 2026. Starting with volume, we expect growth to continue, driven mainly by 300-millimeter where demand and loading is picking up further. On the other hand, we see continued weakness in 200-millimeter, primarily because the power segment still has high inventories and is suffering from some end market weakness. This will clearly impact the 200-millimeter wafer business in 2026.

Regarding pricing, we see continuous price pressure outside our LTAs, especially for 200-millimeter products, while in 300-millimeter, we see first reasonable spot prices. Regarding FX, the impact remains substantial given our U.S. dollar exposure. For 2026, based on our FX assumption, we expect the translation effect to be broadly similar to the prior year level, meaning FX remains a relevant headwind. Additionally, please keep in mind that the SD line closure will impact sales for the entire year for the first time.

Putting this together, we expect sales in '26 to be at prior year level, excluding SD and FX effects, while the reported year-on-year development is expected to be in the mid-single-digit percentage range below the previous year.

Let me briefly outline how we will continue to manage the headwinds in '26 with a clear focus on CapEx, costs and cash. Firstly, we will maintain strict CapEx discipline. After the peak investment phase, we are running at a significantly lower investment level and continue to be very selective on new project approvals. We prioritize only those projects that are essential and fully aligned with our strategic road map and continue to invest in maintenance capabilities and innovation.

Secondly, we will continue our full scope cost program addressing all major cost drivers across the organization. The objective is to further improve efficiency and secure substantial savings, while further developing our technical capabilities and our customer service level.

Thirdly, we keep a strong focus on other cash measures, in particular, a comprehensive working capital management. Overall, these measures are designed to strengthen our financial resilience and support our flexibility in 2026. As previously mentioned, we expect the market environment to remain challenging. Against this backdrop, we guide for sales in 2026 in the mid-single-digit percentage range below '25 based on the euro-U.S. dollar exchange rate assumption of 1.8.

On a comparable basis, meaning excluding FX effects and the SD line closure, we expect sales to be around the prior year level. For profitability, we guide for an EBITDA margin between 20% and 24%. We also expect a soft start into the year below average regarding sales and EBITDA margin. Depreciation is expected to increase significantly in '26 due to our investments in the 300-millimeter business. We already indicated this development in previous communications.

Most of the increase stems from our 300-millimeter operations in Singapore. In addition, our depreciation periods are, in general, comparatively short, which leads to a higher annual depreciation charge. We guide a regular depreciation between EUR 490 million and EUR 520 million, and therefore, EBIT is expected to be significantly below the previous year.

Turning to investments. We expect CapEx between EUR 180 million and EUR 220 million. As explained before by Claudia, cash payments for CapEx are expected to exceed this level. Thus, we expect net cash flow to be in the range of the previous year.

Already during our Q3 conference call in October, I presented a version of this slide. Since then, the list of awards has grown even further. It now also includes recognitions from Micron and ST. These additions underscore how broadly our customer base acknowledges our performance. The awards are strong validation of our technological leadership, our operational excellence and our reliability as a long-term partner.

Strong customer proximity not only reinforces our position as a trusted partner, but also helps us deliver solid results in the challenging market environment.

And with this, we conclude our fiscal year '25 results presentation, and Claudia and I are happy to take your questions. Thank you very much for your attention. Cynthia, please open the Q&A.

[Operator Instructions]. The first question comes from Harry Blaiklock with UBS.

The first is just around the prepayments. And you mentioned that customers have allowed you to push back prepayment refunds. And it looks like they've been pushed back quite a few years with around EUR 300 million being pushed out beyond 5 years. Wondering whether you could give some color on that? Is there anything to read from kind of from that on your view, your assessment on kind of midterm demand?

Yes. Thank you, Harry. And of course, as we highlighted with our last chart, we are very close and, let's say, very successful with our customers these days. And with some of them, we had those conversations. As you remember, LTA's volumes sometimes have been pushed out to later times. And in exchange, so to say, we agreed with certain customers also to push out repayments of the prepayments for a certain period of time.

For confidentiality reasons, we cannot tell you a great deal of details around the time frame. But obviously, you see it's a quite nice effect for the year '26, where initial assumptions have been significantly above the number of EUR 10 million, which we report today.

Got it. Makes sense. And then maybe one for Claudia, just around the 2027-'28 maturities. It seems like the undrawn SIM loan will probably be used for the '26 maturities. And then your pretty close to the EUR 500 million that you've said you'd to maintain just -- the EUR 500 million cash balance that you're going to maintain for running the business, and so would be great to hear just what's the current plan to address those '27-'28 maturities?

Yes, it's clear that -- and we also stressed it a bit that we start to refinance those maturities in 2027 and beyond that already in 2026. So we are just evaluating the options. We have not made any decisions yet on the instrument also or the amount. But of course, we are evaluating the options.

The next question comes from Constantin Hesse with Jefferies.

I've got a few, so let me start with the first one. Michael, I'm just trying to not get confused anymore around what leading edge really means. The CEO of SUMCO was quoted on the -- on their call, saying that there are only 2 players in leading edge, i.e., he was referring to Shin-Etsu and SUMCO.

So can you -- and obviously, Siltronic has obviously been saying for a long time that there -- that you guys are also leading edge. So can you maybe give a bit of color on -- or maybe just get rid of this confusion on, is there -- are there different -- are you just the leading edge in memory, not in logic? What exactly is -- just trying to get rid of this confusion, where exactly is the difference here?

Yes. Thank you, Constantin. You are right, there are indeed kind of leading-edge definitions around. Some, let's say, smaller ones are referencing to leading edge as not just being smaller than 5-nanometer in logic only, some would cover even some advanced memory, which I think is a wrong definition. The statement I want to make, no matter which definition, we are a qualified leading-edge player regardless of the definition, regardless of the scope of only logic or memory. We qualified with supplying and commercializing leading-edge products into all major leading-edge players, no matter which definition you take.

So by that, you mean all definitions, in logic and memory. So you're literally at par with SUMCO and Shin-Etsu and what the CEO said on his call was wrong?

So I don't reference to competitor statement. I can only say we are a widely adopted leading-edge player and commercializing leading edge products independent of even the detailed definition.

Okay. Still a little bit confusing. But okay, number -- the question number 2 is just on the operating business. There are -- some of your peers have started announcing some business restructuring measures for 200-millimeter. Are you potentially taking any initiatives in 200 as well given the weak demand environment?

And for 300, I found it's actually quite interesting. One of your peers said that their new greenfield 300-millimeter will be fully utilized by the end of '26. So how should we think about your new Singapore fab? Are you also -- basically also pretty close to utilized by the end of '26, and that would mean additional CapEx?

So thank you, Constantin. With regards to 300-millimeter, I think you are right. Our peers highlight this for quite some time that the business is under pressure. We also said very clearly that it's the one that got the most pricing pressure. We do not have any decision taking or any plans for restructuring or consolidation of whatever nature. But we're also monitoring the situation very carefully and we also listen, of course, to our peers being extremely vocal around this, which we are currently not there. But of course, we're also anticipating 200-millimeter be under some continued pressure also going into 2026, as we explained in the presentation.

With regards to 300-millimeter, as you know, we are under middle of the ramp of our Singapore fab. We do not see an urgent need to add additional CapEx while even some CapEx spending and from old orders is coming into our fab. So there's, let's say, capacity room in the existing framework. And then in due time, of course, with UTs further going up we will watch when we have to take the next step. Currently, we feel well prepared and set up for the demand that has been coming last year and is announced for this year.

And then it's a watch case for us. It's kind of modular situation where we're in a comfortable position. The shell clean room and all the infrastructure sits there and we can then relatively smoothly ramp more capacity as needed. Currently, we feel fine with what we have and what we have planned.

Michael, can I just point on CapEx? With demand running the way it is when would you potentially expect to have to start investing more into CapEx again to continue building out that fab?

So we don't see it yet, because as you know, our fab in Singapore is not a small one. We always said it's going to ramp over multiple years, 5 years, 4 years was a number we gave out. With demand as we see today, we -- again, we are in a comfortable position. We can follow the demand easily. We have the privilege that now all major customers are qualified in our new fab. So we can work with this and also move volumes between our existing fabs and the new fab. And then we would take a decision at the appropriate timing, which we currently do not see that.

Okay. And last question is to Claudia, a quick question on the balance sheet. I think you mentioned that you expect a decline in net debt from the second half of '26. So is it fair to say that net debt peaks in '26? That's it, thanks.

Yes. I don't want to speak forever, but regarding 2026, we expect, as I mentioned, a clear increase in net debt in the first half and a clear decrease in the second half of the year. So -- but that is planned, that is on purpose. And yes, that's how we see the net debt to evolve over 2026.

I meant rather if we look at over the next 3 years now with the development around cash, is it fair to say that we peak here or could...

Yes. Of course, depending on the market development. But right now, we see a market loading increasing in 300-millimeter. And this gives us quite a confidence for the future. We always have confidence in our future. But right now, it's getting better. And with that, yes, I can't promise, but first half of 2026 will be a peak.

The next question comes from Martin Jungfleisch with BNP Paribas.

Also I have a few. Maybe starting with 300-millimeter pricing. In your prepared remarks your were talking about in 300 millimeter, you're seeing first reasonable spot prices. So maybe just to clarify what that means? I mean given that 300-millimeter utilization rate should be improving gradually, would you see some room for price increases perhaps for some of your memory customers by the second half? That's the first question.

Yes. Thank you, Martin. Let me frame this a little bit. All what we said around pricing remains valid. So first of all, 2/3 of our business is in LTAs and in LTAs pricing is contracted, so no change there. Secondly, price pressure outside LTAs is continuing and is in place. And it's particularly pronounced in 200-millimeter, that's what we always said the lower the diameter much of the price pressure.

And now, let's say, the new bit of information we give out today is that we see, for the first time, first examples with reasonable spot price in 300-millimeter. I would not speculate today more, but it's a first new bit of information, which we want to give today.

Okay. So it's more like a stabilization and then increase? Okay. And then my first on 200-millimeter. I mean, just business in LTAs, but in new contracts that you're signing, is there still incremental price pressure or is the price pressure that you're putting into the guidance for this year, is that mainly like a rollover effect from last year?

I mean I hope you understand we cannot be too specific about new LTAs and pricing rollover and new effect. What I can say is we always have the freedom. If LTA conditions are not attractive, we don't have to sign, right? So in terms of LTA closing, new LTAs, we would only do it if it really makes sense. Also price-wise, and 200-millimeter is under pressure, that effect we have to accommodate in the future business development.

Okay. And then my final question is just on the input costs. I mean, you're in Singapore, Singapore relies quite heavily on natural gas for power generation. Just what's your view there on like any impact? Like do you have any hedges in place? And maybe also on the other side, if you see any impacts on availability of industrial gases, for instance, that you're using in the process like helium, et cetera, from the conflict in Iran?

Yes. Right now, we do not see any immediate impact, which should concern us. So the supply chain is intact. And regarding prices, we have hedging in place, not only in Singapore, but also in Germany. So on the energy side, we feel quite comfortable. And please, I would like to remind you that energy is in our cost position #5 or so. So yes, we are energy intense, but it's not that we heavily rely on energy prices. Of course, it's not nice if they are rising. But as I mentioned, we have hedging in place, and this should protect us from major negative impacts.

Okay. And then on the gases?

Same is true for gases. Supply chain is intact. So we do not have an impact here right now and we do not foresee it right now.

The next question comes from Robert Sanders with Deutsche Bank.

Can you just talk a bit more about the gap between spot and contract? It looks like spot slightly improving, but what's the percentage delta today? And are customers in light of longer lead times generally across the industry looking to perhaps sign more contracts going forward? Or how you think about that 2/3 percentage? I have a few follow-ups.

Rob, thank you very much for your question. I think you will understand that we cannot talk about percentage gaps or great details there. However, yes, loading in 200-millimeter is increasing -- did increase already last year, is continuing to increase this year, and that might give more opportunities. We see some customers considering their strategic 300-millimeter supply in more, let's say, detail. So it's a good positive dynamics for the wafer industry.

