CONTENT. BIOGAS. It pays off.

Transcription

1 INTERIM REPOR T 26 REPOR T ON THE THIRD QUAR TER OF 26 ( JULY 1 TO SEPTEMBER 3, 26) AND ON THE FIRST NINE MONTHS OF 26 ( JANUARY 1 TO SEPTEMBER 3, 26)

2 CONTENT BIOGAS. It pays off.

3 Letter of the Management Board 4 Economic Development / Biogas Market 7 Business Performance 8 Earnings, Net Asset and Financial Position 9 Employees 11 The Share 11 Outlook 12 Consolidated Income Statement 15 Consolidated Balance Sheet 16 Consolidated Cash Flow Statement 18 Statement of Changes in Group Equity 19 Group Segment Report 21 Risk Report 21 Notes to the Consolidated Interim Financial Statements 22 Financial Calendar + Contact 27

4 Letter of the Management Board Ulrich Schmack Herbert Abel Dr. Alexander Götz Ladies and Gentlemen, EFFICIENCY In the past weeks and months, energy issues continued to dominate the media as well as the political and public debate in many respects. Two issues of particular, if not paramount, importance are Germany s dependence on energy imports e.g. from Russia and the rising energy prices. After many years of impressive efforts and the obvious success achieved with regard to wind, solar and bio energy, nobody will deny that renewable energies will play a key role in solving both tasks. The critical question that is currently being discussed is What can renewable energies do, how much can they contribute to domestic and self-sufficient energy supplies? This was one of the main topics discussed at the Energy Summit hosted by the German Chancellor in Berlin at the beginning of October. Sometimes you get the impression that the German public - maybe deliberately influenced by various interest groups - still underestimates the potential of renewable energies. First of all, it is not a vision but reality that renewable energies together are effective in generating energy across load ranges and all areas of demand. Also, renewable sources can actually supply the full energy requirements of this country; about one third of Germany s agricultural land would theoretically be sufficient to produce the quantity of biogas required to fully substitute the natural gas imports from Russia (4 TWh) by the year 22. Apart from the important aspect of ensuring reliable supplies, this would retain approx. EUR 2 to 3 billion of the gross national product in Germany instead of transferring this sum to Eastern Europe. Incidentally, we speak of biogas in this context not only because we represent the Management Board of a market-leading company but also because biogas, compared to all other bio energies, makes the most efficient use of agricultural land. From an energy point of view, biogas is much more efficient than, for instance, the often cited fuels of the so-called second generation such as BTL. The efficiency advantage is even greater compared to bioethanol and biodiesel. Apart from these arguments, which are convincing on their own, there is another strong aspect: already today, German companies from the wind and solar energy industry but also from the biogas sector are among the world leaders and make a significant contribution to our country s impressive export performance. All these markets are only just beginning to grow. Why shouldn t they develop into an industry dominated by small and medium-sized companies similar to the mechanical and plant engineering sector, which creates jobs and moves the country forward? 4

5 We are convinced that biogas and the other renewable energies will provide the right answers to the problem of ensuring reliable supplies in Germany and that they will have a dampening effect on energy prices in the medium term. And we have the feeling that the course will gradually be set in both political and economic terms. The biogas industry is currently in a phase in which future market shares are being staked, not only in Germany but also in other countries. This is the right time to secure a good market position. We have prepared our entry into the international market and are progressively implementing it. A major milestone in this process was our 3 % investment in Bio-Energy LLC, USA, in the third quarter. Our partner in this venture is the Kurtz family. The Kurz Group is an important company in the sewage sludge recycling market in the USA. On the one hand, we can use Bio-Energy s sewage sludge as the base material for the production of biogas, on the other hand, we have found a partner who has an excellent knowledge of the US market. The option to acquire another 21 % in 29, and hence a majority stake, in the company enables us to push ahead this company and our US activities on a very secure basis and with moderate investments. Being the world s largest energy consumer, the US market obviously offers huge potential. Moreover, the country s vast expanses of agricultural land are ideal for planting energy plants. We are also very satisfied with our market entry in Italy, where we won a major contract worth EUR 8.4 million at the beginning of the fourth quarter. As the Italian market is still at a very early stage, we expect the positive development to continue. The operation of our own biogas plants is an important element in our strategy to exploit and to expand our competitive position. Our aim is to market electricity and heat from biogas, or the biogas directly. Following a thorough analysis of the market, we have decided to operate our own plants primarily in the context of major cooperations with large regional energy utilities. An important step was taken at the beginning of the fourth quarter, when we established a joint venture with Erdgas Südbayern (ESB) for the manufacture of biogas plants and the marketing of biogas. Due to their day-to-day energy business, EBS has long-standing distribution and marketing expertise and ideally complements our strengths in plant construction and biogas production. The joint venture will primarily market heat from biogas directly to consumers, mostly municipalities, local authorities and industrial ADVANTAGE companies. It is especially the efficient use of the heat that will ensure that our plants report not only good but even excellent figures. Together with ESB, we have defined two different business models: the generation of electricity from biogas on the site of the biogas plant or the feeding into the natural gas network and the utilisation in co-generation plants along the pipe network. Cooperations with regional energy utilities will take us a major step forward both in the development of projects and the marketing of energy. ESB is one of the first important elements in this process. We believe that we have made good progress in all areas of the company since we went public in May of this year. This is also reflected in our nine-month sales revenues, which tripled to EUR 57.4 million compared to the previous year. As we continue to evolve Schmack Biogas, we will expand our leading position in Germany while at the same time establishing and developing promising positions in emerging international markets. Ulrich Schmack Herbert Abel Dr. Alexander Götz 5

