ReFuels N.V. (REFL) Earnings Call Transcript & Summary

Good morning, and a warm welcome to ReFuels Q4 2025 results representing the period January to March 2025. With me today to present the results, we have, as usual, CEO, Philip Fjeld; and CFO and Managing Director, Baden Gowrie-Smith. After the presentation, we will have a Q&A session, and you can submit your written questions during the webcast. With that, I hand the word over to Philip.

Thank you very much, Alan, and good morning to everyone who is watching this live and hello to everyone who's watching this on demand or catch up. So I'll take you through what we've done in our Q4 in the previous quarter. Before I do that, I'll just set the scene slightly as to where we're at and what we're doing. So we're on a journey to decarbonize U.K.'s truck fleet or Europe's truck fleet as you want, but we're focused on the U.K. for now. We've got a very strong leadership position in the market in the U.K. probably about 95% of all CNG trucks on the road use our network. We've just opened a new station. That takes us up to 16 large public access stations in the U.K. and we're now north of 2,000 trucks that use our network exclusively. And we're very proud of the fact that for calendar year 2024, we helped our customers save north of 216,000 tonnes of greenhouse gas emissions by running on 100% sustainable and renewable biomethane. What does a typical station look like? Those of you who have seen our presentations before, you'll probably recognize this slide. Why haven't we renewed it or we keep it here? It's because it's a very good visual, a very good illustration as to what we do. So we are not into retail of coffees and snacks. What we do is build very large public access, very efficient, high-capacity renewable energy vector, if you want, dispensing facilities. This is a good example. This is [indiscernible] Northeast England, can do 14 trucks simultaneously. About 800 trucks per day at full capacity, a very, very efficient way of putting renewable energy into trucks, probably not anything more efficient in the market today and the unmanned, which you will see later on, is a very good way to scale our business going forward. We're very pleased and quite proud with the previous quarter. We have started to change or to turn a corner. We listed 2 years ago. There have been, I would say, market forces that haven't necessarily been in our favor over the past 2 years. Regardlessly, we've been executing on a plan to take the company to where it is today and to take it also further into the future with further growth. And it is good now to finally be able to demonstrate to our investors and to the broader market what this company is capable of doing, even though we are still far away from, I would say, fulfilling and extracting its true potential. So it's the first quarter of profit since listing 2 years ago. We've had good growth in the biomethane dispensed to our customers. I mentioned previously, we've got north of 2,000 trucks now that used our station exclusively, a lot more to come over the coming quarters. Once again, 6x2, which we'll touch upon later in the presentation as well, but we now have the first confirmed orders for customers of the Scania 6x2, which will be delivered over the coming months, unlocking a 6x larger market than 4x2 market that we've currently been confined to. We are pretty much done with the biomethane sourcing that we need for this calendar year. Our team are very busy also sourcing for next year. That gives us much better visibility on earnings and margins going forward than we previously had. I also mentioned our Livingston station that we announced earlier this week. Second station in Scotland once again opens up important new customers to us. And finally, we've, of course, gone through this before through the announcement, but the transaction or the finalization of the transaction with Foresight that we announced in April has given us a very strong platform from where to not just conduct our day-to-day business, but also to grow from. If you look at that structure, what does it do? It brings basically the verticals we've previously had, which has been the biomethane sourcing and trading of certificates, CNG Fuels being the engine room, if you want, and then also CNG Foresight where the stations used to sit. That's all now being brought under the CNG Fuels umbrella, which means we're internalizing cash flows and so on and so forth, and therefore, makes it easier for us to execute on the strategy that we've got. And what we've now basically created is a self-funding, self-funding from an equity perspective platform that we can now focus on growing again. We've been a bit in sort of hiatus the last year whilst we're negotiating this. But now as you will see also from some of Baden's slides later on, we are in a strong financial position and that strength to just continue to compound and accelerate as we go forward. And here we are. If we then look at the operational review. We are now north of 2,000 trucks using our stations on average through the month. That has gotten us up to close to 10% of the so-called 4x2 truck market in the U.K. That is only a small sliver, if you want, of the overall articulated truck market out there. On the graph on the left-hand side and to some extent the -- sorry, the right-hand side, but also to some extent the left-hand side, you will see that there is -- this isn't a straight curve that goes upwards. There's always some seasonality in there month-on-month, some months of more days than others. You've got Christmas in certain periods, Easter and so on and so forth. But the overall trajectory here is heading pretty much upwards. And the growth we've had over the last year has been good. I wouldn't call it strong, but we're confident based on what we're now seeing that, that growth rate should accelerate going forward, even though it's always harder to grow from a higher base. But going forward, based on what we see now with regards to customer interest, we're confident that we will accelerate growth going forward. If you