Quarterly Report • Aug 14, 2008
Quarterly Report
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PROFITABILITY
| IN EUR MILLION | HY1 2008 | HY1 2007 | ∆ 2008-2007 | ||
|---|---|---|---|---|---|
| Sales | 298.8 | 203.8 | 95.0 | ||
| Gross margin | 37.6 | 29.6 | 8.0 | ||
| EBITDA | 9.4 | 13.4 | -4.0 | ||
| EBIT before commodity futures | 10.2 | 1.1 | 9.1 | ||
| EBIT after commodity futures | 3.8 | 1.1 | 2.7 | ||
| EBT | 2.2 | 0.7 | 1.5 | ||
| LIQUIDITY AND RISK | |||||
| IN EUR MILLION | 30/06/08 | 31/12/07 | ∆ 2008-2007 | ||
| Cash and cash equivalents | 73.8 | 57.1 | 16.7 | ||
| Net debt1 | 21.0 | -0.6 | 21.6 | ||
| Operating cash fl ow | 72.6 | -94.0 | 166.6 | ||
| Equity ratio | 62.3% | 58.7% | 3.6%-points | ||
| RETURN ON INVESTMENT | HY1 2008 | HY1 2007 | ∆ 2008-2007 | ||
| ROCE | 0.8% | 0.2% | 0.6%-points | ||
| EBIT before commodity futures/ Gross margin | 27.1% | 3.7% | 23.4%-points | ||
| OPERATING DATA | |||||
| HY1 2008 | HY1 2007 | ∆ 2008-2007 | |||
| Production (tons) | 234,182 | 250,547 | -16,365 | ||
| Number of employees | 368 | 328 | 40 | ||
| Investments in property, plant and equipment in EUR million |
4.3 | 14.0 | -9.7 | ||
| SEGMENTS | |||||
| IN EUR MILLION | Q1 2008 | Q2 2008 | HY1 2008 | HY1 2007 | ∆ 2008-2007 |
| BIODIESEL | |||||
| Sales | 92.6 | 115.9 | 208.5 | 133.1 | 75.4 |
| EBIT before commodity futures | 3.2 | -1.0 | 2.2 | 3.8 | -1.6 |
| BIOETHANOL | |||||
| Sales | 22.7 | 53.7 | 76.4 | 57.5 | 18.9 |
| EBIT before commodity futures | -3.3 | 10.3 | 7.0 | -5.9 | 12.9 |
| ENERGIE | |||||
| Sales | 8.2 | 2.6 | 10.8 | 12.3 | -1.5 |
| EBIT | 2.5 | -1.1 | 1.4 | 3.0 | -1.6 |
| OTHER | |||||
| Sales | 1.6 | 1.6 | 3.2 | 0.9 | 2.3 |
| EBIT | -0.04 | -0.3 | -0.4 | 0.2 | -0.6 |
1 Cash and cash equivalents less current and non-current fi nancial liabilities and other non-current liabilities
for the period 1 January to 30 June 2008
The fi nancial reporting of VERBIO Vereinigte BioEnergie AG (hereinafter also referred to as VERBIO AG or VERBIO) is based on International Financial Reporting Standards (IFRS). The interim report is generally regarded as an update to the annual report and should therefore be read in conjunction with the annual report published for the business year 2007. The prior-year fi gures disclosed in this report were prepared using the same accounting and valuation methods.
The blending market for biodiesel and bioethanol, one of VERBIO's core markets, experienced signifi cant growth in the fi rst fi ve months of 2008. Biodiesel blending increased by approximately 25 percent compared to the prior-year period. Sales of bioethanol went up by only around 11 percent in the fi rst fi ve months of 2008 despite the blending quota increasing from 1.2 percent to 2 percent (energy input) as of 1 January 2008.
By contrast, biodiesel pure fuel (B100) sales fell due to increased taxes as of 1 January 2008. This resulted in overall demand for biodiesel dropping 19 percent as of 30 May 2008.
The increased tax rate and high raw material prices led to reduced demand and consolidation in the biodiesel market in recent months. As a consequence, the market's excess capacities shrank and adapted to the actual current sales opportunities of 2.7 million tonnes p.a. Of this, the blending market accounts for approximately 1.4 million tonnes p.a.
Global agriculture reacted to the shift in demand by increasing its production capacities. In the European Union (EU) for example, the acreage used for grain expanded by 4 to 5 percent from 55 million hectares to almost 58 million hectares. The European Commission estimates that the 2008/2009 grain harvest will be considerably larger than in the previous year.
While the prices of raw materials such as rapeseed and sugar increased in Q1 2008 in line with the price of crude oil, they broke the link in Q2 2008. The price of rapeseed experienced sideways development in the fi rst half-year while the price of sugar was volatile.
PRICE DEVELOPMENT FOR SELECTED RAW MATERIALS
The price of oil remained high in the fi rst half of 2008, rising by 40 percent, up from USD 99.64 per barrel (30/06/2007) to USD 139.96 per barrel (30/06/2008). Oil industry experts expect the production of crude oil to reach its peak (peak oil) before the end of 2009 (or believe that it may have reached its peak already), and that it will drop by about 3 to 6 percent every year after this. This leads us to anticipate that the price of oil will continue rising.
| Q1 2008 | Q2 2008 | CHANGE IN % |
HY1 2008 | HY1 2007 | CHANGE IN % |
|
|---|---|---|---|---|---|---|
| Crude oil in USD/Barrel | 98 | 126 | 29% | 111 | 62 | 79% |
| Mineral diesel in EUR/TON | 600 | 775 | 29% | 685 | 442 | 55% |
| Rapseed oil in EUR/TON | 900 | 975 | 8% | 971 | 609 | 59% |
| Sugar in EUR/TON | 196 | 186 | -5% | 186 | 181 | 3% |
In the fi rst half of 2008, a total of 234,182 tonnes were sold (HY1 2007: 250,547 tonnes), providing revenue of EUR 298.8 million (HY1 2007: EUR 203.8 million). This represents an increase in sales of 46.6 percent, primarily due to pricing factors.