6 Economic development 6

7 ECONOMIC DEVELOPMENT Biogas market As expected, the biogas market continues to develop dynamically. There is strong demand for using and processing biogasgenerated electricity and heat from all our target groups - from nationwide and regional utilities to farmers and capital investors. Importantly, biogas can be stored, which means it is available whenever needed. These target groups generally want a supplier who provides them with the full range of services, i.e. who handles not only project development and the construction of the plant but also takes care of the complex process management procedures from the operation of the plant as well as the service. Both investors and utilities are primarily interested in the profitability and the proper BIOGAS functioning of the plant. Thanks to its long-standing experience as a full-service provider, Schmack is excellently positioned to meet the demands of the market. The growth of the biogas market is supported by the general objectives of both energy policy and environmental policy in Germany and increasingly also in Europe and the USA. The Energy Summit hosted by the German Chancellor in early October highlighted the continued great importance of energy issues. As the event coincided with the visit by the Russian Prime Minister, the talks also focused on the reliability of Germany s energy supplies. On this occasion, Ulrich Schmack emphasised that biogas together with the other renewable energies will make a major contribution to keeping Germany s energy supplies reliable and affordable. 7

8 Business performance BUSINESS PERFORMANCE NOTE: The prior-year figures do not represent consolidated figures but reflect the stand-alone financial statements of Schmack Biogas AG. These figures are provided for information purposes but are not directly comparable. In the third quarter of the fiscal year, Schmack Biogas AG further increased the number of plants planned and built. Since its foundation, Schmack Biogas AG has built approx. 16 plants of different sizes (as of September 3, 26). The nominal installed electrical output adds up to over 36 MW. In the first nine months of the year, some 69 plants were in the planning or construction phase. Schmack Biogas AG generated its nine-month sales almost exclusively from the planning and the construction of biogas plants. Revenues generated from servicing and operating the plants have also increased steadily. In this business segment, Schmack Biogas AG provides microbiological support for 72 plants and for 47 the technical service. The third business segment, i.e. the operation of own plants, is currently being built up and is expected to generate its first revenues before the end of the year. One of the special features of Schmack Biogas AG is the seasonal nature of its business activities. As expected, Schmack Biogas was able to clearly exceed the results of the previous two seasonally weaker quarters in the third quarter. Both third-quarter sales and earnings exceeded the combined figures for the first and second quarter. In the third quarter, the company increasingly won new contracts from utilities and capital investors. The number of new orders from the traditional customer groups such as the farming sector also continues to grow. Due to the somewhat lower average plant sizes in these customer groups, the growth rate in terms of sales or the nominal installed electrical output is not quite as high. GOne of the single most Rimportant projects Oin the third quarter was Wthe contract for the construction Tof a 3 MW biogas Hplant for Stadtwerke Schwerin. The contract has a net order volume of approx. EUR 9.3 million. Construction is scheduled to start before the end of the year. Depending on the duration of the approval process, most of the sales revenues will be booked in fiscal 27. A projected electrical output of 3 MW will make the new biogas plant in Schwerin one of the largest of its kind in Germany. The plant will produce biogas exclusively from renewable resources. Another strategically important project is the start of construction of a biogas plant in Pliening with the aim of supplying biogas of natural gas quality and feeding it into the natural gas network. This is the second project of this kind realised by Schmack Biogas AG following the biogas plant in Kerpen, which was built for the Stadtwerke Aachen. The plant in Pliening is scheduled to go online before the end of the year. E.ON Bayern will buy the biogas produced in Pliening. Fed into the network on the plant site, the gas will be transported to two E.ON co-generation plants where it will be converted into electricity and heat. The project has an contract volume of approx. EUR 9.5 million. With the help of selective acquisitions and investments, Schmack Biogas continued to pursue its strategy of integrating key technologies of the biogas sector into its own technology and competence portfolio and of pushing ahead its international expansion. The company s strategic entry into international markets was accelerated through the 3 % investment in Bio-Energy LLC, Independence/Ohio, USA. Apart from this direct investment, Schmack Biogas has the option to acquire another 21 % of the shares in 29 from its co-shareholders, Steven Smith and the members of the Kurtz family ( Kurtz Group ), for a majority shareholding in the company. The investment in Bio-Energy means that Schmack Biogas begins to expand its international activities much earlier than projected on the occasion of the IPO. While requiring only moderate investments, the project offers the company the opportunity to gain a foothold in the world s largest energy market together with a competent and well-established partner. In the third quarter, Schmack Biogas AG also acquired a 5.1 % stake in Stelzenberger Biogas GmbH, Kirchweidach, with retroactive effect from January 1, 26. This investment gives the company access to the component supplier s expertise, especially in the development and production of technologically advanced stirring devices for biogas plants. 8