look at what is it we provide for our customers, the majority of our customer base are very focused on decarbonizing their transport operations. How do they best do that? Well, as of today, they don't really have that many options pretty much by diesel or buy methane, particularly for the heavy long-haul operations, which is our core market. So we provide biomethane, which is 100% renewable and sustainable gas to our customers. Not only does it offer the benefit of massively reducing your greenhouse gas emissions 80% to 90%, sometimes more than 90% compared to running a regular diesel truck, but it also offers you cost savings and which we've added in the last couple of quarters here, it also offers -- sorry, considerable cost savings over biodiesel, biodiesel here being represented by HVO. There has been an increasingly focus in, I would say, the media landscape but also in the broader industry landscape that sourcing the feedstock you need to produce HVO might be challenging and might sometimes not provide the assurance level that it should. I don't want any way to take away from this call that HVO is a bad fuel to run your truck on. HVO done properly is an amazing solution to decarbonize your trucks. The challenge really lies in -- this is a globally traded market for the feedstocks, typically used cooking oil, other types of waste fats that can be used to produce biodiesel. And of course, the product itself is globally traded. And because of that, the so-called chain of custody, the quality of assurance here can be challenging. If you don't look at biomethane, this is very much a locally produced fuel, the feedstocks, whether they are food waste, manures from farms, other agricultural waste or residues, sewage sludge. This isn't put on a tanker and sailed across the ocean. This is locally sourced. And therefore, the provenance and actually the chain of custody of knowing that the feedstock is 100% proper and is genuinely what it says on the tin is so much easier compared to other supply chains such as liquid biofuels. And when you look at the investment that's currently going into the sector in Europe, and these are just figures that have recently been announced, we expect to see continued growth in that investment going forward. We are in a world currently and for the foreseeable future, where we don't see a shortage of feedstocks to produce biomethane nor the actual end product, which is important for us. Mentioned the 6x2 on many presentations previously. It's now actually nice to be able to stand here and say, listen, what we said is now starting to happen. IVECO have had a 6x2 model for a while. They've released a new version of their 6x2, a much improved version of the 6x2 model with very strong customer interest. Scania released their 6x2 last year. We've now had the first customer orders confirmed. They're actually being ordered and delivered earlier than we thought with the first ones going into operation over the summer months. And when you look at this graph or this chart, it's pretty obvious that we are more or less nonexistent in the 6x2 market. We've got just below 100 6x2s currently going through our network, but the potential there is huge. And if we can replicate what we've done in the 4x2 market, but probably at an accelerated pace, it's going to be really exciting going forward. As part of the Foresight transaction, we are on a trajectory now and have set out a business plan over the next 3 months -- 3 years, sorry, to double our capacity, both of grid-connected stations and on the so-called MRSs, Mobile Refueling Stations. Where we're going to take ourselves, we're going to add another 9 large high-capacity stations and also add a number of MRSs. In addition, we continue to explore early-stage developments. Why? Because our view of the market, of course, adapt and future interest from customer actually feeds into where we need to prioritize sites going forward. So sites that we maybe think we're going to build in 18 months' time, one of those might be discarded and another one put in depending on how customer demand, how new customers decide to come on board. We recently opened Livingston earlier this week. It's been great there to see Tesco, have 40-plus trucks going through there on day 1 and very strong interest from customers surrounding customers starting to use that site. The next one to go into development is a site in Magor, where we are -- where you can see there, there's not a bigger on site yet, but that's not that far away. That will be another large capacity station, and then we'll advise our investors of the future ones to come at our next earnings release in August. Then we have the Mobile Refueling Stations, where we've now got 11, 10 physical ones today and 11, which is on order/build. I say on order/build because we order certain components, but of course, we do all the integration and all the build ourselves. Our target there is for 30 by 2028. And based on just the last weeks and a couple of months, the interest from our customer base, existing and new customers of us deploying mobile refueling stations has, I wouldn't say taken us by surprise, but it is definitely a lot stronger than we would have expected just 6 months ago. If you then look at the circuit prices that we rely on to source biomethane, we're now up at a 25, 26p level. It's been there for a while. Baden will give a better view as to the margins that we're making there. What we're now seeing is that the biodiesel market is more balanced. The feedstock market that, of course, feeds into the biodiesel market is also more balanced and there are various specific drivers in Asia, which is also pushing up the feedstock prices, which again is helping to push up certificates. Does that mean that '25, '26 is where it's going to remain forever. There's one thing that's certain with this market is that the answer there is no. Let's see how that further develops over time. But as of today, yes, we're in a pretty good position there. And I'll hand it over to Baden before I provide a summary towards the end. Thank you very much, Philip.