Got it. And in FabNext, what are you actually doing right now? Are you -- have you stopped hiring? Are you kind of pausing the fab? I mean I think you got 200,000, which is only 20% of the feasible capacity. So where are you at in terms of getting that to scale given that your CapEx guide is pretty low compared to the recent history?

Yes. I think we never talked about 200,000 or whatever in great detail. But we continue ramping. As I said, we are now since mid of the year where we announced that the major customers are qualified, we continuously ramp volume with these customers. We have, from the first wave of investment quite some space of capacity there and that is being ramped. Of course, in synchronization as we always said, with our existing 300-millimeter footprint in Germany.

And then in due time, when we feel demand is getting to the capacity limit, which currently is not obviously seen nearby, we would then bring more equipment into the fab. So I think it's a comfortable position. We can follow the demand. And currently, it's running very smoothly in ramping the fab.

Just last question. Have you actually reached cash margin parity in Singapore versus Burghausen? I guess, the reason I'm asking is you have more automation in Singapore, but you probably have lower fixed cash cost amortization. So I'm just interested whether you've reached cash cost margin parity?

Let me put it like that, breakeven always depends on how you will allocate to the fab. So this is one of our central activities that we do here, we allocate the volume where it's most reasonable. So we do not comment on breakeven points of certain fabs or specific fabs. But what I can say is that last year, we talked a lot about ramp cost in FabNext and that they put a burden on our P&L. Perhaps you've heard that I have not mentioned it yet, not because they manage, but they dilute more and more.

So with the volume that we bring in FabNext and with the ramp there, we see a clear fixed cost dilution there and profitability there is getting better and better. So we are very happy with the development of profitability in the new fab, which is together with SSW one company. So it's -- we are -- yes, as I said, we are happy with the development there.

The next question comes from [ Mason Thompson ] with [indiscernible] Metzler.

[indiscernible] Metzler. A few questions. The first one on the LTA topic, do you face any LTA in 2026 or any contracts that run out?

So thank you, [ Mason ]. We do not indeed see an LTA cliff. And during the course of '26, no major LTA will expire, I think we mentioned that already previously. And we look at LTA as a kind of portfolio, sometimes 1 goes, 1 comes. There's opportunities always even in market down situations, we said roughly we won't have 2/3 of our business in LTAs. That's not written in stone, but it's a, let's say, enough framework for us. And of course, we highlighted particularly around our fab in Singapore, 80% of the business there is in LTAs with -- did also correspond to those prepayments, which have been discussed earlier today already.

Got it. And then the second question, just trying to understand your top line guidance a little bit better. So at mid-single-digit decline that means and your sales will be roughly down EUR 70 million, 1 13 FX in average 2025 versus your guidance, 1 18, which means we have EUR 50 million FX headwind there. So then you expect a volume growth of 5% to 6%, at least the market volume growth?

And then you have the small diameter business. Can you quantify that? What was the first half of 2025? So which basically I'm trying to understand how much price or product/mix impact do you anticipate here in your guidance, particularly if 2/3 of the business is LTA and the ASPs are quite stable there?

I think -- thank you, [ Mason ], for this question. I think we were pretty clear on one of our charts that without the SD and the FX effect, we would be on the previous year level. So that means roughly speaking, volume, price and mix are compensating each other. I'm a bit reluctant to comment on your volume assumptions, we will then go into very details of market share developments, et cetera. But you can assume that volume price and mix are game, so to say.

Got it. And it will be probably more the product/mix, right? So higher nonpolished wafers in 300-millimeter and some price decline in 200-millimeter probably, right?

I mean we're also a bit reluctant to comment, but as we talk repeatedly about advanced specifications, leading-edge advanced memory being fully loaded, you can kind of derive, yes, it's more the mix effect as well.

Got it. And then another question regarding the -- there was one of the previous questions already touching the leading edge topic. Or asked differently, if you are qualified for the really leading edge nodes and like TSMC, they built initial capacity for leading edge when they go to 2 nanometer manufacturing node. But later, they add more capacities as they move volumes to this leading edge, which then becomes kind of leading or not leading edge node at a certain point after 1, 2 years.

Can you say that you keep your market share stable when this happens? I mean when TSMC adds more capacities to the former leading edge node and they expand the capacities, you still keep your market share stable versus when you initially qualified at this leading edge?

Thank you, [ Mason ]. I'm not sure whether I got the question exactly. What I can say is the following: One of our strategic focus area is -- has been communicated is, of course, we want to be and we are a technology leader on that, particularly focused on leading advanced specifications.

So we have, according to our, let's say, analysis we have in this advanced specification, we have above average market share. And if this segment is growing faster than legacy, which needs to be proven because legacy growing significantly, then the share would grow correspondingly.

On the other side, we have to be aware that all those advanced specifications, particularly leading edge when you have a capacity of a certain amount for legacy nodes and you convert it to leading edge, then less wafers are needed in the same capacity as processing is needing more time and wafers, so to say, are certainly longer in the manufacturing footprint. So therefore, there is also a kind of compensating effect. And then with new capacity as you hinted and as we also showed for the DRAM memory, then of course, that effect would be also overcompensated again. So there are multiple things coming into play. But for sure, leading edge is very attractive for us, and it's one our key focus areas.

Got it. And then the final question on the 200-millimeter. I think your competitor, one of your competitors said yesterday, a little bit around -- comments around 200-millimeter that they expect the peak of inventories behind that, then a mild recovery. Do you see any level of inventories in the industry, particularly in the auto where you can -- where we can assume a new inflection point in terms of wafer starts and for your wafer demand?

So we see still -- particularly in the power and industry segment, we see significantly elevated inventories that overproportional affects the 200-millimeter business. And maybe just a note of caution, if some of our peers talk about 200-millimeter, they sometimes include statements around gallium nitride or SOI technologies, which we are not pursuing. So therefore, statements around inventories can differ whether the scope is more general or whether the scope is focusing on silicon, and that's what we are doing.

The next question comes from Gustav Froberg with Berenberg.

Just a quick one on DRAM, actually. Just on the slide that you showed in terms of, I guess, bit growth and bit density and how it impacts wafer demand. Do you see that the current state of, I guess, technological advancement means that there is a bigger drag on wafer demand today versus previous shifts in technology. And as a follow-up to that, I mean, does this mean then that with this going on and if the answer is yes to question one, that we should expect the wafer market to take longer to reach the sort of levels of previous years when it comes to shipments?

Yes. Thank you, Gustav. I think we would look at this more as a continuous development. It's not kind of over proportionately or even exponentially growing in terms of the drag, as you call it. We also know, of course, that the customers are reacting already to this, maybe also the CapEx and the project road maps of the big, particularly in memory, players. And then once they launch, of course, it's also a ramp for the wafers, which, to be honest, is sometimes even a bit ahead of time as it starts already with first test and monitor wafers and those kind of activities here. So therefore, I don't think there will be particular, let's say, delaying effects, as your question stipulates from this bit growth.

Next question comes from Daniel Schafei with Citi.

Basically, I just wanted to ask a few market assumption questions. First one being on your slide, I'm seeing that you're seeing smartphones, the end market being -- volumes being down 2%. With now the kind of quarter of being done and a lot of the smartphone players talking about kind of volumes dropping, let's say, 5% to 10% or even worse. Could you explain a bit what your assumptions are for this kind of 2%, that would be great to understand?

And then also the second question would be also on market share, just coming back to that. Before you were usually stating stable market share and kind of that this is among the four players, I'm just wondering, are you still kind of when you're stating market share, is that still among the four players? And how -- or are you also now kind of factoring in China within that? And yes, sure, I understand they're maybe not in the very leading edge 300 millimeter, but they are adding capacity, and that is a potential risk down the line as well. So I'm just trying to understand how you see your share there as well.

Thank you, Daniel. To your first question with regards to smartphones. I mean, our numbers we're communicating is, as we said, it's prior to all potential, let's call it, Iran effect. When you look at those numbers sometimes being communicated, which are significantly pointing negative, let's make sure we don't mess up quarterly communications with full year communications, that will be my first point.

But what we see is definitely the kind of effect from the memory shortage and all the -- not all, but significant parts of the available memory chips, particularly in the high end, all go into the AI segment, which continues growth, and that leads to a certain shortage into the smartphone.

Will it become worse over the year? To be honest, we don't know. We said clearly we will report when we have, let's say, more visibility, what happens in the Middle East and whether that would also affect the overall, let's say, market sentiment. We will most likely come up with an update of the model in our next call. But we are aware of those, let's say, announcements that are a bit more negative. On the other side, there are also some more positive on the industry around. So for the time being, we feel that the assumptions here are well set. But you're right, it's a kind of a watch case for the course of the year.

With regards to your market share question, there are not 4, 5 players or even 1 more in there reporting into this semi organization. And this is the space where we have a lot of precision, a lot of detail because all the players reporting here on a monthly basis. And we know very well and very precisely what is going up, what is going down. And in this space, we are moving in a good direction.

We also, of course, look at the total situation, including China. Sometimes that information around China is a bit more, let's say, foggy and assumption based. But what we see, of course, yes, there are capacities being added continuously. The Chinese wafer manufacturers develop. They keep developing technology and quality. For the time being, they are focusing extremely on a local to local supply chain model, which is also supported by the China 5 years plan.

And we also see that their ability is still not in a situation where they can do anything what we would call a leading edge or advanced memory. But this is a watch case going forward. On the other side, we see also companies like TSMC having announced it's going to be less dependent on China supply for, let's say, geopolitical reasons.

We see the China chip industry being burdened by some bans on the chip side, so they do not get advanced machines, et cetera. That means there is a certain burden to develop those leading edge and advanced technologies on the chip side in China, which is also a burden, of course, to develop, let's say, advanced specifications for the wafer manufacturers in China.

So it's a complex game for us. It's a watch case. We also, of course, are doing business in China, as you know, and our share of the business comprising, what we call, Greater China, so that's the People Republic of China and Taiwan did slightly increase when you start our annual report in '26 versus -- '25 versus '24.

And if I may slip also a modeling question for Claudia. Just to quickly understand a year ago-or-so, you've mentioned that maintenance CapEx is around EUR 200 million. Now you're guiding to EUR 180 million at the low end. Just trying to understand did things shift? Is now kind of maintenance CapEx more something like EUR 160 million? Or yes, could you just give us a bit more color on that, that would be great.

Yes, we guided EUR 180 million to EUR 220 million for CapEx. And yes, we said EUR 200 million steady state CapEx on average over 5 years with some years being lower or higher. And this year is obviously lower than 200-millimeter -- than EUR 200 million, sorry, but we cannot disclose any further details on how much the maintenance CapEx.

By the way, our steady-state CapEx is not just maintenance, is also capability and cost position or product mix CapEx. But we cannot disclose the exact amount this year. But obviously, it's lower than the average of EUR 200 million that we stated for steady-state CapEx.

The next question, a follow-up question comes from Constantin Hesse with Jefferies.

Just a very quick follow-up. Claudia, over to you quickly on the refinancing. I mean you're obviously looking at instruments and magnitude, but looking at the payback that you have to do in '26 of EUR 100 million and your cash buffer running close to the EUR 500 million, as previously pointed to. I mean I just want to say, can you comfortably say that refinancing these, given the current financial situation of the company, that you would potentially be able to keep interest rates in place? Or would you expect interest rates to worsen? And as a result, would you consider equity options instead?

One general remark upfront. You mentioned EUR 500 million to be our cash buffer, we always said that we have no fixed amount. Our cash buffer always depends on the assumed cash outflow for our cost and invest. And we want to make sure that liquidity covers several months of payouts for cash cost and invest. So EUR 500 million is not a fixed number that we have, so that as a general remark.

And regarding interest rates. When we do financing, yes, that heavily depends on the instrument that you take. So for example, a convertible, for example, is much lower in interest rates compared to a term loan. So it's not clear yet which interest rate we will achieve when we do the refinancing. And regarding your question about capital increase, there are no specific plans to do a capital increase right now.