9 Earnings, Net asset and Financial Position EARNINGS POSITION Sales performance As expected, sales increased sharply in the third quarter. At EUR 29.1 million, they exceeded the combined figure for the first and second quarter (EUR 28.3 million). Compared to the relevant period of the previous year, when the company generated sales of EUR 12., this represents a growth rate of %. SALES AFTER NINE MONTHS IN EUR MILLION In the first nine months of the year, Schmack Biogas generated sales of EUR 57.4 million, marking a threefold increase over the previous year s nine-month sales of EUR 18.9 million. The main drivers behind the threefold increase in sales were the strong domestic demand for biogas plants and the increased share of larger plants, which generate higher sales. The increase in sales was almost entirely attributable to organic growth while prices were largely kept stable. Earnings performance The earnings figures of Schmack Biogas were clearly up on the previous year s figures both in the third quarter and in the first nine months. Gross profit amounted to EUR 4.4 million in the third quarter and to EUR 6.6 million after the first nine months, reflecting an increase by % and 28.3 %, respectively. Thanks to the disproportionate earnings growth, the gross profit margin improved from 9.2 % to 11.6 % at the nine-month stage and from 13.9 % to 15.2 % on a quarterly basis. Despite strong staff growth, increased investments and the accelerated expansion of internal structures and capacities, Schmack Biogas AG achieved margin and earnings improvements at all other levels of the income statement. EBIT amounted to EUR 2.2 million in the third quarter ( %) and to EUR.9 million at the nine-month stage, up from EUR -.6 million in 25. At 7.4 %, the EBIT margin for the third quarter was on a par with the previous year s 7.5 %, while the nine-month figure showed a clear improvement from -2.9 % in 25 to 1.6 % in 26. Consolidated earnings after tax and before minority interests amounted to EUR 1.4 million in the third quarter; the nine-month figure is still negative at EUR -.8 million. 9

10 Earnings, Net Asset and Financial Position NET ASSET POSITION Balance sheet structure analysis At the end of the third quarter, the balance sheet of Schmack Biogas was again characterised by a very balanced asset structure. Non-current assets of EUR 22.9 million are covered by equity of EUR 38.6 million. As of September 3, 26, the equity ratio stood at approx %, compared to 24.1 % at the end of the previous year. At 45.4 million, current assets clearly exceed current and non-current liabilities of EUR 29.6 million. FINANCIAL POSITION Investment analysis The third quarter saw the Schmack Biogas Group accelerate its investment activity. In the first nine months of the year, Schmack invested a total of EUR 21.4 million, of which roughly EUR 19.6 million was expended in the third quarter. Key investment projects included the majority investment in Stelzenberger Biogas GmbH and the 3 % participation in Bio-Energy LLC, USA. Liquidity analysis At 2.36, the working capital ratio, i.e. the relation between current assets (EUR 45.4 million) and current liabilities (EUR 19.2 million) shows that the Group can meet its payment obligations at all times and that its long-term liquidity position is secure. As of September 3, 26, the Group s cash amounted to EUR 17.8 million, compared to EUR 3.6 million on the balance sheet date of the previous year. The negative operating cash flow of EUR -14. million in the first nine months of 26 is mainly attributable to the increase in receivables from long-term production orders in an amount of EUR 18. million. These receivables will be realised partly in the fourth quarter and partly next year. At EUR million, the cash flow from investing activities reflects the accelerated pace of the company s expansion. Cash flow from financing activities rose from EUR 1.3 million to EUR 47.7 million in the first nine months of 26 and is largely due to the successful IPO in the second quarter of 26. Development of order volume At EUR 2.8 million, incoming orders in the traditionally weaker third quarter with respect to order volume were down on the previous quarters but up by approx % on the third quarter of 25 (approx. EUR 11.1 million). Incoming orders for the first nine months totalled EUR 91.6 million, up 112. % on the previous year s EUR 43.2 million. 1