Thank you very much, Philip. So we've talked this locking in the biomethane margins for the second half, and I'll tell you why. We continue to see certificate prices improve over the last couple of quarters. And in the last quarter, we recognized 23p per RTFC on average, slightly below the current market price, but that's due to the forward sales that we had conducted prior -- through both earlier in the obligation year and towards the end of last year, given that you can sell forward RTFCs, not just for the obligation year in the calendar year you're currently in, but also for the year that follows, which is a hedging strategy, which I can update you on shortly. Margins have continued to recover. And you can see on the right, when we remove the accounting adjustments, which require a difference between spot treatment and forward treatment, we see that we have a 28% gross margin on RTFC sales for the quarter we've just had. 73 million RTFCs were sold, but that did include the carryover of 13.7 million, which again is an accounting treatment from the prior quarter. So 60 million RTFCs actually sold in this period, and those were all delivered at spot. As Philip mentioned, we are fully sourced for 2025 year and sourcing for 2026 year is progressing. But the most important part of that is that we have also been able to sell forward these RTFCs to lock in the margins on those -- on the biomethane purchases, and that gives us a great visibility on having healthy earnings throughout the second half of 2025 and moving into 2026. On the next slide, I'll run you through how we're able to use market conditions to lock in these margins better. But the margins you see here on the slide are removed the distortion of this accounting treatment. So here, you can see that the volumes -- a straight lining volume growth, which, of course, is not certainly not something we always see. Trucks will obviously arrive when they want to arrive and generally seasonally. But what this is used here to demonstrate is that over the period of a year where we continue to see increased volume growth, we do not have to balance the biomethane for our customers in every quarter of each year. Now to make -- to try and clear up some confusion around this, the obligation year for the RTFO is a calendar year obligation, and that is the year in which the fuel -- obligated fuel suppliers who must provide certain amounts of biofuel have to -- will need to buy certificates and balance the amount of biofuel that they sell through the year. For us, it means for us, it enables us to dispense CNG and Bio-CNG throughout the year and dispense CNG to customers and then balance it in certain quarters to make sure that over the course of the calendar year, we are what we fully sourced to the extent that we physically can. Customers do, however, care that their Q4, which is the calendar Q1, is ideally fully sourced because, of course, then for their annual reports, they're able to disclose that they were fully sourced their biomethane. However, for us, it's important that we are fully sourced over the calendar year because after the calendar year, you're unable to then catch up biomethane, which you are short. What this means is that you will see in these forward periods that although we are generating very healthy margins and we have a very healthy look-through, you will see that our calendar Q2 and Q3, which is our reporting Q3 and Q4 will usually have a higher amount of certificate sales and matched off against higher biomethane purchases because we'll be trying to fill our customers' final quarter of their financial year. And most importantly, as you can see here, the Q4 calendar year for us to be fully sourced -- to be fully source that period. That actually comes at a huge benefit for us. It enables us to time the purchases of our biomethane when we see favorable market conditions, time the delivery of that biomethane. And then we can also sell forward sell RTFCs for specific periods to match that biomethane, but also to deliver RTFCs to customers at the time that they want to receive -- that they want to be receiving RTFCs. There are also various other benefits such as when gas is able to be shipped where we source from the continent. And so really, in all, this 1-year obligation period provides us great flexibility for customers and for ourselves and to benefit customers. And what we've seen -- what we've been doing for the last couple of months is fully sourcing for this calendar year, being able to sell the RTFCs forward to lock in those margins, and we're doing -- doing that for the 2026 year already to get really -- to get clear visibility of earnings and obviously and more stability for the year, 1.5 years ahead. So here are the financial highlights. Obviously, very pleased to show the ReFuels, which is the listed entity that we currently have. This is under the old structure. The new structure of the transaction with Foresight concluded in early April. And so this is the final quarter where we will be reporting all of the earnings from the prior structure. And obviously, yes, very happy to show that it was -- we had healthy profit over the quarter with GBP 3.4 million, GBP 4.2 million of unadjusted EBITDA and GBP 4.7 million once we adjust out for the noncash items and timing differences. You can see we've had a huge increase in gross profit over the year, just showing how the business has really developed GBP 17 million for the financial year versus GBP 2.3 million for the prior year. So really a very substantial increase. And the EBITDA from this quarter was substantial enough even on an unadjusted basis to take the financial year 2025 into a positive EBITDA, positive cash generation year. So obviously, very happy to be able to show that. The cash flows didn't really move around a lot. That's largely due to working capital changes. We had a lot of very large increase in trade receivables during the period. But again, as you can see, a massive increase from the prior year in the performance on a cash basis as well. And finally, on the overheads, we've been really, really cost conscious. We've been very careful in managing the existing resources for the business, which we have designed to provide -- to be able to look after and manage a nationwide network of stations. We've seen a decrease from 32p down to 25p from the Q4 to Q4 on a per kilo basis. And actually, if you strip out the transaction costs and the recent transactions, it gets down to around 19p. So obviously, a very substantial improvements in our cost per kilo from the growing economies, increasing kilos through an existing network that has plenty of capacity. And yes, so really, really lovely to see this as well. So what's the slide showing? I know I've shown it before, but for those of you who haven't watched these presentations. This is the station network itself. Again, this is under the old structure where this was actually owned by the CNG Foresight joint venture. So this is the stations purely by themselves, how are they performing over time, trucks going through them and the EBITDA they're generating. The EBITDA they're generating previously was -- has been -- has obviously been building up, and we're now GBP 1.82 million for the Q4 period, up from GBP 1.57 million same period last year. And the station network generated GBP 7 million of EBITDA over the year. What we anticipate is that once the existing order book we have and those confirmed orders from the OEMs and customers is delivered, then we will be over the GBP 12 million of annualized EBITDA per year, which is enough revenue to cover the entire cost base of the operating costs of the CNG Fuel stations, the [ MRU ] business, the construction business and future research and development. So moving the biomethane side of the business -- moving the biomethane business to one side, that the entire station network business and network business and its growth will be able to be funded by the stations very shortly off our existing order book. And beyond there, obviously, we've got substantial growth and scale given that we've now got a network that can hold about 10,500 trucks, and we are currently just over 2,000. Truck deliveries are starting to speed up again. You can see a reasonable uptick there. This is a 3-month rolling average. So we're now over 2,000 coming through the stations, but we are seeing these starting to come back through. And yes, that will continue to drive towards that positive EBITDA soon. And finally, this is the new CNG station -- CNG Fuels pro forma group. Now this is what we will be showing every quarter going forward. because, of course, ReFuels will become a minority holder of the shares in CNG Fuels, and so we'll not be consolidating these earnings up. So we're going to show the ReFuels accounting performance, of course, but we'll also be showing CNG Fuels pro forma, so the ReFuels and investors and the market can see what the 40% ownership looks like, which has a ratchet mechanism, which takes us up beyond that in the future. But as you can see, as a group, which is now newly formed, had it been in existence in the last quarter, we would have had EBITDA in the period of GBP 5.7 million. What you can see from the last quarter to this quarter is there's quite a big jump. There were some adjustments, transaction costs, elements of payroll, et cetera, which needed to be adjusted out. So actually, what we would have seen here is a slightly lower EBITDA in this quarter, a higher EBITDA in the Q3 and a much more smooth increase over time. What we have now, of course, we got the 2 revenue streams coming into this business. We've got the RTFS biomethane and RTFC generation, which we now have great visibility on for the next 12 months or so. And then we've got CNG station business, which you've just seen is improving on a quarter-by-quarter basis. And the combination of those should form a very -- should form a fantastic platform for growth and profitability into the future. So thank you.

