Verbio SE (VBK.DE) Q1 FY2026 Earnings Call Transcript & Summary

Good afternoon, everyone, and a warm welcome to the Verbio earnings call for the first quarter of the fiscal year 2025, '26. Today's speakers are Olaf Troeber, CFO of Verbio; and Alina Kohler, Head of Investor Relations and Corporate Strategy. They will walk us through the company's performance, touching on key milestones and current market trends. But before we dive in a quick housekeeping note. The conference is being recorded. [Operator Instructions] Let me pass the word to Ms. Kohler and Mr. Troeber. The floor is yours.

Thank you, Harald, and good day, everyone. Welcome to Verbio's earnings conference call. We will be discussing our first quarter 2025, '26 financial and operating results. I'm also delighted to welcome Alina Kohler, Head of Investor Relations, who is joining me today. Slide, please. Yes, we've got a bit of a problem with the slide, give me a second. We are there. Okay. So for that one, we achieved a record biodiesel production in our first quarter. Biodiesel production reached close to 167,000 tonnes and the capacity utilization rate was close to 94%. Meanwhile, ethanol production grew by 10% year-on-year to 154,000 tonnes. This was purely driven by the ramp-up in Nevada and efficiency gains at our ethanol plant in South Bend, Indiana. Biomethane production grew by 24% year-on-year, also thanks to Nevada. Our EBITDA increased strongly to EUR 15.4 million from minus EUR 6.6 million. The year-on-year increase was driven by the main segments. Higher coproduct revenues and favorable developments in commodity forwards and ForEx valuations supported our results. The North American business also contributed positively produced developments, as outlined before. The increase in net debt primarily reflects negative free cash flow stemming from reduced operating cash driven by working capital and investments in our strategic projects. The working capital effects mainly reflect a lower reduction in receivables and a decrease in payables, both related to cut-off date effects. The strategic investments in the amount of around EUR 20 million include investments into the specialty chemicals unit here in Bitterfeld as well as inventory production plant in South Bend, Indiana. Overall, the development of net financial debt is in line with the planned temporary cash outflows related to inventory changes and the investment program. The equity ratio remained at 58%, and well, it's -- hence, it's at a comfortable level. Overall, these results are reassuring. We haven't fully reached our goals yet but the progress towards Q2 strengthens our confidence in the path ahead. Next slide. Here, you can see our gross margin per tonne of liquid fuels versus the sales volume weighted reference spread. Yes, but the spread is basically the difference between the biofuel price and the feedstock cost per tonne of biofuel. Overall, and that shows the capabilities of Verbio. We achieved a greater premium versus the market in Q1 '25, '26 compared to Q4 the previous year, '24, '25 and Q1 last year. This was supported by co-product revenues and the nonrecurrence of inventory write-downs and lower cost and net realizable value impacts. Our coproducts generate additional value and reduce the effective cost base compared to producers of the main product alone. Year on -- yes, quarter-on-quarter, Verbio also benefited from positive market momentum that gives you a sense of our position in the market. Let's now move on and see how the segments performed. I will begin with a quick overview of EBITDA development across the quarters. What stands out, again, is that a Biodiesel segment shown as the dark green bar continues to deliver strong earnings support. This increase in EBITDA to EUR 22.6 million in the Biodiesel segment was primarily due to an improved gross margin. Also, we managed to cut our losses by more than half in the Bioethanol and Biomethane segment to minus EUR 9.5 million, which is represented by the light green bar. Year-on-year, this has been driven by the positive development in North America. Earnings below the gross margin improved mainly because last year's negative effects from the weak U.S. dollar, open commodity positions did not reoccur. Quarter-on-quarter, one-offs, including write-downs on inventory, which had discussed during our earnings call in September did not repeat. The other segment shown in the green, which harbors our logistics and trading activities reported an EBITDA of -- can you mute?

Oh, sorry.