11 Employees, the Share INCOMING ORDERS IN EUR MILLIONS Q I 5 Q II 5 Q III 5 Q IV 5 Q I 6 Q II 6 Q III 6 As of the end of the reporting period, orders on hand totalled EUR 87.7 million, which represents an increase of roughly 14 % on the same period of the previous year (EUR 36.6 million). Employees As of September 3, 26, Schmack Biogas AG employed 241 people, up 129 on year-end 25. The Share Following Schmack Biogas AG s IPO on May 24, 26, the share stayed clearly above its issuing price of EUR 31. also in the third quarter. During the reporting period, the share price moved between EUR 36. and EUR 4., making the Schmack share one of the most successful new listings of the year 26. At present, Schmack Biogas is regularly covered by HypoVereinsbank, Sal. Oppenheim and Cheuvreux. Their latest assessments are published at in the Investor Relations section. The fourth quarter will see Schmack Biogas AG participate in the German Equity Forum in Frankfurt am Main. The Management Board will present the company to the financial community on November 28. In addition, one-to-one meetings will be held with national and international investors. WKN: SBGS11 Free float: 46.7 % Price on September 29, 26: EUR 37.9 Market capitalisation on September 29, 26: EUR million Free float market capitalisation on September 29, 26: EUR 87.2 million 11

12 Outlook Outlook Schmack Biogas AG expects the dynamic development of the first nine months to continue in the fourth quarter of 26. Against this background, we assume that it will be possible to meet the projections for the current fiscal year, which see sales at approx. EUR 85 million and EBIT at roughly EUR 5 million. Schmack is benefiting disproportionately from the current market growth. When it comes to major projects in Germany, contracts for the planning and construction of biogas plants tend to be awarded to Schmack. Also, at the beginning of the fourth quarter, the company took the first step towards building up its new business segment for the operation of company-owned biogas plants. Through the joint venture with Erdgas Südbayern (ESB), Schmack will build its own biogas plants and market electricity and heat to end users. The company s expertise in plant construction, smooth operation and raw material procurement will now be complemented by ESB s distribution and marketing skills. This cooperation model will continue to be an important strategy in the business segment Own operations next year. Schmack Biogas expects further notable increases in both sales and earnings in the next fiscal year. This expectation is supported by both incoming orders, which, at approx. EUR 2 million, were almost twice as high in the third quarter than in Q3 25 (EUR 11.1 million) and by orders on hand, which amounted to approx. EUR 88 million at the nine-month stage, compared to EUR 36.6 million in the previous year. Schmack will capitalise on the dynamic market development to expand its leading market position and further increase its market share. Against this background, Schmack projects next year s sales to grow substantially to EUR 13 to 15 million. EBIT is expected to rise at a disproportionate rate to reach a double-digit figure. As a result, the company s EBIT margin should also improve over the year

13 I N T E R I M R E P O R T REPOR T ON THE THIRD QUAR TER OF 26 TO IFRS

14 14

15 Interim Financial Statement CO N S O L I DAT E D I N CO M E S TAT E M E N T ( I F R S ) Jul. 1, 26- Sep. 3, 26 Group Jul. 1, 25- Sep. 3, 25 AG* Jan. 1, 26- Sep. 3, 26 Group Jan. 1, 25- Sep. 3, 25 AG* Sales 29,129 12,29 57,414 18,949 Cost of sales -24,688-1,357-5,781-17,25 Gross profit 4,441 1,672 6,633 1,744 Distribution expenses -1, ,747-1,15 General administrative expenses -1, ,34-1,8 Research and development expenses Other operating income Other operating expenses Operating earnings 2, Earnings of financial assets valued at equity EBIT 2, Interest income Interest expenses Earnings before tax 2, Income taxes ,686 Net income 1, Share of income allocable to minority interests Share of income allocable to equity providers 1, Retained earnings -1,796-7, ,559 Balance sheet profit , ,25 Earnings per share (EUR) Undiluted earnings per share (EUR) Diluted earnings per share (EUR) Weighted average number of shares ** Undiluted Diluted 3,58,186 3,58, , ,274 3,58,186 3,58, , ,274 * The figures stated for the previous year are not consolidated, but have been taken from the separate financial statements of Schmack Biogas AG, to which reference is made in the explanatory notes. The figures have been stated for information purposes, but are not directly comparable. ** Amended calculation due to retrospective adjustment as of to account for capital increase from company funds pursuant to IAS et seqq. 15

16 Interim Financial Statement B A L A N C E S H E E T ( I F R S ) ASSETS Sep. 3, 26 Group Dec. 31, 25 AG* NON-CURRENT ASSETS Intangible assets 16, Property, plant and equipment 4,418 1,313 Shareholdings valued at equity 1,386 Other financial assets Deferred tax assets 126 CURRENT ASSETS 22,855 2,99 Inventories 2, Accounts receivable 3,786 5,595 Receivables from long-term production orders 2,321 2,272 Other short-term financial assets 1, Tax claims 74 Cash and cash equivalents 17,782 3,586 45,359 12,159 TOTAL ASSETS 68,214 14,258 16

