Verbio Vereinigte Bioenergie AG

XETRA:VBK

Earnings Call Analysis

Earnings Call Transcript 2024-Q3

[Operator]

Good afternoon, ladies and gentlemen, and welcome to today's earnings call of VERBIO SE following the publication of the 9 months and Q3 figures of 2023, 2024. We are delighted to welcome the CEO, Claus Sauter and the CFO, Olaf Troeber, who will speak shortly and guide us through the presentation and the results. Afterwards, we will move over to our Q&A session in which you will be allowed to ask your questions directly to them. And having said this, Mr. Sauter, I hand over to you.

[Claus Sauter, executive]

Thank you very much, Mrs. Malok. Good afternoon or in my case, good morning, and thank you very much for joining today's earnings call. With me on this call today is Olaf Troeber, our CFO. At the moment, I am in the United States in our headquarter in Stamford, Connecticut. We are making good progress here in South Bend, in Nevada, the ethanol plants as well as in Valent and also in Europe. Our strategy remains steadfast, even in the dynamic renewable market. We are now 10, almost 11 months in our financial year. And as we had anticipated with our guidance cut in January for the actual financial year. The market in renewables was more challenging in the third quarter. But let me first give you a quick run through of our key figures for the first 9 months. So as you can see, in good VERBIO fashion, we continue to deliver strong production volumes, increasing our production across all key products. The biodiesel volume increased year-on-year was mainly driven by the acquisition of South Bend ethanol in the U.S., the plant which we bought in May 2023, and what we ramped up the last month. So at South Bend, ethanol, we have managed to increase our production about the nominal capacity, which represents a 30% increase from just a few months ago. So we did technical changes, but mainly operational changes. So despite the increase in volumes, group EBITDA for the 9 months, 2023, 2024, reached EUR 82 million, down year-on-year from EUR 214 million. The main reason remain largely unchanged from what we have seen for the first 6 months. So let me quickly reiterate. In the financial year 2022, 2023, we still benefited from the exceptional contribution of the biodiesel segment. We made more than EUR 90 million in the first quarter alone with our biodiesel. Meanwhile, we are getting up for further growth, which led to additional fixed costs year-on-year. Considering that our European operations still have to cover all growth investments and that we are facing short-term headwinds in the European biofuel market, the results are largely within our own expectations. Net debt stands at EUR 55 million, especially our investments in growth projects of close to EUR 130 million weighed against our positive operating cash flow. Still, our equity ratio is at a level of 68.4% came down slightly. And now I would like to hand over to Olaf Troeber, our CFO.

[Olaf Troeber, executive]

