Verbio Se

Good day, ladies and gentlemen, and a warm welcome to today's earnings call of Vervio SE, following the publication of the Q3 figures of 2025 and 26. CFO Olaf Trüber and Head of IR Alina Köhler will speak in a moment and guide us through the presentation and the results. After the presentation, we will move on to a Q&A session in which you will be allowed to place your questions directly to the management. We're looking forward to the presentation, and with this, I hand over to you, Mr. Trüber.

Thank you, Martha. Good afternoon, everyone. Thanks for joining our nine months and third quarter 25-26 earnings call. Well, we had a very strong third quarter, supported by improving market conditions. Our teams executed well in a fast-moving environment and the strength of our diversified portfolio did the rest. We also saw an important positive industry development year-to-date with the final implementation of the Renewable Energy Directive 3 in Germany and the finalization of the largest renewable volume obligations in the US ever for 26 and 27. Now, given the ongoing strength in market supported by the favorable regulatory environment and geopolitical factors, We are now expecting our full year EBITDA to come in at the upper end of our prior guidance range, which we had lifted to 100 to 140 million Euro in our ad hoc release in March. Let me now walk you through the key metrics of the first nine months of 2025-2026. which showed a strong performance across the entire board. Starting off with production volumes. As you can see from the chart on the left, our biodiesel output was at the same level as the same period last year with 458,000 tons in the first half of 2025-2026. Our ethanol and biomethane production increased year on year to 431,000 tons and more than warm terawatt hour for the first time after nine months respectively. The increase in production came from the ramp up of our bioethanol biomethane plant in Nevada and better uptime at the ethanol plant in South Bend. And that more than made up for the lower volumes in Europe due to maintenance and an infection in the fermentation process, which temporarily affected production in Q3. With overall higher production and sales volumes, Virpi was also able to increase its revenue. Another key factor was the rising demand for greenhouse gas quotas in an increasingly stabilized market environment, which was reflected in both rising trading volumes and higher selling prices. Although material costs were also above the level of the same period last year, their increase was disproportionately lower compared to revenue growth. Hence, our EBITDA increased mostly thanks to a higher cross-margin. Lower operating costs, higher operating income and gains from commodity forward transactions also contributed to the increase in FEDA. Also, thanks to the improved operating dynamics, supported by more attractive market conditions, we saw a year-to-date operating cash swing of more than €100 million, bringing operating cash flow to €96.4 million. Meanwhile, investments in PPE amounted to 63.4 million euro, resulting in a positive free cash flow of 33 million euro after nine months. This led to a decrease in net debt to 126.8 million euro. Our investments are directed towards the biobio-based Specialty Chemical Unit in Bitterfeld, as well as into the production plant in South Bend, Indiana. The equity ratio improved slightly to 59.3% following debt repayment, despite quasi-equity investment grants being recognized as liabilities. Now turning to our quarterly performance, I will start with FEDA as our key measure. Our group FEDA increased both year-over-year and quarter-over-quarter to €60.2 million from €8.2 million in Q3 last year and €30.1 million in the previous quarter. As depicted on the slide, the bioethanol biomethane segment was the main driver behind this development. Thanks to the ongoing greenhouse gas quota market recovery, combined with seasonally high demand for greenhouse gas quotas, as well as increased biomethane sales values, Virpio was able to report a strong APDA in the third quarter of 25-26. With that overview, I will turn the call over to Alina to discuss our segments in detail. Alina, the floor is yours.