17 EQUIT Y AND LIABILITIES Sep. 3, 26 Group Dec. 31, 25 AG* EQUITY Subscribed capital 4,94 22 Capital reserve 32,53 2,765 Reserve for currency translation differences 1 Appropriated retained earnings Unappropriated retained earnings Minority interests 1,474 NON-CURRENT LIABILITIES 38,616 3,438 Long-term financial liabilities 8, Long-term provisions Deferred tax liabilities 2,9 189 CURRENT LIABILITIES 1,418 1,177 Accounts payable 6,765 5,293 Short-term debt Other short-term financial liabilities 8,997 1,71 Advances received 2, Short-term provisions 62 1,88 Tax liabilities ,18 9,643 TOTAL EQUITY AND LIABILITIES 68,214 14,258 * The figures stated for the previous year are not consolidated, but have been taken from the separate financial statements of Schmack Biogas AG, to which reference is made in the explanatory notes. The figures have been stated for information purposes, but are not directly comparable. 17

18 Interim Financial Statement C A S H F LO W S TAT E M E N T ( I F R S ) = = CASH FLOW FROM OPERATING ACTIVITIES Earnings after tax and before minority interests Income taxes Interest expenses Interest income ADJUSTMENTS TO NON-CASH INCOME AND EXPENSES Expenses for share option plans Write-downs/(write-ups) of property, plant and equipment Write-downs/(write-ups) of intangible assets (Profit)/loss on companies stated at equity (Profit)/loss on disposals of property, plant and equipment (Net profit)/loss generated on short-term securities and financial assets other non-cash (income)/expenses CHANGE IN NET CURRENT ASSETS (WORKING CAPITAL) (Increase)/decrease in inventories (Increase)/decrease in accounts receivable (Increase)/decrease in receivables from long-term production orders (asset balance) (Increase)/decrease in other short-term financial assets (Increase)/decrease of tax receivable Increase/(decrease) in accounts payable Increase/(decrease) in other short-term financial liabilities Increase/(decrease) in advances received Increase/(decrease) in provisions Increase/(decrease) of tax liabilities CASH GENERATED BY OPERATING ACTIVITIES Income taxes paid Interest paid Interest received INFLOW/(OUTFLOW) OF FUNDS FROM OPERATING ACTIVITIES Jan. 1, 26 - Sep. 3, 26 Group , ,473 1,89-18,49-1, ,472 1,17 1,752-1, , ,98 Jan. 1, 25 - Sep. 3, 25 AG* , ,53 1,868 4,411-1,592-1, ,221 CASH FLOW FROM INVESTING ACTIVITIES = Payments for investments in property, plant and equipment Payments for investments in intangible assets Proceeds from disposals of property, plant and equipment Proceeds from disposals of financial assets Proceeds from initial consolidation effects Payments for investments in financial assets INFLOW/(OUTFLOW) OF FUNDS FROM INVESTING ACTIVITIES -3,457-16, ,489-1,93-19, CASH FLOW FROM FINANCING ACTIVITIES = = + = Proceeds from equity allocations Payments for equity allocations Payments for financial leasing Payments for redemption of long-term financial liabilities Proceeds from the raise of financial credits Payments for redemption of short-term financial liabilities INFLOW/(OUTFLOW) OF FUNDS FROM FINANCING ACTIVITIES Increase/(decrease) of the difference from currency translations CHANGE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents as of January 1 CASH AND CASH EQUIVALENTS AS OF SEPTEMBER 3 38,16-3, , , ,196 3,586 17,782 1, , ,983 1, * The figures stated for the previous year are not consolidated, but have been taken from the separate financial statements of Schmack Biogas AG, to which reference is made in the explanatory notes. The figures have been stated for information purposes, but are not directly comparable.

19 S TAT E M E N T O F C H A N G E S I N E Q U I T Y (IFRS) Subscribed capital AG* Capital reserve AG* Currency translation differences reserve AG* Appropriated retained earnings AG* Unappropriated retained earnings AG* Minority interests AG* Total AG* BALANCE AT DECEMBER 31, , , Net income for the period Capital increase 54 1,41 1,455 BALANCE AT SEPTEMBER 3, , , Subscribed capital Group Capital reserve Group Currency translation differences reserve Group Appropriated retained earnings Group Unappropriated retained earnings Group Minority interests Group Total Group BALANCE AT DECEMBER 31, , ,438 Net income for the period Change resulting from initial consolidation 1,489 1,489 Costs of equity procurement -3,632-3,632 Currency translation differences 1 1 Stock options Withdrawal from capital reserve 2,614-2,614 Capital increase 2,16 36, 38,16 BALANCE AT SEPTEMBER 3, 26 4,94 32, ,474 38,616 * The figures stated for the previous year are not consolidated, but have been taken from the separate financial statements of Schmack Biogas AG, to which reference is made in the explanatory notes. The figures have been stated for information purposes, but are not directly comparable. 19