Thank you very much, Baden. There we are. Camera is back on. So I will provide a brief summary and outlook, and then we go into questions. I can see there are some questions that have been submitted. As Baden went through, a bit of a watershed moment for us here. We've been executing on the plan that we're now finally starting to see the bear fruits. We have an EBITDA profitable year, and I would say, a positive outlook with regards to healthy earnings going forward, not only for 2025, but that's also now stretching into '26. We've got the underlying growth in trucks here that are coming through. The vast majority of those are 4x2s because that's the visibility we've got. The 6x2 market, we are, of course, very excited about, really hard there to put more accurate estimates as to what that could mean for us. We're seeing unprecedented interest in trials and demos for 6x2 vehicles. The first orders of the Scania have come through, once again, that's very encouraging, probably actually come through and being delivered earlier than we thought. But we will be able to provide more hard evidence on the uptake of the 6x2s over the coming quarters. If you then look at where we're at with regards to the transaction we did with Foresight, what we've achieved there is to put the overall group on very solid footing. We're fully equity funded. We're busy running a debt process at the moment that is making good progress. And as such, we're in a very, very good position to accelerate our growth going forward. And I think what's also good to mention here is we previously talked a bit about biodiesel, biomethane, et cetera. Whilst there are potential challenges and, I would say, assurance complications with certain parts of the biodiesel chain, what we see with regards to biomethane, the access to feedstock, the growth that's coming here, we today can't see any supply issues that would affect our growth in this market. So I think what we've been saying for a long, long time now, that biomethane is in Europe is now starting to see the start of a megatrend. That's now actually being delivered upon as well. So all in all, very pleased with where we're at now, and we've got some really exciting quarters and years ahead of us. And with that, we will probably drop the slides and go into some Q&A.