The next question, a follow-up question comes from [ Mason Thompson ] with Bankhaus Metzler.

Yes, [indiscernible] again. Just a quick follow-up on the memory and on your Slide 14. I was just wondering if I got that correct. So you basically mentioned that the new capacities, which memory vendors are planning till first wafers hit the market or you see the demand, it will take 1 to 3 years, and I was wondering if I got that correct and why this assumption? I mean, if I'm correct, 2024 all the memory vendors have converted their spare capacity to serve level DRAM, so using that basically as HBM memory.

And now they are all fully utilized, fully booked out, and we have seen in Q4 that all those guys are accelerating their CapEx plans. And historically, it took around 6 to 9 months, particularly when customers are double ordering. There was always an incentive to bring capacities much faster online to grab market share of volumes. Why would that be 1 to 3 years this time?

So thank you, [ Mason ]. I mean, 1 to 3 years always starts the question when does 1 to 3 years start, we were not very precise around this. Yes, CapEx road maps have been again accelerated, but you have to have in mind that they also pulled a brake not so long ago now. So construction progress was interrupted and now is resuming and maybe it's also accelerating here and there. What we know, that's the statement in our presentation today, is that we will not see most likely an effect in 2026 from this. And then in outer years, yes, there will be first effects.

So as I hinted, even though such a chip factor is not fully fledged and running at full capacity. Of course, there will be first wave of being used in terms of test wafers, monitor wafers and so on. So it will be a smooth increase in wafer demand eventually our statement is we will not see a major effect from this yet in the current year.

Got it. Just a brief follow-up on this. If you -- I mean on your -- one of your competitors stated yesterday that they saw already some rush orders, but they were not sure if that's sustainable or if it's just because some customers have very low inventory already. And do you see a similar dynamic? And are your memory customers giving you kind of extended visibility at this stage already? Or is it still unchanged versus last year?

No. What we see is, of course, the volume dynamic is there. It's consistent. It started last year. It continues into this year. We see some of the memory players looking into let's say, further strategic supply opportunities. So obviously, the memory situation is driving a different attitude already into the chip manufacturers. And they look maybe already a bit differently on the wafer situation now than they used to look maybe, as you stipulated, than maybe a year ago. Yes, that's absolutely right.

The next question, a follow-up question comes from Martin Jungfleisch with BNP Paribas.

Sorry, just one quick follow-up question on one of the earlier ones on the prepayment. Can you comment if the pushout of the prepayments had any impact on pricing to the LTA customers? Has pricing been adjusted in any way to those customers?

Thank you, Martin, a very short answer, no impact on pricing.

There are no further questions at this time. I will now turn the conference back to Ms. Malgara for any additional or closing remarks.

This concludes our Q&A session. Thank you for joining us today. We will release our Q1 2026 figures on April 29. On this slide, you can also see our next IR activities. Have a good day, everyone. Bye-bye.

This concludes today's call. Thank you for your participation. You may now disconnect.

Hello everyone, and welcome to the presentation of Siltronic's Q3 2025 Results. Please note that this call is being recorded and streamlined on Siltronic's website. The call will also be available as an on-demand version later today. Your participation in this call implies your consent with this.

At this time, I would like to turn the conference over to Stephanie Malgara, Senior Manager, Investor Relations at Siltronic. Please go ahead.

Thank you, [ Cynthia ]. Welcome everybody to our Q3 2025 results presentation. This call will also be webcast live on siltronic.com. A replay of the call will be available on our website shortly after the end of the call.

Our CEO, Michael Heckmeier and our CFO, Claudia Schmitt, will give you an overview of our financials, the current market developments and our guidance. After the presentation, we will be happy to take your questions.

Please note that management comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. All documents relating to our Q3 2025 reporting are available on our website.

I now turn the call over to Michael for his remarks.

Thank you, Stephanie, and a warm welcome also from my side.

Let me start with the key messages of today's call. As anticipated, Q3 was the weakest quarter of the year, mainly driven by expected volume shifts into Q4 and FX effects. The market environment remains challenging and wafer demand continues to be soft, in line with the trend we have observed in recent quarters.

We managed the situation by taking active measures to control costs and cash. At the same time, we stay close to our customers, ensuring that we align production and deliveries with actual demand and remain a reliable partner.

These measures help us to navigate the current environment effectively and deliver on our commitments. Today, we can confirm and specify our guidance for the full year, although we had to further adjust the FX assumption as the weakening U.S. dollar remains a relevant factor for our performance.

Finally, as you've probably seen in the media over the past few weeks, there has been some positive news flow from the semiconductor industry. Several companies in our sector have improved their results, clearly benefiting from the ongoing AI momentum, particularly in the memory segment, which has gained further traction in recent months.

I would like to emphasize that these effects are not yet visible in the short term for Siltronic as some of our customers are still in the process of normalizing their inventory levels. Nevertheless, we see these announcements as confirmation of the long-term growth trend of the semiconductor and wafer industry, and we are well positioned to benefit once demand is further picking up.

Let me give you a broad overview of our development in the third quarter. Claudia will provide more financial insights in just a moment.

In line with our expectations, sales and profitability weakened in Q3. Sales came in at EUR 300 million, which has declined compared to Q2. This development mainly reflects the temporary volume shift into the final quarter of the year, as well as the continued FX headwinds.

Our EBITDA margin was 21.9% compared to 26.3% in Q2. The decline was primarily driven by lower sales volumes and FX effects. As a result of the reduced EBITDA and because of significantly higher scheduled depreciation related to our new fab in Singapore, EBIT fell to minus EUR 31 million.

CapEx totaled EUR 90 million, primarily related to our new fab in Singapore. Consequently, and as anticipated, the net cash flow remained negative at EUR 30 million. Finally, our market share remained stable on a year-to-date basis. This underscores our resilience in a continued challenging market environment.

Let's move to the financials. Claudia, please.

Thank you, Michael. A warm welcome from my side as well.

I'm pleased to walk you through our performance over the past quarter and highlight key developments. As Michael mentioned, sales in Q3 developed in line with our expectations, totaling EUR 300 million, an 8.7% decline compared to the previous quarter. This decrease was mainly driven by a lower wafer area sold due to a planned shift to Q4 and by FX effects.

The euro continued to strengthen against the U.S. dollar reaching an average rate of EUR 1.17 in Q3 compared to EUR 1.13 in the previous quarter, which had a noticeable impact on our reported sales. In addition, we saw slightly negative price effects.

Our EBITDA came in at EUR 66 million, down EUR 20 million compared to Q2. This decline resulted from weaker sales and the ramp cost of our new fab in Singapore recorded in the P&L since August. As previously communicated, this will weigh on our profitability for now. However, the impact will ease as volume grows.

In the quarter-on-quarter profitability comparison, it is also worth noting that Q2 benefited from a positive non-operating effect related to spare parts valuation. Consequently, the EBITDA margin declined to 21.9%.

Along with the successful customer qualifications, depreciation for the new fab also started in August, having a significant effect on our EBIT, which amounted to minus EUR 31 million. Taking all these factors into account, Q3 net income came in at minus EUR 44 million.

Let's move on to the balance sheet, which shows a solid and healthy structure. When comparing the 9-month figures, please keep in mind that significant portions of our balance sheet are subject to the translation of Singapore and U.S. dollars into euros and that the euro's appreciation has resulted in FX valuation effects.

Following this, total assets stood at EUR 4.9 billion at the end of September compared to EUR 5.1 billion at the end of 2024. The euro strength was most visible in fixed assets given our significant presence and ongoing invest focus in Singapore. Despite CapEx exceeding depreciation, fixed assets declined due to a 6% depreciation of the sing-dollar.

Cash inflows from operations combined with the partial drawdown of our syndicated loan in Q2 did not fully cover CapEx payments and prepayment refunds over the 9-month period. Consequently, cash and securities declined to EUR 510 million, yet our liquidity position remains solid.

In turn, trade payables, mainly those related to investment activities decreased from EUR 280 million at the end of '24 to EUR 232 million by the end of September and prepayments were reduced to EUR 529 million. Financial liabilities increased as planned by EUR 36 million. Our equity ratio remained stable at a healthy level of 43%.

As you can see, our CapEx has been significantly scaled back since the peak in 2023, totaling EUR 308 million year-to-date and demonstrating our continued focus on disciplined capital allocation. However, payments for capital expenditures once again exceeded the invest level, reaching EUR 340 million year-to-date.

Such timing differences between CapEx and payments are influenced by factors such as the timing of asset additions during the year, the completion of construction phases or specific payment terms. Looking ahead, we anticipate some rollover effects into 2026, though at a lower investment level.

Let's turn to our cash and debt position. Liquidity decreased from EUR 664 million at year-end '24 to EUR 507 million as of September '25, mainly due to substantial CapEx outflows and the repayment of prepayments. Including the undrawn EUR 127 million portion of the syndicated loan, we continue to maintain strong financial flexibility.

Financial debt remained stable at around EUR 1.55 billion with initial repayments of around EUR 65 million scheduled to begin in Q4. Compared to our Q2 communication, the overall debt level, drawn facilities and maturity profile are largely unchanged.

Net financial debt amounted to EUR 933 million at the end of Q3, marking the peak for 2025. In Q4, we expect an improvement driven by superior business development, positive working capital contributions and an improved cash flow from investing activities.

With that, I'll hand it back over to Michael.

Thank you, Claudia.

Let's take a look at the key factors that influence our performance. We see a gradual recovery in volume since the sharp decline in 2023. This is mainly driven by the 300 millimeter segment where demand has started to pick up again, an encouraging signal after 2 softer years. We clearly expect this volume upturn to continue beyond 2025.

However, 200 millimeter demand remains weak, primarily because the power segment still has high inventories and is suffering from some end market weakness.

Regarding prices, we see a continuous price decline outside our LTAs, which is visible in all diameters, but more pronounced in the segments below 300 millimeter. It is likely that we will continue to face this trend beyond 2025.

In addition, foreign exchange effects are substantial as the weaker U.S. dollar had a significant impact on reported sales. Compared to the U.S. dollar level at the beginning of the year, the euro has strengthened significantly, which translates into an expected negative top line impact of around EUR 50 million in 2025 versus '24. Over the past 3 years, we have incurred more than EUR 100 million in sales losses due to unfavorable FX exchange rate developments.

Let me summarize the main developments we see across end markets. Overall, wafer consumption is expected to increase by up to 8% in 2025, driven by strong AI-related momentum. Recent tariff announcements have created uncertainty in the markets, but the underlying demand trend looks healthy and overall is a significant improvement from the slight decline in 2023 when the downturn began. Server demand remains the key driver, continuing to benefit from the strong momentum in AI, particularly through sustained investments in data center infrastructure.

The PC market has shown a substantial step-up largely due to the launch of Microsoft Windows 11, which has significantly increased demand. Overall, the majority of this growth comes from content and only a smaller share coming from unit growth. This underlines that the innovation model for all end markets is intact.

Looking at specific inventory levels: memory inventories are starting to come down, which is encouraging. Although, logic inventories are in good shape. However, as previously mentioned, power inventories remain elevated. It is important to note that inventory headwinds persist, although they are gradually decreasing. They continue to dampen the full volume impact on wafer demand.

Foreign exchange continues to be one of Siltronic's main external headwinds. Why is this? We have a U.S. dollar exposure of more than 80% of our top line. This makes us sensitive to exchange rate fluctuations. Throughout 2025, this headwind has accelerated driven by the continuous weakening of the U.S. dollar against the euro with a particularly strong impact on the second half of the year. Without this effect, our sales would be roughly at the same level as last year, rather than showing a decline.

Let me briefly outline how we manage the current market environment in a proactive and decisive manner. The measures will sound familiar to many of you as we have consistently been emphasizing these priorities over the past quarters.

Firstly, we are maintaining strict CapEx discipline. We have deferred selected investments, especially with our new fab in Singapore in synchronization with market demand. Also, we apply restrictive new project approvals to ensure that every euro spend is fully aligned with our strategic priorities.