20 Group Segment Report 2

21 GROUP SEGMENT REPOR T In accordance with its internal organisational and management structure, Schmack Biogas is divided into a projects and construction division and a service and plant management division. For reasons of materiality, the company does not prepare a segment report by business divisions, given that the project and construction division accounts for more than 9 % of the overall value of segment sales, segment earnings and segment assets. As earnings were predominantly generated in Germany, the company does not report segment earnings by regions for reasons of materiality. SALES BY REGION Germany Other EU countries Non-EU countries July 1, 26-Sep. 3, 26 Group 28, July 1, 25-Sep. 3, 25 AG* 11, Jan. 1, 26-Sep. 3, 26 Group 56, Jan. 1, 25-Sep. 3, 25 AG* 18, Total 29,129 12,29 57,414 18,949 * The figures stated for the previous year are not consolidated, but have been taken from the separate financial statements of Schmack Biogas AG, to which reference is made in the explanatory notes. The figures have been stated for information purposes, but are not directly comparable. RISK REPORT The detailed risk report of Schmack Biogas AG formed part of the 25 Annual Report. The report included a detailed description of the typical risks to which Schmack Biogas AG is exposed. The financial statements and the description of the risks and opportunities are included in the Securities Prospectus, in particular on page F-68. The Prospectus is available for downloading at No material changes to the risks outlined in the financial statements occurred in the third quarter

22 Notes NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. LEGAL BASIS: IFRS ACCOUNTING Schmack Biogas AG is the parent company pursuant to 29 of the German Commercial Code (HGB). As a result of the issuing of equity titles on the capital market, Schmack Biogas AG (Schmack Group) is obliged by Article 4 of Regulation No. 166/22 of the European Parliament and Council dated July 19, 22 to compile the consolidated financial statements of the company in accordance with IFRS as adopted by the EU. Accordingly, this interim report as of September 3, 26 has also been compiled in accordance with IAS 34. New IFRS accounting standards and interpretations came into force as of January 1, 26 and have been implemented where necessary in these consolidated interim financial statements. The consolidated financial statements have been compiled in euros. Unless expressly indicated otherwise, all amounts reported in these consolidated financial statements have been stated in thousand euros (). 2. RECOGNITION AND MEASUREMENT PRINCIPLES The interim financial statements as of September 3, 26 have basically been compiled on the basis of the same principles of recognition and measurement as applied in the determination of the comparative figures for the previous year and in the annual financial statements as of December 31, 25. The figures for the previous year have been based on the figures contained in the IFRS separate financial statements of Schmack Biogas AG. The previous year s figures have been stated for information purposes, but are not directly comparable. Consolidation Principles In addition to the Schmack Biogas AG parent company, the consolidated financial statements include all subsidiaries in which the company directly or indirectly exercises a majority of the voting rights, to the extent that the impact of such subsidiaries on the net asset, financial and earnings position of the Group is not of subordinate significance. The capital consolidation has been based on the acquisition method. This involves the costs of acquisition of the shares thereby acquired being offset against the newly valued proportionate equity allocable to the parent company. The assets and liabilities of the subsidiary acquired are to be stated at their respective fair values. Any remaining credit differences are capitalised and subject to an annual impairment test. Debit differences are recorded with an immediate impact on earnings. Receivables, liabilities and provisions, inter-company profits and income and expenses between the companies included in the consolidation have been eliminated within the framework of the consolidation of liabilities and of income and expenses. Shares in associated companies have been valued in the consolidated financial statements using the equity method. These have initially been valued at cost of acquisition. Subsequent valuations involve adjusting the book value by the prorated changes in the equity of the associated company. Any goodwill included in the book value is not subject to scheduled amortisation. The book value of the shareholding is rather subject to an impairment test in accordance with the requirements of IAS 39 and IAS

23 3. NOTES ON SELEC TED ITEMS IN THE BALANCE SHEE T AND INCOME STATEMENT Financial assets The other financial assets of 572 reported in the balance sheet as of the reporting date include receivables from associated companies amounting to 527. Receivables and provisions Accounts receivable amounted to 5,595 as of December 31, 25 and have therefore declined during the reporting period by 1,89 to 3,786. Receivables from long-term production orders rose from 2,272 (December 31, 25) to 2,321 as of September 3, 26. The development of both of these balance sheet items is attributable to projects predominantly finally settled in the second half of the year. This is also the reason for the decline in current provisions by 1,26 from 1,88 (December 31, 25) to 62 as of September 3, 26, which are mainly guaranty and reoperation provisions. Capital reserves With a view to motivating and retaining its executive staff, Schmack Biogas has launched a Matching Stock Programme (MSP), under which executives are entitled to subscribe phantom stocks. MSP participants are entitled to acquire shares in the company at their own expense, up to a maximum volume defined by the company (MSP stocks). The MSP stocks are deposited down in a blocked security deposit in favour of the MSP participant for the duration of their participation in the programme. In a first tranche, the company allocates 5 virtual so-called phantom stocks per MSP stock to each MSP participant. The phantom stocks may be exercised after two years provided that certain exercise criteria, which are linked to the company s share price performance, are met. Phantom stocks that are not exercised two years after allocation of a tranche will lapse. If the phantom stocks are exercised when the exercise criteria are met, the difference between the company s share price upon exercise of the relevant phantom stocks (average share price of the past 6 days) and the share price upon allocation of these phantom stocks (issuing price or average share price of the past 6 days, each plus a premium of 12 percentage points) will be determined as the gross MSP profit. The combined profit for all participants is limited to max. EUR 1 million. After deduction of wage tax and other charges, the MSP profit will be paid out to the MSP participant by the company in the form of company shares. As of the effective date, 6,122 shares were subscribed under the Matching Stock Programme. This means that 3,61 options (phantom stocks) were exercisable as of the reporting date. According to IFRS 2, the Matching Stock Programme is classified as equity based, as the compensation always takes the form of a subscription to shares. Equity-based compensation with genuine equity instruments must generally be valued at the fair value of the goods/services received (direct valuation). As no reliable fair value can be determined, the fair value of the equity instruments at the time they are granted must be used (indirect valuation model by means of option price model). The company uses the Black Scholes valuation model whose main parameters are as follows: the EUR 37.3 closing price on the day the decision to implement the MSP was taken (September 18, 26), an exercise price of EUR 34.72, a volatility of 3 %, a term of 21 months and a risk free interest rate of 3.6 %. With a fair value of an option of EUR 8.16, the time value of the options granted in the period amounts to 249 for the total term of 21 months, i.e. 11 for the period under review. In accordance with IFRS 2, the amount is booked as personnel expenses (dr.) to capital reserves (cr.) and prorated over the vesting period. 23

