Verbio Vereinigte Bioenergie AG
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Verbio Vereinigte Bioenergie AG
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Good morning, ladies and gentlemen. -- half of Montega, welcome to the earnings call of VERBIO following the publication of the Q3 figures of 2022, 2023, the CEO, Claus Sauter and Alina Köhler from Investor Relations will give you a presentation on the results in a moment, and the floor will be opened for upcoming questions following the presentation. Having said that, I hand over to you, Mr. Sauter.
Thank you very much, operator. Welcome, ladies and gentlemen for the presentation of the Q3 results of the business year 2022, 2023, in my name and the Board and together with Alina, our Head of IR.So we prepared a presentation. First of all, we will report about the group financials, segment financials, acquisition of our new site in the United States, in South Bend Ethanol and then update and outlook. And for sure, for this discussion, one of the main topics will be the development in biodiesel, especially the imports from China. But let's start, Alina, please start. Okay. So first of all, an overview about the production and the key figures for Q3. So finally, about the production, we are very much in line. We increased the biodiesel production 10% year-on-year due to higher utilization in Canada. Ethanol production is stable year-on-year, and the RNG production, renewable natural gas, 14% plus year-on-year due to capacity expansion. EBITDA minus 66% compared to the previous quarter last year. So the decrease is primarily due to decline in sales prices in particular for biodiesel. We have big margins squeeze in biodiesel imports, but therefore, we prepare a later slide about the Chinese imports and on the same time, higher purchase prices for feedstocks. Net cash, minus 32% from EUR 177.5 million to EUR 121 million. So change is driven by EBITDA and working capital plus then we spent money mainly for growth investments, building up new capacities and our other activities in Germany, tax payments and dividend payout. Equity ratio still stable at 73.8%. So we have a strong balance sheet, financial stability remains high. But now I would like to hand over to you about the details.
Thank you very much, and good morning ever to everyone from my side as well. So as Klaus already said, our EBITDA for Q3 was at EUR 43 million. And this is short of the year back EBITDA of EUR 128 million, which was definitely driven by the attractive procurement that we did on rate fleet oil, but also in [indiscernible]. So it's not very comparable for -- to actually compare the numbers. And so what we also show on this slide is that in the last quarter, we had an EBITDA of roughly EUR 49 million. And as you can see, the composition has changed tremendously. So the bioethanol segment actually recovered very strongly, whereas the biodiesel segment declined due to the reasons that Klaus already mentioned, especially the imports of the Chinese biodiesel, which we will come to in a second. However, we will -- for the biodiesel segment, as I mentioned, there is a low comparability year-over-year. However, you can actually see that in or the green light cars, our sales increased year-over-year. We said that the biodiesel price actually declined. However, in North America, we had a better utilization in the Canadian plant, which was driving the increase as well as as well as better biodiesel prices. And in Yes. So however, the EBITDA was burdened by the decline in European biodiesel prices, which were coupled with comparably high purchasing costs and attractively priced GHG premiums stabilize our results here. So in the end, we showed EUR 25 million EBITDA in the Q3 figures for our Q3 EBITDA in the biodiesel segment and which is a very good result considering the imports that we've seen from China. But I'll hand over to you again.
