Leipzig, December 6, 2024 – At today’s annual general meeting, held in Leipzig, Verbio SE’s CEO Claus Sauter reported on the financial year 2023/2024 which ended on June 30, 2024. The Company’s shareholders approved the proposal by the Management Board and the Supervisory Board for the payment of a dividend of EUR 0.20 per share.
Verbio concluded the financial year with a good result despite the challenges that have confronted the industry. In his speech to shareholders, Verbio CEO Claus Sauter said: “In the last financial year we have proved that we are also able to generate a strong result when the market for biofuels is defective. This is something we can be proud of, because with our team and with our technology we are able to generate comparatively good margins even under difficult conditions.“
He continued: “In the past financial year we were able to significantly increase the CO2 savings from our products – our ‘Handprint’ – to 4.4 million tonnes worldwide, which corresponds to growth of around 30 percent. In the meantime, almost 40 percent of our CO2 savings in Germany were generated from what are known as ‘advanced’ biofuels, i.e. waste-based biofuels as defined in the Biofuel Sustainability Regulation (Biokraftstoff-Nachhaltigkeitsverordnung – Biokraft-NachV). This climate protection potential will continue to increase through the expansion of our production in the USA, through increasing raw material efficiency, and through the production of renewable basic materials for the chemical industry.“
Good result despite market turbulence
The German and European biofuels market was characterised by even more turbulence than it had been in the previous year. The challenges included significant market distortions due to high volumes of falsely-declared biodiesel imports from China. The climate fraud in so-called UER (Upstream Emission Reduction) projects also had a negative effect on the biofuels market.
Group revenue in the financial year 2023/2024 was EUR 1,658.0 million. Compared with the record level of revenue of EUR 1,968.3 million seen in the previous year, this represents a fall of approximately 15.8 percent. The fall in revenue was primarily due to the drastic collapse in sales prices.
Biodiesel production volumes increased further in the past financial year 2023/2024, with a new record production total of 637,273 tonnes (previous year: 610,509 tonnes). Bioethanol and biomethane production volumes were also at record levels. Verbio manufactured 521,407 tonnes of bioethanol (previous year: 317,613 tonnes), representing a significant increase of 64.1 percent. Verbio increased the production volume of biomethane to 1,100,184 MWh (previous year: 1,078,053 MWh), once again exceeding the 1 TWh mark.
Earnings before interest, taxation, depreciation and amortisation (EBITDA) was EUR 121.6 million, within the range indicated in Verbio’s most recent forecast.
Verbio’s CEO Claus Sauter also commented on the results for the first quarter of the current financial year 2024/2025.
In the first quarter of the current financial year 2024/2025 biodiesel production was at the level seen in the corresponding quarter in the previous year. In addition, Verbio manufactured 11.5 percent more biomethane and 14.1 percent more bioethanol than in the first quarter of the financial year 2023/2024. Despite this, EBITDA fell to minus EUR 6.6 million. This decline was due to the lower gross margin as a result of the ongoing difficult market conditions in Europe.
Stabilisation of the biofuel and GHG quota market expected in 2025
On November 13, 2024 the [German] Federal Cabinet approved the draft amendment to the 38th Regulation on the Implementation of the Federal Emissions Protection Act (Verordnung zur Durchführung des Bundes-Immissionsschutzgesetzes – BImSchV) proposed by the Federal Ministry for the Environment, Nature Conservation, Nuclear Safety and Consumer Protection (Bundesministerium für Umwelt, Naturschutz, nukleare Sicherheit und Verbraucherschutz – BMUV). This has the effect of suspending the ability to carry forward GHG quotas accumulated in 2024 for the years 2025 and 2026. Verbio expects the demand for GHG quotas in the coming year to increase again and the quota prices to rise.
In his speech Claus Sauter emphasised: “A recovery in the prices of GHG quota prices is in sight. A statutory quota increase is planned for 2025 anyway, and as a result of this, demand will increase by approximately 2.5 million tonnes of CO2. In addition, the capping of supply due to the elimination of UER projects, which was already decided in May, and the eligibility of GHG quota surpluses will create an increase in demand for other options. Most of this additional demand for CO2 savings will have to be met with liquid and gaseous biofuels.“
The European anti-dumping duties on Chinese biodiesel and high palm oil prices are likely to at least temporarily limit the amount of fraud. The ongoing EU investigations have already led to a significant reduction in the volume of exports from China. In addition, China has announced that it will expand its own biofuels market in the transport sector. The tax concessions for the export of used cooking oil were abolished in order to promote domestic biodiesel production. China's increasing domestic demand for biofuels should have a positive impact on the global biofuel and GHG quota market.
