Good day, ladies and gentlemen, and a warm welcome to today's earnings call of Verbio SE, following the publication of the Q3 figures of 2025 and 2026. CFO Olaf Tröber 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. Tröber.
Thank you, Maja. Good afternoon, everyone. Thanks for joining our nine-month and third quarter 2025/ 2026 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 III in Germany and the finalization of the largest Renewable Volume Obligations in the U.S. ever for 2026 and 2027. 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 EUR 100 million-EUR 140 million 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 45,000 tons in the first half of 2025/ 2026. Our ethanol and biomethane production increased year-on-year to 431,000 tons and more than 1 TWh 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. 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, Verbio 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 gross margin. Lower operating costs, higher operating income and gains from commodity forward transactions also contributed to the increase in EBITDA. Thanks to the improved operating dynamics, supported by more attractive market conditions, we saw a year-to-date operating cash swing of more than EUR 100 million, bringing operating cash flow to EUR 96.4 million.
Meanwhile, investments in PPE amounted to EUR 63.4 million, resulting in a positive free cash flow of EUR 33 million after nine months. This led to a decrease in net debt to EUR 126.8 million. Our investments are directed towards the bio-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 EBITDA as our key measure. Our group EBITDA increased both year-over-year and quarter-over-quarter to EUR 60.2 million, from EUR 8.2 million in Q3 last year, and EUR 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 volumes, Verbio was able to report a strong EBITDA in the third quarter of 2025/2026. 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. Good afternoon from my side as well. As always, we focus on the sequential performance and discuss quarter-over-quarter figures. 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 similar level to the Q2 of 2025/2026, and actually stopped producing during the winter months of November through February. This was due to commercial reasons. While we had discussed this in the previous earnings call, let me quickly reiterate here. In the past, we have actually used our product from Canada and sold it in the U.S. market. With fundamental changes in the regulation, as well as now protective measures in Canada, the Canadian market is now much more attractive for us.
With that comes the seasonal cash flow profile of the plant that is now changing, because in Canada, there is 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 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. 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 EUR 203 million.
This was driven by lower sales volumes, 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 a still a solid EUR 18.5 million EBITDA in Q3 2025/2026, the reduction versus the previous quarter comes from a change in market conditions, it has been slightly less favorable than previously. 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, on the left side, you can see the spread.
The spread is essentially the difference between the biodiesel price and the rapeseed oil price. 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 regulation when double counting was still in place. With this, inventory levels were lifted, and this coupled with a delay on mandate votes wait on demand early in our third quarter or calendar Q1. 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 chains, 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 wall 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. Let's move on to the bioethanol and biomethane segment. 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 U.S. 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's two reasons. One being the disruptions in the biological processes that Olaf already had 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. Overall, this led us to show an EBITDA improvement to EUR 34.2 million, which is largely driven by the structurally tighter GHG quota market and the seasonal demand. 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 RED III implementation, 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. 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 quota year 2025.
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. Here on the chart, you can also see the 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. 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. Let's have a look at the EU and U.S. ethanol market.
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 supportive global blending policies, as well as blending economics. Let's talk about the imports first. They declined at the start of the year because in the past, Netherlands was an attractive entry point for bioethanol. With changes in regulation there, the import tax advantage disappeared, and hence, the arbitrage is closed. Lower imports met healthy demand, and this especially picked up with the geopolitical tensions. However, due to high freight rates, also linked to those geopolitical tensions, they discourage the imports of spot volumes. Since our feedstocks do not pass through the Strait of Hormuz, they keep largely stable.
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. This bullish sentiment goes into Q2, and unless the logistical conditions ease, we expect that the arbitrage remains closed. Let's jump across the pond and have a look at the U.S. ethanol market. In the U.S., you see that after the seasoning, after the seasonal easing of spreads on the left-hand side, they have settled around a low level in January. What you cannot see on this slide is the high natural gas prices that made production margins go negative during the month of January, or at least early on.