Good. We can move into Q&A. So first question is, do you have any views on the U.S.-U.K. trade deal and potential impact on the U.K. biofuels/RTFC market?

I'll take that one. And the answer is yes, we do. I won't get too complicated here, but the U.K.-U.S. trade deal, the way it stands at the moment will make the U.K. bioethanol sector or will put the U.K. bioethanol sector in a very, very difficult position. That's been in the press in the last weeks, the last month. And how will that affect RTFC pricing? Well, a lot of the bioethanol that comes in the so-called single counting. There is a so-called crop cap. So there's only so much of that bioethanol that come into the RFC market. So I don't think we're expecting to see a direct impact on RTFC prices as such. But clearly, the overall impact on the U.K. industry is not great because bioethanol production in the U.K. doesn't just provide bioethanol. It provides food-grade CO2, which is important for the food and beverage sector in this country. It's important for abattoirs use CO2 during the slaughter process. It produces animal feed. It has a massive impact on farmers that supply into the sector. So as a broader economy, the bioethanol sector and losing the bioethanol production in the U.K. is not great at all. But when it comes to RTFCs, probably not going to be a large impact, at least not short term.

Good. And next question in regards to the rollout plan. Is the plan for operational cash flow to finance the 9 new stations over the next 3 years? And how do you structure the financing for stations with regards to debt and equity? And what percentage of the CapEx can the ReFuels equity ticket typically be?

Yes. I'll take that one. Thank you. So is the plan to operation to fund with cash flow over the next few years? Yes, absolutely. So the shareholders don't intend to pull cash out of the business. We are fully aligned on business growth over the next couple of years. The 9 new stations is a check size that would work -- that could well work with cash flow and a conservative debt facility. We are progressing really well on that at the moment. We anticipate that we'll be able to commence the development of some additional stations over the next -- very, very shortly. And really, that debt facility is designed to bring forward our capacity to get into development as quickly as possible for these next sites because we really want to keep the momentum going here. How do we fund with regards to debt to equity? At the moment, as I said, we're looking at a fairly conservative facility given the size of the asset portfolio we have that underpins it. And that can be revisited in the future if need be. When it comes to ReFuels, equity, ReFuels and equity finance, we are fully equity financed at this point and cash flow generation over the next couple of years is fairly substantial. So clearly, if it looks like we'll need to build a lot more CNG stations, then we'll revisit how we revisit what the capital structure should be looking like, but -- and the speed of growth. But at the moment, we feel this is a really good place to be.