Yes. So a big problem at the moment, I must say is the wrongly labeled biodiesel imports from China. And on this chart, just -- we want to show you how the market developed. So the gray chart is the situation last year, 2021, 2022. And for biodiesel, you can see that between September and August and January, margins were very attractive EUR 500, EUR 600 per tonne of margin. It went down then in February, March. And the actual business here now shows that the margins now at a level of below EUR 100 per metric ton. The whole commodity on the right hand on the right chart, the whole commodity market went down dramatically. So when rapeseed oil was EUR 2,200 last year in July, then we are at the moment at EUR 900 per tonne.Finally, there is a possibility to hedge the feedstock costs. But -- we are in a position where we say for vegetable oil, we are bullish because in the United States, 10 million tonnes of new capacities for high-grade vegetable oil is coming up. So the distortion of the Chinese imports, which are finally palm oil methyl ester, some blended with other components is really distorting the mark heavily. And that -- what I say that it is not just a gimmick.April 24, there was an announcement that Chinese imports labeled as used cooking oil to the U.S. We have stopped in New Orleans, 2 ships. The Environmental Protection Agency and the beauty control takes -- took samples. And finally, it was palm oil, which was labeled as used cooking oil. So we have now more and more indications that it is really a big thing what is coming there.And now on the next slide, I want to show you about what amounts we are talking. So Chinese biodiesel was always coming to Europe or was exported. Capacities in China are around 2.4 million tonnes of biodiesel capacity -- and the whole volume in Europe, what we need is around 9 million tonnes, just that you get a feeling. So it's about 25% of the capacity in China. Most of these exports in previous years came as used cooking oil methyl ester. And if we are looking to January to the first quarter of the last year, January, February, March 2022, then the exports were approximately 50,000 to 100,000 tonnes, but it was labeled as used cooking oil methyl ester. So compared with this, Chinese exports have doubled year-on-year. And most of this product is wrongly labeled as advanced biofuel with an attractive greenhouse gas quota. The point is that also used cooking methyl ester is now since January 2023 capped at 1.9%. Now these imports, especially from China to Europe, are labeled as advanced biofuel according to Annex 9A.So that means that for the German market and also the market in the U.K. for advanced biofuel, biodiesel, it is very attractive because the quota is counting double. So in the chart down in tons of CO2 reduction most of the product is importing imported via Rotterdam, but we estimate that most of this biodiesel, which is labeled as advanced is coming to Germany. And you see that it is not only that there are these amounts coming to the market and blended from the oil companies into diesel with the double counting, the quota is doubling. So that means, for example, when in 2022, 100,000 tonnes of biodiesel came to the European or German market.It was a single counting in Germany for the quote. So 100,000 tonnes was counting 100,000 tonnes for the quota. Now labeled as advanced and finally, a lot of base on palm oil which is banned anyway with a multiplication, 250,000 tons of biodiesel are coming to Europe. Most of them to Germany because it's the most attractive market. And with 250,000 tonnes, you get 500,000 tonnes of quota. So used cooking amethyl ester is the imports last year, 100,000 tonnes in January, for example, is 100,000 tonnes of quota and now 250,000 tonnes are coming, and this is 500,000 tonnes of quota. That shows how the market is really disturbed. There is a huge distortion and it's simply not possible that all this product coming from China is really advanced because the feedstock is -- first of all, the feedstock is not available. And secondly, a planned which was built to make used cooking oil methyl ester cannot handle the advanced feedstock for advanced biofuel. We know from what we are talking. We also want to increase our existing capacity for advanced biofuel, but therefore, we are building a completely new plant. So [indiscernible] and national solutions are currently being developed to address the mislabeling of the biodiesel. So we know that Berlin and Brussels is working on it. And in the United States, I mentioned it April 24, they just blocked the import. One of are the most important certifier for the whole biofuel business, ISCC withdrew already 5 certificates in the last couple of weeks from Chinese exporters. And fortunately, fortunately now, the first oil majors stopped using mislabeled time oil-based biodiesel from China. Last week was a clear announcement from Total -- anything which has Chinese components insight will not be taken in Germany for German refined total refinery or refineries. So action is taken, but at least these significant fraudulent imports from China are distorting the whole market. Even that what I mentioned before that rapeseed oil came down from EUR 2,200 to EUR 900. So the whole market is shaped up because the amount of imports is just so huge. 250,000 tonnes per month, which is 3 million tonnes per year, counting double, so you are creating 6 million tonnes of CO2 savings in a market environment where the use of biodiesel is 9 million tonnes, you can see it's more than 50%. All of the products coming from China, huge distortion, which is not only affecting the biodiesel, which is also effect in bioethanol because when it's now easy for the oil companies to fill their obligation with these kind of biofuel they also decide to take less ethanol because there is no pressure at the moment. So what we are asking the government is, first of all, to stop the imports; and secondly, investigate how much volume came from these companies where the certificates were withdrawn and finally, to go back because it was all fraudulent. So let's see what we can achieve here. But finally, it is a huge scandal, which is also participated by Big Oil. Okay. Thank you very much. Alina, continue, please.