As I had 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. More countries increased their blending rates, 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 gasoline. Olaf will touch on this topic later on as well. 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 EBITDA guidance in an ad hoc 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 EUR 100 million and EUR 140 million. We had formulated a forecast with a wide range, as the geopolitical environment remains dynamic. Given now the ongoing high selling prices supported by a favorably regulatory environment and geopolitical factors, we are raising our EBITDA forecast for the full financial year 2025/2026 to the upper end of the forecast range of EUR 100 million-EUR 140 million, 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 EUR 140 million. Now following the firming up of our EBITDA expectations, we now expect net financial debt to be less than EUR 140 million at the end of the financial year. 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, actually a great achievement too. Yeah. Let me now turn to current developments, starting with the implementation of the RED III. As a starting point, it is important to note 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 2024 and 2025 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. Effectively, a material part of the reported volume in 2024 did not correspond to real climate impact.
Now looking ahead to 2027 and 2028, the picture changed fundamentally. Quota levels rise materially to 20 Now, 17.5% and 19.5%, pushing required CO2 savings into a range of roughly 35 million-40 million tons. 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. Stricter verification and on-site controls significantly reduce the availability of artificial supply. Now, when you put the math together, the implication is clear. While the headline requirements rise from a roughly 20 million tons per annum in 2024/ 2025 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 crude, 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 bioLNG. 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, bioLNG costs could be maintained well below 1 EUR per kilogram, while diesel prices increased to above 2 EUR per liter. On an energy equivalent basis, this represents roughly one-third of the cost, which is a key consideration for customers with high fuel consumption. For Verbio, 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 this structurally growing market. We continue to monitor potential risks, including the impact of higher fertilizer 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 Obligations 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. Finally, ethanolysis 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. We 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 pose 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 nine to raise your hand and star key six 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 Kühnert, you may unmute yourself now. Mr. Sven Kühnert, can you hear us?
I just sent you an invitation to unmute yourself. We just received another question in our chat box. Mr. Kühnert, I will come to you later and will first read out the question from Mr. Brian Zelenke. He's asking, "Is Verbio 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 visibility, which is essential for investment decision in capacity expansion and optimization. In the near term, tighter supply conditions support demand stability and, which is more important, pricing. Over 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 Hormuz effect influence the prices of biofuels in Germany?
We had the one chart. When the war started, I think it was end of or mid of March, the prices for especially bioethanol picked up. Chart. Yeah, you can see it here. With respect to biodiesel prices, we saw actually not bad margin, but more or less average margin. 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. With that 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?
Well, with respect to biodiesel, it's a European margin, it's not a German margin, the prices are made in Rotterdam. The demand for gasoline molecules are higher in Europe, that's actually is driving the demand for the blending component, which is the bioethanol. Also, what you also can see, the price spread in Germany at the gas filling station between E5 and E10 is widening. With higher prices, the price sensitivity actually increased, more bioethanol is actually in demand, 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 Stürzer. You may unmute yourself now and ask your question.
Hi, can you hear me?
Yes, perfectly. Thank you. Hello.
Thank you. I have a couple of questions. First, could you please elaborate on the sensitivity of your EBITDA guidance to changes in GHG quota prices. We've observed quota prices rising again recently, understanding their impact on future EBITDA would be very helpful.
Alina?
Let me quickly answer that question. Thank you, Manuela. The sensitivity that we usually talk about is that for an increase. Sorry, Stürzer. Thank you. If the GHG quota price increases by EUR 100, that can have an effect on our EBITDA on an annual basis of EUR 40 million-EUR 80 million. The range is broad because it depends on the optimization in our plants, 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. We understand that there is significant geopolitical uncertainty. However, with your nine months EBITDA is already in your guidance range, and only an additional EUR 34 million would be needed in Q4 to reach the upper end of your guidance. How realistic is it that you might raise the guidance, especially now with the ramp up of Nevada? The other question would be that you mentioned benefiting from forward in Q3, could you provide us also an update on the current spread situation, especially concerning rising input prices in the last weeks, such as rapeseed oil? Thank you.