Thank you, Claus, and a warm welcome also from my end. I'm here today a bit of help where we hold our crown frigging ceremony for the Ethanol Schwedt plant. But first, let me turn to our Q3 results before we dive deeper into our strategic update. The chart shows the EBITDA bridge from Q3 '22, '23 to Q3 '23-'24 left to right and gives you an overview of how both segments have developed. Once again, the biodiesel segment safeguards our earnings as ethanol segment covers all the costs related to the U.S. expansion. The decline in the biodiesel segment year-over-year is mostly due to unrealized changes in the fair value of open commodity derivatives. Excluding this effect, the biodiesel segment result would have stood at EUR 21.1 million, close to the level in the previous year. Overall, we posted an EBITDA of EUR 7.3 million in Q3, '23, '24, down from EUR 43.2 million in Q2 last year and from EUR 26.1 million sequentially, but let us dive a bit deeper and look at the key drivers. While our sales volumes were roughly stable year-over-year, sales came down by 29% year-over-year. The main reason for the sales development in biodiesel segment, where the lower biodiesel and greenhouse gas quota sales prices in Europe compared to the same quarter of the previous year. Additionally, changes in the presentation of the sales revenues in Canada led to a significant reduction in revenues. What does it mean? Since December 23, the contracts for the production volumes in Canada are treated as storing contracts. The change in reporting has no impact on our EBITDA. However, the unrealized changes in fair value of open commodity 2. As you know, we only opportunistically choose to hedge and considering that Q4 forward spread stood at attractive levels, and we are operating in volatile markets, we decided to take a position. Including the effect our Q3 reported EBITDA came in at EUR 11.44 million. This chart, you can see how the market spreads in this case, biodiesel price per ton minus rapeseed oil price per ton have developed over the past 2 years and specifically during our Q3. This year's market spreads shown as the dark green line, were below previous year spreads but remained roughly stable throughout the quarter. Considering that we buy our rapeseed oil approximately 2 to 3 months in advance we couldn't lock into spreads in financial year '22, '23. Over the first quarter of the year 2024, which is our third quarter, biodiesel prices and rapeseed oil prices increased slightly. While demand was stable, biodiesel prices increased on the back of higher raw material prices and pricing fossil markets. Now moving to the ethanol and biomethane or RNG segment. Production and sales volumes increased mainly thanks to the acquisition of South Bend Ethanol in May last year, where we greatly advanced in terms of efficiency, as Claus mentioned before. With this, revenues were up despite lower sales prices in Europe. Grain prices came also down but the lower greenhouse gas premiums in the contracts that started in January 2024, had a negative effect on overall margins. On top came of course, U.S. expansion costs. And last year, we earned about EUR 10 million more by additional quota sales compared to Q3 this year. Overall, we returned a negative EUR 5 million EBITDA, which includes a positive effect from unrealized commodity futures. As you might be able to identify from the chart, the average quarterly market spreads were roughly stable quarter-over-quarter and year-over-year. During the quarter, spreads increased. And here in the chart on the right, you can see why. Ethanol prices recovered while prices continued a downward trend. Reduced imports in particular from Brazil led to a reduction in ethanol stocks in water dam from 2023 due to increased blending mandates and the introduction of E10 in Poland and elsewhere. There was healthy demand for spot quantities. The ongoing backwardation is making ethanol imports more difficult and should contribute to a positive price trend. In Germany, however, the low greenhouse gas quota prices continue to slow the E10 growth. The incentive will expand the market share of fuels with a higher proportion of biofuels remains limited in the short term. Yet the ongoing antidumping investigations at the European level as well as the media attention, in particular, with regard to cases of fraud involving upstream emission reductors allow us to stay optimistic that missing control mechanism will be installed and that we will return to fair market conditions in the future. Claus will now give you an update on that and share the latest news.

[Claus Sauter, executive]