Thank you, Olaf, and good afternoon from my side as well. As always, we focus on the sequential performance and discuss quarter-over-quarter figures. So let's kick it off with the biodiesel segment. In the third quarter, again, we achieved a record production volume in Europe. Meanwhile, in Canada, we kept our production volumes at a low level, so a similar level to the Q2 of 25, 26. And actually, stopped producing during the winter months of November through February. This was due to commercial reasons and why we had this crisis in the previous earnings call that we quickly reiterate here. So in the past, we have actually used our product from Canada and sold it in the US market. But with fundamental changes in the regulation, as well as now protective measures in Canada, the Canadian market is now much more attractive for us. But with that comes the seasonal cash flow profile of the plant that's now changing because in Canada there's no demand for biodiesel in the winter months. However, with the renewable volume obligations that have been just recently announced and that Olaf will discuss in a minute, we actually also see upside to that that we actually can produce during our winter months. Overall, with the new change in the cash flow profile, the annual earnings remain unchanged, and we actually expect a similar earnings profile than previously. But now with that information, let me return to the production volumes in the third quarter. Overall, this means that we could still increase our production quarter over quarter to 147,000 tons. Despite this, our revenues decreased to $203 million. This was driven by lower sales volumes and particularly because we reduced the use of third-party molecules. This also shows in our earnings because we reduced our third-party molecules because of the market conditions. In fact, we achieved still a solid 18.5 million APTA in Q3 25-26, but the reduction versus the previous quarter comes from a change in market conditions and it has been slightly less favorable than previously. But with that, let's have a look at the market context. As you can see, we have in the first quarter a decrease in biodiesel prices. You can see that in the graph on the right side of the slide. We, as always, depict here the price development of biodiesel and rapeseed oil, and on the left side you can see the spread. The spread is essentially the difference between the biodiesel price and the rapeseed oil price. So during our third quarter, you can see a pull-forward effect in demand into Q4, which is the calendar Q4. When market players still benefited from the old regulations, then double counting was still in place. So with this, inventory levels were lifted. And this coupled with a delay on mandate votes, weight on demand early in our third quarter, we're in calendar Q1. So this is also shown in the biodiesel price development. Biodiesel prices have come down at the start of the quarter. Later in the quarter, the Iran war disrupted the fossil fuel supply chain, and our biodiesel premiums could absorb a large share of the gas oil price movement. In fact, Blending economics have been negative at times, which drives demand of biodiesel. The full utilization of blend walls can still be expected, or exactly because of that can be expected, because if the blend economics are negative, you would want to increase your biodiesel in the mix. But let's move on to the bioethanol and biomethane segments. So again, we achieved a record segment revenue. This was driven by the seasonal strength of the GHG quota market and explicitly because of the attractive market conditions. And I will discuss that in a minute. In the revenues, this was partly offset by lower selling prices in the US and reduced sales volume in Europe. our biomethane production reached new highs as well. And this was driven by the continued ramp-up in Nevada. Meanwhile, as you can see on the slide, depicted by the dark green bar on the left graph, our bioethanol production decreased. And there are two reasons. One being the disruptions in the biological processes that Olaf already has mentioned in Europe. and the second being that our production margins in the U.S. or in general production margins in the U.S. turned negative in early January. This was actually due to higher natural gas prices, and this led us to scale back our ethanol volumes but increase renewable natural gas volumes or biomethane volumes, as you can see and as we had already just discussed. So overall, this led us to show an EBITDA improvement to 34.2 million, which is largely driven by the structurally tighter GHG quota market and the seasonal demand. So let's have a look at that. On this slide, you can see the GHG quota price development. In December of last year, the cabinet approved the draft for the RET3 implementation, and this already gave some more visibility and clarity in the market. In our third quarter, the calendar first quarter, we also got some more clarity when the first reading took place in the Bundestag. As a result, the buying activity of 2025 quota picked up This was then further supported by the approaching GHG quota compliance deadline. So what is this deadline? The oil companies, which are the obligated parties, have until June 2025 to close their GHG balances for the year 2025, for the quarter year 2025. And hence, this is typically when they increase their buying activity closer to the deadline. So this is what we have seen specifically during our third quarter. At the same time, the initial demand for 2026 quota picked up. And here on the chart, you can also see that 2026 GHG quota prices already reflect the removal of double counting. And prices even did that before the law was finally approved just this May. As we had discussed during our last earnings call, this lifts the competitiveness of biofuels, of conventional biofuels. And if you're interested to hear more about that, you're invited to hear into the last earnings call again, because we did some explicit explanations on this topic. But now let's have a look at the EU and US ethanol Overall, you can see that there was a steep ethanol price depreciation on the graph on the right side. This was driven by a tightening supply due to limited imports and also supported global lending policies as well as lending economics. So let's talk about the imports first. declined at the start of the year because in the past, Netherlands was an attractive entry point for bioethanol. But with changes in regulations there, the import tax advantage disappeared and hence the arbitrage is closed. So lower imports met healthy demands and this especially picked up with the geopolitical tensions. However, due to high strike rates, also linked to those geopolitical tensions, they discourage the imports of spot volumes. Now, since our feedstocks do not pass through the straight open moose, they keep largely stable. And you can also see on this slide how wheat has remained stable throughout the period. With this, the spread increased very strongly, as you can see on the left-hand side of the chart. and margins remain very attractive. So this bullish sentiment goes into Q2, and unless the logistical conditions ease, we expect that the arbitrage remains closed. So let's jump across the pond and have a look at the US ethanol market. So in the US, you see that after the seasonal easing of spreads on the left-hand side, they have settled around the low level in January. What you cannot see on the slide is the high natural gas prices that made production margins go negative during the month of January or at least early on. And as I said before, due to those negative production margins, We scaled back ethanol, but at the same time increased our renewable natural gas production. As we moved through February and March, demand conditions improved again, particularly on the export side. So more countries increased their blending rate, and this trend gained momentum. At the same time, oil prices remained elevated, especially in the regions that are dependent on the Middle East, which then further supported the ethanol's competitiveness versus Gavoline. But Ola will touch on this topic later on as well, and with that, I will turn back to him so he can give you some comments about the outlook.