Yes. So moving to the ethanol segment. Year-over-year, we also saw a decline. However, we saw a strong recovery quarter-over-quarter. Looking at our sales, again, so that's the green light for that you can see in the chart. You can actually see stable revenues year-over-year while our production remained largely stable. And this is mostly driven by additional GHG quota that we sold despite the ethanol prices declining. So that explains why revenues actually remained largely stable. And while the GHG quota is -- has a very attractive margin. The decline that you can see in EBITDA was still driven by the strong pressure that we had on our input costs linked to feedstock but also the energy cost. Also, last year, we benefited from positive one-off effects, which are worth mentioning. And so this also explains the difference that you can see. It's also -- it's also noteworthy that we had initial bio-LNG sales actually in the last quarter. And we stored the quota. So we're definitely waiting to sell the potato prices are at a very attractive level for us again. However, we center progressing very well, and Klaus will also give an overview of our gas network towards the end of the call because we actually already have 5 gas stations online now for own gas stations. Moving to the market here, you can see that the spreads on the left side hand of the chart, the green line actually is -- are the current spreads that we're seeing that they have recovered strongly over the quarter, also driving the results, and they remain largely stable, came down a bit due to also the biodiesel imports as Claus was just explaining a little bit earlier that this also has an effect on directional demand. So this is basically what you're seeing in the chart. On the right side, it's the comparison between bioethanol prices and weak prices, both per tonne of bioethanol, which is basically just gives you the calculation for the spreads on the left-hand side...Moving on to our acquisition.
About China, we were talking now about the U.S. market and our new acquisition, South and ethanol. South Bend Ethanol is in Indiana. And what we prepared here is to show you the competitive advantage of our technology compared with U.S. technology. Let me explain in the United States, corn as a feedstock goes in and ethanol end feed, which is called DDGS feed -- animal feed for chicken, for cattle, for pigs goes out. These are the 2 main products. The big difference to our technologies corn goes in, ethanol goes out, but we are not producing animal feed, we make renewable natural gas. So this is the big difference between traditional U.S. technology and all the 220 ethanol plants in the Midwest are doing it, how I mentioned. And now VERBIO is coming with the combination ethanol and RNG. RNG can be sold in the U.S. as a biofuel. So then we have ethanol as traditional corn ethanol plant, which is a V6 RIN and our renewable natural gas, which is a D5 RIN. So when we compare these 2 technologies, then we have a competitive advantage on looking forward for the next months, approximately EUR 0.50 per gallon.So on the example for South Bend, which is 85 million gallon ethanol plant, -- our competitive advantage with about $0.50 per gallon is USD 42 million per year. This is the competitive advantage. So guessing, you are not making money on ethanol. Our competitive advantage gives us USD 42 million, only through with the combination of ethanol and renewable natural gas compared with ethanol DDGs. That's the first time that we show this slide. And this slide is pre-IRA has nothing to do with the IRA. So about the deal rationale, what are we going to do? We are going to convert the traditional bioethanol plant into a VERBIO bio-refinery with 85 million gallons and 850 gigawatt hour per annum of renewable natural gas with a strong competitive advantage. The estimated CapEx is EUR 230 million. The project will be financed from freely available cash credit lines and cash flow. And as I said, these competitive advantages pre-IRA. So when we are looking on the IRA, then for this location, the IRA provides an investment tax credit between 30% and 50%. At this location there in Indiana, we will get a tax credit of 30%. So 30% of the investment will be given by the state as an investment tax credit, which is finally the equity. But apart from the ITC, the investment tax credit, we are also creating production tax credits. Production tax credits means if the CI, the carbon intensity of our biofuels of ethanol and renewable natural gas under the threshold of 50 kilogram CO2 per MMBTU, we are getting $0.2 per gallon for each kilogram which we are under this threshold. For example, if our CI carbon intensity for the ethanol and also for the renewable natural gas is 40. So we have 10 points below 50. We are getting $0.02 per gallon production tax credits for 5 years, which is another 20 USD 5 million compared with a traditional producer. Why 25 with 85 million gallons because it's given for the ethanol. So with 85 million gallons, EUR 0.02 at 40 CI, we are talking about 70 million. And then we are producing renewable natural gas, where it's the same logic, there we are also getting $0.02. If all the product stays in the U.S., if we are going to export because there are more attractive markets outside for sure, we are not creating the production tax credit. But at least, this is the baseline. The baseline with our technology, once it is finished, post IRA, we are talking about a competitive advantage of 70% to 75% per gallon. So I think that is a strong argument and shows these -- yes, advantages of our technology compared to traditional technologies.We were dealing now more than 1 year on this acquisition with South Bend. We -- the closing was May 2. So we are already operating the plant. Our engineering team was already there. So even if it's a traditional ethanol plant at the moment, we identified already low-hanging fruits to improve the efficiency. And the next step is that we are going once Nevada is commissioned, what will be in late summer this year. We will start immediately with South Bend and according to the fact that our business model is so attractive, even for the U.S. market. And the fantastic environment of the IRA, we are looking further what other targets are there in the market. Okay. Next slide. So at least with this new investment in South Bend, the capacity increase in liquid biofuels and also in renewable natural gas will continue. So I see there is a mistake. So our estimation at the moment was 2023, 2024, 710,000 tonnes of biodiesel from which is 100,000 advanced biofuel, 800,000 tonnes of ethanol and approximately 2 terawatt hours of gas -- and with the acquisition of South Bend, and there, there is a mistake, 2026, 2027. Also, ethanol will increase. We will be then approximately at 1.1 million tonnes and gas is going to approximately 3 terawatt hours, okay?