Secondly, we've launched a comprehensive program covering all key cost drivers. Our goal is to drive efficiency and secure lasting savings across our operations without compromising our technological capabilities and customer service. I will provide more details shortly.

And thirdly, we continue further cash measures such as closing our small diameter line or working capital management. Together, these actions strengthen our financial resilience and ensure that we remain well positioned even in this challenging market phase.

This slide provides a closer look at our capital expenditure. As you can see, 2023 marked the peak of our investment cycle, mainly driven by our new fab in Singapore. Since then, CapEx has come down significantly, and this trend continues in 2025.

If you look at the right-hand side of this chart, you can see that CapEx has declined steadily on a half year basis. For the second half of this year, we expect a further reduction, reflecting our strict investment discipline and our ability to adapt to the market environment.

Going forward, we will continue to invest selectively and within a disciplined financial framework. But I can assure you, our strategic focus remains unchanged, the ramp of our new fab in Singapore according to the market environment and a necessary steady-state CapEx level to support our global operations.

Cost discipline has always been a strong part of Siltronic's DNA, and we continue to build on this strong track record. We have a global cross-functional program in place that targets all major cost categories: labor, supplies, raw material and energy.

One example I would like to emphasize, our headcount program, which is progressing as planned. By the end of September '25, our total workforce was about 10% below the level of end 2022 despite the ramp of the new fab.

Additionally, we are driving energy efficiency measures that have already reduced the electricity consumption by around 5% compared to 2022. All initiatives will run through until the end of 2026 and will contribute increasingly positive to our results over time.

At the same time, during the ramp of our new 300 millimeter fab, we are temporarily seeing higher fixed costs that are not yet fully absorbed by production volumes. These costs have been capitalized until mid-2025 and since then are impacting our P&L. This will lead to temporary margin pressure. However, once volumes go up, the burden will significantly reduce.

While we remain focused on cost discipline, we also built the foundation for the next growth phase. At the heart of this are our customers, and we are proud to do business with all big names in our industry.

Over the past 12 months, we have received multiple supplier awards from some of our key customers. Some of these are displayed in this slide. These recognitions are a strong validation of our technological leadership and reliability as a partner. The strong customer proximity not only reinforces our position as a trusted partner, but also helps us deliver solid results even in challenging market environments.

In closing today's presentation, we would like to share our guidance for 2025. We confirm our full year guidance, although we have further refined our FX assumption.

Our outlook now reflects a euro U.S. dollar exchange rate of EUR 1.17 for the second half of 2025 compared to EUR 1.15 previously. Sales are still expected to come in mid-single digits below '24 levels.

We narrow our EBITDA guidance from 21% to 25% to 22% to 24%. EBIT is expected to show a significant decline, mainly as a result of the start of the depreciation of our new fab in Singapore.

Depreciation is now expected to be between EUR 340 million and EUR 360 million compared to our previous guidance of between EUR 340 million and EUR 400 million. CapEx is expected to be between EUR 360 million and EUR 380 million, which was EUR 350 million to EUR 400 million previously.

Last but not least, cash flow is projected to be significantly improved compared to last year, although it will remain notably negative due to our continued high investment activity.

With this, we conclude our Q3 2025 results presentation, and Claudia and I are happy to take your questions. Thank you very much for your attention. Cynthia, please open the Q&A.

[Operator Instructions] The first question comes from Daniel Schafei with Citigroup.

So, I just wanted to ask you on the competitive dynamics you're currently seeing. So, I'm just wondering, some of your peers are now past the trough and seeing stronger AI wafer demand, whereas you're kind of seeing a slightly lower benefit there, yet you're still pointing to a stable market share. And so I'm wondering what are the drivers which help you maintain your share in this current environment where power is kind of weaker? That would be the first one.

And the second question would be on pricing. You mentioned headwinds, especially in lower diameters. You mentioned before that you have a power, edge in 200 millimeter, which should aid you in competing for -- with China in that field. Do you see China being more active there? If not much, then what precisely can they replicate in terms of this power, edge 200 millimeter that you have, and kind of what prevents them of taking more share in these wafers?

Thank you, Daniel, for your questions. The first one, we have always said that we are exposed to all major segments in industry that means memory, logic and power almost with an equal share with a slight overexposure into the memory segment. So what we see in terms of market share is, of course, an average of those segments, an average of multiple customer effects. And here, we are on a stable track.

So, it's typically a give and take at certain segments and customers, which holds true for us and our competitors as well. So therefore, there are no major shifts at all from AI demand where we are benefiting and participating as well as some of our peers.

With regards to the pricing, yes, it's more pronounced in the lower diameters. Particularly China was the question. I think China is well advanced at lower diameters, that's what we always said. The smaller the diameter, the more is, let's say, the China activity there. The more also the price pressure is pronounced. That was one of the reasons why we exited the small diameter business. So everything below 150 millimeter is history for Siltronic. We concluded that phase out in mid of the year.

200 millimeter, as we said, is under some pressure. Volumes are stable roughly, but not growing. And in 300 millimeter, we see a significantly growing volume trend, which is driven by AI. Here, I would say, the Chinese competition is on a way to localize some of their activities, means Chinese chip manufacturers also buy from Chinese wafer suppliers, certain wafers. And outside China, we see some activities on lower grade test wafers and simple specification. So, there is, let's say, no breakthrough news or any significant change to our statements we made around this situation in the previous calls.

The next question comes from Constantin Hesse with Jefferies.

I've got 3. I just want to start a little bit on momentum and customer conversations into next year a little bit. So I understand that 200 millimeter, I think, that's kind of expected. No major improvement there. Industrial activity is expected to remain relatively sluggish next year. So the focus is obviously on 300.

Looking at 300, legacy 300 seems to be flat to improving. And obviously, leading edge 300 millimeter is doing all the work. So, I'm just trying to get a feel for what your customers are seeing in terms of what they potentially expect next year. And within the mix of legacy and leading edge 300 millimeter, could you give us an indication of how much the mix today is -- it doesn't have to be for Siltronic, because I know that you typically don't provide this for Siltronic. But maybe a market indication, how much is leading edge today of 300 millimeter compared to legacy 300 millimeter? Let's start with that.

Constantin, thank you very much for your questions. I mean, as you know, today, we don't guide '26. So my comments around your questions will be a bit more, let's say, high level. I think you are absolutely right. The power segment is indeed the one being still significantly elevated in inventory levels and that will not be depleted very short term. So there will be definitely clear hangover effects into next year, which might, of course, particularly influence the 200 millimeter segment.

In 300 millimeter, we see indeed the growth trend driven on leading edge specifications on advanced nodes. It's a difficult task to kind of differentiate really between leading and legacy as there are even multiple definitions in the market. But the volume upswing will be mainly driven by larger means higher specification, including leading edge, which will be, I think, a significant volume growth to be continued.

On the other side, when you have in mind our chart with all those arrows, we would also see the major trends there being continuing into -- beyond the year's end. So means the price and mix effects, and particularly the FX effects, will be definitely opposing the described volume trends. So that's maybe as much as I can say today for an early view into the market environment in '26.

Could you maybe, Michael, just a follow-up on that. I mean, let me try it differently. Compared to conversations that you were having with customers at the end of '24, have these -- are conversations today showing a bit more -- are they more optimistic today? Are they perhaps a little bit more positive compared to what they were then? Is there any reason to be a bit more positive about '26 than you would have been at the end of '24?

Yes, I think, by and large, we can say that the memory environment is, let's say, on a more positive tune. In the meantime, some of the customers are back to really healthy inventory levels, not everybody. There are still elevations here and there. So definitely that's, I think, better in terms of tonality and atmosphere.

Logic never was that bad anyway. So especially leading edge logic is a driver of this whole development and particularly loaded in the industry. And power, as we -- as I indicated already, is still, let's say, the worst out of those 3 segments, and it's going to hang over beyond the year's end for sure. But for the other 2 segments, we can say tonality and atmosphere did brighten up a little bit.

Okay. good. And maybe, Claudia, going over to you. Clearly, trying to protect cash flow here given the continued sluggish environment. Just to have an idea, can you just remind us again roughly what the repayment cycle is going to be over the next 2, 3 years?

And just for 2026 specifically, just sort of, I mean, without guiding, but just to have an idea because, obviously, you will be cutting CapEx further. So your maintenance CapEx runs at about EUR 200 million -- or roughly EUR 200 million as far as I understand. How should we think about the expansion area like? Do you think you can bring free cash flow to at least breakeven next year?

Yes. Let me put it that way. We don't guide for 2026 right now. But of course, I can provide some context around 2026. So right now, we have quite a solid cash position. And taking into account that we also have another -- roughly EUR 130 million undrawn loan, we have quite a good flexibility going into 2026.

In Q4, we will start to repay loans with an amount of EUR 65 million roughly, and next year roughly EUR 100 million or a bit more, EUR 105 million or so. But looking into 2027, there's more to come, more to repay. So most likely we will have to make a refinancing next year.

Of course, we try to protect our cash, as you said. So we will bring down the CapEx level next year even further. But right now, we do not do any guidance on that. You have to wait until, let's say, February or so. But I can promise that we will bring down our CapEx level next year again.

But as I mentioned during my speech, there will be a rollover effect from CapEx payments. So asset additions this year will lead to some CapEx outflows next year. So this is more or less what we can say now about 2026. More details we will provide beginning of next year.

Okay. Maybe just to try and go a little bit further into this view, with regards to the refinancing, are you comfortable on the refinancing? Or do you see any reason for having to go into equity markets here? Are you comfortable that you can refinance it all via debt?

Definitely. So there are several options that you can use to refinance. And there's a high interest by financing partners. They are actively approaching us about refinancing. So we -- there's no doubt that we can refinance what has to be refinanced.

Last one, Michael, over to you. I think this does become quite important now because China is, obviously, becoming a bit more of a risk feels to me compared to the last few years. So I know that you don't break down Mainland China, but I think it's really starting to get important to understand what the risk is for Siltronic if the Chinese start making a dent on volumes overall. So what -- how much of sales could we potentially be talking about being at risk, call it, at 200 millimeter or 300 millimeter legacy? Just to have a rough idea of what the risk could be over the next 3, 4, maybe 5 years if the Chinese really start catching up?

Yes. Thank you, Constantin. Yes, China is, let's say -- so we don't single out details. What we say is Greater China, so that means Mainland China and Taiwan together for us, are 36% of revenue last year. What we also say are both are more than 10%. Both are double digit.

More details, we will be reluctant to break down for, let's say, also competitive reasons. What I can say is, we have a more lower exposure to Mainland China than some of our peers. And we see in recent times more a, let's say, sidewards market share development for us. So not a significant pressure or decrease. So it's an attractive market for us. Some of the customers really love us as partners and are kind of building in relation with us.

On the other side, of course, competition is building there, its growing there, so we're fully aware of that. But let's say, our exposure is not huge. It's smaller than, let's say, the average of the industry from the Western manufacturing side perspective.

The next question comes from Gustav Froberg with Berenberg.

I have a couple, if I may. First, on sort of the sluggish recovery in wafer shipments. Clearly, things are happening, but slow as has been the case in the last couple of quarters. With a bit of reflection, is there now anything you can point to in terms of maybe structural elements that are causing fab sort of buying to be a bit slower than it has been in the past, maybe elongated fab cycle times or anything of the sort? And is there anything you can point to in terms of a tipping point where you think this might change and properly reaccelerate again, maybe broader adoption of HBM memory or anything of the sort? So that would be my first question.

Second is around working capital contributions. You mentioned a positive uptick in working capital cash inflow in Q4. Could you help us understand the magnitude there, just so we can understand a little bit better how to think about the year-end cash balance?

And then last one is on loading in Singapore and just how you're progressing with the fab build-out there? Those would be my questions.

Yes. Thank you very much, Gustav. I will take your, let's say, volume effect question and the loading in Singapore and then hand over to Claudia for the working capital related question.