The cost of materials in the fi rst half of 2008 was EUR 259.3 million (HY1 2007: EUR 177.8 million), representing a material cost rate of 87.3 percent (HY1 2007: 85.7 percent).
Gross profi t rose 27 percent to EUR 37.6 million (HY1 2007: EUR 29.6 million) in the fi rst half of 2008, representing a gross margin of 13 percent (HY1 2007: 15 percent).
The operating result before commodity futures ran to EUR 10.2 million. Commodity futures made a loss of EUR 6.4 million, thereof EUR -3.8 million was generated in the period under review.
What the consolidated income statement does not make obvious is that the commodity futures posted form the contractual basis for mainstay business in the future. This cannot be refl ected in the balance sheet as yet, and leads to an overcompensation of the currently negative derivatives item at the current price level.
The balance sheet total fell by EUR 49.1 million to EUR 494.2 million (31/12/2007: EUR 543.3 million), mainly due to the reduction in inventories, fi nancial liabilities and current trade payables.
| IN EUR MILLION | 30/06/2008 | IN % OF THE BALANCE SHEET |
31/12/2007 | IN % OF THE BALANCE SHEET |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | 276.6 | 56% | 277.2 | 51% |
| Current assets | 217.6 | 44% | 266.1 | 49% |
| Total | 494.2 | 100% | 543.3 | 100% |
| EQUITY AND LIABILITIES | ||||
| Shareholders' equity | 307.7 | 62% | 318.8 | 59% |
| Non-current liabilities | 52.7 | 11% | 55.9 | 10% |
As of 30 June 2008, VERBIO had cash and cash equivalents amounting to EUR 73.8 million, up EUR 16.7 million from the end of 2007.
Current liabilities 133.8 27% 168.6 31% Total 494.2 100% 543.3 100%
As of 30 June 2008, net fi nancial assets came to EUR 21.0 million (31/12/2007: EUR -0.6 million). As of the reporting date, the equity ratio stood at 62.3 percent (31/12/2007: 58.7 percent).
Operating cash fl ow amounted to EUR 72.6 million and was mainly infl uenced by a decrease in inventories of EUR 63.4 million. This was particularly due to a reduction in trading volumes of grain, as well as a drop of EUR 6,953 thousand in prepayments for inventories posted under other assets. The cash fl ow from investing activities (EUR -4.8 million) contains capital expenditure of EUR 4.7 million. The cash fl ow from fi nancing activities (EUR -51.2 million) is mainly determined by disbursements from secured credit transactions related to the decrease in grain trading volumes (EUR -44.3 million). Cash funds increased by EUR 16.7 million in the period 1 January to 30 June 2008, totalling EUR 73.8 million at the end of the reporting period.
As of 30 June 2008, the VERBIO Group had a workforce of 368 employees as well as 21 apprentices (31/12/2007: 385 employees, 24 apprentices). We fully appreciate the importance of training young people; with an apprenticeship rate of 6.9 percent at our production plants, VERBIO is above average for the former East Germany (5.9 percent).
In the fi rst half of 2008, EUR 4.3 million (HY1 2007: EUR 14 million) was invested in property, plant and equipment. The investments in property, plant and equipment were mainly expansion investments in the esterifi cation/transesterifi cation facility and the tank farm in Schwedt/Oder as well as the biogas facilities in Schwedt/Oder and Zörbig. These expansion investments were completed in the fi rst half of 2008.
In the fi rst quarter of 2008, capacity at the Schwedt/Oder facility was raised by 50,000 tonnes per year, giving VERBIO an annual production capacity of 450,000 tonnes. VERBIO further improved its market position in the Biodiesel segment in the fi rst half of 2008, allowing VERBIO to profi t from increased volumes in the blending market. In the fi rst six months of 2008, 191,510 tonnes of biodiesel were produced (HY1 2007: 174,239 tonnes), increasing revenue by 57 percent. Gross profi t in the Biodiesel segment in the fi rst half of 2008 was slightly up from the comparison period at EUR 19.0 million (HY1 2007: EUR 18.1 million). The segment result for Q2 2008 is therefore unsatisfactory for contractual reasons.
Bioethanol was exclusively produced in Zörbig between January and April 2008. The shortened shifts in Schwedt/Oder fi nished in May 2008 and production recommenced. In total 42,672 tonnes of bioethanol were produced in the fi rst six months 2008 (HY1 2007: 76,308 tonnes). The package of initiatives implemented by the Management Board at the beginning of the year led to an increased market presence and an improved gross margin compared to the two previous quarters. Gross profi t increased by EUR 7.0 million from the prior-year period, resulting in a gross margin of 18 percent. This is mainly due to the raw materials mixture used. Grain sales fi xed in Q1 2008 contributed EUR 1.4 million to the result. As with the fi rst quarter result, little of this quarter's result will be carried forward.
The Energy segment contributed revenue amounting to EUR 10.8 million in the fi rst half of 2008. This was down from the revenue generated in the previous quarter and the prior-year period (EUR 12.3 million) due to months with weaker wind. The segment income before tax fell to EUR 1.1 million owing to sales factors and maintenance (HY1 2007: EUR 2.7 million).