I will repeat it. So the other segments shown in the green, which comprise our logistics and trading activities reported an EBITDA of EUR 2.3 million and reflects, in particular, the positive development of our commodity forward contracts. Now let me hand over to Alina, and I will be back to give you the financial outlook later on.

Thank you, Olaf, and apologies for the microphone again. And good afternoon to everyone else. Let me walk you through the segment performance, focusing on how things have developed quarter-over-quarter. In the Biodiesel segment, which I want to start with, as you should see on the slide, can we please? Yes. There we go. Thank you. In the Biodiesel segment, we have generated revenues of EUR 244 million in the first quarter which is in line with the previous quarter or Q4, as you can see in the chart on the left side. Our production volumes increased slightly while sales volumes, which are not depicted here in the chart, remain stable. This underpins the steady market demand that we're seeing for our product as well as our consistent operational performance. Our EBITDA also grew quarter-over-quarter, thanks to a slight improvement in the gross margin. And now let me give you some more market context, and we will have a look at the reference charts. Does that work? There we go. There, we have it. On the left, you can -- apologies for the technical issues we're having here. On the left, you can see the biodiesel spread chart, which shows the difference between biodiesel prices and rapeseed oil prices per tonne of biodiesel. And as you can see, the spread has widened during our first quarter. On the right side of the slide, we show how the biodiesel and rapeseed oil prices have driven this development specifically. As always, and we mentioned that during each conference call, we have these charts do not reflect our sourcing strategy but rather give us a good indication of how the broader market has moved. We -- on the other hand, we typically purchase our rapeseed oil 2 to 3 months in advance. That's just as a heads up. So with that, let's move to the Bioethanol and the Biomethane segment. We recorded an increase in revenues to EUR 191 million, which is a new quarterly record for us. And this record has been driven by an increase in sales volumes, specifically for biomethane. On the slide, we usually say RNG, which is short for renewable natural gas, and the recovery in the markets. So the biomethane production actually also reached a new record at 336 gigawatt hours for the first 3 months and this is a utilization rate of 68%, whereas the production volumes for bioethanol fell slightly in comparison with our last quarter so Q4 due to maintenance work we had to do here in Europe. Overall, our bioethanol utilization stood at 77%. The significant increase in earnings that you can see in the chart on the right side is primarily driven by the positive development in North America and the nonrecurrence of one-off items, which Olaf had just discussed a minute ago. Let us now move to the reference graphs. And here, it's a bit more interesting than what we've seen with the biodiesel. So again, the reference graph, they illustrate how ethanol market spreads have moved and what has been driven that price-wise. Like with biodiesel, they don't mirror our exact purchasing or our feedstock strategy. We show wheat on the slide, but mostly, we can also use corn, for example, or triticale, anything that's available and that comes cheaper than wheat in -- due to availability, for example. So this is rather indicative for the market. Looking at the price chart on the right, you can see that ethanol prices actually jumped during our first quarter, but wheat prices fell slightly, thanks to a strong harvest. So this move in ethanol prices was likely due to short-term imbalances in the market. However, looking ahead into 2026, the fundamentals should also remain strong for ethanol. A key factor here that we're seeing is the transposition of RED III in the Netherlands, which restricts the use of denatured ethanol. So what is denatured ethanol? Denatured ethanol is ethanol that is treated with additives to make it unfit for human consumption. Undenatured ethanol, on the other side, is pure ethanol, and that's what's typically produced here in Europe. So that's also what we produce here in Europe. By restricting denatured ethanol, the regulation reduces the supply that's available mainly from North America, which then helps support the ethanol prices in Europe. European producers like us also benefit from higher import duties for undenatured ethanol, which then limits the competitiveness of ethanol imports and strengthens the domestic market prices. So overall, all of these factors should create a favorable market environment as we had into 2026. Coming now to the U.S. market, you will find some similar -- sorry, there we go. Coming out to the U.S. market, you will find some similar charts as ethanol prices bounced back by about USD 0.30 per gallon, which is roughly EUR 80 per tonne in August and September from the summer lows that have -- we have been seeing specifically in our Q4. The increase was supported by tighter supply, and you can see this increase in the chart on the right-hand side. Meanwhile, the corn prices stayed relatively low, thanks to good weather also and larger yields. Hence, quarter-on-quarter, market spreads improved strongly, as you can see on the chart on the left-hand side again. So year on the year, the market spreads were nevertheless slightly behind as the summer market remained below its usual seasonal pickup, which also carried into our first quarter or calendar Q3 and that we had discussed in a bit more detail in our last earnings call. So with the fall maintenance done now and peak summer driving also behind us, ethanol prices are now closer to historical levels again. So last but not least, let me now turn to the GHG quota price development. Here we go. And here, you can see that prices have increased over time. Much of the movement that we have witnessed has been driven by news and discussions around the RED III transposition in Germany. Since the first draft was released at the end of June, we have seen an increased market activity and further policy clarifications have then strengthened the confidence in the sector. One of them being the ministerial agreement that has been reached confirming that double counting will now be eliminated. This change is actually like really a positive step for the market, especially combined with the restriction of the production of -- protection of trust, excuse me, which we call the [Foreign Language] here in Germany. Also, as some of you may have already seen in the news, the adoption of the new draft in the cabinet has been delayed multiple times now. But importantly, ministries still expect retroactive application. And while these delays have temporarily shown activity -- sorry, slowed the activity in 2025, which we see here in the graph which was just shown there, the 2026 demand has particularly remained very strong, and prices only know one way and that is up. It's also encouraging that a new draft version has been leaked, which also some of you might have seen, I think it has -- it was covered in the press also on Monday, which we actually overall feel very positively at this time. And now with that, I hand back to Olaf for the financial outlook.