Structural changes on volume effects, I mean, volume is driven by 300 millimeter and it's by AI and some, let's say, smaller effects around AI. In terms of high-bandwidth memory, we see that growing significantly. There are those effects you're mentioning, yes, so high-bandwidth memory wafer is maybe processed longer in a chip manufacturing cycle.

On the other side, also we see, let's say, yield of those manufacturing is lower than, let's say, standard memory yields. So therefore, there are 2, let's say, opposing effects. Overall, volumes seem to be almost on 2022 levels as some of our peers also reported. So it looks quite a volume growing situation again. Other structural effects, I'm currently not aware of.

So when you add more complexity, let's say, the technical requirements on wafers get higher, which allows, let's say, a very close technical collaboration with customers. And which is maybe an additional, let's say, burden for new entrants into this industry. That's maybe another thing where we see advanced leading edge and those kind of colors really have very high-tech requirements where, of course, we are perfectly, perfectly strategically positioned with our new fab in Singapore, having this fully automated and all the state-of-the-art metrology tools in place. I mean, that's now really, I think, a great positioning. That's maybe another effect that there's more high-tech and advanced requirements.

And with that, loading in Singapore is progressing as planned. We reduced the initial ramp speeds. But now, of course, loading is gradually climbing up. We have achieved the major milestone mid of the year that major customers are now qualified for advanced and leading specifications there. So therefore, we can more and more use the fab.

But as indicated, of course, we're doing, let's say, the further ramp and bringing in new or additional tools very carefully. We have some, as Claudia described some hangover from our orders for the first wave of equipment coming into Singapore, and we are kind of pulling the brake of more as we currently don't need it yet. So we will synch further scale up then really with market demand.

And with the qualifications being achieved, we are in a position now with using the capacity, doing some preferred loading there to drive volumes into Singapore, but in line with, let's say, market demand and, of course, a relative restrictive CapEx approach to protect our cash.

So for the working capital question, Gustav, I hand over to Claudia.

Thank you. Thank you, Gustav, for your question. As indicated in our guidance, Q4 is expected to be the strongest quarter in 2025. And to ensure timely deliveries in Q4, we built up inventories in Q3. So you see that in our balance sheet and in the cash flow statement. This, obviously, led to a negative cash effect in Q3, which will reverse into a positive effect in Q4 when we reduce the inventory again. So this is more or less the working capital effect that I mentioned.

And regarding cash flow in Q4, as mentioned before, we anticipate an improvement in cash flow from investment activities as well. So those are the major factors impacting the cash flow in Q4.

The next question comes from Florian Treisch with Kepler.

My question is a bit more on, let's call it, a very near-term demand. I mean, you reiterated your guidance more or less on implying a clear uptick in demand looking into Q4. I mean, can you maybe add some, let's say, details to it or where your confidence is coming from? Have you already seen some kind of clear acceleration in October?

And building on that question, would you be willing to call the bottom in Q3 and expect continued sequential growth in the coming quarters, i.e., would you be willing to say Q1 will likely be up sequentially over Q4 as well, i.e., is really the worst behind us and now you really can all benefit from volume recovery entering 2026?

Yes. Thank you, Florian. Great question. As we are already 1 month into Q4, of course, confidence is growing by the day. As Claudia hinted, some of those, let's say, shifts of volumes from Q3 into Q4 have been already preproduced in Q3 and are now scheduled with very clear, let's say, dates in most of the cases already. I mean the year is only 2 months to go by and large. So confidence is growing there by the day, and that was the reason why we definitely and clearly confirmed our full year guidance there.

Is Q3 the bottom of whatever time frame, I don't know, to be honest. But what we clearly say Q3 is the bottom of the year, and that was mainly because of those mentioned individual shifts. As we -- you know, today not to talk in detail about the next year, it would be a bit weird now to make a precise Q1 statement. So I'm really not in a position to do that. But Q3 is the bottom of this year based on very individual customer shifts and decisions by some of our customers rather than anymore.

The next question comes from Martin Jungfleisch with BNP Paribas.

Two questions, please. The first one is on this cost reduction or headcount reduction that you mentioned. Could you just provide some color on this one? When this will be implemented and what kind of full cost savings run rate we should expect from that?

Martin, Siltronic has a strong track record of sustainable cost reductions and we implemented that cost program, yes, end of '23, beginning of 2024 in order to deal with the weak market environment.

Our cost program, as we mentioned, is addressing all cost categories across all sites and it's definitely strengthening our resilience. You can see that probably already in Q3 with the low sales volume, we still achieved an EBITDA margin of 22%. So I think that speaks for itself.

Regarding definite numbers, we are a bit reluctant or we don't want to communicate on how the program is going despite the fact that it's going well, and we do not communicate any targets. But I hope that the numbers, they speak for themselves because you see that we are -- we have reached quite a resilience in our cost position, I would say.

Yes. And maybe to build on this, Martin, the statement that we already came down 10% in headcount globally compared to 2022 levels. I mean, it's, I think, a clear message. And of course, there's a counter effect when you ramp a new fab in Singapore, you have to build certain headcount. So this is even overcompensated by headcount savings in other areas. So therefore, I think, as you know, labor is cost driver #1. It's, I think, a clear proof point that it's going pretty well in that corner.

Got it. So you expect incremental cost savings in Q4 versus Q3 as well, right?

Definitely, it's not continued -- sometimes it's more a step function, but we expect sequential improvements at least until the end of 2026, and then we have to decide how to continue with the cost program. But we do not stop.

Yes, that makes sense. And then secondly, just on pricing. I mean, 300 millimeter, as you ramp the Singapore volumes over the next quarters, I mean, should this have a positive effect on the total 300 millimeter pricing environment given that contract pricing for these FabNext volumes should be significantly ahead of the levels that we are seeing today. So I guess should you see a tailwind on 300 millimeter from these contracts, I think, increasing the mix next year? Or it is not a correct assumption?

So when we -- Martin, when we talk about pricing, it's, of course, a mixture of multiple effects. So roughly speaking, 2/3 of our business is in LTAs and here the prices are as contracted, and there's also no change to that statement. What we see outside LTAs, and that's about 1/3 of the business is indeed some price pressure that is, let's say, increasing. I mean if you have a small effect on a quarterly basis and you accumulate that over a couple of quarters, it's not so small anymore. And when we talk about pricing in overall, it's the average of those 2/3 as contracted and 1/3 that is under some, let's say, price pressure.

Going forward, we don't see any, let's say, indication that, that will change because, yes, we are ramping more volumes in the new fab -- but outside the LTAs and outside, let's say, the core of the 300 millimeter business, the price pressure is persisting and is ongoing. So therefore, overall, I don't see, let's say, a very short-term change in this pricing trend.

The next question comes from Jimmy Huang with JPMorgan.

Can you talk about which applications we might be able to raise prices of silicon wafers next year or maybe at least reflecting higher cost to customers? Are only AI-related applications such as HBM and leading edge logic have this kind of chance? And in the meantime, will other mainstream AI market emerge to have spot price erosion pressure next year?

Jimmy, it was very difficult to really get the point of your question. Can I ask you to repeat maybe the essence of the question again? Also the line was a little bit noisy.

I was trying to ask about the silicon wafer price trajectories into next year. Can we talk about the different applications such as AI-related and AI applications? Do we see any different pricing trajectories for silicon wafers into next year?

Okay. I hope I got it. So the question was whether there are different pricing tendencies in different segments, particularly in the AI segment?

Yes.

Okay. Yes. So it's not so much about, let's say, end segments for us. It's more about really wafer specifications. And when we talk about leading edge, what we always said is it's a very clear strategic focus for us. And here, we have indeed higher prices, higher margins and also a slightly above average market share. So that holds without any change. So the pricing is more driven by, let's say, technical detailed specifications in certain projects rather than by end market segment overall.

There are certainly also, let's say, more standard AI-related wafers in the power segment, for example. When you do power supply in those data centers also some, let's say, chips are required in the power segment, which they also claim to be AI-related demand and market dynamics, but that would be rather standard wafers being needed for those sort of applications.

So I think technical specification, impurity levels, defect levels geometry and physical properties of the wafer and let's say, the increase in these specifications are, let's say, more the driver for the pricing in the end rather than, let's say, an overall segment. So I would not say that every wafer that is related to AI is different in pricing.

I see. Understood. Can I have a follow-up question? Yes. So for 300 millimeter wafers based on your company's own supply-demand projections, could 300 millimeter wafer utilization rate return to 95%, the level that big wafer supplies could have certain bargaining power over its customers? Or just currently, there's no visibility that the 300 millimeter wafer utilization rate could return to such high level based on your customer discussions or based on your industry observations.

So again, Jimmy, so we apologize, but it's really difficult to understand really the question. Was it whether 300 millimeter volume at customers brings us a different power in negotiations?

Yes. Not sure whether it's my device issue, but I was trying to ask about what's your view on the 300 millimeter wafer utilization rate, because we see there's so many industry supply, and we don't think that the 300 millimeter wafer have high utilization rate. But we would like to ask you what's your view on the 300 millimeter wafer utilization rate over the next few quarters?

Okay. Now I think I got it. It was about UT in 300 millimeter in general. So I'm not able to talk about different segments, UT. But what we know is the UT did climb up again. So we have a situation that some of our peers and some of the market analysts reporting already volumes being back on 2022 levels. On the other side, in the meantime, some capacity has been added.

A high-level estimate would be that the UT is somewhere around 80% in the overall industry, but that contains, let's say, certain arrow bars. It might be higher in, let's say, in segments where the volume demand is picking up very quickly. It might be lower in segments where the volume demand is rather sluggish over the last couple of quarters. But that's a number I heard in, let's say, in certain communications already. It's not our number, but that's maybe an indication with a significant error bar.

The next question comes from Robert Sanders with Deutsche Bank.

I'd also like to ask about utilization of epi versus polished. I'm just interested to ask around the new facility, FabNext that you're ramping up. Is that going to be primarily ramping up polished wafers? Or will it move quickly to epitaxial wafers? The reason I'm asking is I would assume that the utilization rate of epi is higher than the utilization rate of polish.

Rob, thank you very much for your question. Epi versus polish, I don't think there are substantial differences because both in 300 millimeter are driven by, let's say, leading edge and high-end demand.

You're absolutely right in Singapore for the first time in 300 millimeter, we established also the epi technology, which is also ramping at the same time as polished is doing. So we're delivering both sorts of wafers out of our new fab. In the meantime, also when we talk about major customer qualifications, this also comprises both polished and epi wafers.

Got it. And just in terms of China, your Japanese competitors talked about SMIC and Hua Hong not allowing them to compete for business anymore because they are under pressure to buy locally. What have you seen in China so far?

So we also hear and read such news flow. Current geopolitics is not hindering us. So we have customers in China, which we are shipping to unchangedly. We have a team in place that is kind of monitoring new requirements and regulations coming out of Washington or wherever, continuously and make, let's say, assessment, which is not sometimes a simple task. Those guys have to analyze 400 printed pages overnight sometimes. But for the time being, we don't see any major effects on our business development with China from those regulations.

Got it. And just the last question just would be on covenants on the debt that you have. Can you just remind us what those are, whether it's interest coverage, net debt leverage, net debt to EBITDA or anything like that, just so we can understand any risks there may be as you go into losses.

Rob, I take your question regarding financial covenants. Our covenant is net debt to EBITDA. We do not disclose any further details on that, but I think we gave you some hints regarding reaching net leverage, which was a discussion before. But I can still -- we are still confident that we will remain within the financial covenants.

The next question comes from Didier Scemama with Bank of America.

A very quick one, maybe for Michael. I think you mentioned earlier that there were still excess inventories of wafers in the power segment. And in memory, things were normalizing, but there is still some pockets of inventories. So I guess my question is, can you maybe quantify that? What you estimate is the level of excess inventories or level of inventories in general in power and in memory relative to what it should be in a normalized market?