Revenue from the Other segment amounted to EUR 3.2 million in the fi rst half of 2008 (mainly revenue from fl eet services), contributing to improved sales (HY1 2007: EUR 0.9 million). Segment earnings before tax amounted to EUR -0.5 million. Revenue from fl eet services only came into play when it became operational in Q4 2007.
Please see the notes on the interim consolidated fi nancial statements for further information and fi gures on the specifi c segments.
As of 30 June 2008, VERBIO had acquired 1,470,000 treasury shares, representing 2.4 percent of share capital, at an average price of EUR 2.06 per share. 1,112,519 of these shares were bought back during the period under review.
On 12 June 2008 the Annual Shareholders' Meeting authorised the acquisition of shares up to the amount of 10 percent of the share capital until 11 December 2009.
There have been no signifi cant changes compared with the disclosures made on 31 December 2007.
There were no signifi cant changes in VERBIO's opportunity and risk profi le in the fi rst half of 2008 in comparison to the opportunities and risks listed in the VERBIO annual report 2007 (pages 27 to 30). There are no risks to the company as a going concern and non are currently recognisable for the future.
Generating energy from renewable resources is an important part of the energy mix of the future. We were prompted by the debate surrounding the issue of "food versus fuel" as well as Federal Government and EU demands for proof that we adhere to sustainability standards to commission the Institute for Energy and Environmental Research in Heidelberg (IFEU) to carry out a study. IFEU is a non-profi t-making ecological research body which made a major contribution towards drafting the German Sustainability Ordinance. The IFEU study showed that VERBIO's biofuels will cut CO2 by more than 80 percent. This means that using VERBIO biofuels cuts CO2 emissions by 80 percent compared with fossil fuels. VERBIO thus already meets the criteria for the second generation of biofuels and is setting the standard.
VERBIO aims to continue positioning itself as a reliable, fi nancially strong supplier and partner. Both the consolidation of the biodiesel market and our positioning as a biofuels producer and supplier should lead to more stable income and cash fl ows in the medium term.
We will exceed the previous year's high capacity utilisation in the Biodiesel segment.
In the Bioethanol segment we expect to reach full utilisation of the production capacity provided by the bioethanol plant in Schwedt/Oder by the end of the year. We plan to use raw materials containing sugar again as Brazilian imports remain the benchmark for ethanol prices.
Given the current adverse conditions, it is imperative that VERBIO AG increases and systematically expands the effi ciency of its processes and organisation through further centralisation. We also face the challenges of expanding our market position as well as increasing and stabilising the gross margin and/or EBIT margin relating to the gross margin.
The Federal Ministry for the Environment delivered a new draft proposal for the future biofuels strategy of the Federal Government on 25 July 2008. In VERBIO's opinion, the draft proposal contains a raft of positive suggestions. The most important changes are the focus on the use of waste materi-
als and the production of biogas along with ways of reducing greenhouse gases. This indicates that VERBIO is on the right path with the concept of biogas production in combination with Bioethanol. Critically for the biofuels industry, the quota is due to be lowered in 2009. It remains to be seen how the suggestions of the Ministry for the Environment will be put into legislation on 1 January 2009.
The VERBIO Management Board expects 2008 to be a volatile business year owing to the current negative industry and legislative situation. The measures we have introduced are showing initial signs of success in shoring up our ability to remain competitive.
The raw material markets remain unpredictable because of a variety of factors, making it hard to predict the long-term profi tability of the biofuels industry.
The Management Board only expects an improvement in the general situation and that for VERBIO specifi cally once the EU Sustainability Ordinance is passed (scheduled for December 2008) and the government implements its new biofuels strategy. As the results of the IFEU study show, the VERBIO Group is already well positioned to fulfi l the probable greenhouse gas reduction requirements.
As the legal representatives of VERBIO, we declare that – to the best of our knowledge, and in accordance with the applicable reporting principles for interim fi nancial reporting – the interim consolidated fi nancial statements give a true and fair view of the income, assets and fi nancial situation of the Group, and the interim consolidated management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the fi nancial year.
VERBIO Vereinigte BioEnergie AG Leipzig, 14 August 2008 The Management Board
at 30 June 2008
| IN KEUR | 01/04/-30/06/2008 | 01/04/-30/06/2007 | 01/01/-30/06/2008 | 01/01/-30/06/2007 | |
|---|---|---|---|---|---|
| 1. Revenue including energy tax collected | 176,514 | 102,101 | 304,142 | 206,634 | |
| Less: energy tax | -2,808 | -1,443 | -5,338 | -2,867 | |
