2G Energy AG — Earnings Release 2013

Sep 30, 2013

News Details

Corporate | 30 September 2013 07:27

2G Energy AG: H1 2013 results impacted by weak market environment and counter-cyclical investments; 2G retains medium-term growth targets

2G Energy AG / Key word(s): Half Year Results/Change in Forecast

30.09.2013 / 07:27

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Corporate News

2G Energy AG:H1 2013 results impacted by weak market environment and counter-cyclical investments; 2G retains medium-term growth targets

– H1 2013 revenue: EUR 41.9 million (H1 2012: EUR 50.3 million)

– H1 2013 total operating revenue: EUR 48.3 million (H1 2012: EUR 46.9 million)

– H1 2013 EBIT loss of EUR 2.1 million (H1 2012: profit of EUR 2.8 million)

– Weaker international business impacts and earnings

– Business in Germany with natural gas-driven CHP’s in line with expectations

– 2013 forecast adjusted: revenue of EUR 120 million to EUR 140 million, EBIT profit of EUR 3 million to EUR 5 million

Heek, September 30, 2013 – 2G Energy AG (ISIN DE000A0HL8N9), one of the leading German manufacturers of combined heat and power (CHP) plants, generated EUR 41.9 million of consolidated revenue in the first half of 2013 (as of June 30), compared with EUR 50.3 million in the comparable period of the previous year. This is offset by a higher level of projects which have been started, but where most of which will not become effective in terms of revenue and earnings until the second half of the year. Total operating revenue consequently grew to EUR 48.3 million (previous year: EUR 46.9 million). The continued weak economic situation in Southern Europe and regulatory changes in many European countries negatively impacted sales in the first half of 2013. Business trends in the USA also lagged expectations. Growth on the German market, especially for natural gas-driven CHPs, was satisfactory, however. Orders came increasingly from industrial customers, municipal utilities and major energy supply companies. Industrial companies and municipal utilities wish to become more independent of rising energy prices with the help of their own decentralized electricity and heating supplies. For energy supply companies and municipal utilities, CHP systems’ contribution to grid stability as well as the flexibility and security of these energy supplies comprise important investment reasons. Overall, lower sales revenue on the one hand, and higher investments and reserve costs on the other hand, as well as extraordinary impairment charges fed through to a EUR 2.1 million loss before interest and tax (EBIT) (previous year: EBIT profit of EUR 2.8 million). The Group incurred a consolidated net loss of EUR 1.6 million in the first half of 2013 (previous year: consolidated net profit of EUR 1.9 million). Earnings per share (EPS) stood at EUR -0.36 (previous year: profit of EUR 0.43 per share), after deducting profits/losses attributable to non-controlling shareholders.

Good business in Germany, foreign markets lag expectations

2G generated two thirds of its sales revenue in Germany and acquired market shares in the first half of 2013. Especially given the weak market for biogas systems for the second consecutive year, and further growth in demand for natural gas-driven CHPs (sales revenue share in Germany almost 50 %), this trend on the company’s domestic market lies within the range of expectations. Weak business in Europe and the USA primarily characterized the drop in sales revenue and earnings compared with the first half of 2012. Business with biogas-driven CHP systems dominated business on markets outside Germany in the first half the year with an approximately 30 % revenue share. The biogas market in Europe was impacted by some significant falls in national feed-in payments. To these are added lengthy registration and approval procedures, almost protectionist market barriers and generally stringent lending conditions for CHP systems, especially on Southern European markets.

USA: start-up investments on this still young but attractive growth market

In the USA, 2G generated revenue primarily with biogas-driven CHPs. A marked resurgence of demand is evident on the market for natural gas-driven CHPs. Numerous projects and tenders – such as that of the Federal State of New York for 3,000 CHP systems in the 50 to 300 kW output category – are in the preparatory stage, feeding through to orders in which 2G can participate through its plants’ high quality and efficiency. 2G systems are currently being subjected to certification procedures in line with US industrial norm standards so that it can bid in this and other tenders through preferential approval procedures. Political support for the US CHP systems market, which is still young but very important, is generally good. With the founding of 2G Manufacturing in the summer of 2012 and of the 2G Cenergy sales and service company, the Group has realized important investments for a good competitive position in one of the most attractive future growth markets. 2G is still in an early competitive phase in the USA. The market for natural gas-driven CHPs will become increasingly relevant there from 2014.