Thank you, Olaf. Yes, to come back to Main to fair market condition in short future, in short term. So now you can see on that slide the development of the quota prices. So quota prices remain under pressure. But again, we see a new story of Chinese proud. So the new story is UER. First of all, what we can see on the chart is that from January 23, the quota prices came down from EUR 400 per metric ton of 100, 120. And I think what we can see here on the chart is that we found the ground makes sense because on this level with EUR 100 million, EUR 120, EUR 150 per metric ton of CO2 savings, even the proud of from China, labeling as advanced biofuel doesn't make sense. But what is now about UER. So UER is upstream emission reduction. There were a few reports recently on television, in newspapers. And upstream emission reduction is another option to meet German regulation on greenhouse gas reduction. It was implemented in 2020. And it is limited to up 1.2% maximum. So for example, if there is a greenhouse gas reduction quota of 10% from this 10%, 1.2% can be fulfilled by upstream emission reduction, which means 8.8% have to be done by biofuels or renewable electricity. So it is significant. We are talking about 1.5 million tonnes of CO2 savings per year coming from UER. And UER, for example, is greenhouse gas reduction measurement at oil rigs, at gas rigs. So everywhere in the world where emissions coming from fossil crude and fossil gas upstream, all the measurements, which take place to reduce this emission accounting for greenhouse gas reduction in Germany and several other European countries, not all of them. So what came out is that with this UER project, we're already 95% are located in China that there is similar frauds like with imports of fate biodiesel. So it turns out that at least 10 projects are not existing or not eligible. So some of these projects are simply not existing. They are not there, even though they have been certified. And the place of certification is the Deutsche Bundes-Immissionsschutzgesetz, which is part of Deutsche Bundesstiftung Umwelt. And because fraud could easily be demonstrated. The German government quickly presented an amendment to the 36 Bundes-Immissionsschutzgesetz. So the draft and the accounting of upstream emission reduction certificates towards the greenhouse gas quota in 2024. But this is 2 years earlier than originally planned. And at least what makes me happy is that this is the first time that the German government related to Chinese proud is really reacting fast. So the announcement resulted in a small jump in greenhouse gas quota prices from the lows. But let me go through this specific implication on the following slide. So I mentioned that UER were firstly implemented in 2020. So in 2020, the greenhouse gas reduction quota was 6%. And from the 6%, 1.2% where UER. So at least coming from 2019, where the greenhouse gas quota was 4% to 2020 with 6%, but with UER, the increase at least was just 1% from 2019 to 2020. So if we compare now and look on the chart, so the chart shows the yearly growth in market size of greenhouse gas savings in biofuel and e-mobility. So without the UER, only biofuels and e-mobility. So that we can see in 2020, it even came down, the use of biofuels minus 0.2%, and then it went up again in 2022 by 1.9% and in 2023 by 2%. So that is the logic behind that chart. And since the introduction of the greenhouse gas quota in 2015. The sad increase of 1.25% plus the elimination of the UER as a compliance option leads to the highest ever increase of about 5 million tonnes of CO2 savings year-on-year. So without upstream emission reduction disappearing at the end of 2024, the demand for liquid biofuels and e-mobility. The greenhouse gas reduction, which has to come from that part will increase to approximately about or even more than 5 million tonnes. This is huge. So this adds up to a total market size of renewable fuels of more than 21 million tonnes of CO2 equivalent. So altogether, this means that the cushion of the CO2 savings that oil majors have on their balance sheets should deteriorate, eventually leading to a buying spree and supporting prices again. On top comes the decline in Chinese import. This provides additional upside for all other renewable fuels and e-mobility market players and is fueled by the EU antidumping investigation. So taking into consideration less imports from China from advanced biofuels, investigation from the EU capped with no more UER and the further increase in obligation in 2025 should create a significant higher demand for biofuels and greenhouse gas reduction in 2025. What about the investigation? So for now, there is no retroactive cancellation of a quota plant, but the industry, of course, and our associations are still fighting for. So as we have received particular interest from shareholders who want to support the fight against green product fraud. We or Alina have added a few sources in the appendix. So you can refer to those links after the call if you are interested. So I think VERBIO was one of the first companies who pointed out very strong on that route already 1, 1.5 years ago. Now it is everywhere. It appeared everywhere in Europe, the European Commission politicians recognized that high greenhouse gas targets and an open market without control will not work. So now let's switch over to the, I guess, it is the last slide about our guidance. So guidance remained unchanged, specified to the lower end. So turning out to our guidance. Our guidance, which was updated in January for the current financial year remains unchanged. As of now, we expect or we do expect to come in at the lower end of the EBITDA guidance based on the current market environment. This still translates into a very strong increase in EBITDA in Q4 year-over-year and quarter-over-quarter. So aside from better spread in biodiesel, which we can only partially capture due to some hedged volumes. This is specifically driven by the better performance of South Bend Ethanol. On top come biodiesel production volumes with higher CO2 efficiency as we have successfully commissioned our advanced biodiesel capacity in suite. With this, we are doubling our total second-generation biodiesel production capacities to 100,000 tonnes. So at least these are the results of our investment program in Europe, what we started about 2 years ago. So having said that, let me turn to our strategic update. So at Nevada, the production of renewable natural gas was already successfully commissioned in March and is currently running at about the capacity of 30%. The next step is to start up the ethanol production. Right now, we are working on it, and the plan is to have the first significant volumes of ethanol by the end of May. So as you can probably tell, this means that we were able to repair the sulfur separate container. There's a lot of small stuff had to be eliminated the last month, but our team made there a very good job. So full capacity utilization of the biorefinery in Nevada is expected in 6 to 9 months from now. Furthermore, the biomethane plant is eligible for an investment tax credit regarding the IRA in the inflation reduction of 30% of the investment cost, but it is only the part of the RNG plant, not the ethanol part. So right now, VERBIO North America is currently in final negotiations to sell the ITC in the amount of about USD 40 million, and we want to complete the process before the end of the current financial year. Honestly, I'm surprised how easy it works to create the ITC and to find a customer who is interested in buying an ITC. We have to give a discount here higher single percentage. So not a big deal and compared with the actual inflation rate, it is really moderate. But that is a very interesting experience for me how the United States are financing their investments in renewables. Knowing that now, I think Germany could learn a lot from this system. So the rules are simple, and the market works transferring tax credit to other companies. So to come back to Nevada, specifically, so the near-term start of the full commercial production at the refinery in Nevada as well as the advancement at South Bend Ethanol means that we are ready for the next step. And the next step is we will begin the expansion into a combined bioethanol and biomethane production in South Bend. So the official groundbreaking with some politicians is scheduled for May 23. So May is an interesting and successful month in the business year 2024. So let me now hand back to Olaf, who will give you an update on our European activities, Olaf, please take over.