The $800 million already includes 250,000 to...
Okay, you are right...
Because we already...
We are already producing ethanol, I don't know... Okay, okay. Sorry, sorry. The numbers are right. Okay, 800,000 tonnes of ethanol, approximately 3 terawatt hours. And with the acquisition of South Bend, our ethanol gas unit in the United States is then already much bigger than our capacities in Germany. All the gas there, this 3 terawatt hours are advanced biofuel in the United States, but they are also qualified as advanced biofuel Annex 9A for the European market.So as a conclusion, we had to adjust our guidance from EUR 300 million EBITDA to EUR 240 million EBITDA. But I described the reason. It's a market distortion. So our net cash is still in positive territory. And looking on these market distortion and the effect -- what you want to do against fraud. So when I look on the actual market situation and I see here what's going on with our competitors. And I must say these results, what we are presenting are extraordinary because a lot of competitors are already shutting down. So compared with last year, it's less EBITDA, for sure, but last year was extraordinary. And under the actual circumstances, it's really, really a great job with everybody in VERBIO made. Just some add-on here. So about the expansion in Germany, we are slightly ahead of our plan. In the United States, the 160 gigawatt hours straw-based RNG plant is operational with about 50% utilization. Capacity will come additional onstream. The -- the Nevada Biorefinery rollout is running. Mechanical completion of the biorefinery is expected by summer -- late summer. So we are going to start up the plant. And why only 50% capacity utilization on the straw-based gas that has something to do with the quality of the feedstock, but it's mainly that with the completion of the biorefinery and the fact that the straw-based RNG production has to be implemented in the biorefinery. We are here also limited in production. So last summer, the whole biorefinery, everything will be implemented, then we can start it up and then we are talking about 800 gigawatt hours of yearly gas production and everything is advanced. About our downstream business, our own network of bio LNG and bio CNG filling stations, so 20 gas stations are planned, locations secured, rollout is running and 5 gas stations are already online. We are producing already bio-LNG since January. And yes, we are now going to increase these amounts, but it's already working. And we have also third parties, filling stations, other companies who were investing in LNG filling stations are now supplied with our bio-LNG.Ethenolysis, which is the gate to the chemical industry. So the plant location is secured. It was more difficult than we expected to get the right location, but the plant location is secured. Approval processes for the ethanol uses plant are pending. And from the government, we will get investment subsidy, not as attractive as in the United States, but it's about 25% of the investment.So thank you very much, ladies and gentlemen. Thank you, Alina, for presenting the numbers. And now the stage is open for a Q&A session.
Thank you very much, first of all, to you, Mr. Sauter and Ms. Köhler for your presentation. [Operator Instructions]. We will start with the questions from Jonah Emerson. Jon, please go ahead.
Perfect. Can you hear me?
Loud and clear.
Great. Yes, let me start off with my first 2 questions. So how much quota credits have you currently start? And do you expect to carry into the next fiscal year? And question number two, how big are your renewable natural gas reserves right now? How much have you sold versus store this product? And how does this look like in Q4?
So we're not communicating on how much quota we have on our balance sheet for competitive reasons for the gas that we started on the balance sheet is around 750 gigawatt hours. Because as we also already said during the call, we already started supplying bio-LNG. And hence, the increase in gas reserves is already slowing down a bit.
And can I ask a follow-up question to this?
Sure.
Maybe just what I want to add. We sold a significant amount of our quota and February. So before this big downturn came and quota prices went from 460 down to 200. Now it recovered again at 270, 300. But right now, we are not selling at these levels. So more -- we have the freedom now to take it and to store it. We sold a significant amount, as I mentioned, but we are not forced to sell our quota at the price levels at the moment. This is also a big advantage. For biodiesel, the quota goes with the molecule and when biodiesel prices are so low, we are not able to keep the quotas. But for the gas business, we are now increasing our sales for the molecules directly into transport. We are realizing the CO2 savings and we keep it. Okay. Continue, Jonah...
Yes, just then consigning cap and renewable natural gas reserves. So the level is currently at 750. You initial go back in the day was around 1,000. Yes, how is it going to look like in Q4, right? How much -- I mean, you're probably already -- if you accumulate all everything probably already reached 1,000. Can you maybe just give a bit further insight into Q2, how much are you actually planning to sell on your renewable natural gas?