24 Notes Liabilities The accounts payable of 6,765 reported in the balance sheet as of the reporting date include liabilities to associated companies in an amount of 1,39. The change in long-term financial liabilities is mainly attributable to bank loans raised, while the change in other short-term financial liabilities is due to the recognition of a put option in conjunction with a fully consolidated company. Deferred tax liabilities The increase in deferred tax liabilities is due to the increase in receivables from long-term production orders. Sales The overwhelming share of the sales of Schmack Biogas AG and of the Group were generated from long-term production orders. Earnings per share Pursuant to IAS 33, earnings per share are calculated by dividing the consolidated income by the average number of shares. The calculation has been depicted in the income statement on Page REPOR TING ENTIT Y With its interim financial statements as of June 3, 26, Schmack Biogas AG compiled for the first time consolidated interim financial statements. In addition to the Schmack Biogas AG parent company, these include the subsidiary Schmack Biogas S.R.L., Italy, which was fully consolidated during the period under review and at which the parent company exercises direct control via a majority of the voting rights (66. %). Schmack Biogas S.R.L., Italy, was founded on January 13, 26 and for reasons of simplification was fully consolidated as of April 1, 26. A total of 454 has been spent to date on the shares in the company. Its prorated cumulative loss since consolidation amounts to 18. The business objective of the subsidiary is the planning, development and construction of biogas plants. In the period under review, the company acquired a majority stake (5.14 %) in Stelzenberger Biogas GmbH with effect from August 3, 26. As of this date, Stelzenberger is included in the consolidated financial statements of Schmack Biogas AG by way of full consolidation. Other minority shareholders in Stelzenberger Biogas GmbH are the Stelzenberger brothers (29.97 %) and MF Bay (19.89 %). Also with effect from August 3, 26, Stelzenberger Biogas acquired all shares in Stelzenberger Metallbau GmbH against a hybrid contribution in kind. Subsequently, Stelzenberger Metallbau GmbH was merged into Stelzenberger Biogas GmbH. Stelzenberger Biogas GmbH was consolidated for the first time with effect from August 3, 26. In this context, the equity investment stated in the separate financial statements of Schmack Biogas AG was offset against the pro-rated equity capital of Stelzenberger Biogas GmbH as of the date of first-time consolidation. For reasons of simplification, the first-time consolidation as of August 3, 26 was based on interim financial statements as of August 31, 26. All assets and liabilities in these interim statements were stated at their fair value. At the level of Stelzenberger Biogas GmbH, the revaluation resulted in a credit difference in the amount of the hidden reserves acquired, which had to be allocated to the individual assets by way of purchase price allocation in accordance with IFRS 3. The remaining difference of 12,79 was recognised as goodwill. This represents the material addition in the context of first-time consolidation. Schmack Biogas AG has granted minority shareholder MF Bay a put option, which may be exercised from December 1, 27, i.e. from this date MF Bay may sell its interest in Stelzenberger Biogas GmbH to Schmack Biogas AG against payment of a purchase price. At the same time, Schmack Biogas AG was granted a call option on this minority interest, which may be exercised from December 1, 28. In accordance with IFRS 3, a contingent purchase price adjustment due to the put option was effected, as MF Bay GmbH is very likely to exercise the put option and a reliable estimate can be made of the acquisition cost. The put option was 24