Equity ratio rises to 54.6 %

The balance sheet structure of the 2G Energy Group continued to be very stable as of June 30, 2013. Compared with the December 31, 2012 balance sheet date, total assets were down by 10.8 % to EUR 84.5 million since trade receivables and liquid assets were deployed to reduce trade payables and bank borrowings. Working capital fell accordingly from EUR 30.1 million as of December 31, 2012 to EUR 25.1 million. The 2G Group’s consolidated equity stood at EUR 46.2 million as of the balance sheet date (December 31, 2012: EUR 47.8 million), with the equity ratio improving to 54.6 % (previous year: 50.4 %).

Counter-cyclical investments in capacity expansion and the tapping of new markets burden earnings

During the reporting period, 2G continued to invest in key areas for future growth. These include continuous technological improvements of CHP systems for natural gas, biogas and lean gas operations, and capacity expansions at the company’s site in Heek as well as the hiring of new staff. In the USA, too, 2G realized counter-cyclical investments in the expansion of production capacities, employee qualification and tapping the market there. These investments and reserve costs are not offset by any direct sales revenue growth, thereby placing a brake on earnings growth in the first half of 2013. Irrespective of this, 2G has quite consciously utilized investments and strengthened organizational structures to position itself at an early stage in this changing and still very attractive market.

The cost of materials ratio during the period under review rose year-on-year to 68.3 % (H1 2012: 67.7 %) due to an increase in inventories. The personnel expense ratio was also up year-on-year, from 16.7 % to 21.4 %, due to continued hiring (75 additional staff to reach a total of 486 staff). Other operating expenses increased from EUR 2.1 million to EUR 7.1 million as part of higher sales, operating and administrative expenses in line with the company’s internationalization.

Order book position at the previous year’s level

The order book position consisting of CHP orders stood at around EUR 60 million as of June 30, 2013, thereby at the previous year’s level. This order book position comprises around 46 % biogas and 54 % natural gas applications. The geographic distribution approximately reflects around 67 % from Germany and 33 % from abroad. As far as gas types are concerned, the order book in Germany comprises a clear preference for natural gas-driven CHPs of around two thirds. The opposite applies abroad: more than 95 % of the order book position is attributable to biogas-driven CHPs there.

Outlook: new order intake up, forecast adjusted

For the second half of the 2013 financial year, 2G anticipates marked sales revenue growth due to its current order book position and a higher level of invoicing of existing work in progress. New order intake grew in the third quarter with the order book position for CHP systems amounting to around EUR 80 million at the end of September 2013, reflecting an approximately 27 % export share and a 52 %/48 % ratio between biogas and natural gas projects. Although this again signifies sufficiently strong capacity utilization and employment for the second half of 2013, it will fail to offset the weak first and second quarters. EBIT trends in the 2013 fiscal year remain affected by the retention of personnel capacities, the expansion and creation of Group structures for international business activities, and extraordinary impairment charges.

The Management Board is downgrading the forecast for the 2013 financial year that it issued at the end of May (EUR 160 million of sales revenue and an EBIT margin in the low double-digit range) to consolidated revenue of between EUR 120 million and EUR 140 million, and a profit before interest and tax (EBIT) of between EUR 3 million and EUR 5 million.

