DGAP-News: 2G Energy AG grows EBIT to EUR 17.9 million in FY 2021 (previous year: EUR 16.4 million)

Corporate News Heek, March 31, 2022

2G Energy AG grows EBIT to EUR 17.9 million in FY 2021 (previous year: EUR 16.4 million)

- EBIT margin at upper end of guidance at 6.7 % (previous year: 6.7 %)

- Sharp rises in Natural Gas and electricity prices highlight further importance of CHP systems' efficiency advantages

- Management Board confirms FY 2022 net sales guidance (EUR 280 million to EUR 310 million) with EBIT margin between 6.0 % and 8.0 %

- 2G acquires SenerTec Center Schweinfurt GmbH and minority interest in KWK-tec GmbH

Heek, March 31, 2022 - 2G Energy AG (ISIN DE000A0HL8N9), one of the internationally leading manufacturers of gas driven combined heat and power (CHP) systems, reports higher consolidated net sales of EUR 266.3 million in the 2021 financial year (previous year: EUR 246.7 million). In addition, 2G improved its consolidated earnings before interest and tax (EBIT) to EUR 17.9 million (previous year: EUR 16.4 million), thereby achieving an EBIT margin of 6.7 %, at the upper end of the guidance range (previous year: 6.7 %).

Especially the service business in Germany proved to be a sales driver, with growth of EUR 15.4 million, or 24 %, to EUR 80.9 million. Of this total, around EUR 4.7 million was attributable to HJS Motoren GmbH. Overall, the service share of Group sales rose to 43 % (previous year: 38 %). Adjusted for the first-time consolidation of HJS Motoren GmbH, traditional service sales increased by 18.9 % to EUR 110.9 million (previous year: EUR 93.3 million).

Despite the successes in the service business, foreign sales also grew at an above-average rate and accounted for 39 % of total net sales in the past financial year (previous year: 38 %). The crisis regions of Russia and Ukraine account for only around 1 % of consolidated net sales.

The foreign subsidiary generating the highest level of net sales in the 2021 financial year was 2G Energy Ltd. (UK), which increased its sales to EUR 26.2 million (previous year: EUR 22.2 million).

The following table shows the overall distribution of net sales:

Expense ratios shift due to higher service share

As the service business typically incurs more personnel expenses and less cost of materials, the cost of materials ratio decreased to 63.7 % (previous year: 65.8 %), while the personnel expense ratio rose to 18.4 % (previous year: 17.4 %). The resultant margin improvement offsets the rise in other operating expenses of EUR 5.1 million (+ 21 %). This increase reflects additional sales commissions abroad (EUR + 1.0 million), a higher level of value allowances applied to receivables (EUR + 1.0 million, of which EUR 0.5 million in connection with the war in Ukraine), a higher level of legal and consulting expenses, particularly due to the investments in various companies and the capital increase (EUR + 0.5 million), normalized travel activities (EUR + 0.3 million), vehicle costs (EUR + 0.3 million), and the first-time consolidation of HJS Motoren GmbH (EUR + 0.5 million).

Sharp rise in natural gas prices highlights CHP systems' efficiency benefits

Russian natural gas accounts for around 55 % of Germany's natural gas imports and is mainly used in heat generation. In the event of supply restrictions, this portion would have to be at least partially offset short-term by other suppliers in the form of pipeline gas or LNG on the world market. However, a fundamental substitution of natural gas is impossible before the next heating period and is unlikely to be achieved within the next few years. At the same time, the price of electricity will continue to rise, as not only will a lack of Russian natural gas prevail, but also - albeit to a lesser extent - Russian hard coal will have to be replaced. Additional solar and wind power plants will provide relief here at best in the medium to long term.

2G's Management Board consequently expects the efficiency benefits of CHP systems to become much more important given extremely sharp rises in gas prices. Further benefits of CHP systems include their usually short delivery times, low social and regulatory hurdles relating to their installation and operation, as well as the ability to convert 2G CHP systems that have already been supplied and commissioned to hydrogen and biogas operation at any time.

Moreover, the sharp rise in natural gas and electricity prices will have a positive impact on the economic viability of lean gas and biogas projects. 2G is very well positioned in this segment thanks to its decades of experience. Furthermore, 2G is the only CHP manufacturer in the world to carry an entire line of fully hydrogen-capable CHP units in its regular price list.