25 not stated under minority interests in consolidated equity capital but, in accordance with IAS under other liabilities from minority interests with put option. The put option was valued as of August 31, 26 at the discounted cash value of the repurchase amount. In the context of capital consolidation, total Group goodwill increased by 2,938 to 15,647. In the period under review, the newly established companies Schmack Energie Holding GmbH and Schmack Energie Betriebs GmbH were included in the consolidated financial statements for the first time. The business purpose of the holding company is the acquisition, holding, management and sale of equity investments in commercial companies. The purpose of Schmack Energie Betriebs GmbH is the management against payment and the operation of biogas plants as well as the management against payment and the operation of plants for the generation of renewable energy from biomass. Both companies are wholly owned by Schmack Biogas AG. In addition to these consolidated companies, a further 3 subsidiaries in which the parent company holds 1 % of the shares in each case have not been included in the consolidated financial statements as a result of the absence of any business operations or of the volume of business being negligible. Their impact on the net asset, financial and earnings position of the Group is of subordinate significance. One investment valued at equity was included in the consolidated financial statements in the period under review. This is a 3 % investment in Bio-Energy LLC, Independence/Ohio, USA. In addition to this direct investment, which became effective as of August 16, 26, Schmack Biogas AG has the option to additionally acquire up to 21 % of the shares held by the co-shareholders for a majority shareholding in 29. Equally, the coshareholders have the option to offer up to 21 % of their shares to Schmack Biogas AG in 29. These options were not taken into account in the recognition of the investment, as it is not sufficiently likely at the present time that the options will be exercised and a valuation is not possible. Bio-Energy was established at the beginning of the year and plans, builds and operates biogas plants in the American market. 5. EVENTS OF SPECIAL SIGNIFICANCE IN THE REPOR TING PERIOD With exeption of the aforementioned issues, no events of special significance occurred in the reporting period. 6. EVENTS OF SPECIAL SIGNIFICANCE AFTER THE REPOR TING DATE ON SEPTEMBER 3, 26 With effect from November 16, 26, Erdgas Südbayern Wärme GmbH, a subsidiary of Erdgas Südbayern GmbH, and Schmack Energie Holding GmbH established a joint venture in the legal form of a GmbH & Co. KG with the aim of jointly building biogas plants and marketing the energy generated by these plants. The selection of the first suitable sites is scheduled to start before the end of 26. Each partner holds a 5 % stake in the joint venture. This project and the cooperation with one of the key players in Bavaria s energy sector will enable Schmack Energie Holding GmbH to expand the new division Own operations in the long term on a larger scale. Since its foundation in 23, Erdgas Südbayern Wärme GmbH has marketed over 78 million kwh p.a. of heat and the new joint venture will add biogas to its existing heat service portfolio. Accordingly, the joint venture will be able to exploit all the available channels for the sale of biogas and the energy generated from it. 25

26 Notes 7. BUSINESS DEALINGS WITH RELATED PAR TIES In the reporting period ended September 3, 26, the company engaged in business dealings with the following related parties: Abel Mobilfunk GmbH & Co. KG (installation work, project development) Abel Elektrotechnik GmbH & Co. KG (electrical work) KLSAL Rechtsanwälte (legal advice) Aufwind Schmack Betriebs GmbH (sale of biogas plant) BGA Feichten GmbH & Co. KG (sale of biogas plant) BG Schoissenkager GmbH & Co. KG (sale of biogas plant) Relatives of Management Board members of Schmack Biogas AG are shareholders, managers or partners of the related parties listed above. For more detailed information, please refer to the Securities Prospectus. As of the reporting date, the total business volume from the sale of biogas plants amounted to 8,136.1, while the volume from services sourced amounted to These business deals are closed and settled on arm s length terms. 8. FINANCIAL REVIEW The present consolidated interim financial statements were reviewed by an auditing firm. Disclaimer This interim report includes forward-looking statements based on assumptions and estimates made by the management of Schmack Biogas. In spite of the assumption that the forward-looking statements are realistic, it cannot be guaranteed that these expectations will prove to be accurate. 26

27 Contact This interim report was compiled as of November 2 and was published in German and English on November 28. The 9 Months Statement as well as further up-to-date information on Schmack Biogas AG are available on the Internet at Under this address, you may also subscribe to the newsletter from Schmack Biogas AG. For further information, please contact our Investor Relations Department: Schmack Biogas AG Bayernwerk Schwandorf Markus Meyr Telefon: + 49 () Telefax: + 49 () ir@schmack-biogas.com Press information for the business and financial press is available from: Haubrok Investor Relations GmbH Frank Ostermair, Michael Müller Kaistraße Düsseldorf Telefon: +49() Telefax: +49() office@haubrok.de or from the Press Department: Schmack Biogas AG Petra Krayl Telefon: + 49 () Telefax: + 49 () petra.krayl@schmack-biogas.com Financial calendar: Publication of the Annual Report 26 - April 27 Annual General Meeting 27 June 27 27

28 Schmack Biogas AG Bayernwerk 8 D Schwandorf Tel: + 49 () Fax: + 49 ()