Appraisal of the sector and the company’s own growth prospects from 2014

Based on the company’s own assessments of the sector and underpinned by market studies (e.g. DELTA Energy & Environment), 2G expects a resumption of constant growth rates from 2014 – following market rationalization due to a change in international political and economic conditions. While subsidy and compensation schemes are being reviewed internationally, a crowding-out process is occurring among CHP manufacturers and biogas system builders. With its stable financial and asset backing, technically innovative and multifaceted product range, diversified customer base, international positioning and independence, 2G is very well positioned on its markets. With its focus on the future growth markets of America and Eastern Europe / Middle East, 2G will continue to benefit in the medium to longterm in the international expansion of annually installed electric output derived from combined heat and power plants (biogas and natural gas), especially in the output range between 20 kWe and 550 kWe. 2G also has many years of expertise in the output range up to 2,000 kWe and will also be able to generate growth in this area due to a rising number of reference clients. As a consequence, 2G is retaining its long-term forecast of revenue growing to EUR 300 million and an achievable EBIT margin of 15 % by 2020. As far as the coming 2014 financial year is concerned, the Management Board expects year-on-year growth in both revenue and earnings in light of its improved order book position and more vigorous new order intake growth. The forecast for the 2014 financial year will be made more specific at the latest in May 2014 when the 2013 consolidated financial statements are presented.

Half-yearly report as of June 30, 2013 available for download

The company will make the half-yearly report as of June 30, 2013 available for download on September 30, 2013 at http://www.2-g.de/?langid=2&seitenid=86 .

The English version of the H1 report will be published no later than Oct 3, 2013.

2G Energy AG company profile

2G Energy AG is one of the internationally leading providers of CHPs for decentralized combined heat and electricity supplies. 2G’s product portfolio offers electrical output between 2G kW and 2000 kW for operation with natural gas, biogas or biomethane. 2G has successfully installed more than 4,000 modules in 25 countries to date. Its customer base spans agricultural and industrial operations, local authorities, the residential housing sector and large energy utilities. The high level of satisfaction among the company’s customers is closely connected with its dense service network and the high technical quality and performance of 2G power plants, which achieve total efficiencies of between 85 % and far in excess of 90 % through combined heat and power. 2G is consistently expanding its technology leadership through continuous research and development work. Along with the construction and manufacturing of CHP systems, the company, which is based in Germany’s Münsterland region, offers comprehensive solutions ranging from planning and installation through to service and maintenance.

In the context of Germany’s new energy policy, CHPs within smart grids – so-called virtual power plants – are becoming rapidly important due to their predictable availability.2G Energy (ISIN DE000A0HL8N9) is listed in the Entry Standard of Deutsche Börse AG. The share capital amounts to EUR 4,430,000, and is split into 4,430,000 shares. As of June 30, 2013, the company’s founders held 56.0 % of the shares, with the free float amounting to 44.0 %.In the 2012 financial year (January 1 to December 31), 2G Energy generated EUR 146.5 million of revenue, EUR 16.6 million of earnings before interest and tax (EBIT), and EUR 11.3 million of net income. The company currently employs 486 staff.

Forthcoming dates in 2013

October 1, 2013 German Mittelstand Conference, New York

November 11, 2013 Eigenkapitalforum Deutsche Börse AG (Equity Capital Forum), Frankfurt/ Main

December 10, 2013 Prior Börse Capital Market Conference, Frankfurt-Egelsbach

Further information: www.2-g.de

Investor relations contact

2G Energy AG

Benzstr. 3, 48619 Heek

Telephone: +49 (0) 2568 93 47-2795

Fax: +49 (0) 2568 93 47-15

E-mail:ir@2-g.de

Internet: www.2-g.de

End of Corporate News

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Language:	English
Company:	2G Energy AG
	Benzstr. 3
	48619 Heek
	Germany
Phone:	+49 (0)2568-9347-0
Fax:	+49 (0)2568-9347-15
E-mail:	service@2-g.de
Internet:	www.2-g.de
ISIN:	DE000A0HL8N9
WKN:	A0HL8N
Listed:	Freiverkehr in Berlin, Düsseldorf, Stuttgart; Frankfurt in Open Market (Entry Standard)

End of News	DGAP News-Service

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