| Revenue | 173,706 | 100,658 | 298,804 | 203,767 | |
| 2. Change in unfi nished and fi nished goods | -4,723 | 4,104 | -2,596 | 3,652 | |
| 3. Capitalized production of own plant and equipment | 397 | 0 | 744 | 0 | |
| 4. Cost of materials | |||||
| a) Raw materials, consumables and supplies | -145,489 | -81,486 | -232,935 | -157,651 | |
| b) Purchased services | -4,073 | -9,778 | -26,371 | -20,195 | |
| Gross Margin | 19,818 | 13,498 | 37,646 | 29,573 | |
| 5. Other operating income | 4,836 | 1,617 | 6,135 | 3,272 | |
| 6. Personnel expenses | -4,288 | -4,018 | -8,310 | -7,286 | |
| 7. Depreciation and amortisation | -2,955 | -6,205 | -5,530 | -12,358 | |
| 8. Other operating expenses | -9,554 | -7,066 | -19,734 | -12,099 | |
| 9. Operating result (EBIT) before commodity futures | 7,857 | -2,174 | 10,207 | 1,102 | |
| 10. Result from commodity futures | -4,753 | 0 | -6,366 | 0 | |
| 11. Operating result (EBIT) | 3,104 | -2,174 | 3,841 | 1.102 | |
| 12. Interest income | 530 | 1,309 | 1,210 | 2,688 | |
| 13. Interest expense | -1,153 | -1,528 | -2,881 | -3,086 | |
| 14. Financial result | -623 | -219 | -1,671 | -398 | |
| 15. Income (loss) before taxes (EBT) | 2,481 | -2,393 | 2,170 | 704 | |
| 16. Income tax benefi t (expense) | -769 | -1,302 | -1,822 | -4,051 | |
| 17. Income (loss) for the period | 1,712 | -3,695 | 348 | -3,347 | |
| Earnings (loss) per share (basic and diluted) | 0.03 | -0.06 | 0.01 | -0.05 |
|---|---|---|---|---|
| ----------------------------------------------- | ------ | ------- | ------ | ------- |
| ASSETS | |||
|---|---|---|---|
| IN KEUR | 30/06/2008 | 31/12/2007 | |
| A. | NON-CURRENT ASSETS | ||
| I. Goodwill | 155,655 | 155,655 | |
| II. Customer relationships | 18,685 | 19,411 | |
| III. Other intangible assets | 421 | 266 | |
| IV. Property, plant and equipment | 99,022 | 99,921 | |
| V. Financial assets | 1,300 | 1,268 | |
| VI. Deferred tax claims | 1,521 | 667 | |
| Total non-current asset | 276,604 | 277,188 | |
| B. | CURRENT ASSETS | ||
| I. Inventories | 33,993 | 97,394 | |
| II. Trade receivables | 58,606 | 52,164 | |
| III. Deferred tax assets | 9,242 | 11,737 | |
| IV. Other assets | 23,452 | 30,331 | |
| V. Derivatives | 18,581 | 17,273 | |
| VI. Restricted cash balances | 17,785 | 7,133 | |
| VII. Cash and cash equivalents | 55,966 | 50,028 | |
| Total current assets | 217,625 | 266,060 |
| Total assets | 494,229 | 543,248 |
|---|---|---|
| LIABILITIES | |||
|---|---|---|---|
| IN KEUR | 30/06/2008 | 31/12/2007 | |
| A. | EQUITY | ||
| I. Share capital | 63,000 | 63,000 | |
| II. Additional paid-in capital | 483,659 | 483,659 | |
| III. Fair value reserve | -4,635 | 4,908 | |
| IV. Reserve for treasury shares | -3,030 | -1,131 | |
| V. Retained earnings | -231,311 | -231,659 | |
| Total equity | 307,683 | 318,777 | |
| B. | NON-CURRENT LIABILITIES | ||
| I. Provisions | 598 | 578 | |
| II. Financial liabilities | 19,962 | 24,286 | |
| III. Deferred investment grants and subsidies | 11,420 | 11,138 | |
| IV. Other non-current liabilities | 17,628 | 17,584 | |
| V. Deferred tax liabilities | 3,109 | 2,276 | |
| Total non-current liabilities | 52,717 | 55,862 | |
| C. | CURRENT LIABILITIES | ||
| I. Current tax liabilities | 8,962 | 8,880 | |
| II. Other provisions | 15,390 | 18,276 | |
| III. Financial liabilities | 15,135 | 15,845 | |
| IV. Trade payables | 32,631 | 36,927 | |
| V. Deferred investment grants and subsidies | 1,768 | 1,745 | |
| VI. Other current liabilities | 32,184 | 74,955 | |
| VII. Derivatives | 27,759 | 11,981 | |
| Total current liabilities | 133,829 | 168,609 | |
| Total equity and liabilities | 494,229 | 543,248 |
| IN KEUR | 01/01/-30/06/2008 | 01/01/-30/06/2007 |
|---|---|---|
| Net income for the period (in prior period: net loss) | 348 | -3,347 |
| Income tax expense | 1,822 | 4,051 |
| Financial result | 1,671 | 398 |
| Depreciation and amortisation | 5,530 | 12,358 |
| Loss on disposal of non-current assets | 131 | 14 |
| Release of deferred investment grants and subsidies | -1,097 | -1,643 |
| Changes in derivates with effect on income | 3,031 | -275 |
| Decrease in inventories | 63,401 | 11,652 |
| Decrease (in prior period: increase) in trade payables | -6.443 | -3,319 |
| Decrease (in prior period: increase) in other assets | 11,927 | -2,933 |
| Increase (in prior period: decrease) in provisions | -2,403 | -6,099 |
| Decrease in trade receivables | -3,641 | -9,341 |
| Increase (in prior period: decrease) in other liabilities | 1,848 | -798 |
| Interest paid | -2,959 | -2,403 |
| Interest received | 1,088 | 1,959 |
| Income tax paid | -1,619 | -3,541 |
| Cash fl ows from operating activities | 72,635 | -3,267 |
| Investments in time deposits | 0 | -24,990 |
| Proceeds from the disposal of property, plant and equipment | 65 | 28 |
| Acquisition of property, plant and equipment | -4,692 | -14,724 |
| Acquisition of intangible assets | -221 | -81 |
| Cash fl ows from investing activities | -4,848 | -39,767 |
| Expenses of the initial public offering | 0 | 94 |
| Acquisition of treasury stock | -1,899 | 0 |
| Payments on secured loans | -44,264 | -8,018 |
| Proceeds from assuming fi nancial liabilities | 0 | 1,638 |
| Repayment of fi nancial liabilities | -5,034 | -20,737 |
| Cash fl ows from fi nancing activities | -51,197 | -27,023 |