[Olaf Troeber, executive]

Well, thanks. Speaking of groundbreaking ceremonies. As I said at the beginning of the call, the crown freaking ceremonies for the Ichnusa Plant is actually happening today, I think in half an hour or so. So let me sum up at the project specifics for you again. We are doubling down on the chemical sector to gain a foothold in the world, third largest industry. The challenges for green chemistry are enormous. Green chemistry is not just a question of environmental protection. It's also an economic necessity after all, markets are changing and consumers, the public and legacy laters are increasingly demanding and environmentally friendly products. Now since 2019, we have been operating a pilot plant in Hungary in which we produce centers, with very small volumes. We are constantly optimizing this innovative process there. Now, we are taking the next steps. We are investing in the world's first Ichnusa Plant on an industrial scale. What does it mean in figures? VERBIO is investing a total of EUR 80 million to EUR 100 million in the new Ichnusa plant at a better health side, and we will be receiving a double-digit investment trend of approximately 20%. The nominal capacity of our plant will be at 32,000 tonnes per year of 9 Dame and the 17,000 tonnes per year of Deca. We plan to produce a total of 60,000 tons per year of renewable product for the chemical industry at the plant. The aim is to commission Ichnusa plant next year in 2025. We would then like to start regular production the following year in 2026. And with this, we would like to conclude today's prepared remarks and start the Q&A session. Thanks.

[Operator]

Thank you so much for your presentation. Mr. Sauter and Mr. Troeber. And now we will move over to our Q&A session. For a dynamic conversation, we appreciate if you could ask your questions in person by audio line. [Operator Instructions]. And we will start with the questions from Niklas Becker. So please go ahead and ask your questions.

[Niklas Becker, analyst]

Yes. It's Nicholas from Deutsche Bank. Thanks for the call, and thank you very much for the update, especially on the Chinese biodiesel flows in combination with the German Greenreenhouse gas quota. I have one question regarding the quota prices. Is the market still as illiquid as it was back in the second quarter? And where do you see the greenhouse gas quota prices progressing to in 2025?