Yeah, thank you, Alina. Much appreciated. We have communicated an upward adjustment of our APTA guidance in an attack announcement on March 25th based on the business performance to date as well as the current sales and raw material price levels at the time. EBITDA was expected to be between €100 million and €140 million. They had formulated a forecast with a wide range, as the geopolitical environment remains dynamic. Given now the ongoing high selling prices, supported by a terribly regulatory environment and geopolitical factors. We are revising our EBITDA forecast for the full financial year 2025-2026 to the upper end of the forecast range of 100 to 140 million euros, so the upper end. Meanwhile, we had revised our expectations for the net financial debt downwards in the ad hoc announcement, projecting it to be in the region of 140 million. And now, following the firming up of our EBITDA expectations, we now expect net financial debt to be less than €140 million at the end of the financial year. So, therefore, I'm glad to announce we are on track to bring down our net debt to EBITDA to below one. which is, in our opinion, a great achievement tool. Let me now turn to current developments, starting with the implementation of the IDE3. As a starting point, it is important to know that the regulatory framework is now formally concluded. The package was finally approved by the Bundesrat on May 8. The only remaining step is the publication in the Bundesanzeiger. Against this now fixed framework, it is worth looking at how the implementation changes the way the quota system translates into volume demand. On the left hand side you see the regulatory driven greenhouse gas quota path in Germany. In 24 and 25 combined the system operated at roughly a 10% quota, which on paper translated into around 20 million tons per annum of required CO2 savings. In reality, however, this headline figure overstated real demand. Compliance was supported by double counting for advanced fuels, which inflated reported volumes without requiring the same increase in physical supply. In addition, the market was clearly oversupplied with excess volumes that are now broadly understood to be fraudulent rather than real CO2 savings. So, effectively, a material part of the reported volume in 24 did not correspond to real climate impact. And now, looking ahead to 27 and 28, the picture changed fundamentally. Border levels rise materially to 17.5 and 19.5%. Pushing required CO2 savings into a range of roughly 35 to 40 million tons. And at the same time, the mechanics of the system are corrected. These volumes have to be real now. Double counting is abolished, non-compliant feedstocks are excluded, and stricter verification and on-site controls significantly reduce the availability of artificial supply. Now when you put the net together, the implication is clear. While the headline requirements rise, from a roughly 20 million tons per annum in 2024-25 to now almost a 40 million tons in a three years period. The demand for real physical CO2 savings more than doubles. In addition, The gradual relaxation of the crop cap for established agricultural biofuels provides additional headroom for compliant, proven pathways, assuming that blending constraints are lifted as planned. Now beyond the climate aspect. the quota framework is becoming increasingly relevant from a broader energy and security perspective. Recent geopolitical tensions have highlighted the vulnerability of global supply chains and reinforced the importance of locally available domestic biofuels as illustrated in the chart on the left-hand side. The chart compares the price development of different commodities. What here stands out is the high volatility of fossil energy prices represented here by Brent Coote. compared with the much more stable price development of agricultural feedstocks such as wheat and rapeseed oil. This reflects the fact that agricultural inputs are largely sourced regionally and from diversified supply chains. Put it simply, our feedstock does not pass through the strait of Hormuz. This combination of local supply, lower exposure to geopolitical risk and predictable economics is one of the reasons Why not only governments are promoting higher biofuel uptake, but fleet operators are increasingly turning to bio LNG. Customers value competitive fuel costs and, in particular, improved cost predictability compared with conventional fossil fuels. This becomes clear in the chart on the right. With relatively stable feedstock prices, bioenergy costs could be maintained well below 1 euro per kilogram by diesel prices increased to above 2 euros per liter. On an energy-equivalent basis, this represents roughly one-third of the costs which is a key consideration for customers with high fuel consumption. And for Verveo, this supports a gradual expansion of the addressable market, the LNG market, the CNG market. As demand shifts towards fuels that can be supplied locally, reliable and with predictable economics, renewable fuels gain relevance across a broader range of applications. With our assets closely linked to the regional agricultural supply chains and end markets, we are well positioned to participate in the structurally growing market. We continue to monitor potential risks, including the impact of higher fertilized prices related to the Iran conflict. At this stage, however, most crops for the current season are already covered, which limits any near-term effects. Let me briefly update you on a few further developments. Following the renewable volume obligation decision in the U.S. toward the end of the quarter, we see some additional upside for our Canadian operations. With strong demand coming from the U.S., our Canadian plant may continue running through the winter, which would be above normal seasonal levels and provide additional upside. More broadly, the RVO decision and attractive blending economics are supporting higher effective blending rates. This keeps ethanol among the lowest cost liquid transport fuel globally. Export demand is also growing against this background. The ramp up in Iowa continues. And finally, the ethyl malusis plant is now in its final construction phase. We are preparing for commissioning and are targeting and start up in October this year, while at the same time stepping up our commercial activities ahead of start up. You will now take your questions.