| Net cash fl ows | 16,590 | -70,057 |
| Cash funds at beginning of year | 57,161 | 90,616 |
| Cash funds at end of period | 73,751 | 20,559 |
| IN KEUR | SHARE CAPITAL |
ADDITIONAL PAID-IN CAPITAL |
OTHER RESERVES |
RESERVE FOR TREASURY SHARES |
RETAINED EARNINGS |
TOTAL EQUITY |
|---|---|---|---|---|---|---|
| January 1, 2007 | 63,000 | 484,380 | 1,479 | 0 | 14,694 | 563,553 |
| Revaluation of derivatives (after tax) | 0 | 0 | -1,506 | 0 | 0 | -1,506 |
| Expenses of raising capital (after tax)1 | 0 | 94 | 0 | 0 | 0 | 94 |
| Income and expenses recorded directly to equity |
0 | 94 | -1,506 | 0 | 0 | -1,412 |
| Net loss for the period | 0 | 0 | 0 | 0 | -3,347 | -3,347 |
| Total income and expenses for the period | 0 | 94 | -1,506 | 0 | -3,347 | -4,759 |
| June 30, 2007 | 63,000 | 484,474 | -27 | 0 | 11,347 | 558,794 |
| Revaluation of derivatives (after tax) | 0 | 0 | 4,935 | 0 | 0 | 4,935 |
| Expenses of raising capital (after tax)1 | 0 | -815 | 0 | 0 | 0 | -815 |
| Income and expenses recorded directly to equity |
0 | -815 | 4,935 | 0 | 0 | 4,120 |
| Net loss for the period | 0 | 0 | 0 | 0 | -243,006 | -243,006 |
| Total income and expenses for the period | 0 | -815 | 4,935 | 0 | -243,006 | -238,886 |
| Acquisition of treasury stock | 0 | 0 | 0 | -1,131 | 0 | -1,131 |
| January 1, 2008 | 63,000 | 483,659 | 4,908 | -1,131 | -231,659 | 318,777 |
| Revaluation of derivatives (after tax) | 0 | 0 | -9,543 | 0 | 0 | -9,543 |
| Income and expenses recorded directly to equity |
0 | 0 | -9,543 | 0 | 0 | -9,543 |
| Net income for the period | 0 | 0 | 0 | 0 | 348 | 348 |
| Total income and expenses for the period | 0 | 0 | -9,543 | 0 | 348 | -9,195 |
| Acquisition of treasury stock | 0 | 0 | 0 | -1,899 | 0 | -1,899 |
| June 30, 2008 | 63,000 | 483,659 | -4,635 | -3,030 | -231,311 | 307,683 |
1 Decrease in deferred taxes in connection with expenses of the initial public offering and the release of the liability for initial public offering costs
The Group interim report as of 30 June 2008 with selected notes has been prepared in accordance with the accounting and valuation methods applied to draw up the IFRS consolidated fi nancial statements of VERBIO Vereinigte BioEnergie AG for the period ending 31 December 2007. These interim consolidated fi nancial statements do not include all the information required for the consolidated fi nancial statements to the end of a business year and should therefore be read in conjunction with the consolidated fi nancial statements for the year ended 31 December 2007.
The interim consolidated fi nancial statements are presented in euros (EUR). Unless otherwise stated, all amounts are reported in thousands of euros (EUR thousand). Figures have been rounded and rounding diff erences are therefore possible.
There were no changes in the consolidated group during the period under review.
The presentation of the consolidated income statement has been altered as of 30 June 2008. Showing the gross margin (i.e. profi t margin) and the operating result (EBIT) before commodity futures provides a clearer picture of the VERBIO Group's business dealings and gives readers more detailed information.
Revenue increased from EUR 203.8 million to EUR 298.8 million in the fi rst half of 2008, up 46.6 per cent from the comparison period. The segment report in these notes contains information on the breakdown according to business segments.
Other operating income consists of the following items:
| IN KEUR | 01/01/- 30/06/2008 | 01/01/ – 30/06/2007 |
|---|---|---|
| Release of provisions | 3,000 | 0 |
| Release of investment grants relating to | ||
| current period | 1,097 | 1,643 |
| Miscellaneous | 2,038 | 1,629 |
| Other operating income | 6,135 | 3,272 |
The retransfer of provisions amounting to EUR 3,000 thousand pertains to a retransfer from year-end 2007 connected with the investment project in Wismar.
The majority material expenses related to the acquisition of raw materials, consumable and supplies. The cost of materials rate (cost of materials relating to sales, changes in unfi nished and fi nished goods, and other capitalised production of own plant and equipment) was 87.3 percent in the fi rst half of 2008 (HY1 2007: 85.7 percent). Please see the segment report in these notes for information on the breakdown according to business segments.
Outbound freight listed under the cost of materials until 31 December 2007 (HY1 2008: EUR 6,666 thousand; HY1 2007: EUR 4,564 thousand) is listed under other operating expenses in 2008 for the fi rst time. Figures from the previous year have been adjusted accordingly.
As of 30 June 2008, VERBIO AG (Group) had a workforce of 368 employees (30/06/2007: 328), of which 136 were salaried employees (30/06/2007: 114) and 232 were industrial workers (30/06/2007: 214). There were also 21 apprentices (30/06/2007: 19 apprentices).
Compared with the prior-year period (01/01–30/06/2007), depreciation and amortisation fell by EUR 6,828 thousand to EUR 5,530 thousand. The change resulted mainly from the lack of depreciation on orders on hand and the subsequent impact from write-downs in the Bioethanol segment undertaken as of 31 December 2007.
Warehousing expenses are disclosed under other operating expenses owing to changes in purchasing conditions compared to the fi rst half of 2007.