[Claus Sauter, executive]

Yes, interesting question. Well, if you are dealing with pure greenhouse gas quotas, there are just a few players and the market is illiquid. But you know that most of our greenhouse gas savings we are placing in the market linked with our liquid molecules. So the second part, where we see the quota prices we don't know yet how much greenhouse gas savings, the oil companies really have on their books. We estimate something between 6 million and 7 million tonnes, which is a lot compared with 2023 obligation. But with going UER, less imports from China, I think I mentioned it during the call, these amounts are going to the period fastly. So we think that a healthy CO2 price must be in the area of about EUR 250 per metric ton of CO2 savings. This is something where additional investments and additional investments in more production capacities are needed, especially heading into 2030 because the curve of obligation is a hockey stick and is very much increasing in 2026, 2027, '28, '29. So at the end of the curve, we need additional investments, and therefore, we, as VERBIO say, we need CO2 prices of about EUR 250 per metric tone. And on that level, it will attract additional and necessary investments in new capacity. But if we will reach already in 2025 or in 2026, that level of 250 million. This we don't know, and it is very much dependent on the amount of CO2 savings oil companies are having on their book.

[Niklas Becker, analyst]

That's very helpful. Maybe a question attached to that. In your prepared remarks, you mentioned that it is economically not attractive for Chinese biodiesel to continue flowing into the European Union at these greenhouse gas quota prices. Could you just elaborate on the reasoning behind that? Because my understanding is that we still have seen substantial volumes in the first quarter of 2024 flowing from China into the European Union.

[Claus Sauter, executive]

Yes, we see imports, but this is nothing compared to what we saw 1 year ago. So it came now down to a more reasonable level. But if you are creating the double amount of CO2 savings, and if we are right and most of it is coming from Proud, then what are the 2 effects. The first effect is that palm oil is about $100 per metric ton 150 depends on the market situation, cheaper than rapeseed oil. And on the other side, you have higher logistic costs. So logistic cost is it has to come from Indonesia to China, go through a tank, go on the boat again, go to Europe, come in. So if you just get for your CO2 savings, EUR 100 or EUR 120 per metric ton, then you are close that this additional money will not cover your cost anymore. And because of this, I say, it was attractive when the CO2 saving was at EUR 400 per metric ton because you make about 5 tonnes of CO2 savings with double counting on 1 ton of biodiesel. So that was about if we talk about EUR 400, we were about EUR 2,000 additional money per metric ton just from the greenhouse gas savings. And now if we are talking about EUR 120 million, it's just EUR 600 million. And on the other side, you have to deduct your additional cost. So with EUR 400 per metric tonic was much more attractive also to accept the additional logistic costs at 120, it doesn't make so much then anymore. Understood.

[Niklas Becker, analyst]

Yes. That's very clear. And then one last question before I go back into the queue on your hedging in the biodiesel segment. Can you provide a little more color on the hedging initiatives. And specifically, I'm looking for how much of your biodiesel sales volumes in the fourth quarter you have secured and also at what prices, i.e., what kind of EBITDA tailwind can we expect from those hedges in the fourth quarter, given you should have visibility on your rapeseed oil prices you have locked in already?

[Claus Sauter, executive]

Okay. I think these numbers, the detailed numbers, Olaf will provide just about the strategy behind. Well, the last few calls, we were always talking about the uncertainty in Europe, what is coming from China. So we saw reasonable margins coming in especially for rapeseed oil-based biodiesel, and that was one point where we said, okay, let's do some hedging. Numbers will come now from Olaf. And it's a little bit ironical. I said the margins were good for rapeseed biodiesel, we were surprised about that. But most of the imports which are coming from China, are off spec. So they don't fulfill the spec, the specification. The best biodiesel in the market is biodiesel from rapeseed oil and especially from VERBIO because most of our product is distilled. So the market needs biodiesel from rapeseed oil, high-quality product to blend the off-spec import from China. So it's a little bit ironical that especially the first generation biodiesel biodiesel made from rapeseed oil is taking advantage about it. So Olaf, could you provide more details about Q4?

[Olaf Troeber, executive]

Yes. Regarding the biodiesel, we hedged close to 50% of our European production in Q4. And the reason we disclosed already, it's simply to shield us a little bit against the higher expected volatility within the market. Regarding the prices, we achieved a good margin and good means healthy and good enough that we expect to reach the lower end of our financial year '23, '24 guidance. And just to give you a little bit more color, we had a negative volume value of these derivative of a little bit more. I think it was EUR 11 million. So I mean that's a result that is already given in the fourth quarter. And that means, in turn, we have to achieve a little bit less than a EUR 10 million EBITDA in each month in the fourth quarter, which should be achievable. And that's also the reason why we said we will come in at the lower end of our guidance.

