PETROTEC AG / Key word(s): Final Results/Forecast
18.03.2015 20:14

Dissemination of an Ad hoc announcement according to § 15 WpHG, transmitted by DGAP - a service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.

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Petrotec AG

Ad hoc-notification according to § 15 WpHG

Annual Financial Results 2014

Petrotec AG: Challenging 2014 due to declining prices and spreads
- Sales revenues: EUR 167.2 mill. (2013: EUR 193.3 mill.) down 13.5 %
- EBIT: EUR -2.2 mill. (2013: EUR 4.9 mill.), EBIT-margin -1.3 % (2013:     2.5 %)

- Remaining high production level of waste-based biodiesel of 138.8K tons     (2013: 138.5K tons)

- Forecast 2015: sales between EUR 100 mill. and EUR 150 mill., EBIT-margin expected to be in the range of -2 % and 2 %
Borken, March 18th, 2015 - Petrotec AG (ISIN DE000PET1111), one of the largest European producers of waste based biodiesel predominantly from used cooking oil, reports group sales revenues of EUR 167.2 mill., down 13.5 % (2013: EUR 193.3 mill.) in the financial year 2014 (Jan. 1st to Dec. 31st). The company reported EBITDA of EUR 0.6 mill. (2013: EUR 7.5 mill.) and an operating loss (EBIT) of EUR -2.2 mill. (2013: operating profit EUR 4.9 mill.). Net loss amounted to EUR -3.8 mill. compared to a EUR 4.0 mill. net profit in the previous year. Undiluted earnings per share (EPS) went down to EUR -0.15 compared to EUR 0.16 in 2013.

The results are primarily attributed to the continuous price decline trend experienced in 2014 which had a negative impact on product-feedstock spread, the cost of goods sold ratio (cost of materials minus changes in inventories of finished an unfinished product) / (total sales) increased from 87.1% to 89.4%. The stable production output supported the sales of the company that were primarily negatively impacted by the strong declining price development.

Remaining high production level of more than 138K tons
Biodiesel production volumes demonstrated stabilization of the significant improvement in the company's performance through the last years. Petrotec produced 138.8K tons of its EcoPremium biodiesel product (2013: 138.5K tons). Utilization remains stable at 75 % both in 2014 and in 2013 of the nameplate capacity.

During winter of 2013 and through the first quarter of 2014, the company managed to increase its trading activity by offering suitable blends to its customer to comply with the winter specification requirements. This activity slowed down during the second half of the year. In Spain, the company slowed down its activity in the second half of the year in response to the falling prices in the market. Taking into account the increase in the trading activity and the decrease in the activity in Spain, the company slightly decreased its unit volume sales of biodiesel in the year 2014. From a sales value and margins standpoint, the drop in the commodity prices further drove down not only the total revenue value but also the profit margins of the company. Unfortunately, the drop in the commodities prices was not followed by a parallel drop in the company's feedstock prices.
In 2014, a major upgrade in one of the plants was successfully executed. With this upgrade the company is able to use a wider variety of feedstock, and still complying with the EN-14214 specifications for the produced biodiesel.

Equity ratio increased to 51.2 %

The balance sheet as of December 31, 2014 is affected on the assets side by declined inventories of EUR 7.6 mill. (2013: EUR 15.1 mill.). On the liabilities side equity decreased due to the current year loss of EUR 3.8 mill. and the increase in the capital reserve as a consequence of the stock option program by EUR 0.2 mill., to EUR 24.2 mill. (2013: EUR 27.7 mill.). Total assets position declined to EUR 47.1 mill. (2013: EUR 58.2 mill.) primarily due to the decline in inventories and trade accounts receivables. The equity ratio increased to 51.2 % at year end (2013: 47.6 %) as a result of the reduced total asset basis.

Cash position of EUR 11.1 mill.

In fiscal year 2014, Petrotec achieved a positive operating cash flow of EUR 11.1 mill. compared to EUR 11.6 mill. in 2013 mainly thanks to lower working capital utilization which in turn resulted from a combination of the dropping prices of feedstock and biodiesel and the inventory volume reduction. Petrotec's cash flow from investing activities of EUR -2.5 mill. (2013: EUR -1.4 mill.) is mainly attributed to investments in technical equipment aiming at further optimization of productivity and yields as well as investments for the truck fleet. The working capital of Petrotec amounted to EUR 6.2 mill. (2013: EUR 16.6 mill.) at the end of fiscal year 2014. Overall, increased cash flow of EUR 1.2 mill. resulted in cash at the end of the year of EUR 11.1 mill. (2013: EUR 9.9 mill.).
Regulation 

As of January 1st, 2015 Germany switches from a volumetric obligation of blending 7 % biodiesel to a CO2 reduction objective, mandating a CO2 reduction of 3.5 % from 2015, 4 % from 2017 and 6 % from 2020. The blending mandate for biodiesel then needs to be fulfilled with green house gas (GHG) savings. From that date on, there will be no double counting mechanism in Germany. Also, the relevant implementation guidelines were published very late in the year creating uncertainty amongst market players and reduced the demand in Q4 2014. Yet, double counting will continue to be valid in many other European markets.