Yes. Thank you, Didier. Let's start with the memory segment first. So they built up inventories, I think, for more than 2 years in the meantime. It's a kind of growing line and substantially above, let's say, healthy levels. In the very last quarter, we saw potentially the peak as those levels did maybe come down a little bit. Now we need to kind of watch out whether this was really the peak or whether it's more sidesways walk on an extremely large and high level. We need to check on further data coming out in the next quarters there.

Memory did come down significantly, I would say, on average, almost on healthy levels, which still means some customers are elevated. But they also were significantly elevated in the past, and I think did a good homework both in managing this and also maybe with some advanced demand from the, let's say, particularly advanced specification, high-bandwidth memory side. So therefore, overall, close to normalizing with a few customers still being elevated a little bit.

And in power?

Power, I think, across many players and almost the whole industry significantly elevated and not yet clear indications that they're really coming down, maybe flattening out, maybe saw the strongest growth in inventory, but there's just one data point being below the second quarter. So we need to really see whether those stabilizing and potentially decreasing trends are really manifesting in the quarters to come.

Got it. And I have a quick follow-up just on the memory side as well. I think estimated HBM demand is about -- or current capacity, I should say, is about 400,000 wafer starts per month, the total DRAM capacity of about 1.9 million wafer starts per month. Is that roughly your exposure when it comes to wafers going into DRAM market or a similar exposure to HBM? Or do you think you are slightly underweight to slightly overweight HBM? That would be helpful if you could help us understand that.

I'm not sure where your numbers coming from. But I'm, of course, very reluctant and maybe even must not comment on our exposure to those different segments. Our competitors would love, of course, to know our precise exposure to high-bandwidth memory. I can say very clearly, we are well positioned there. As you know, we are -- have a slight overexposure into the memory segment. But today, I am really not in a situation to give you more details there.

We will take a follow-up question from Constantin Hesse with Jefferies.

Very quick one. Michael, do you think that the volumes that are coming online in Singapore now that have started coming online in the second half and obviously, the base effect next year, could these volumes compensate the loss of the smaller diameter that you closed in '25? That's the first question.

Second question, is the price pressure entirely focused in 200 millimeter? Or is there some in 300 legacy? Let's start with these 2.

Yes. Thank you, Constantin. The DST closure is really a small effect. We will see, let's say, slight margin contributions from it as we communicated. And the top line contribution in the full year was mid-single digit. So this year, it's only half a year, so you can pretty much neglect it. And the overall development will be covered by other effects like the volume growth, the price effects and the FX effect. But in that context, the DST closure this year is almost in the noise level top line-wise.

In terms of price pressure, it's, I would say, everywhere outside LTAs, yes, the majority of the LTAs are on 300 millimeter, but there is also of course, non-LTA 300 millimeter business. And here also we see some price effect. So it's always when we don't have LTAs, then you are more in price discussions.

Claudia, just a very quick one. Remind me again what the rough reimbursement is of the prepayments. I think you made a comment to that in Q2. I just wanted to get a quick -- just a homework question.

The prepayments, I think it's around EUR 50 million within the next 12 months.

There are no further questions at this time. I will now turn the conference back to Ms. Malgara for any additional or closing remarks.

This concludes our Q&A session. Thank you for joining us today. We'll release our preliminary full year 2025 figures on February 3. Please note that there will be no conference call on this day. The full set of numbers, including our Annual Report will be published on March 12. On this slide, you can also see our next IR events. Thank you, and have a good day.

This concludes today's call. Thank you for your participation. You may now disconnect.

Hello, everyone and welcome to the presentation of Siltronic's Q2 2025 Results. Please note that this call is being recorded and streamed on Siltronic's website. The call will also be available as an on-demand version later today. Your participation in this implies your consent with this.

At this time, I would like to turn the conference over to Verena Stutze, Head of Investor Relations and Communications of Siltronic AG.

Thank you, Elaine. Welcome, everybody, to our Q2 2025 results presentation. This call will also be webcast live on siltronic.com. A replay of the call will be available on our website shortly after the end of the call. We'll give you an overview of our financials, the current market development and our guidance. After the presentation, we will be happy to take your questions. Please note that management's comments during this call will include forward-looking statements that involve risks and uncertainties. For a discussion of risk factors, I encourage you to review the safe harbor statement contained in today's press release and presentation. All documents relating to our Q2 2025 reporting are available on our website.

I now turn the call over to Michael for his remarks.

Thank you, Verena. And a warm welcome also from my side. Let's start with the key messages of today's demand remains subdued continuing the soft trend we've observed over recent quarters. Despite this, we achieved our targets for H1 this year and delivered solid results in Q2 2021. Regarding the tariff situation, even though things seem to be clearing up lately, we have to analyze this in detail, including implication on our business. So for our overall end market assumption from the beginning of the year is unchanged. The most significant headwind for us is the weakening U.S. dollar against the euro. This is why we've aligned our full year 2025 sales guidance based on these FX developments. Our FX assumption for the second half of 2025 is a Euro-U.S. dollar rate of $1.15 compared to our previous assumption of $1.08 billion Consequently, we now anticipate that full year sales will be in the mid-single-digit range below 2024 levels. .

Before we look at the details of our performance in the second quarter, I'd like to take a moment to recap the progress we've made in H1 2025. The key highlight was the successful completion of important prime wafer qualifications or new fab, paving the way for depreciation to begin in August. At the same time, our cost and cash initiatives are progressing well, further emphasizing our commitment to operational discipline. And last but not least, we remain fully on track to complete the phase out of the small diameters business in just a few days by the end of July 2025. This marks the successful conclusion of a highly professional and well-executed transition process, thanks to the outstanding collaboration and commitment to everybody involved. Let me give you a broad overview of our development in the second quarter and Claudia will provide a detailed financial overview shortly.

Quarter-on-quarter, our sales declined by 5%. This development was in line with our expectations. While we saw an increase in wafer sold, this was not sufficient to fully offset the negative impact driven by FX effects and to a lesser extent by price difference. Despite the decline in sales, we achieved an improvement in our profitability in Q2. EBITDA reached EUR 86 million in Q2, up from EUR 78 million in Q1. Consequently, the EBITDA margin increased to 26.3% compared to 22.6% in Q1. This positive development was largely driven by nonoperating effects which Claudia will explain. CapEx came in at EUR 126 million, primarily related to our new fab in Singapore. Consequently and as anticipated, the net cash flow continues to be negative at EUR 83 million. On a positive note, our market share among the major competitors remained stable in the first half of 2025., underscoring our resilience in a challenging environment that continues to affect all wafer manufacturers.

Financials. Claudia, please.

Thank you, Mike. A warm welcome from my side as well. I'm pleased to walk you through our performance over the past quarter and highlight key developments. As Michael mentioned, sales in Q2 developed in line with expectations, totaling EUR 329 million, a 5% decline compared to the previous quarter. While the wafer area saw it increased, this was more than offset by headwinds from the U.S. dollar and to a smaller extent, pricing. The product mix remained largely unchanged compared to Q1. On a positive note, EBITDA rose to EUR 86 million in Q2, marking an EUR 8 million increase quarter-over-quarter. In addition to positive contributions from fixed, this development was supported by 2 main factors. First, Q1 typically includes seasonal effects such as vacation accruals that are more pronounced at the beginning of the year. Second, Q2 benefited from, I would categorize as nonoperating effects. We adjusted the valuation of our spare parts following the phase out of small diameters. On the other hand, compared to previous quarters, a somewhat higher amount was capitalized for innovation projects that have now entered the development phase.

Importantly, our overall R&D spending remains in even under the current cost discipline as we continue to invest in our future. This higher EBITDA despite lower sales, our EBITDA margin improved significantly, reaching 26.3% in Q2, up from 22.6% in Q1. In the comparison of the first half of '25 versus '24, FX effects had only a limited impact on the top line performance. However, we observed noticeable effects within the P&L line, other operating income and expenses, where FX-related impacts are recorded. In H1 last year, we benefited from positive hedging results, resulting in a net gain of EUR 5 million. In contrast, H1 this year, showed a net expense of nearly EUR 6 million in these line items. While Q1 was negatively affected by hedging losses, Q2 brought a new dynamic, with gains driven by the sharp weakening of the U.S. dollar. However, these gains were more than offset by valuation effects on recorded receivables at the reporting date.

To put this into perspective, within just 1 quarter, the U.S. dollar weakened significantly against the Euro moving from 1.08 at the end of March to 1.17 at the end of June compared to 1.04 at the end of last year. As depreciation remained almost unchanged quarter-over-quarter, the positive development in EBITDA also translated into a higher EBIT of EUR 24 million an increase of EUR 9 million compared to Q1. Looking ahead to Q3, we expect depreciation to rise significantly starting in August as our new fab in Singapore will begin to be depreciated. Turning to the financial results. A slight decline was offset by lower tax expenses. Taking all these factors into account, Q2 net income came in at EUR 15 million. Let's now turn to the key developments on our balance sheet. At the end of June, total assets amounted to EUR 4.9 billion, slightly below the EUR 5.0 billion reported at the end of March. Q2 totaled EUR 126 million, once again clearly exceeding depreciation of EUR 63 million. However, the FX valuation effects related to our Singapore entities had a counterbalancing impact, resulting in a slight decline in fixed assets.

Inventory saw a slight increase mainly due to lower write-downs on spare parts. Trade receivables declined partly as a result of FX valuation effects at the reporting date. In contrast, other receivables increased, reflecting marketing -- market values of our FX hedging positions. Operating cash flow fell short of covering our payments for CapEx, leading to a decline in cash and securities to EUR 535 million. Our equity ratio remained stable at a healthy level of 43%. As communicated in Q1, we drew EUR 53 million of our syndicated loan in Q2, which is reflected in financial liabilities. The increase was partially offset by FX valuation effects related to our Singapore dollar loan at the end of June. Trade payables, primarily those related to investment activities decreased as planned from EUR 280 million at the year-end '24 to EUR 233 million by the end of June. Alongside the refund of prepayments and FX valuation effects, this contributed to a noticeable reduction in liabilities and prepayments. CapEx in the first half of 2025 totaled EUR 222 million.

Given our full year CapEx guidance of EUR 350 million to EUR 400 million, investment activities will be lower in the second half of the year. Our strategic focus remains unchanged. The ramp of our new fab in Singapore and the necessary steady-state CapEx level to support our operations. Looking beyond 2025, we still expect some incoming equipment from the initial ordering for our new fab. However, new equipment orders will only be placed if we see clear positive market trends. We continue to provide updates on the structure of our financial liabilities as illustrated on left-hand side of this slide. As of today, our total loan drawdowns amount to EUR 1.42 billion. This includes EUR 53 million from our syndicated loan newly accessed in the second quarter. Our revolving credit facility of EUR 127 million remains entirely undrawn and fully available to us. On the right, you will find the corresponding maturity profile.

As previously communicated, repayments will start in '25, beginning with a modest tranche of EUR 65 million in the fourth quarter. Our balance sheet also reflects short-term prepayments of EUR 42 million, which will be reimbursed within the next 12 months. Overall, our liquidity position remains robust with EUR 535 million in cash and securities, excluding the undrawn revolving credit line, which further strengthens our financial flexibility. Turning now to net financial debt. As shown in the bridge, Siltronic closed the year '24 with net financial debt of EUR 734 million. In the first half of 2025 we generated an operating cash flow of EUR 80 million, netly impacted by working capital effects, prepayment refunds and rising interest payments. As anticipated, CapEx payments in the first half totaled EUR 250 million, exceeding the investment by around EUR 30 million.

Consequently, net financial debt increased to EUR 903 million by the end of June. Looking ahead, we expect net cash flow to improve significantly in the second half compared to H1 level, mainly driven by positive working capital effects and an improved cash flow from investing activities. With that, I'll hand it back over to Michael.

Thank you, Claudia. Turning to the market outlook, even though the situation around the U.S. tariffs begins to clear up, it remains volatile. This makes it difficult to assess the broader impact on global GDP growth and demand for wafers in the end markets. Nevertheless, we would like to share our current view on the end markets. Looking at individual end markets. the smartphone market has softened slightly. Meanwhile, PCs have shown a notable uptick compared to our March assumption, driven by a stronger-than-expected Microsoft Windows 11l impact. Server demand remains robust, fueled by the continued AI momentum. The Automotive segment has seen a slight decline, partly due to lower sales of electric vehicles. Overall, our market assumption is valid and the end markets are expected to grow approximately 7% this year. The majority of this growth comes from content and only smaller share from unit growth.