As noted in the 2007 year-end fi nancial statement, a claim for damages amounting to EUR 3.4 million is pending against VERBIO Diesel Bitterfeld. The Management Board believes that the EUR 700 thousand allocation to provisions in Q2 2008 covers the resulting litigation risks.
| IN KEUR | 01/01/- 30/06/2008 | 01/01/- 30/06/2007 |
|---|---|---|
| Outbound freight | 6,666 | 4,564 |
| Warehousing expenses | 3,496 | 0 |
| Repairs | 2,380 | 1,841 |
| Insurance and subscriptions | 925 | 921 |
| Litigation risks | 700 | 0 |
| Miscellaneous personnel expenses | 640 | 644 |
| Allocation to adjustment allowances and losses on receivables |
557 | 80 |
| Legal and consulting fees | 528 | 483 |
| Allocation to impending loss provision for pending sales contracts |
485 | 0 |
| Miscellaneous | 3,357 | 3,566 |
| Other operating expenses | 19,734 | 12,099 |
The item "allocation to adjustment allowances and losses on receivables" contains an individual value adjustment relating to advance payments for inventories worth EUR 480 thousand listed under other current assets.
The "miscellaneous" item comprises, among others, automobile costs, rental, leases and advertising costs. The previous year has been adjusted accordingly.
The result from the valuation of futures which do not qualify for hedge accounting as well as the ineff ective portion of the futures which do qualify for hedge accounting amounts to EUR -6,366 thousand. In addition, the other reserves from the valuation of futures fell by EUR 9,543 thousand without an eff ect on profi t and loss after consideration of deferred taxes (EUR 1,503 thousand) as they qualifi ed as cash fl ow hedges.
Tax expenses for the period 1 January to 30 June 2008 amounting to EUR 1,822 thousand are made up as follows:
| IN KEUR | 01/01/-30/06/2008 | 01/01/-30/06/2007 |
|---|---|---|
| Current tax expenses | -54 | 5.070 |
| Deferred tax expenses (in prior period benefi t) |
1,876 | -1,019 |
| Income tax expense | 1,822 | 4,051 |
The earnings per share were calculated in accordance with IAS 33. For the calculation of the earnings per share, the earnings for the period were divided by the weighted average number of shares outstanding.
| 01/01/- | 01/01/- | |
|---|---|---|
| 30/06/2008 | 30/06/2007 | |
| Result for the period (in EUR thousand) | 348 | -3,347 |
| Weighted average number of shares outstanding during the period | 62,029,889 | 63,000,000 |
| Earnings per share in EUR | 0.01 | -0.05 |
The weighted average number of shares outstanding was calculated as follows:
| 2008 | 2007 | |
|---|---|---|
| Issued shares on 1 January Effect of treasury shares |
62,627,702 -597,813 |
63,000,000 0 |
| Weighted average number of shares outstanding as of 30 June | 62,029,889 | 63,000,000 |
There is no dilution eff ect.
Intangible assets include goodwill, customer relationships and software licences. Customer relationships are amortised over 15 years. Goodwill is subject to an annual impairment review in accordance with IAS 36.
After allowance for scheduled depreciation, property, plant and equipment increased in value particularly as a result of investments at the Schwedt/Oder and Zörbig sites.
This item comprises a receivable of STS (nominal value) which has been deferred without interest charges until 31 December 2009 under consideration of accrued interest.
| IN KEUR | 30/06/2008 | 31/12/2007 |
|---|---|---|
| Raw materials, consumables and supplies | ||
| Bioethanol production | 24,881 | 50,102 |
| Finished and unfi nished products | 9,112 | 11,674 |
| Merchandise (grain) | 0 | 35,618 |
| Inventories | 33,993 | 97,394 |
The reduction in inventories compared with 31 December 2007 is mainly due to the decrease in raw materials, consumables and supplies for biodiesel production and merchandise.
Write-downs (30/06/2008: EUR 4,003 thousand; 31/12/2007: EUR 13,570 thousand) were mainly undertaken on the stocks of raw materials for bioethanol production, amounting to EUR 3,856 thousand (31/12/2007: EUR 9,069 thousand). The EUR 9,567 thousand drop in write-downs is listed in the consolidated income statement under the item "cost of materials".
Trade receivables amounted to EUR 58,606 thousand (31/12/2007: EUR 52,164 thousand) and are disclosed net after consideration of value adjustments totalling EUR 187 thousand (31/12/2007: EUR 222 thousand). The receivables have a residual term of less than one year.
Deferred tax assets of EUR 9,242 thousand (31/12/2007: EUR 11,737 thousand) concern construction work withholding tax, corporate tax and trade tax.
| OTHER ASSETS | ||
|---|---|---|
| IN KEUR | 30/06/2008 | 31/12/2007 |
| Investment subsidies | 12,327 | 11,012 |
| Security desposits resulting from security agreements and liability declaration |
3,183 | 3,124 |
| Security deposits for unrealized losses on commodity futures |
2,868 | 1,060 |
| Claims from security deposits to be reimbursed (customs offi ce) |
2,065 | 0 |
| Value added tax receivable | 369 | 4,300 |
| Advanced payments for inventories | 192 | 7,145 |
| Other | 2,448 | 3,690 |
| Other assets | 23,452 | 30,331 |
In order to secure the supply of raw materials for Biodiesel production, derivatives are used in the form of futures contracts for vegetable oil to hedge against margin-damaging price levels and as a procurement instrument to secure access to the raw materials. As of the balance sheet date, the positive market value of these futures came to EUR 18,579 thousand with the negative market values amounting to EUR 3,608 thousand. These market values are recognised directly in equity.
Futures were used to hedge against falling prices from fi rm obligations for rapeseed. As of the balance sheet date, the negative market value came to EUR 2,868 thousand and was recognised in the result of commodity futures, aff ecting net income.