It depends on the ramp-up of our gas stations. So it's not -- we cannot comment on it yet. So depending on how much we can actually already sell through our gas stations, we will store like not a significant amount that we will already be able to deliver to the transport sector directly.
Perfect. I appreciate...
We expect that it will stay at that level. So there will be no further increase.
Okay.
So something about this, but it is like Alina said, it's dependent on the ramp-up of the filling stations. But the fact that we are already able to deliver bio-LNG, that was faster than what we expected. So our assumption is it will stay on that level with 750 gigawatt around. Okay?
Thanks for your questions, Jonah. [Operator Instructions]. We can see that you not have unmuted yourself yet... [indiscernible]
Yes. Good morning, Mr. Sauter, Ms. Alina, it's Nicholas Becker from Deutsche Bank. I also do have a couple of questions, and I would like to take them one by one. First question would be on the European biodiesel market. What's your personal view on the situation? Do you expect it to be resolved? Or what is the likely outcome in your view, given your experience? And furthermore, also, do you think this will be a structural problem going forward with oversupply and customers' ability to source the biofuel from cheaper alternatives. Also, can you highlight the unannounced audits by the ISEC again and put the 5 withdrawn certificates into context? How many do you exist in total?
Sorry, you said one question, one by one, and now looming. It's a lot now. Okay -- about the competition from cheap sourced biodiesel. This is not advanced biodiesel, which is coming here. And the fact that everything is just coming from China, you can smell it, you can just smell it. And the fact that now the first oil companies started to say, sorry, no, we don't take it anymore. I think it is already a scandal that it was possible to bring these huge amounts to Europe, to Germany, because all these products suddenly is coming now from China. So you can smell it. So at least, we expected something like this. During the process when this law, what we are executing right now was done. We mentioned it in public hearings that the whole system is fragile. And it was a question of time when something like this is happening. And finally, fraudulent imports are coming already 5 years. But the amounts were low 50,000 per month, 30,000, and then it was going everywhere in Europe. Now with 250,000, that has a dimension which is really dramatic. And to your question, what do we expect? We expect that it will go away shorter. It will go away short term because there is legal action has started from Berlin, from Brussels, but it will take time.The more efficient point is now that all this proud is already public, is becoming more public and at least it is the oil industry, which is circumventing with fraudelent product, which is not advanced. If you continue this idea of making fraud why to take biodiesel at all. So just do it with diesel. So the point is now that the product will just be blocked from the oil industry. Everybody knows that there is a huge question mark. Huge amounts coming, everything only from China. Suddenly, everything is labeled as advanced. So it's just not possible. So from our side, we expect that it will go away fast -- we are also fighting therefore, that biodiesel from these sources as to equipment. -- will be canceled retroactive to be canceled because it's just too obvious. And then let's see what is happening, but the market distortion, we expect that it will disappear short term. But as I said, we also want that amounts which were already blended that they are canceled because the oil industry, for example, in Germany, is sitting on about 2 million, 3 million tonnes of CO2 savings if they were extremely using now these kind of biofuel, they were able even to ramp it up. It cannot be that something like this is happening. So okay, these are the main points. Can you repeat something, what I didn't answer yet, please?
Yes, that was really clear. Maybe just one follow-up on the Wistron certificates. Can you put the fight withdrawn certificates you mentioned into context? Do you know how many in total exists in China?
Sorry, you have to see our slate for… [indiscernible]
[Foreign Language]
Okay. Well, at least, there are 43 producers, 2.4 million tonnes of capacity. And until 2022, everything was labeled or most of it was labeled as used cooking oil metier. So first point, technically, to use advanced feedstock in this technology doesn't work, number one. To your question, -- that these are just estimations. But at the moment, the German market is the most attractive market for this product. So when we look on January 250,000 tonnes and most of it should have come to Germany, then 250,000 tonnes is creating about 500,000 tons of CO2 savings because 1 ton of biodiesel makes 2 tons of CO2 savings. So 250,000 tons, 500,000 tonnes of CO2 savings and this 500,000 tonnes, if it is really advanced, is creating 1 million tonne of CO2 savings.So for 2023, the overall target of CO2 savings is 16 million tonnes. So you see only from China, this amount of CO2 savings is huge only January. So at least if we will continue with these Chinese imports without doing something 60%, 70% of the German quota can be fulfilled with this product dramatic. So under lease situation, if you see our results under these spots, but then we made really a great job.