Thank you, Alina. Well, let's come to our guidance. It might disappoint some of you, but our guidance remains unchanged. We expect to achieve an EBITDA in the high double-digit million range in the financial year, '25, '26. I'm not going to walk through the detailed assumptions, which we already discussed during our full year earnings call 6 weeks ago. The strong bioethanol market works in favor, but we are still early in the year and eagerly awaiting the German decision regarding the RED III. While overall, the preliminary information will look promising, as discussed by Alina, we don't want to get ahead of ourselves. And I believe you got the message and the message is clear. The next is the improved results and lower investments compared to the previous year are expected to lead to at least a balanced free cash flow and a moderate reduction in net financial debt year-over-year as outlined in the September call. CapEx is under tight control as we have demonstrated this quarter, working capital will be optimized through the year. And now with this, we would like to open the line for the Q&A. Thank you.

Thank you for these insights, and we will now move on with the Q&A session. [Operator Instructions] So let's dive in. And we go for the first question. Olaf, Alina, how are the new contract negotiations going? If we see the development of the GHG quotas, shall we expect that the EBITDA will increase significantly in Q1, Q2 and 2026?

Well, we concluded a few contracts already at market prices, but the large chunk of agreements will be done beginning of December, rather mid-December or concluded beginning December, mid-December. And EBITDA increase -- well, I outlined it with my comments regarding the guidance. We are rather a little bit more on the cautious part. What I can say, overall, the downside risk is reduced, the upside potential has been increased. But so far, we stick with our guidance.

That's said, I mean the next question is going into the similar direction. The guidance is conservative. Are we expecting adjustments in the EBITDA to the levels of EUR 120 million to EUR 160 million?

No further comments.

No further comments. So for the time, there's no further question in the line, but I can see that somebody is typing. So let's wait a moment. And let's have a look on the U.S.A. and the business there. Can you provide more color on the outlook in the U.S.? And what assumptions underlying your current forecast for market pricing and earnings?

So Alina?