Exactly. Thank you very much for your presentation. Dear participants, we are now open for your questions and everybody is invited to post questions in the chat and I would be happy to read them out loud for you. Additionally, analysts have the possibility to ask questions in person via audio line. To do so, please click on the raise hand button And if you have dialed in by phone, please use the key combination star key 9 to raise your hand and star key 6 to unmute yourself. We have not received any questions so far, but I will give you a little bit more time to put them into our chat and type them down. We have not received any risen hands either so far. Here we go. Mr. Sven Kunert, you may unmute yourself now. Mr. Sven Kunert, can you hear us? I just sent you an invitation to unmute yourself. We just received another question in our chat box. Mr. Kunert, I will come to you later and will first read out the question from Mr. . He's asking, is Virgio able to meet the demand for increased bioethanol for the next years as the regulations for bioethanol increases?

Thanks for the question. Supply will clearly be challenged, especially for compliant and sustainable pathways. That's precisely why the quota increase is highly relevant. It creates long-term disability, which is essential for investment decision in capacity expansion and optimization. And in the near term, title supply conditions support demand stability and produce more important pricing. So all the time, the framework incentivizes additional investments into scalable solutions.

Thank you very much. We have another question by Thomas Piontek. He's asking, how and when does the Hormis effect influence the prices of biofuels in Germany?

Well, we had the warm chart. When the war started, I think it was end of or mid of March, the prices for especially bioethanol picked up. You can see it here. But with respect to biodiesel prices, we saw actually not bad margins, but more or less average margins. So we had an additional cash influx from a higher bioethanol margin, but only for, I would say, two or three weeks.