Hedging in the form of fi xed diesel sales to counter variable diesel sales was undertaken to secure revenue from sales contracts linked to mineral diesel prices. The positive and negative market values of these swaps of EUR 2 thousand and EUR 21,283 thousand as of the balance sheet date were recognised directly in equity after deduction of non-eff ectiveness.
Please see the consolidated statement of changes in equity as of 30 June 2008 for more details on the development of shareholders' equity at VERBIO AG.
Other reserves comprise the eff ective portion of changes in the fair value of futures qualifying as cash fl ow hedges which had not been realised as of 30 June 2008.
As of 30 June 2008, VERBIO had acquired 1,470,000 treasury shares at an average price of EUR 2.06 per share. Of this total, 1,112,519 shares were acquired during the period under review.
Non-current provisions amounted to EUR 598 thousand as of 30 June 2008 (31/12/2007: EUR 578 thousand), with the majority (EUR 432 thousand; 31/12/2007: EUR 420 thousand) representing asset retirement obligations for wind power plants.
Non-current fi nancial liabilities relate exclusively to bank loans. These fell in comparison to 31 December 2007, mainly as a result of scheduled repayments.
Bank loans reported under fi nancial liabilities are mainly collateralised by mortgages on company sites, assignment of inventories, technical facilities and machinery, vehicles and production and offi ce equipment, as well as by pledging bank balances. Please see the detailed notes in the annual report for 2007 for further information.
As of the reporting date, deferred investment grants and subsidies came to EUR 13.2 million (31/12/2007: EUR 12.9 million), with EUR 1.8 million being current and EUR 11.4 million non-current. Additions amounted to EUR 1.4 million in the fi rst half of the year, with EUR 1.1 million retransferred in the current period.
Other non-current liabilities are innovative fi nancing instruments in the form of mezzanine capital.
Tax liabilities remain unchanged in comparison to 31 December 2007, mainly comprising trade tax obligations and construction work withholding tax.
| IN KEUR | 30/06/2008 | 31/12/2007 |
|---|---|---|
| Investment grants | 7,819 | 8,510 |
| Impending for premium guaranties in connection with the energy crop program |
5,293 | 5,293 |
| Provision for impending losses | 1,543 | 4,400 |
| Litigation risks | 700 | 0 |
| Miscellaneous | 35 | 73 |
| Other provisons | 15,390 | 18,276 |
Please refer to other operating expenses for more information on the litigation risks item.
Provision for other impending losses fell by EUR 3,000 thousand in Q2 2008 due to the abandonment of the Wismar investment project.
Financial liabilities (bank loans) were reduced to EUR 15,135 thousand mainly owing to scheduled repayment (31/12/2007: EUR 15,845 thousand).
| IN KEUR | 30/06/2008 | 31/12/2007 |
|---|---|---|
| Liabilities from grain transactions | 19,198 | 62,956 |
| Realized losses on commodity forwards | 4,712 | 669 |
| Energy tax | 2,106 | 1,725 |
| Tax on sales | 2,227 | 5,607 |
| Miscellaneous | 3,941 | 3,998 |
| Other current liabilities | 32,184 | 74,955 |
The cash funds only include the cash and cash equivalents reported in the balance sheet. Operating cash fl ow amounted to EUR 72,635 thousand and was mainly infl uenced by a decrease in inventories of EUR 63,401 thousand, particularly due to a reduction in trading volumes of grain, as well as a drop of EUR 6,953 thousand in prepayments for inventories posted under other assets. The cash fl ow from investing activities (EUR -4,848 thousand) contains capital expenditure of EUR 4,692 thousand. The cash fl ow from fi nancing activities (EUR -51,197 thousand) is mainly determined by disbursements from secured credit transactions relating to the decrease in grain trading volumes (EUR -44,264 thousand). Cash funds increased by EUR 16,590 thousand in the period 1 January to 30 June 2008, totalling 73,751 thousand at the end of the reporting period.
The Group's risks and revenues are determined signifi cantly by its business segments. Consequently, these form the primary segment reporting format. The VERBIO Group is divided on the basis of its internal organisation and management structure into the business segments of Biodiesel, Bioethanol, Energy and Other.
Regarding the positive overall position from revaluation of derivatives in the Biodiesel segment we refer to the comments on page 5 of the interim consolidated management report.