Yes. I think most important is the utilization at Nevada because that's, in the end, driving our increase in EBITDA year-over-year in North America. And with that, we stick to what we have said just in our last earnings call that we still expect the full utilization in Q4, and we're on track to reach that. We have actually a very good utilization at this point of time. In terms of market pricing, we have looked at historical data there and are pretty much on par with historical margins.

And still waiting for the next questions. And here we go. Can we run through the potential impact on this year's guidance if bioethanol spreads stay at this level?

Well, I mean that's a simple mathematic calculation. We provide the volumes we produce per quarter and per year and then simply multiplied by the increase we have seen the last 6 weeks. The point is why I'm stressing this that we are not going to adjust our guidance. The year has 52 weeks. And we are seeing just 6 weeks now elevated bioethanol prices. And if this is going forward, we, of course, have to adjust our guidance. But for the time being, we had 6 weeks of elevated bioethanol prices or bioethanol rather -- bioethanol margins. But we also had 2 weeks of compressed or lower biodiesel margins. So right now, as I pointed out, the downside risk decreased and the potential -- upside potential increased, that's all.

Thank you for answering this question. Maybe let's have a look again to the Nevada plant. How is ramping up going on? And is it almost to its peak levels of 90%?

Well, I had a call -- first of all, Alina already provided some color on this one. I had a call yesterday with Dr. Lüdtke in Nevada, he is on the path. So we are in the -- yes, as we planned. We reached the 80% already of capacity utilization, not on an hourly basis rather on a daily, and now we are getting to a weekly basis and peak capacity utilization was temporarily also exceeding the 80%, but not for a longer time. So nothing of concern right now. And I hope that we really achieve the 100% stable capacity utilization beginning of spring, summer next year.

Thank you for answering this question. Moving on to the next one. In which area are you currently focusing your management capacities, in particular? Which areas require your greatest attention and where should we, as investors, focus our attention in particular?

Well, we clearly communicated our focus. Our focus is on the -- yes, more or less stable production with respect to the existing plants, also capacity -- increase in the capacity utilization of our German plants, getting more out of the raw materials. So it's all what you can do on a common basis without facing larger investments. With respect to the U.S., we also clearly communicated that our focus is on making our investments profitable. So the main focus is right now on Nevada but not reflecting the South Bend ethanol plant. So it's really focus on these ongoing process. I forgot one. It's the ethenolysis plant in Bitterfeld. So we are also making progress there. And yes, as Alina outlined, we also had a larger chunk of investments there already. And I'm quite confident that we complete the investment mid end of next year and then starting with the ramp-up phase. What you should have in mind as an investor, well, it's always the RED III development quota prices. We are quite dependent. We had a cautious planning regarding the quota prices. So if they may go up substantially, there is an upside potential. Also what one of the investors mentioned before, the margins with respect to bioethanol remain that high. I don't expect it. But if they remind that high, that would also have a positive impact. And with respect to the U.S. business, well, as long as you stay within our plan, then everything is fine.

Let's have a closer look to the U.S. activities. How smoothly are your U.S. operations running at the moment? And do you anticipate any technical challenges in the upcoming winter period?

Well, we managed last winter quite nicely. We had some minor technical issues, but the plant was running through the entire winter time, both South Bend and Nevada. So with increased production, you produce more heat. So the likelihood of facing any technical issues will decrease, but you never can be certain. I mean, there might be a [ metal ] hitting one of our facilities or whatever. But really, the likelihood is small that something might happen. Right now, we are making progress, everything maybe at a lot of people there taking care of all the insulation of all the external heatings. So from a common perspective, the plant should be safe. So that's U.S.

Speaking about the U.S., what are the current share -- what's the current share in the European markets, speaking in percent, of U.S. ethanol imports, which might be diminished next year?

We have a figure...

I don't have it on top of my head, but volumes that came from the U.S. to Netherlands for around 450,000 -- sorry, 450 million tonnes and -- sorry, 450,000 tonnes. And Netherlands in the U.K., we're the only markets that could receive denatured ethanol here in Europe.