All right. Thank you so much. We do have No questions at the moment in our Q&A. And we have said the next one just came in by Alfons Borkens. He's asking, can you give more color why the margins of biodiesel are not on the level of bioethanol of 15% EBITDA margins? Why is the German margin so low?

With respect to biodiesel, it's a European margin. It's not a German margin. So the prices are made in Rotterdam. So the demand for gasoline molecules are higher in Europe. And that actually is driving the demand for the blending component, which is the bioethanol. And also what you also can see The price here in Germany at a gasoline station between E5 and E10 is widening. So the higher prices, the sensitivity, the price sensitivity actually increased. So more bioethanol is actually in demand. And therefore the margin, especially for bioethanol, increased.

All right. Thank you so much. And thank you so much for the question as well. We have a risen hand by Manuela Stoeser. You may unmute yourself now and ask a question.

Hi, can you hear me? Yes, perfect. Thank you. Thank you. So, I have a couple of questions. So, first, could you please elaborate on the sensitivity of your EBTA guidance to changes in DHT quota prices? So, we observed quota prices rising again recently. So understanding their impact on future EVTA would be very helpful.

Yes, let me quickly answer that question. Thank you, Manoj. So the sensitivity that we usually talk about is that for an increase, sorry, thank you. So if the GHG quota price increases by 100 euros, this can have an effect on our EBITDA on an annual basis of 40 to 80 million euros. And the range is broad because it depends on the optimization in our plan, what type of feedstock we're using, and we also have some ability to increase our volumes by using third-party molecules as well.

Okay, thank you. And we understand that there is significant geopolitical uncertainty. However, with your nine months EBCA, it's already in your guidance range and only an additional 34 million would be needed in Q4 to reach the upper end of your guidance. So how realistic is it that you might break the guidance, especially now with the ramp up of Nevada? And the other question would be, that so you mentioned benefiting from forward in Q3 so could you provide us also an update on the current threat situation especially concerning rising interest prices in the last weeks such as rated oil thank you well with respect to the guidance there are still a few factors

We are here mid-May, so we are just trying to figure the figures for April together. And as soon as we are aware that we exceed the 140 million, we have to notify the market via NetHawk. So that's not happening right now, but as we outlined, I mean, of course, the cash in It's getting smaller, so we are close to 140 million. We communicated this one, so that's it. And the second part was the margins. Well, we see healthy margins also for bioethanol in the US. They are actually above the five years average, which is quite promising. But, I mean, we are not talking about making an extra few million bucks per month with our U.S. operations. So, yeah, we are quite happy how the plant is running or both plants are running right now. Yeah, that's it. Market margins are good.

Thank you so much for your questions. We do have another couple of questions in our Q&A, one from Diana Tokar. She's asking, are there risks of demand destruction from higher biofuel prices, especially after the conflict in the Middle East ends? How sustainable are the current high prices?

Well, first of all, bioethanol is cheaper than gasoline. Especially in the US, but also here in Europe. Therefore, bioethanol is competitive. And, of course, as soon as the price for the gasoline drops, the price for the bioethanol will also drop in some extent. We don't know, but it will come to, let's say, to a lower level based on the five years average or whatever. So there is a risk that the price is going down, but it's not a risk. It's rather that it's a windfall profit we are facing. So the risk is actually that we are not facing a windfall profit anymore. Yes, thank you very much.

We have two more questions, actually three more questions by Sam Malmachi, I hope I pronounced that correctly. He's asking, you mentioned a temporary biological disruption. Has this been fully resolved and are ethanol production volumes back to normal capacity in Q4?

Yeah, the issues have been solved mid-April. So, yeah, full capacity utilization here in Germany. We are back on track.