[Niklas Becker, analyst]

Sorry, just to confirm, the lower end of your guidance, does this only assume contribution from biodiesel? Or are you also counting on your ethanol segment, too?

[Olaf Troeber, executive]

Yes. Also from a certain contribution from the ethanol segment is needed to achieve the lower end, the EUR 120 million for the entire financial year. But right now, we see quite good margins, not very healthy, but good margins. The ethanol price stands approximately at EUR 680, EUR 690 per cubic. And we also already locked in the raw material prices for most of the needs for Q4 of this financial year. So there is a good visibility. You never know it's commodity markets with a high volatility, but it's a good visibility right now.

[Claus Sauter, executive]

Yes. And we are quite sure now also with ethanol. The arbitrage for import volumes to Brazil and to the United States are for single counting, ethanol are closed at the level what Olaf mentioned, EUR 690 EUR 700 per cubic meter. On the other side, what I can report here from the U.S. is we had, and I mentioned it during our presentation, we made significant progress in South Bend. We increased the production volumes by 30%. And that means that the whole economics is changing, you have more volumes with the same amount of fixed costs. So that means the contribution, the negative contribution to our ethanol segment in the last quarters are going down. So U.S. is still not profitable, but we are heading now into reducing costs. And saying that means our European ethanol business was never negative. It was always profitable, but the costs of increasing the capacities in the United States and all these investment projects are covered in our ethanol and RNG segment. So ethanol and RNG European production has to cover all the costs. So that is the reason. So what Olaf said, for the last quarter, better and stable margins in Europe, something we locked already in, what he referred to. And on the other side, reduction of cost contribution for the U.S. expansion. And I would say, yes, we are through the valley. Now we are able to increase our profitability and with all the arguments and the facts around higher quotas in 2025, we are very positive that we can come back to real and attractive profitability. So now, somebody else should come in and ask questions. Niklas, thank you very much. But some more questions from other parties.

[Operator]

Absolutely. So we now move over to the questions from Adrian Pehl.

[Adrian Pehl, analyst]

So first one because we just had the floor of discussing that regarding hedging. Just to be clear on what you did. So is it basically hedging on the input side, so being rapeseed in wheat? Or are you also hedging the appetite, that's my first question. The second one is, I'm still wondering if, I mean, obviously, you had negative EBITDA contributions from hedging. And on the other hand, is it fair to assume that if you had not done that, your guidance would rather look for, let's say, the midpoint. I mean, on the other hand, you're probably sacrificing some stability in Q4. But any thoughts and clarification on that would be helpful.

[Claus Sauter, executive]

Okay. Second question, first, you are right. Without hedging, it would be even better. But Olaf mentioned it, we didn't hedge all the volumes. We hedged half of it. But anyway, margins became even better. That is the reason why the hedging position at the end of March was negative with minus 11%. But you saw also that the margins came back. So that's also the hedging, there for Q4 is now on a more positive side. But you are right, without hedging, we would be closer to the middle of our guidance than on the lower end, but [foreign language]. Okay. So second, input. How is the hedging? When we talk about hedging, then we talk about sales hedging because usually, our input is priced at a fixed price. So that means the wheat or the, let's say, serial, not wheat, the cereals, because it's a bunch of different cereals, the cereals for ethanol production are bought fixed, and we don't need additional amounts now until the new harvest 2024. So with cereals, we are more or less done. The same with the rapeseed oil. And then on the sales side, we did the hedging to secure our sales prices. On biodiesel and yes, on ethanol, we are doing more or less the same through our trading department. So everything there is on a healthy way.