Challenges remain for politicians: The rules should apply to everyone
However, the measures taken by the [German] Federal Government are not sufficient to stabilise the market for the long term. Without effective control mechanisms for regionally produced AND imported biofuels, the system remains vulnerable to fraud.
In order to eliminate this potential for fraud and achieve the ambitious climate protection targets, Verbio and the affected industries see a need for action. First, the German government must create structures that enable the systematic audit of the sustainability criteria of biofuels outside Europe, too. For this purpose, the BMUV should establish a national approval process; this could be done with the use of a regulation. Belgium, France, and Austria have already introduced such approval processes. Further, Germany should swiftly enact the EU RED III (Renewable Energy Directive III) into national law, and meet the time frame set for this by May 2025 despite the upcoming reorganisation of the [German] government.
On the right strategic path
In view of the ongoing market turbulence, Verbio sees its current strategy confirmed. The diversification and internationalisation pursued by Verbio are enabling the company to open up new business areas and reduce its dependence on political decisions despite current challenges.
This includes the company’s entry into the market for bio-based speciality chemicals. The new production plant in Bitterfeld is currently under construction, with the expectation that it will be commissioned in 2026/2027.
With the renewable speciality chemicals manufactured there, Verbio will make an important contribution to the defossilisation of the chemical industry. The green molecules are suitable for many applications such as high-performance lubricants, bio-based solvents and plastics.
The expansion of the Group’s own BioLNG/BioCNG filling station infrastructure in Germany to deepen its value chain is also continuing. Several filling stations are being opened just these months, with a notable positive resonance in the transport and logistics sector.
The company’s expansion into international markets is also continuing. In the USA the two biorefineries in Nevada, Iowa and South Bend, Indiana should, in the medium-term, produce more ethanol and biomethane than Verbio currently produces in Germany. Bioethanol-biomethane production in Nevada is expected to be operating at full capacity utilisation by as soon as the end of the current financial year. The expansion of the South Bend plant to create a combined bioethanol-biomethane is in progress.
In India, intensive discussions are underway with the Indian government to tap further potential. In October a memorandum of understanding was signed with GAIL, the regional energy utility, for the potential construction of a further 10 biomethane plants in northern India.
With its growing portfolio and increasing internationalisation, Verbio has achieved further strategic milestones in the past year. Claus Sauter summarised: “We have generated a strong result in a very difficult environment. In difficult times it is important not to lose your head and to continue to follow your strategy – especially when you can see how solid it is overall. We try to position ourselves in a broad and well-considered way so as to ensure that we are as profitable and value-enhancing as possible in every market environment.“
Dividend and outlook for the financial year 2024/2025
Verbio published its forecast for the current financial year on September 10, 2024 and expects a satisfactory result in view of the conditions applying in the sector, with EBITDA in the range of EUR 120 million to EUR 160 million. “The amendment to the 38th Regulation on the Implementation of the Federal Emissions Protection Act will lead to a significant surge in demand for biofuels and GHG quotas in 2025 and 2026. Although the first quarter of the current year did not meet our expectations, we are very optimistic for the coming quarters,” commented Mr. Sauter.
He continued, “We expect a significant increase in earnings as early as the second quarter, primarily thanks to improved biodiesel margins. In addition, we anticipate the reversal of negative effects from currency exchange rate changes and open commodity forward contracts.“
Net debt is of a maximum of EUR 190 million by the end of the financial year. This is due to the investments planned in expanding production capacities in Europe and North America as well as in bio-based speciality chemicals, the Group’s future growth business.
At today’s annual general meeting a dividend distribution of EUR 0.20 per qualifying share, unchanged from the previous year, was proposed to shareholders. The proposal was approved by the annual general meeting.
Detailed business results are provided in the Verbio SE annual report 2023/2024: Verbio SE – Financial Reports