However, elevated inventory level continued to weigh on positive end market picture, resulting in a significantly lower volume impact for the wafer industry. Our internal market assessment indicates that there was no meaningful inventory digestion in the first quarter as most of Q2 data of our customers are not yet available. Inventory levels across key segments remain elevated continuing to weigh on wafer demand. Memory inventories are still elevated. Our inventories have reached record levels, further limiting short-term demanding policies. In contrast, logic inventories look the best for, did little to improve market visibility as elevated inventory still postpone a demand recovery. As you all know, we have so far been calculated with net x rate of USD 1.08 in our guidance. However, due to recent developments in the FX market, we've adjusted this rate to 1.15 for H2 '25 and updated our guidance accordingly. It's therefore worth taking a closer look at this.

As you can see on the left side, in 2025, U.S. dollar exposure of more than 80% of our top line, while the majority of our EBITDA costs are euro based. This makes us sensitive to exchange rate fluctuations. Let me explain our updated U.S. dollar sensitivity based on our 2025 exposure and the revised exchange rate of USD 1.15 for H2, a change of USD 1.01, including the highly correlated Singapore dollar would impact our full year sales by approximately EUR 10 million and our EBITDA by around EUR 6 million before hedging. Our hedging strategy remains unchanged. We hedge up to 18 months ahead based on expected foreign exchange net exposure. In closing today's presentation, we would like to share our final guidance for 2025. Although we are more than confident in the mid- and long-term growth of the silicon wafer market, we expect elevated customer inventory levels and related volume shifts to continue influencing the next quarters.

Furthermore, there's a clear uncertainty in the market from U.S. tariffs going forward and the continuous change in regulations. We maintain our full year 2025 guidance based on a constant exchange rate of USD 1.08. However, as explained before, we have updated our expectations for the second half of the year using a revised exchange rate of EUR USD 1.15. With this new assumption, we now expect 2025 sales to be in the mid-single-digit percentage range below 2024. Previously, we had anticipated sales to be roughly in the region of last year. For Q3 '25, we expect sales to come in below the second quarter. This is primarily due to intra-year shift in delivery volumes with a significant portion scheduled for Q4, while EBITDA margin forecast remains unchanged at 21% to 25%. We've also revised depreciation outlook. Depreciation is now expected to range between EUR 340 million to EUR 400 million. This adjustment reflects improved visibility and the impact of a weaker Singapore dollar. Our guidance for CapEx, EBIT and net cash remains unchanged.

With this, we conclude our Q2 '25 results presentation, and Claudia and I are happy to take your questions. Thank you very much for your attention. Elaine, please open the Q&A session.

[Operator Instructions] And the first question comes from Amelia Banks from Bank of America.

If I could just ask a question on your margin. Is it possible if you could quantify the decrease in cost of sales from the write-down of the spare parts.

This is Claudia. Yes. Just to give you a ballpark number, this was, let's say, a mid-single-digit amount in Q2, which impacted our EBITDA positively.

And is that quarterly?

That's a onetime effect.

We will take our next question from Daniel JC from AG Group.

I have 2 questions. The first one being, you're mentioning that you continue to have a stable market share among your main competitors. However, relative to your peers, your dynamics are slightly slower now on customer and product mix. How is then your share stable right now? And in addition to that kind of also we see China now accelerating in 300-millimeter. Sure, it's not leading edge yet. But still do you see any pressure there if you look at the overall share, is it then decreasing? And my second one would be on guidance. Basically, you lowered it on FX reasons, with a sequential deterioration in 3Q. Could you elaborate what gives you the confidence in the 4Q order as it was already pushed out twice and now end markets continue to be sluggish and customer inventory is high.

So thank you, Daniel. A couple of questions. Let me take the market share question first. Market share, of course, is an average of all the different customers. And indeed, we have some negative mix effect there, which means there are effects that certain customers buy less in certain, let's say, segments. On the other side, this is opposed by market share gains at other customers. So that in an overall average consideration, and that's what we're talking about, we can say our share is stable. With regards to the China question, we do not see very specific or very accelerating China dynamics. And when you study, let's say, the wording around this of our peers, there are also, let's say, more optimistic and more pessimistic statements. So we would see ourselves in the middle of this range. So China is on the one side, important market for us. China competition is the more serious, the smaller the wafer diameter is. We see 200, I would say, as a mixed bag. They are still very attractive segments for us where we can play our technology-leading position.

And in 300 millimeter, particularly in the higher specs, as you mentioned, leading-edge there's still a huge technical gap between the Chinese players and the 3 major players that are able to serve leading edge. And with regards to your guidance question and the patterns in Q4. So these are particular and individual customer postponements of volumes. So we have allocated those volumes now to Q4. And I can say we have reasonable confidence that the customers will execute and we are, in a way, positive that this will happen as predicted in our guidance.

We will now move to our next question from Constantin Hesse from Jefferies.

Also for me, if we could talk a little bit about, Michael, the outlook overall. I mean, clearly, this bottom has just been dragging on and on and on, and it just feels like it's almost never ending. Inventories, if I look at the Sumco charts are still extremely High, both -- I mean, logic obviously a little bit better, but memory, of course, pretty bad, power getting only worse. What I'm trying to figure out now is, I think you want to be conservative on the top line on the P&L going into 26, how should we think about CapEx in '26? Now I think you did say during the call that you will not invest in additional equipment unless you see a sustainable improvement in markets, which, I guess, implies that CapEc will obviously come down negative. But I think your maintenance CapEx is currently running at about EUR 200 million.

Is there any that you already have committed expansion CapEx beyond maintenance CapEx that you already have committed that you have to spend in '26, I mean it will be just pretty good to have -- if we could have a clearer picture of how we think about investments in '26 because clearly, your balance sheet is levering quite significantly. So it would be good to have a bit of a picture there.

Thank you, Constantin. The outlook, I mean, you're absolutely right. This inventory situation is hanging on for quite a while. We see the good progress in logic memory, I mean, the overall picture isn't good. Still individual customers are on the right track and many -- so there's a huge variety of different statements from different customers. And power indeed from all what we see is further creeping up, and this might be related to the very, let's say, poor overall automotive sentiment and industry environment. On the other side, we have this end market growth of 7%. So I mean, it's very difficult to predict but it should be and will be, hopefully, a question of time until those 7% are making its way through this inventory through the supply chain and also eventually lending at the wafer industry. But it's a way to go and it's very difficult to predict how long this will still need I mean your '26 question is a bit a difficult one today. We don't guide any '26 numbers. However, maybe around your specific CapEx point, let me emphasize a couple of things. So we communicated the steady state CapEx of around EUR 200 million, but we also said it's an average number. So there could be years below. There could be years above -- so that's maybe something you might want to have in mind. And indeed, there is, let's say, a certain CapEx hangover still from our fab in Singapore that will trail into '26. So overall, we would see CapEx coming down and we will specify this more concretely when we come closer to the '26 and the related guidance time frame.

That's very, very helpful. And on the next question, if I may, I think part of the depreciation adjustment was driven by an improved knowledge of equipment activation. So I'm just wondering, is this at all change that old or the legacy outlook that you used to have on depreciation of EUR 500 million plus a year, one, Singapore is being fully depreciated. Just to have a rough idea. .

Yes. You're absolutely right. The focus of investment projects, you gain a better visibility on the time line and we had to do the adjustment due to FX. So -- but we stick to our communication that depreciation will be above EUR 500 million, not this year, definitely not because we have the guidance out, but once is in full depreciation, going forward, we will see the EUR $500 million plus in depreciation.

Okay. This is great. And then lastly, on the long-term agreements, I think, Michael, I think in Q1, you said there are no major long-term agreements expiring either this year or next year. If you could just confirm that? And then second of all, is there any reason to believe that the bargaining power of Siltronics, one, may be at a place where if you do have to renegotiate these long-term agreements, say, in 2, 3 years, given the current market conditions, could you potentially experience significant pricing pressure here? Or is there an understanding between the semi players and the wafer manufacturers and I don't want to sound naive here; but would there be an understanding that they do understand how much money you just invested into these plans, and there will be some kind of in the core that pricing would probably be under pressure, but it wouldn't be a huge amount. So I'm just trying to get an idea of the potential negotiation dynamics of yourself and your customers given the current market environment? .

Yes. Thanks, Constantine. First of all, let me confirm indeed no major NPAs expiring this year or 2026. And major LTAs in concluded in the framework of our new fab in Sinapore have a very long duration. So we talk numbers like 2028 or in 2030 there, yes. So there's a very let's say, overall robust situation as around the LTAs. Further LTAs, yes, we also concluded smaller ones and they are here the segments that are still very significant in demand, and that is also reflected in pricing. On the other side, of course, we will not conclude a major LTAs in this current market environment for sure. but customers have a rather strategic perspect this year, and some talked about LTAs of a couple of years for certain products even in the current environment. So it's really kind of portfolio. You have to imagine one small one can go another one is coming in, but the major ones are fixed for a long period. And -- with regards to pricing, I can also confirm that all the LTAs are adhered to as in contract price and the price effect we were describing is happening outside LTAs and that is around 1/3 of our business.

Please go ahead.

My first one is just around I guess, I mean, you kind of answered a bit, but why you think inventories are taking so long to come down. And in particular, with Asian manufacturers having a higher portion of LTA and you do quite significantly higher. Do you think you might be suffering because they continue to deliver contracted volumes despite higher inventories? And then I guess to follow up on that, if you and competitors continue delivering LTAs, how can we expect inventories to come down, especially when they haven't budged even when you've been saying that end demand is kind of greater than what you've been shipping and what the demand is.

Yes. Why is this hanging on for so long time? It is indeed in a way that the key question here. I think it's still the situation that the chip manufacturing is in a way by focal. There are a small number of companies that are centered around AI chip developments. And they're doing extremely well, and you can study the quarterly monthly numbers, which are going up significantly. However, when we analyze this in more detail, we see that this is primarily value-driven today with technical developments in a position to charge much more for their chips than they used to be for previous generations. At the same time, the amount of wafer area sitting on the lease, these chips is not growing significantly, or only moderately. So we have those decoupling of volume and value growth at certain customers. And then, of course, we have others, particularly in the Power segment, whose business is not, let's say, devaluing pretty aggressive. So that means their volume demand and their wafer each situation is still tuned along for quite a bit.

And this in a way, total to the overall picture we're describing, healthy or reasonable end market demand of around 7%, but not lending yet vastly and in some parts of progressing as we talked about logic. But vastly, it's totality not landing on the wafer industry. And your question was whether Asian peers are insisting on LTAs or whatever, everybody tries to insist on LTAs is not just possible. And I think the clear evidence that this is affecting everybody to the same extent, is our market share statement. So we are stable. So there is no indication that we are doing significantly better or worse than our peers. It's really an industry-wide phenomenon and affects all of the wafer manufacturers.

Got it. And then on the ramp of FabNext, I know you said it kind of depends on market conditions. But based on your current view of that and how the market will develop into '26. Can you give some color around how much capacity you think will be added in Singapore this year in FabNext. I mean we -- a we talked about the initial rent capacity. It was under per month by end of last year. Now that is further build up, we reluctant to talk about very specific loss in relation to equipment, et cetera, that would be a highly competitive information. So therefore, yes, this will be further ramped but we will be also very careful with the ordering of new tools, as we explained, and that we will only trigger once we have the indication that markets are really ticking upwards again.

So for the time being, we work with what we have. We have certain hangover of CapEx, which means there are still some effects trending CapEx ones into next year, as we said already. And then there will be a decision point when we have market, let's say, clearance indications to further bring capacity into this head. So detailed numbers is not what we want to communicate for competitive reasons.