[Adrian Pehl, analyst]

And actually, the second question is, as always, we are very curious to hear the amount of biomethane that's still stored in the balance sheet because it looks to me like at first glance, not gone through everything, but you sold more biomethane in Q3. Is that correct?

[Claus Sauter, executive]

Yes, it's correct.

[Adrian Pehl, analyst]

And do you have a number for us where we stand with the stored methane?

[Claus Sauter, executive]

Well, we are not disclosing this number in detail, but you are in the right way. So I think you have a feeling. So we were selling some greenhouse gas reduction. What we have to sell amounts from 2023. And yes, we sold also more biomethane, even into different markets like transport, but we are not disclosing the volumes.

[Adrian Pehl, analyst]

That's unfortunate, but I'll take it as it is. The next question that I have is actually I was surprised to see actually that your headcount in the ethanol business was actually coming off a little bit from the peak that we saw in the quarter before. So what's the background for that?

[Claus Sauter, executive]

Well, at the end of, so in October, November is in the United States, the season where we are harvesting the cons over. So that is a seasonal work. So we had to hire there some drug drivers and drivers for the balers. And when the season is over in our third quarter, so first quarter 2024, we released these people. So it is just this seasonal part. On the other side, what means the team in the production, South Bend as well as Nevada, we are still hiring people. We did already a lot, but small amount. So there will be further increase on the yearly average. We are investing there in people. We saw that the former owner, especially in South Bend was running the plant really at the lower end of what is necessary really from employees and especially blue colors to run such a plant. So our strategy is different. We are more technical driven, and Oliver with his team is now building up there a team. And I think the results are great, more or less with the same team and 30%. The last 10 years, the plant didn't make so much ethanol like we are doing now since February, and there is further space to go up. So our real target is to achieve 100 million gallon ethanol with that plant, which is about 385,000 cubic meters.

[Adrian Pehl, analyst]

Just 2 very quick ones. Actually, do you have the number for us actually on the production of ethanol that you had in the U.S.? And the second one is phasing on CapEx. I mean, I would assume that fourth quarter will see quite some CapEx versus the previous quarters. Is that fair to assume? Or are you going lower on the CapEx side of things?

[Claus Sauter, executive]

Okay. All right. So ethanol right now, it's just South Bend. And we are doing now close to 8 million gallons per month. So that is the actual capacity. So the target for 2024, 2025 is 90 million gallons. The previous year before we overtook the plant was 65, EUR 65 million gallon. So I think for this business, yes, I don't have the real numbers in mind for the first 6 months of the business year, but I guess we are coming out at 75 million, 80 million gallons for the business here. The first half was [foreign language] was not sufficient. But as I said now, since February, we are doing good progress. And I think overall, we should come out at 70%, 75%, 80% in that range. And for the next business year is 90%, let's see if we are really even able to reach the 100 million gallons. So for the CapEx, well maybe Olaf can give a more meat on the bone. But I don't expect so much CapEx now in the last quarter. Yes, we are doing groundbreaking in Bitterfeld and we are doing groundbreaking in South Bend, but that's not related to so much cost. So the real costs are coming during 2025, when you are ordering equipment, destilations, everything like this. But Olaf, can you approve my statement?

[Olaf Troeber, executive]

Yes. Actually, the plan is that we will face additional investments in Q4 of close to EUR 60 million. But based on my experience that is at the very high end of our planning. I would rather expect a EUR 40 million, EUR 45 million for the Q4 this financial year.

[Adrian Pehl, analyst]

Yeah, that's what I thought. So definitely below EUR 200 million for the full year, right?

[Olaf Troeber, executive]

Yes. For the full year, definitely below the EUR 200 million.

[Operator]

Thank you, Adrian. So by now, we just have one question from the chatbox left, and we do not want to leave Camia without the answer. So the question is, does the guidance also include the sales of U.S. IRA tax credits? Or is that on top?