Okay. That's very clear. And then maybe my second question, since we're already in [indiscernible]. Looking ahead into next year with key events and profit contributors coming online, such as on the one hand, the downstream expansion and then also the North American capacity is coming online. But on the other hand, we still have the headwinds on the pricing side. Currently, consensus expects EBITDA to be in the ballpark of around EUR 320 million for the next financial year. What is your take on this number? Do you think it's ambitious or is it achievable given the current environment? And maybe you can just put the number a little bit in context
Okay. One question back. What do you mean with pricing headwinds?
So given the current pricing dynamics and the headwinds on the spread side.
Well, okay, the pressure on the margin is coming from the fraud and the fraud is not only affecting Europe, Germany, also Chinese used cooking oil imports are hurting the U.S. market. But the U.S. authorities are much faster and more consequent like the Europeans, but it is also affecting the U.S. market. So in a normal situation, there is no pricing headwind because, as I said, for vegetable oil for the whole segment of vegetable oil and mainly rapeseed oil and soybean in the U.S. -- we are bullish, but the prices are coming down because there is no demand for the biodiesel or it is hard to make a margin for our competitors. And then this is the reason. Our plants are still running on full capacity. But if you want to sell rate from the last harvest today to an oil mill in Europe, they are full. They don't take it because oil demand, vegetable oil, especially rapeseed oil demand is weak. So that's the reason why the prices were coming down. At least when the fraud is the way, we expect that vegetable oil will go up again because at that price level, farmers are not able to make money. So we don't see these headwinds. To come back to your specific question. For the new business year, EUR 320 million EBITDA. That is a little bit too early. We are at the moment in the face of planning the new business year. And this year, usually, we give just a guidance for the next 12 months. This we will continue, but we want to give also an implication for the next 2 or 3 years because now we have a clear view. We have a clear strategy. IRA in the U.S. is clear. So we can look a little bit further into the future, okay? But it's for EUR 320 million, it's a little bit too early. We have to make our plans. We will come up with it in September.
Okay. And then maybe just one last one on the South Bend acquisition. Could you maybe just give a little bit of insight about the EBITDA contribution and how we can think about the phasing going forward...
The U.S. market for ethanol is very volatile, but usually in a plant like South Bend, at the moment, you are able to make a margin between $0.10 and $0.20 per gallon traditional ethanol production. So under normal -- under full production, we would say it's about EUR 10 million to EUR 20 million EBITDA, if we would just run the plant. But we want to start as fast as possible with our investment, and this investment will impact the operation of the plant. So maybe to make a long story short, the contribution of South Bend as long as our technology is implemented with -- this is fanatic. It will be not very much maybe even negative.
Thank you for your questions. We also received some questions via chat. We will start with the first one. Is there a risk that you have to slow or stop biodiesel production for some time in Germany due to low or negative spreads? When do you expect the fourth Chinese imports to end?
I think, I answered this question. We expect that Chinese will stop short term because it's too obvious. And no, there is -- we have still a margin on biodiesel. I think we showed it on the slides. We don't see any risk at the moment that we have to reduce our biodiesel production in Germany due to negative margins. We have a positive margin, not on the biodiesel production, but when we take our co-products, then we are making a positive margin. And I think you were able to see our EBITDA margin last year was 25.8%. Now it is EUR 7.9 million, so this is disappointing for us, but at least it is still a positive margin.
All right. Next question. And we received some more questions regarding the South plant. If you could give some more color on the main risks where your breakeven for your R&D is. And if you have capable people there and how about the procurement contracts.
Okay. I showed in this slide here our competitive advantage, which means if ethanol is making no margin, we will make EUR 0.50 per gallon. That shows the competitive advantage. The plant is fully operational. So there is a team, and we we overtook the whole team. As I said, our engineers were there. May 2, we show them our concept. And yes, the feedback was very, very positive. Finally, I'm happy about the team there. These are experienced people with the former owner, there possibilities to improve the plant and to give their input was limited because the former owner, Mercuria is mainly a trader. They don't have these engineers. So yes, it's quite positive. We have a team and everything is very promising. So feedstock. Feedstock is both short term. So we don't have there -- it's the same in the U.S., like in Europe, there are no long-term contracts. We are continuing, like we are doing the normal business. The corn will be bought at the market, 1 to maximum 3 months ahead, we must see how is the market condition. The question about RNG, what is your breakeven? Look, corn goes in, ethanol and RNG goes out. So it is like you have a refinery and crude oil goes in and there is produced diesel and gasoline and chat fuel. So when you are breakeven with your diesel, if we look to the market situation, the last 12 months, when Diesel was much more expensive than gasoline than you can see. You can even lose money on gasoline because you make a super margin on the diesel. And this is also our business model. I cannot give you a number where RNG is profitable. The 2 main products, which are going out must give us a margin base on a bushel of corn. So that is the point. Feedstock goes in 2 main products go out, and they are priced at the market differently. Natural gas has in the United States, also a big volatility. That -- but at least renewable natural gas in the United States is much cheaper than in Europe, which makes it more competitive, which makes it also more interesting for so-called voluntary markets. So in the U.S., we see more and more demand coming from Maritime. So big cruises with LNG engines, they ask for renewable natural gas, bio-LNG. So there's a lot of development, a lot of movement. And it's important the slide what we showed here that our competitive advantage with the traditional ethanol plant is about $0.50 per gallon...