Got it. And then just a quick one on Q3. Are you able to give a bit more quantification on kind of below the level that slightly below the level, mid- to low single digits, secondly below the level of Q2. Any color would be helpful.

So I mean, you can do a lot of math, right? You have our full year guidance, half year it's over. We gave some indication where Q3 will sit in that Q4 should be further elevated, giving more details would be very difficult as we have those quarterly phasings and quarterly closing effects typically letting in a few millions left or right in the end of the quarter. So therefore, I think all you can do is to do the calculations, which should be then already pretty precise.

Got it. No worries. One last quick one just on -- I'm not sure whether you've disclosed in the past, but in terms of the debt that you have, are there any covenants that we should be aware of?

You are asking for our covenants, right? Yes, have covenants in place, but we haven't communicated so far any contract details, and we will stick to that. So we won't disclose any details here.

We will now take our next question from Florian Treisch.

Yes. Just, I mean a quick follow-up on my end. It's mainly around phase in Q3, Q4. I mean you mentioned that end of July, the smaller diameter part will go out of the equation. Can you maybe quantify the impact in Q4? And I mean, in general, I mean you have pitched the story that the next or the quarter after the next quarter will be better. I mean, you mentioned you have a decent confidence that the shift from Q3 are going into Q4? Is there something different in the structure of it compared to the last couple of quarters? Or is it the same crystal ball you like to mention in the quarterly calls.

So, thank you, Florian, and I think very good question. So number one, the small diameters will be closed as scheduled by end of this month, that revenue effect from that is a very small for total year, it was mid-single-digit percentage of total revenue and no net having it's only 7 months. So it's really small. So we will not see any significant effect from this in the second half. The crystal ball is still there. And let's say, the overall view on the future is still for. I think we explained that in great detail.

Nevertheless, the particular phasing between Q2, Q3 and Q4 this year is something different as it's the result of individual customer discussions and allocations with different customers and in content with different customers to the different quarters according to their demand needs. Therefore, there is, I think, a different level of confidence of our quarterly phasing, our quarterly statements we made for this year. The overall situation is still a bit in the cloud. And I think I would really like to differentiate those 2 in terms of how large our trust and confidence is.

We will now take our next question from Matin Jung from BNP Paribas.

I have 2 questions. First one is on the pricing impact that you've seen in the second half. The guidance implies now relatively flat sales development in the second half. So it's right to assume that the small diameter wind down, which has seen a price pressure and also the ramp of next volumes that typically should carry higher prices should need to at least flat pricing development in the second half? That's the first question.

So I mean, overall, we don't give quarterly or half year pricing statements or comments. But the effects you were mentioning like a small diameter and ramping of the fab should not affect the pricing at all here because the pricing is more market thing where we clearly can confirm that around 2/3 of our business are in LTAs where the prices are up as contracted. And the other 1/3, which is maybe a bit more smaller diameter and 200-millimeter is more under price, let's say, discussions, which leads then to our overall price situation as described. So we do not see a very particular quarterly pricing effect and it should not be affected by the SD business closure neither and or the.

Okay. And then just a follow-up on this cost stuff that you had in the second quarter. I mean you mentioned the mid-single-digit number from the write-downs. You also had a positive effect from capitalized R&D, negative effect from the revaluation of receivables. Can you just disclose what the total number and the cost base was considered one-off and what we can extrapolate into the third quarter? And then just on hedging, I mean, would you expect to realize hedging gains now in the second half at current FX rates? .

So yes, we disclosed, we just disclosed the rough amount of the valuation effect mid-single digits. Regarding R&D, you should have a picture, if you look at our P&L where you see the development quarter-over-quarter in R&D, that gives you an idea, and this will also translate into the next quarter. So R&D costs will stay on roughly that level because we will continue to capitalize those activities that we started right now to.

Listen, let me emphasize this is not affecting our the activities, in our operating R&D works. We didn't cut at all the activities on the ground, working on R&D and tech development are unchanged.

Okay. And then just on hedging...

And regarding hedging, yes. In total, we had a positive hedging result in Q2, but it was counterbalanced by those valuation effects. Nevertheless, for Q3, we have some beneficial, let's say, hedging positions in place for the second half of the year. So there's a strong movement always in the U.S. dollar, so you can't really make a math on valuation effect. But given that the U.S. dollar would stay at 1.15, like it's today, we should have a positive effect from hedging in the second half of the year.

I would like to add something which you haven't mentioned, but which is important for the second half of the year and this is the rent cost as we start to depreciate FabNext in August, there's also an effect in rent cost, we will see them in the P&L from August on. Until now, we capitalize them on CapEx.

Great. Can you just remind us how much it roughly is in the second half? .

Yes. We don't disclose a number here. On a full year basis, the effect is not so big, but on a quarterly or half year base you will definitely see it. .

We will take our next question from [ Jimmy Huang from JPMorgan ].

Dr. Heckmeier. First, I would like to ask about how do you think about potential impact of Chinese competition within the China market and in international markets because we see that 5 Chinese speaking with wafer suppliers, they reported a revenue was around USD 100 million in 2021, but it has increased to about USD 1.1 billion in '24 only for 12-inch wafers. So I still would like to ask about your views on potential Chinese competition for international suppliers. .

Thank you very much. I mean Chinese competition is definitely on the ground and they're progressing and developing. So we see the capability strongest in the smaller diameter place and in the 300 millimeter, as you highlighted, starting with some lower specs, some test waiver activities. We do not see a lot of activities outside China. And here, we think geopolitics could even be contained and locally. As you know, the tariff discussion is hot between China and U.S. and some other countries. On the other side, we also have, let's say, good business in China. A lot of customers appreciate our quality, our technology and our, let's say, technical support and capability there. So yes, there is a Chinese dynamics and China's progress, but I think it's a very long time to go until they would be in a situation to deliver premium products, particularly such as leading edge or high bandwidth memory or something like that.

And second, would like to ask about the leading edge logic seeking wafer because previously, people think there are 3 major suppliers, including you and Japanese companies. But we heard that another international supplier from Taiwan is also relatively confident about the progress within the leading-edge logic, i.e., from the U.S. fab. So how do you think about potential like more competition from this international supplier in the leading edge markets?

So thank you very much. I mean I must not and cannot comment on illegal competitors. However, when you talk about a new fab in the U.S. Of course, we have to take in mind that qualifying a new fab, and we experienced ourselves in the last couple of years, I can say, it's a very, let's say, long and difficult process with customers. You might remember when we had the first wave out ceremony in late '23. And now we starting here in August per was being fully qualified with the prime products with our customers. And if we had no leading-edge experience, it would have taken much longer time. So therefore, yes, everyone is ambitious to go into the segment and provide premium products. However, we know there's a clear entry barrier and it's, let's say, long and very difficult path to go there. And customers feel quite happy with 3 volume suppliers of leading edge. So there is not a aggressive need for another one.

[Operator Instructions]

We will now take our next question from Robert Sanders, Deutsche Bank.

I just was hoping to ask about the FabNext scale that will give you accretion on the EBITDA margin level. Is there like a 100,000 or 200,000 level where you think that could that ramp could start to be accretive rather than dilutive at the EBITDA margin level? Second question would be about what cash flow burn you expect in 2025? And lastly, if you could just -- although you're not willing to disclose covenants, I think it would definitely benefit investors to understand if you're at least close to breaching covenants. And so if you could just confirm that you're not actually close to breaching covenants.

Thank you, Rob, and I take your first question about the new fab, and then Claudia will talk about the other elements of your questions. I mean the good news is now FabNext is qualified in major products. And with that, we have, for the first time, the opportunity to ramp volumes to balance volumes between our global footprint. So that means we can actively steer our volume development in the fab. And we will do that to, let's say, an optimum manner on the one side. There is an interest to load the fab, let's say, as quickly as possible to come into the volume area where it becomes margin accretive, which will take some time. And of course, target is unchangedly to deliver those EBITDA margins and also 50% out of that fab, which only will happen with what we called a significant loading as you might remember. So that's the clear path going there. On the other side, we must not underutilize our existing footprint in Germany to handle costs. And it's, let's say, the ongoing task of our global operations team to steer this mix in an optimum manner.

But for sure, FabNext will see volume increase now because the way is clearly paved with the more indications. We've done particularly achieved in the last couple of months where we now say the fab is ready, and that's also the reason why it's depreciated starting in August. For the other elements of your questions, I hand over to Claudia.

Okay. Rob, I'll start with the cash burn. Yes, our guidance for net cash flow this year is significantly negative, but still better compared to previous year. And I can only add that, yes, we had a cash burn in H1. And let me put it like that. That was the majority of our cash burn this year. We will see definitely an improvement of net cash flow in the second half of the year, mainly driven by positive working capital effects and the improved cash flow from investing activities. We will drive down our investing activities in the second half of the year. And regarding the questions, financial covenants, I can only underline that as of today, we expect to stay within the financial covenants. So unfortunately, no more details on that.

[Operator Instructions]

[indiscernible] I hope you hear me. A few questions. The first one on the inventories. I mean I'm not sure I got that correct. So your inventory analysis is basically based on customer inventories from the first quarter. Is that correct? And then related to this, particularly in the memory business, where do you see the crossover for the inventories where customers should start to see higher order activity or start with higher order activity I mean, seen micronic, where inventory days in Q2 came down much stronger. And related to this also is in memory, maybe your customer mix rather a headwind and really the overall demand.

Yes. Thank you very much for your questions. And indeed, as you mentioned, the Q2 picture is not fully on the table yet there. So a couple of other statements are really you could say, outdated or, let's say, based on Q1 data where we have the full picture of the inventory for all the 3 segments, logic, memory, power. You're right, and I said it already, within memory, there are some differences between different customers, some reported a bit, let's say, progressing data. On the other side, the question might imply, do we have a negative exposure or customer mix which I can deny clearly because it's again coming back to the overall market share. We have a very reliable data from this independent semi organization. So if that was a significant influence, we would see market share differences, which we don't see. So I would say all the wafer manufacturers are exposed to different customers, unless everybody at every customer, of course, with different market shares. On average, those major players are affected similarly by its inventory picture. So there's nobody really better than the others.

Got it. And then on the customer pushout, you mentioned from Q3 to Q4. In previous calls, you mentioned that customers are pushing volumes to the second half of 2025. And now in this call, you mentioned especially this one customer -- is that really related to this customer? Or is the big picture still a lot of customers are pushing out volumes, sticking to the LTAs, but pushing out volumes? And are you willing to share what type of customer or which end market does push outcomes mainly?

So thank you very much for this this request. I mean, what we see as, let's say, the quarterly pattern of volume of our sales development is the total of a couple of, let's say, individual customer discussions and conclusions. So some of them wanted to have more in Q2 or more in Q4, et cetera. So it's really a pattern of many customers. We're not in a situation to disclose individual customer patterns or individual segments there. But what we see is now the consolidated picture. And as you know, we have a couple of huge customers and some of them were also, let's say, demanding specific allocations.

And then final one, if I may. On the smaller diameter as the question was asked previously, and you mentioned the impact is, yes, a small I understand that on the full year basis, however, if the smaller diameter is 5% of the sales, which basically means from last year sales is roughly around EUR 70 million headwind. That would be probably 10%, 11% of your second half sales. So it would be, I think, helpful if you could give a little bit color around what this is going to shape out between Q3 and Q4, the phasing out.

Phasing out is ongoing already for more than 1 year. So in that business already on a kind of phase out level. And when we say the overall market share is stable, then, of course, you could conclude, and that's definitely true that some other segments we did overcompensate the decline in SD. So I would not and we don't see any particular further effects in the second half. It's all been worked into our guidance already.

At this time, I would like to turn the conference back over to Verena Stutze, Head of Investor Relations and Communications at Siltronic AG.

Thank you, Elaine. This concludes our Q&A session. Thank you for joining us today. We will release our Q3 2025 figures on October 28. On this slide, you can also see our next IR event. Thank you. Bye.

This concludes today's call. Thank you for your participation. You may now disconnect.