On the regulatory fronts, some important factors with potential long term and short term effects on the biodiesel industry are still being debated on the EU level. In line with this spirit, the iLUC concept, sets "penalties" on GHG savings (that would reduce the calculated savings), to account for the 'indirect land usage change' that the virgin vegetable oil biodiesel industry makes use of to grow oil seeds. It appears that the regulators on the EU level strive to emphasize the original causes of providing incentives to set up renewable energy activities - namely GHG savings. As a waste-based biodiesel producer generating over 85 % savings, Petrotec is relatively safe from the ramifications of this type of discussion. However, the iLUC discussions hold the potential to cause a significant damage to the biodiesel industry as a whole. On a very much related note, the recent de-carbonization regulations introduced in Germany seem to have, at least so far, caused damage to the market position of Petrotec in Germany. Although the management expects the demand to increase again in the summer season, it is also concerned by the immediate negative effect this regulation, published "last minute" at the end of the year 2014, has effectively had on the company. Another central market-disrupting factor is the fact that this regulation is enforced in Germany only and no harmonized regulation exists in Europe.

New major shareholder

On December 9, 2014, Renewable Energy Group, Inc., Ames, Iowa, USA through its fully owned subsidiary REG European Holding BV, Amsterdam-Schiphol, Netherlands ("REG"), announced its intention to acquire all shares held by the major shareholder, IC Green Energy Ltd. ("ICG"). On January 19, 2015, REG published a voluntary takeover offer to the remaining shareholders offering them the option to sell their shares to REG at a price of EUR 1 per share. Based on the fairness opinion prepared by Equinet Bank AG, Frankfurt am Main, the Management Board and the Supervisory Board of Petrotec AG published a statement, on January 26, 2015, referring to the reasoned opinion they prepared. According to this document they consider the abovementioned price offer of REG to be adequate, recommending the acceptance of the takeover offer. By the end of the additional acceptance period on March 5, 2015 the offer has been accepted for a total of 3,764,789 shares. Hence REG notified Petrotec that via shares its voting rights on the company have exceeded the threshold of 75% of voting rights on March 12, 2015 and amounted on that day to 84.42% (this corresponds to 20,720,234 voting rights).

Guideline

Due to uncertainties especially those related to the recent changes in the regulatory environment in Germany, the management presumes to have only limited ability to fully anticipate the impact of said changes on the market position of the company and its respective financial performance in the year 2015. Assuming no extreme worst-case scenario, and under current market prices, Petrotec gives a range for sales between EUR 100 mill. and EUR 150 mill. for the year 2015. EBIT-margin is expected to be in the range of -2 % to 2 %.

The assumptions underlying the forecasts include basic expectations of market development in the context of the uncertainties in the regulatory environment and changes in commodity prices, as well as seasonal effects. The assumptions are based on past experience as well as business -specific market expectations and are therefore subject to uncertainties regarding the actual development. In this respect significant deviations from the predictions can not be excluded.

The management clarifies that making an accurate assessment of the new economic equilibrium point in such a dynamic market, is beyond its capacity. Furthermore, the above mentioned information with regard to the expected demand for the company products represents an internal assessment of the potential outcome of the recent development in said market.
Report download

The 2014 full year financial report can be found in the following link:
http://www.petrotec.de/core/cms/front_content.php?idcat=96&lang=2
Petrotec group key annual financial figures 2012 - 2014

Disclaimer

This corporate news contains forward looking statements, which are based on assumptions and estimates of the management of Petrotec AG. Although Petrotec management believes that these assumptions and estimates are correct, actual future developments and results can deviate substantially from these assumptions and estimates due to many factors. These factors can include alteration of the economic situation, legal and regulatory constraints in Germany and the EU, and changes in Petrotec's general business and competitive environment. Petrotec assumes no liability and provides no warranty that future developments and actual future results will conform with the assumptions and estimates expressed in this corporate news.

About Petrotec

Petrotec AG, Germany, is the largest European producer of waste-derived biodiesel, mainly based on used cooking oil. The Company owns an overall nominal production capacity of 185,000 tons per year at two locations in Germany. Petrotec runs a vertically integrated business model including own collection of used cooking oil from more than 15,000 collection points, treatment and refining of the raw material up to the technologically demanding production of waste-based biodiesel. The Company sells its biodiesel primarily to large mineral oil companies in northwest Europe. The usage of waste based biodiesel enjoys a preferential double counting scheme granted by major EU countries as part of the mandatory blending quotas. Petrotec's EcoPremium biodiesel provides significant environmental and climate advantages with the highest CO2 emission reduction of 85% (compared with fossil diesel) amongst all biofuels approved by the EU Renewable Energy Directive (2009/28/EC). Since its IPO in 2006, Petrotec cleaned more than 800,000 tons of waste and saved over 2.5 million tons of CO2 emissions. Petrotec is a public listed company (ISIN DE000PET1111) in the regulated market of Frankfurt Stock Exchange, in the Prime Standard segment, complying with high international transparency standards. It has a capital stock of 24,543,741 Euro, equaling 24,543,741 shares. As at balance sheet date Dec. 31st, 2014, the main shareholder is REG European Holdings B.V., Netherlands, with a stake of 69 %, free float is approx. 18 %. In the business year 2014 (Jan. 1st to Dec. 31st) Petrotec reached sales of EUR 167.2 mill. and generated an EBIT of EUR -2.2 mill. and a net loss of EUR -3.8 mill. The Company employs about 105 employees.
Press contact

Petrotec AG

Vera Berlin

Investor Relations 

Tel.: +49 (0) 2862 910080

ir@petrotec.de

End of ad hoc notification


18.03.2015 The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases.
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Language:     English
Company:      PETROTEC AG
              Fürst-zu-Salm-Salm-Str. 18
              46325 Borken-Burlo
              Germany
Phone:        +49 (0)2862 9100 19
Fax:          +49 (0)2862 9100 99
E-mail:       info@petrotec.de
Internet:     www.petrotec.de
ISIN:         DE000PET1111
WKN:          PET111
Listed: Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich,               Stuttgart
 
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