All right. Thank you very much for elaborating on that. And would you be so kind to remind us on the U.S. market potential to sell biomethane as fuel?
As I said, so renewable natural gas goes to transport. Market demand is high. It was usually very high in California. California, nearly all the natural gas, which is used for bi-- for fuel is already renewable natural gas. In other states, Texas Illinois, everywhere there in the Midwest, there is demand for filling stations. And compared with diesel, RNG is the most attractive fuel. So there is enough demand. And as I said now, voluntary demand is coming up, [indiscernible], when I talk about transport, but also chemical industry, methanol production, steel industry, everybody is asking for renewable natural gas. So the demand is very, very high and it is increasing very fast. We have more questions for RNG than here in Europe and big amounts, really big amounts. So it's quite positive. First thing. Second thing is with the possibility to liquefy the renewable natural gas. It's also interesting to supply under the U.S. RNG for the German or the European market. And after, let's say, some break in natural gas heavy-duty transport. The market is coming back because with diesel compared with diesel is very attractive. The break came from the extremely high natural gas prices last year. So some of the whole years were shocked. But now with the possibility to supply their bio-LNG, we can guarantee them a stable price, and we can guarantee them a discount compared to facilities. So this bio LNG is a game changer for price stability for the hauliers and secondly, to decarbonize transport. Next question, please.
Yes. The next questions are about the request to comment on the recent Indian activities, the current status, time planning, the business volume and also regarding the utilization and profitability of the plant.
Okay. India is not making money at the moment. So at least the EBITDA is about minus EUR 2 million per year. So it's still very small. But we are working at the moment with the Ministry of Oil & Gas, what is necessary to improve the business case. India was very busy last year with the high oil and gas prices because the Indian government, the oil ministry is subsidizing oil and gas, which was finally hurting our business. So we were able to address our expectations directly to the Minister of Oil & Gas, Hardeep Puri. We had several meetings. And now we are working on legal changes, which are necessary that we are able to increase our capacity in India. But at the moment, India is a start up is -- has huge potential, but at the level where we are at the moment, we are doing typical first mover work. First of all, the legal framework must be fixed. And then in the second point, we can think about to increase our capacities. But from our time frame, the plan is clearly to get India profitable, positive EBITDA contribution next year, next business year.
All right. Thank you very much. You also mentioned that you are ready for further acquisitions in the U.S., how much more plans or how much more firepower do you have here?
I don't understand this question. What means firepower... As always...
How much more plants you are planning to...
Further growth is coupled with financing models. So right now, our equity ratio is still at 75%. We have to see how it will work. So I think there is space for another 2 acquisitions in -- at the range of South Bend. Something like this should be possible. And it is from a financing point of view and because of this, I mentioned it with 30% investment tax credit that is the equity. So with the IRA, also possibilities to do a new kind of financing models due to U.S. projects because normally, the banks are also financing the ITC. So we have to look now, South Bend was paid with equity. It was not necessary to raise their money. But now we are looking what kind of possibilities under the light of the IRA are possible to do more. Right now, I would say until the end of 2024, it should be possible to do 2 more projects.
Thank you very much. We received a follow-up question from Jonah...
Yes. So thanks for taking my question again. So basically, concerning the statement you just made, right, so 2 acquisitions until the end of 2024. Does it mean we can potentially maybe even expect another acquisition still during the remainder of this year? Or would you expect both of them to come during next year? How far along are you even when discuss that side?
I guess you mean the calendar year and not the business -- in the business, you for not it is 1 month...
I want to comment...