The following table contains segment revenues and results:
| BIODIESEL | BIOETHANOL | ENERGIE | OTHER | TOTAL | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| IN KEUR | HY1 2008 |
HY1 2007 |
HY1 2008 |
HY1 2007 |
HY1 2008 |
HY1 2007 |
HY1 2008 |
HY1 2007 |
HY1 2008 |
HY1 2007 |
| Revenue | 208,487 | 133,126 | 76,349 | 57,411 | 10,806 | 12,293 | 3,162 | 937 | 298,804 | 203,767 |
| Change in fi nished and unfi nished products |
2,182 | -48 | -4,778 | 3,700 | 0 | 0 | 0 | 0 | -2,596 | 3,652 |
| Capitalized production of own plant and equipment |
155 | 0 | 589 | 0 | 0 | 0 | 0 | 0 | 744 | 0 |
| Cost of materials | -191,800 | -114,987 | -58,471 | -54,450 | -7,535 | -8,095 | -1,500 | -314 | -259,306 | -177,846 |
| Gross Margin | 19,024 | 18,091 | 13,689 | 6,661 | 3,271 | 4,198 | 1,662 | 623 | 37,646 | 29,573 |
| Other operating income | 1,245 | 1,164 | 4,376 | 1,096 | 416 | 1,014 | 98 | -2 | 6,135 | 3,272 |
| Personnel expenses | -3,942 | -3,618 | -3,406 | -3,447 | -73 | -77 | -889 | -144 | -8,310 | -7,286 |
| Depreciation and amortisation | -2,948 | -5,025 | -593 | -5,922 | -1,246 | -1,249 | -743 | -162 | -5,530 | -12,358 |
| Other operating expenses | -11,197 | -6,836 | -7,105 | -4,326 | -938 | -851 | -494 | -86 | -19,734 | -12,099 |
| EBIT before commodity futures |
2,182 | 3,776 | 6,961 | -5,938 | 1,430 | 3,035 | -366 | 229 | 10,207 | 1,102 |
| Result of commodity futures | -4,346 | 0 | -2,020 | 0 | 0 | 0 | 0 | 0 | -6,366 | 0 |
| Segment result (EBIT) | -2,164 | 3,776 | 4,941 | -5,938 | 1,430 | 3,035 | -366 | 229 | 3,841 | 1,102 |
| Interest income | 795 | 2,154 | 352 | 352 | 52 | 170 | 11 | 12 | 1,210 | 2,688 |
| Interest expense | -760 | -1,622 | -1,609 | -970 | -363 | -456 | -149 | -38 | -2,881 | -3,086 |
| Result before tax (EBT) | -2,129 | 4,308 | 3,684 | -6,556 | 1,119 | 2,749 | -504 | 203 | 2,170 | 704 |
The item "Other operating expenses" contains expenses for other taxes (EUR 50 thousand; comparison period: EUR 54 thousand).
Please refer to the information in the 2007 year-end fi nancial statement regarding contingent liabilities.
On 11 May 2007 Rabobank International Frankfurt am Main issued a bond worth EUR 14,000 thousand for Märka GmbH on behalf of the Federal Agency for Agriculture and Food, which was reduced by EUR 1,000 thousand to EUR 13,000 thousand by a writ issued on 14 March 2008. VERBIO AG committed to indemnify Radobank International against all claims, including secondary claims.
On 4 September 2007 Dresdner Bank AG granted VERBIO STS AG a secured line of credit of EUR 20,000 thousand, which ran until 31 December 2007. As of 31 December 2007, EUR 11,900 thousand of the secured line of credit had been utilised. The secured line of credit was extended until 31 December 2008 after being exhausted on 31 December 2007. VERBIO's fi xed deposits with Dresdner Bank serve as security, which is pledged up to the amount of the credit used.
On 31 July 2007 VERBIO and Euler Hermes Kreditversicherungs-AG Hamburg agreed a fi delity agreement, whereby VERBIO, VERBIO Ethanol Zörbig (previously MBE) and VERBIO Ethanol Schwedt (previously NBE) were awarded a secured line of credit of EUR 10,000 thousand which relates to credit for customs and the Federal Agency for Agriculture and Food. VERBIO provided a deposit of EUR 3,000 thousand as security for all claims made by Euler Hermes Kreditversicherungs-AG Hamburg. As of 30 June 2008, EUR 5,073 thousand of the secured line of credit had been utilised.
Additional fi nancial obligations of EUR 28,045 thousand exist from various long-term leasing agreements of which EUR 14,666 thousand relate to the following year, EUR 6,907 thousand to the next one to fi ve years and EUR 6,472 thousand for a period exceeding fi ve years.
There are purchase obligations on the reporting date resulting from a service contract related to the acquisition of rapeseed oil. Prices have already been agreed yet for the parts still to be provided under the obligation. When future prices are agreed, they should be customary for the market and be based on MATIF price quotations. Using the MATIF future prices for August 2008 as available on 30 June 2008, there are purchase obligations for rapeseed totalling EUR 57,912 thousand.
As of 30 June 2008 there is an order obligation for investments amounting to EUR 1,486 thousand.
There were no signifi cant events subsequent to the end of the reporting period.
CLAUS SAUTER Chief Executive Officer
DR. - ING. GEORG POLLERT Chief Technology Officer Deputy Chairman of the Board
MARTIN MEURER Chief Financial Officer
ALEXANDER VON WITZLEBEN Chairman of the Supervisory Board
PROF. DR. FRITZ VAHRENHOLT Deputy Chairman of the Supervisory Board
BERND SAUTER Member of the Supervisory Board
AUGUST 14, 2008 Publication of Interim Report Q1+Q2 2008 NOVEMBER 14, 2008 Publication of Interim Report Q1–Q3 2008
This interim fi nancial report contains forward-looking statements which are based on assumptions and estimates by the company management of VERBIO Vereinigte BioEnergie AG. Even though the company management believes that these assumptions and estimates are correct, the actual future development and actual future results may deviate substantially from these assumptions and estimates due to many factors. For example, these factors can include changes in the economic situation, legal and regulatory constraints in Germany and the EU as well as changes in the industry. VERBIO assumes no liability and provides no warranty that future developments and actual future results will correspond to the assumptions and estimates expressed in this interim report.
INVESTOR RELATIONS
Anna-Maria Schneider
VERBIO Vereinigte BioEnergie AG Augustusplatz 9, 04109 Leipzig T + 49 341 30 85 30-90 F + 49 341 30 85 30-99 ir @ verbio . de www . verbio . de
EDITOR VERBIO Vereinigte BioEnergie AG, Zörbig
Additional VERBIO reports are available on the homepage of the company. In case of divergence from the German version of the interim report 2008 the German version shall prevail.
CONCEPT AND DESIGN fischerAppelt, ziegler GmbH, Hamburg
IMAGES VERBIO
PRINT Dürmeyer GmbH, Hamburg
© 2008
This interim report is published in German (original version) and English (translation is not binding).
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