Good. Next question is on the 6x2 trucks. So what is the trial feedback for the new 6x2 CNG trucks? And do you have any more insight into production capacity for these trucks?

Good question. So I'll do the production capacity one first maybe. From what we're hearing from the OEMs, they can combine produce into the thousands per year. And what we're always being told because, of course, they adapt to market conditions, right? Whether they come out with a new diesel model that's incredibly popular, they'll, of course, adjust their production platform accordingly, and they will do exactly the same here. So short term, meaning the next 12 to 18 months, we're being told combined, it's several thousand. If demand overshoots that, then I'm sure and they've told us, but I'm sure that they will adapt to deliver even further. If you look at the interest, the interest is incredible. The feedback we're getting is also incredible for both of the new products that have come out, the Scania 6x2 and the new revamped IVECO 6x2. These are game-changing vehicles as such. It's something that we've been hoping and waiting for, for the last 8 to 10 years. They've now been delivered and the feedback is as good or better than we had been expected. The list to trial these vehicles is worryingly long. It's a nice problem to have, but there are currently too few demo trucks on the road in the U.K. The manufacturers are dealing with that as we speak. But that also means there is going to be a slight lag here in getting bums on seats basically so that fleets can actually trial them because the majority of fleets want to trial them before they order, which is why, as I said previously, it's going to take us a couple of quarters here to see really how rapidly the order book ramps, but the indication so far is very encouraging given that we're already seeing considerable orders being placed, but the larger ones beyond that, the 50s and the hundreds and hundreds plus, we're expecting to see later this year or early next year.

Good. Next question on the new structure. So how do you plan reporting going forward for the new structure?

Yes, I touched on that very briefly. But -- so what we -- we've taken feedback from a number of people and sort of considered how investors may want to see us best. We think providing a segmented reporting -- segmental reporting going forward. So splitting the biomethane and RTFC side of the business from the station side of the business to the extent that we can, given obviously, they're heavily interlinked, will be really valuable for everyone to be able to see how they grow and move at their own pace. And then -- and we'll be able to obviously show the consolidated CNG Fuels Group, which ReFuels owns a substantial stake in going forward so that people -- again, people can see how that value grows and develops over time as volumes which are common to the group in total continue to grow.

Good. I have one final question here, and it's -- you are forecasting a large increase in the purchase of Mobile Refueling Stations as opposed to grid-connected stations. Is this a shift in strategy?

Yes, good question. It depends how you define shift in strategy. We are clearly driven by what our customers are demanding and what our customers want. So you can call it an adaptation to ensure that we can fulfill as much customer demand as soon as possible. What we are unfortunately seeing in the U.K., probably not U.K. alone, is that developing fixed infrastructure in this country is just getting worse and worse. The time lines are being stretched out, dealing with landowners, getting planning permission, doing all the surveys, getting all the grid connections, whether it's electrical or gas connections. All of these things take a very, very long time. There's nothing controversial about a CNG station. We've never had planning approval turned down because people object to having a CNG station. It doesn't provide any ground pollution, air pollution, noise pollution, anything like that. It's just the process you need to go through. That is holding back our growth, particularly now that we're seeing some really large new customers come on board with very ambitious/aggressive adoption plans going forward, and we expect the 6x2 will just accelerate this. So we need to make a choice. Do we want to continue to only do grid-connected stations and limit our a role in the Mobile Refueling Station market to only certain customers in certain locations or do we want to bring customer demand forward, make sure they can adopt as many trucks as possible by accelerating the number of MRSs we have in operation. And given that we are a customer-driven organization, we'll go for the latter option, which is to make sure that they can adopt as many trucks as possible. And that's really where it's come from. It's come from a realization that fixed infrastructure takes time. It's complicated and unfortunately, to some extent, is outside of our control on the time lines. MRSs are inside of our control, takes about 8 months from we order one until it's in operation, doesn't require planning permission, and we control all the logistics. So yes, this has been driven by customer interest. And as such, it should help us accelerate the growth in a lot of customers' adoption plans.

Good. Then there are no more questions. So I hand it back to you, Philip, for final closing remarks.

Thank you very much. And yes, thank you for everyone who is showing an interest in the company. Thank you for tuning in, and we look forward to seeing you on the next one, which is towards the end of August.