Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Verbio SE (XTER:VBK, Financial) achieved record production volumes, exceeding 1 million tonnes of liquid biofuels and 1.1 terawatt hours of RNG.
- The company increased CO2 savings for customers by 1 million tonnes to 4.4 million tonnes.
- Significant progress in scaling technology abroad, with Nevada running on small volumes and South Bend Indiana increasing production availability by 20%.
- Groundbreaking ceremony for a new speciality chemicals facility in Bitterfeld, tapping into a promising market.
- Launch of a trading unit in Geneva to better manage global flow of goods and feedstocks.
Negative Points
- EBITDA for 2023-2024 was EUR121.6 million, below initial expectations of EUR200 million to EUR250 million.
- Continued pressure from fraudulent Chinese biodiesel imports impacted results.
- Net debt increased to EUR32.9 million due to growth investments of more than EUR180 million.
- Lower greenhouse gas quota prices and premiums negatively impacted earnings.
- Ramp-up costs in the United States affected the bioethanol and biomethane segment's EBITDA, which fell year-over-year.
Q & A Highlights
Q: Last year you highlighted that US activities were still not accretive to your group margins. What is the outlook for the new fiscal year now that the Nevada plant is ramping up and South Bend keeps improving?
A: (Olaf Troeber, CFO) We expect South Bend to further improve due to increased production. Our technical team has done a great job increasing capacity utilization. For Nevada, we expect an EBITDA of zero for the financial year, starting with a negative EBITDA in the first and second quarters and moving towards a positive EBITDA in the third and fourth quarters.
Q: Could you share the key assumptions in terms of ethanol, biodiesel spreads, greenhouse gas quota prices in Germany, and natural gas prices in Europe at the midpoint of your EBITDA guidance?
A: (Olaf Troeber, CFO) We currently face healthy bioethanol margins in the US, with higher margins during the driving season. In Canada, we have a matching contract in place. For biodiesel in Europe, we incorporated the high margins we are currently experiencing but took a more cautious approach for the third and fourth quarters. For bioethanol in Europe, we expect stable margins with slightly higher ethanol prices. We also anticipate an increase in greenhouse gas quota prices from EUR120.
Q: Can you update us on the ongoing negotiations about enhanced certification on biodiesel imports from Asia? Is that a feasible scenario to avoid new fraudulent volumes?
A: (Claus Sauter, CEO) There will be something for sure, but the details and how to implement it will be discussed in spring 2025. The draft from Friday helps us now by preventing the surplus from 2024 from rolling into 2025 and 2026.
Q: What is the level of CapEx assumed for the new year to reach the net debt guidance set for the new fiscal year?
A: (Olaf Troeber, CFO) The average CapEx for the next three years will be approximately EUR140 million, with up to EUR200 million in investments for this year. We provided a net debt figure of up to EUR190 million due to liquidity fluctuations.
Q: What are your expectations regarding the EU tariffs on biodiesel? Are they going to come under fire or remain in place, and how do you see the impact?
A: (Claus Sauter, CEO) The antidumping duties help but do not solve the problem. We need mechanisms to control imports and ensure that biodiesel is made from the feedstock stated on the certificate. We need stable regulation and more focus on compliance.
Q: Why do you expect higher margins from the US market and lower margins in Europe?
A: (Claus Sauter, CEO) In Europe, we were cautious due to oversupply. In the US, we expect record corn harvests, leading to cheap corn and ethanol. The US is exporting ethanol, and this will continue as long as we have cheap corn.
Q: Do you have an expected timing for the draft published last Friday?
A: (Claus Sauter, CEO) Affected parties can provide feedback until October 1. The target is for the new regulation to be in place by January 1, 2025. We expect the timeline to stay on track, with the draft passing the German parliament in November.
Q: Can you provide more detail on the tax credit sale in the US?
A: (Claus Sauter, CEO) The tax credit was about $40 million, with a single-digit discount. The process was straightforward, and the money is already in our account.
Q: Can you provide more color on the expected production ramp-up and contribution of Nevada to results in the current fiscal year '24, '25?
A: (Claus Sauter, CEO) We aim to reach full utilization by the end of the business year. The ramp-up is slow but will accelerate in spring. South Bend is progressing well, with a 20% capacity increase and reduced costs. South Bend is profitable, and we will start further investments there.
Q: What impact do you expect from the political environment in the US, especially with the upcoming elections?
A: (Claus Sauter, CEO) We do not expect any negative impact. The IRA benefits the Midwest, which are traditionally Republican states. Our technology provides a competitive advantage, making us less vulnerable to political changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