[Olaf Troeber, executive]

Yes, it's not a contribution. It's a tax credit, and we have to write down the tax credit over the next 16 years. So it will be approximately a yearly contribution of USD 2.5 million per year EBITDA wise. But I mean, it's not just a couple of weeks left. So there won't be any kind of contribution for the current financial year.

[Claus Sauter, executive]

And to come to the clear answer, yes, it is on top. It's a tax credit. It doesn't go through our P&L. It's a tax credit. Therefore, it has even a higher value than just a subsidy. And yes, the cash comes on top. And the rest of the value of our assets, it's not impacted immediately by the tax credit. So it is really a very nice and attractive instrument to finance all the investments into renewables, very smart system here in the United States. Okay. Then I think we are done.

[Operator]

Yes. I guess we just come back to Nicholas with a really, really quick follow-up.

[Niklas Becker, analyst]

Just one follow-up question on the ramp-up costs in Nevada. You previously expected some EUR 20 million headwinds in the current financial year. Is this still a valid assumption? And how much additional, if any, should we assume for the next financial year?

[Claus Sauter, executive]

Well overall, and I think we also mentioned this, the costs for our U.S. expansion without investment was about EUR 30 million, not only 20 million, it was EUR 30 million. But South Bend is included there. So right now, we are commissioning and we start up the ramp-up phase. Olaf can give you here more information. But the only thing that I want to say is that the full utilization due to our planning at the moment, we are expecting, let's say, during the first quarter of 2025. So we need, I mentioned this 6 to 9 months now for the ramp-up phase. Let's see if it goes faster, what is, at the moment, very helpful is that corn prices in the United States are very low. Farmers had a good harvest 2023. So corn prices came down from $8.50 per bushel to $4.50 right now, so nearly 50%, which is huge. And that is also reducing our commissioning costs because the gas, and I mentioned it during my speech, the gas, what we are right now producing is not sold to the transport sector. It goes to the voluntary market, and this is more or less very much fixed price. So Olaf, do you have a feeling now what will be the real commissioning costs for 2025 for Nevada?

[Olaf Troeber, executive]

I first would answer the past. So we are talking around the midpoint for Nevada EBITDA rise between EUR 20 million and up to EUR 30 million, so rather EUR 25 million plus/minus, EBITDA wise. For the next financial year, I mean, it's a little bit difficult. We are planning with at least a black figure let's say, plus EUR 5 million EBITDA, including South Bend. But you have to keep in mind, first, it's a ramp-up phase with the one or other uncertainty which might arise. It's the downside. But the upside is actually that's, yes, that's not on the table right now. But with the increase of the production volumes with South Bend plus the healthier margins in the United States and the upcoming or actually the driving season. So we have also a substantial upside potential regarding the EBITDA for the next financial year coming from our U.S. ethanol operations. But again, it's a ramp-up phase. So don't expect very, very good figures at the very beginning of the year. Yes, it's more rather a line going up. So breakeven plus 6.

[Claus Sauter, executive]

And I think as Olaf mentioned it, it's a ramp-up phase. Once the production is running like we have it in Europe, we have much better visibility. So stay in contact with Alina. She will inform you, give you short-term guidance information. And I think that is really the right strategy for the next 12 months that all the analysts stay in close contact with Alina.

[Operator]

Thank you very much. So with this answer, yes, our Q&A session ends, and this means we come to the end of today's earnings call. So thank you, everyone, for joining in to show interest in VERBIO. Should further questions arise at a later time, please feel free to contact Investor Relations. And Mr. Sauter and Mr. Troeber, also a big thank you to you for the presentation and the time you took today. So from my side, I wish you all a lovely remaining day and hand over again to you, Mr. Sauter for some final remarks.

[Claus Sauter, executive]

Yes. Nothing more to add. Thank you very much for everybody who was joining the call and contributing to the discussion and we are Olaf, me, and Alina looking forward to our next call reporting the successful final of 2023, 2024, which was a very challenging year, I had to admit Okay. Thank you very much again. Have a nice day and enjoy. We are looking forward to our next call. Goodbye.