Right, 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. As soon as we are aware that we exceed the EUR 140 million, we have to notify the market via an ad hoc. That's not happening right now. As we outlined, I mean, of course the cushion is getting smaller, so we are close to EUR 140 million. We communicated this one, that's it. The second part was the margins. We see healthy margins, also for bioethanol in the U.S. They are actually above the five years average, which is quite promising. I mean, we are not talking about making an extra few million EUR per month with our U.S. operations.
Yeah, we are quite happy how the plant is running, or both plants are running right now. Yeah, and that's it. Market margins are good.
Thank you.
Thank you so much, Mrs. Stürzer, 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 U.S., but also here in Europe. Therefore, bioethanol is competitive. 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, it will come to, let's say, to a lower level based on a five years average or whatever. There is a risk that the price is going down, it's not a risk. It's rather that it's a windfall profit we are facing, the risk is actually that we are not facing a windfall profit anymore. I think that was the one question, isn't it? Yep. Yeah. Okay.
Yes. Thank you very much. We have two more questions, actually three more questions by Sam Malech. 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. 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 GHG 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?
Yeah. I think we just discussed that biodiesel margins are not very strong particularly, but rather bioethanol margins. Nonetheless, if we compare Q4 and our expectations, which are clearly applied by our guidance compared to Q3, you will see that we don't expect our EBITDA to be in the same range as in Q3. This is not because of the pricing effect in GHG quota, but rather the volume effect. We benefited from the strong seasonal demand selling our 2025 quota, and for Q4 we don't expect that to be on the same value, volume. At the same time, we don't know for how long we will still we will see bioethanol margins at this level, so clearly there is some upside.
All right, thank you so much. We have another question from Brian Zelenke. We already reached EUR 100 million EBITDA in nine months. Aren't EUR 160 million EBITDA realistic, like the previous questioner asked?
Well, 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.
All right. Thank you very much. Another question by Mr. Sven Kühnert is, could you give some news about India?
I think next week in India again. The topic is still the same. The market itself is really attractive. India is India, everything takes a little bit longer. We have everything in mind. We would be open for joint venture, whatever. 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?
There's two things to it. We sell GHG quota along with our liquid fuels, as we have some contracts where we have fixed volumes, sometimes at fixed prices, sometimes at variable prices. Then we have open GHG quota volumes, and these we sell 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 Verbio's EBITDA resulting from the new Heating Act passed by the German government?
Right now, David.
I think maybe I can jump in here as well. We couldn't hear you, actually. I'm sorry.
Oh, yeah. Let me quickly answer that question. There's no impact on our EBITDA in the short term. For us, this is very important on, 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. It's being discussed, and it will also give biomethane a bigger market than just in the transport market. It's really interesting from a market perspective, but in the short term, we do not see an EBITDA effect.
Thank you so much. Another question from Alfons Borkens. He's asking, can you give more color on the capacity utilization in Canada in Q4?
Well, capacity utilization will be close to 100%.
All right. Thank you very much. Sam Malech has another question. He is asking, can you elaborate on the India consortium for CBG plants in India?
Well, 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. 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 them down and put them into our chat. Mr. Malech has another question. He's asking, with a penalty of EUR 600, how likely do you see THG-Quote to go further from today's prices of EUR 470?
Well, there's a likelihood, especially for the current year. Yeah, it Let's see and wait. Wait and see.
All right. Mr. Fuad Kuakua has another question. He's asking, can you estimate exactly when the work in Bitterfeld will be completed and when the plant will finally be commissioned?
Well, we are in the process of commissioning the ethanolysis plant in Bitterfeld, and start up should be in October, together with the annual Capital Markets Day, isn't it? Yeah. Yeah.
All right. Sounds great. Thank you so much. 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 the moment. I would say if there are no risen hands or anything else, I'd say thank you, as no further question 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. Troeber, for some final remarks. Thank you.
Thank you. I think it's clear that we are going ahead with some tailwinds, 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 RED III. Last but not least, we are capitalizing on growth opportunities through international expansion. Thank you very much. I would hand over to Maja.
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.