Okay. Moving on to India. Could you say a few words about the market there? What's going on in India and your activities?

Well, nothing substantial. Nothing changed substantially in India. We are collecting the straw, we are producing the biomethane capacity utilization has increased a bit. We are positive on EBITDA but still not there where we would like to be. So no negative -- I would say no negative news from India, all with respect to India.

Okay. Quite quick answer. Let's move on to the next question. Rapeseed oil prices have risen sharply since June 2025. Do you see any risk to EBITDA for Biodiesel segment?

I mean if you would go back a little bit in the presentation, you can see that we are talking about spreads. It doesn't matter if the rapeseed oil price increases, doubled whatever, you're always talking about a margin. And if I have the figures in mind correctly, then the rapeseed oil price right now is approximately EUR 1,080 or EUR 1,090 per tonne and the biodiesel IME price is EUR 1,240. So it's a good margin. And we're just talking about margins and not a price development of one lag of our spread. So the margin is okay, regardless where the raw material price is.

Okay. Thank you for this. The next question. Let's have a look. There we go. Within the next 3 years, does Verbio plan to invest in a new plant in other countries outside Europe?

Yes, we would like to. But as outlined before, we currently, we focus on our current projects. It doesn't make sense to have so many projects not completed. So we focus on Nevada. Here, the ethenolysis plant and just keep in mind, there's also a plant in South Bend where we face a larger investment with respect to the biomethane facility. So the answer right now would be no. We are not going to purchase another plant in somewhere else.

Okay. Thank you. And let me check the question.

But still it depends on the price.

Of course. There get -- so another question, but thank you for the information, Olaf and Alina. And as far as I can see this could maybe conclude our session for today if there are no further questions coming in. But I can see again that somebody want to type. There we go. Let's open the topic with the RED III. How important is RED III for Verbio's outlook and which parts of the framework, do you expect to benefit your business the most?

Alina?

Yes. So most important is the fraud prevention. And we have the inspection of plants also outside of Europe in the new draft, but also the old draft, which is very important, then what we had highlighted in the call as well is the abolishment of the double counting, which has always been a good idea, like Claus also mentioned during our last call, but unfortunately, the way that it was implemented hasn't been exactly going how it was planned. And then what's also important for us is the [indiscernible] that's going away, which is not part of the RED III, but it comes together as a package basically. And all of those things that really help the fraud to stay out of the biofuels market is what's important for us. Of course, the mandate itself is critical but it's very ambitious anyways. And then in the new draft, they have even higher the mandate. So that's why we are like very optimistic going forward.

Okay. Thank you for this answer. And as far as I can see, there is no further question. And so I guess this concludes our call today. Just waiting a brief moment.

Well, on just a side note, maybe one other investor is still eager to type a question. So what I would like to summarize is simply, we had now many, many quarters of headwind. And I'm happy or a little bit relieved that we face now a decent tailwind for our business and just wait a little bit, give us the chance to demonstrate what we are capable of. I think the Q2 should be a good quarter. So look forward and see how it might affect our guidance later on, but not now. Any questions, Harry?

No, no further questions, but I guess there were some good and final remarks, I would say. So thank you all for the insightful questions, and a big thank you to Alina and you, Mr. Troeber. To all participants, we appreciate your time and the interest in Verbio, and we kindly ask you to share your feedback with the company, so a short e-mail has been sent to your Inbox for this purpose, and we really would appreciate if you give us a feedback. And with this, I want to say goodbye from my side, but I'm now handing over back to you for some final statements, Alina, Mr. Troeber.

Well, I already made my final statement. I really appreciate you guys listening to our conference call. Also, thanks for the questions. And Harry, really thank you. Much appreciate your support, the completed work here, managing, moderating, everything. So I wish everyone a good day, hopefully, a sunny day, and then move forward. Thank you.

Thank you.