VERBIO warns: Operating profit is falling, the market demands a rethink!

VERBIO warns: Operating profit is falling, the market demands a rethink!

The biofuel manufacturer VERBIO has lowered its forecasts for the current 2024/25 financial year and now expects an operating profit that will only be at the lower end of the specified range. This development was presented on Tuesday in Leipzig when the results for the third quarter to the end of March were presented. The Finance.at reports that the target value for EBITDA is now in the mid double-digit million range, which represents a decrease compared to the previous year.

In recent months, VERBIO has recorded a decline in sales of 3.5 percent to around 395 million euros, with an improvement in profits from daily operations, which rose by more than 12 percent to 8.2 million euros. However, the declining figures in the biodiesel and bioethanol/biomethane segments were notable and represent a challenge for the future.

Development of finance and production

In the first half of 2024/25, VERBIO reported EBITDA of 14.3 million euros, after recording a loss of 6.6 million euros in the previous quarter. However, this is a significant decrease compared to the same period last year of 74.9 million euros. The Verbio.de highlights that the market environment for biofuels has continued to deteriorate and product margins remain below the previous year's level. This is partly due to an oversupply of greenhouse gas (GHG) reductions due to fraud in the German market.

The gross margin in the biodiesel segment, however, increased to 64.9 million euros in the second quarter of 2024/25, which represents an improvement compared to the first quarter. Nevertheless, the overall situation remains tense, as sales in the biodiesel sector fell to 242.5 million euros in the second quarter, while the bioethanol/biomethane segment had sales of 146.9 million euros, with EBITDA in the latter area being negative.

Strategic challenges and outlook

A central element in VERBIO's growth strategy is ramping up production in Nevada. However, utilization of the ethanol line in Nevada was estimated to be below 25 percent, which further weighs on the EBITDA forecast. Unexpected technical quality problems in the existing system could have a significant impact on the company's development.

Net financial debt as of December 31, 2024 is 97.0 million euros, which represents an increase compared to June 30, 2024 (32.9 million euros). This is related to negative free cash flow, which reflects investments in strategic projects. The equity ratio is currently 64.7 percent, which also means a decrease compared to the previous period.

For the current 2024/25 financial year, VERBIO forecasts EBITDA in the mid double-digit million range and a maximum net financial debt of 190 million euros. Management has a clear focus on cash flow growth and optimization of existing assets, while GHG quota prices in the industry are expected to recover.