No, no. Jonah, this is too early at the moment. As I said, at the moment, we are not working specifically on something and South Bend took 1 year. So we have to if -- so not before the end of 2024. Maybe there is something faster. I don't think it will be faster because ethanol in the U.S. was under some pressure, margin pressure, the margins recovered now. So nearly everybody is making money at the moment. So acquisitions will be more expensive and also more difficult. So we are still looking on the market. We try to identify something what you can take in your model at the moment.
Okay. Perfect. Thank you. That was already my question. I appreciate it. And thank you for your time.
Yes. Maybe just something on top, Jonah… Clearly, we continue our strategy to increase production capacities. A few years, we say already that the preferred market is the U.S. market. And these messages were before IRA. So IRA is like a toolbar, double turbo for our business. Anyway, we have to look on our firepower, what we can really do it. Firepower, in my meaning means not only the availability of capital, we also need the availability of staff. That is very good in South Bend that we were able to acquire already experienced team. For example, in Nevada, we have really to build up everything from the scratch. So -- but what I want to mention here at the end of that call is we are still continuing our strategy. We want to increase our capacities. We want to increase our trading activities, trading these volumes and continue to move with our main molecules, methyl ester, ethanol and methane into chemical applications. Nothing has changed.
Thank you, Jana. Mr. Salta, could you please give us some color on the plans for the trading desk and Stanford.
Volumes, trading volumes are not significant yet. We have established the team at the moment. And for our kind of trading business, we have to do some homework, build up logistics. We have in our business, and that shows here the Chinese fraud, all the logistics system and the whole business has to be certified. So right now, we are in this process. As I said, the traded amounts are not significant. There is some positive single-digit million contribution to the business but not significant. And I guess that we will be able to ramp up trading volumes and also to be able to move the molecules at the end of 2023. So our plan right now is to import bio LNG by the end of 2023, significant amounts to Europe or from the U.S. point is to export it from the United States.
All right. Thank you. And with regards to the time we are coming now to the last question, can you give an indication on how much revenue is currently first and how much revenue is second-generation product?
It's a very good question.
That's why we're changing our segmentation -- so next year, we will give you an answer for that the next financial year.
Yes. But that is an interesting question because the definition of advanced biofuel in Europe is different like in the U.S. So I know where the question goes, it is about advanced biofuel for the German market for the European business. But let me give a note here on this question. When we are talking about VERMIO as a company, our strategy and where we want to go, we should not be so much fixed on the German and the European legislation. Our business is a global business, and the feedstock is biomass. And the best pricing, and that's the reason why all the Chinese are bringing their proud product to the European or the German market. At the moment, it is advanced biofuel in Germany. That's the most profitable product, but it will also disappear. And we have -- when we are talking about our strategy, we need a more broader view because a lot of the definitions and especially about scientific fuels, European definition shows that there will be no investment because it is too complicated. There will be an obligation in Germany and in Europe for renewable fuels nonbiologic origin, but there will be no production capacity. And that is important. So a lot of our -- for example, IO diesel, what we are producing in the U.S. is all advanced biofuel for the U.S. market. Biodiesel as itself is advanced biofuel according to U.S. legislation. In Germany, if you make it from rapeseed oil, it is first generation. So more specifically. But to come back to your question to that, what Alina said, yes, we will change our reporting and it will show them what is first generation? what is advanced biofuel according to European regulation? At the moment, we don't have the figures clearly because we are in the process to change our accounting and to prepare everything that we have really clear figures. At the moment, I would say it's about 30% of our production. It's all of our guess, it's some kind of the biodiesel, but it is about 25%, 30%.
All right. Thank you very much. This is also where we are coming now to the end of this earnings call. Again, thank you very much, Mr. Sauter and Ms. Köhle for taking the time and all those interesting details. Thank you also to all participants and the questions. I hand over to you, Mr. Sauter for some final remarks before closing.
Okay. Thank you very much for the audience. There is nothing more to add. We were talking about everything. Maybe you have something, Alina?
No. Thank you very much.
Thank you very much. Okay. So we are looking forward for our next call, and we are sure we will be able to have more positive messages and that especially China will be over. And what is even more important for us that it will now have also real consequences that, for example, blended -- already blended amounts from January and February will be canceled. That is, at the moment, especially my work to talk with the ministries that first of all, -- it was expected. We told them that they have to do something. And now we have it, and now it must have consequences because at least also big oil new that it's just not possible that all this kind of product is now coming from China. Thank you very much, ladies and gentlemen. I wish you a nice day. And as I said, we are looking forward for our next call. Have a nice day. Goodbye.