Perfect. Thank you so much. Another question of his is, given the significant increase in THC quota prices since March and the strong biodiesel margins we're seeing in spot markets, can you comment on how Q4 is tracking relative to Q3? So I think we just discussed that biodiesel margins are not very strong particularly, but rather by rational margins. But nevertheless, if we compare QQ with our expectations, which are clearly applied by our guidance compared to Q3, you will see that we don't expect our EPG agents in the same range as in Q3. And this is not because of the pricing effect in GHG exposure, but rather the volume effect. So we benefited from the strong seasonal demand selling power 2025 . And for , we don't expect that to be on the same value. At the same time, we don't know for how long we will see biological margins at this level, so clearly there is some upside. All right. Thank you so much. We have another question from . We already reached 100 million EBITDA in nine months. Are 160 million EBITDA realistic like the previous question asked?

My answer won't change. Right now it's a stretch.

I'm sorry?

Right now it's a stretch. It's not realistic. We will see.

Thank you very much. Another question by Mr. Sven Kuna is, could you give some news about India?

Well, I think Klaus is next week in India again. The topic is still the same. The market itself is really attractive. But India is India, so everything takes a little bit longer. We have everything in mind. We would be open for TransVenture, whatever, but we will provide you with more details in September with the publication of our year-end financials.

Thank you very much for your question. Another question by Thomas Piontek would be, what is the time shift in selling greenhouse gas quota to market prices? So there's two things to it. We sell GHG quota along with our liquid fuels. We have some contracts where we have fixed volumes, sometimes at fixed prices, sometimes at variable prices. And then we have open GHG quota volumes, and these result typically in the high season of quota, which is when we approach the compliance deadline. Thank you very much. Another question by Fuad Kuakua. Can you explain the impact on Virgios EBITDA resulting from the new heating act passed by the German government? Let me quickly answer that question. So, there is no impact on our EVDA in the short term. For us, this is very important from a strategic perspective because it really underpins that biofuels are the new strategic pillar in the energy security. by now adding in the biofuel staircase to the new heating regulation, which is not in place yet, to be fair. But it's being discussed, and it will also give biome the plane a bigger market than just in the transport market. So it's really interesting from a market perspective, but in the short term, we do not see an EVGA effect. Thank you so much. Another question from Alphonse Watkins. He's asking, Can you give more color on the capacity utilization in Canada in Q4?

The capacity utilization will be close to 100%.

All right, thank you very much. Sam Malmachi has another question. He's asking, can you elaborate on the India consortium for CBG plants in India?

And as I said before, please be patient. We will give you an update in September at the latest.

Thank you very much. For now, we do not have any questions in our chat box right now, nor risen hands at the moment. So please, dear participants, feel free to ask your questions and put them into our chat, and I will read them out loud for you. I will give you a couple of few moments to type it down and put them into our chat. Mr. Malachi has another question. He's asking, with a penalty of €600, how likely do you see THG Corda to go further from today's prices of €470?

There is a likelihood, especially for the current year. Let's see.

All right. Mr. Fuad Kuakua has another question. He's asking, can you estimate exactly when the work in Bitterfell will be completed and when the plant will finally be commissioned?

Well, we are in the process of commissioning the atom releases plant in Bitterfeld and start up should be in October together with the Lina Capital Market Space.

Yeah. All right. Sounds great. Thank you so much. With that, that was the last question for now. Dear participants, if you have any further questions, please feel free to put them into our chat We have no risen hands at that time at the moment. So, I would say, if there are no risen hands or anything else, I'd say thank you. As no further questions come in. Thank you for participating in this call today. I have nothing more to add and thank you for attending. Have a lovely remaining week. I hand back over to you, Mr. Trilva, for some final remarks. Thank you.

Thank you. I think it's clear that we are going ahead with some tailwinds. So let me close with three brief points. First, we continue to see further margin upside with growth not limited to additional molecule volumes, but also supported by optimization, product mix and asset utilization. Second, in our European core business, we see a clear improvement in market quality driven by the RED3. And last but not least, we are capitalizing on grow opportunities through international expansion. Thank you very much. I would hand over to Mara.

Yes, thank you very much also from my side. I wish you a lovely remaining week and if any further questions should appear at a later time, please feel free to contact Investor Relations. Thank you and bye-bye.