The Management Board consequently regards this as confirmation of its long-standing strategy of both driving forward the Group's internationalization and expanding its competency edge and technology leadership in all gas applications.

Management Board expects EBIT margin of between 6.0 % and 8.0 % for 2022 on the basis of further sales growth

For the current financial year, the order book is well filled at the beginning of 2022 with EUR 152.7 million of orders (previous year: EUR 111.2 million). As already communicated on January 20, the Management Board anticipates consolidated net sales in a range between EUR 280 and EUR 310 million for the 2022 financial year.

Subject to all reservations and with due commercial caution, the Management Board is aiming for an EBIT margin of between 6 % and 8 %. This guidance range, which has been expanded compared with previous years, reflects both the coronavirus pandemic's continuing effect on the economy and the geopolitical situation, the specific effects of which cannot yet be fully assessed at the present time. For example, the prices of numerous raw materials have risen significantly compared with the previous year, which in view of 2G's business model entails both risks and opportunities. Secondly, the upper edge of this guidance reflects the expectation that further efficiencies can be realized through 2G's four lead projects.

2G acquires SenerTec Center Schweinfurt GmbH and minority interest in KWK-tec GmbH

At the end of the 2021 financial year, 2G Energy AG acquired SenerTec Center Schweinfurt GmbH. In addition to the existing branch operation in Germany's Upper Bavaria region, 2G is thereby strengthening its presence in Southern Germany in order to be able to participate to an even greater extent in the sales potential there.

In February, 2G also acquired a 40 % interest in KWK-tec GmbH (Mendig). KWK-tec GmbH has been a close partner of 2G for many years and, with its 25 employees, specializes in service, complex conversion measures for CHP systems, and CHP control and optimization. The company addresses CHP systems from different manufacturers, thereby enabling access to new customer groups.

2G company portrait
The 2G Energy AG Group is an internationally leading manufacturer of decentralized energy supply systems. With the development, production and technical installation as well as digital grid integration of combined heat and power systems (CHPs), the company offers comprehensive solutions in the growth market for highly efficient CHPs. Aftersales and maintenance services comprise an important additional performance criterion. The product range especially includes CHP modules in the 20 kW and 4,500 kW range for operation utilizing hydrogen, natural gas, biogas, as well as other lean gases. Worldwide, more than 7,000 installed 2G systems in various applications supply electrical and thermal energy to a broad spectrum of customers including companies in the housing industry, agriculture, commercial and industrial companies, public energy utilities, and municipal and local government authorities.

2G benefits from global long-term trends that make efficient and decentralized energy solutions ever more important. These trends include not only rising energy demand but also the need to conserve natural resources. The parallel generation of electrical and thermal energy makes CHP technology more efficient and climate-compatible than conventional energy coversion methods, especially when, for example, hydrogen of regenerative origin is harnessed as fuel. 2G power plants can offset wind and solar power plant production fluctuations as required, thereby forming a backbone technology for future supply concepts, especially in the deployment of hydrogen engines. 2G's customers thereby derive consistent benefits from economically and ecologically highly beneficial innovations that rapidly pay for themselves and create extensive added values.

2G is consistently expanding its technological leadership through continuous research and development work, both in gas engine technology for hydrogen, natural gas and biogas applications, as well as in specific software development. Moreover, in the energy revolution's future electricity market design, the digitalization that 2G consistently implements forms an indispensable system-relevant element in combination with solar, wind, biogas and natural gas producers, and establishes a high barrier to market entry for competitors.

2G employs around 750 staff at its headquarters in Heek, Germany, in North America, as well as at five other European locations. The company is active in more than 50 countries and generated net sales of EUR 266 million in the 2021 financial year. 2G was founded in 1995 and has been listed on the stock market since 2007. The shares of 2G Energy (ISIN DE000A0HL8N9) are listed in the "Scale" segment of the Frankfurt Stock Exchange.

2022 calendar dates
April 6-7            Metzler Micro Cap Days
April 21             Consolidated financial statements for FY 2021
May 19              Q1 key figures and business trends
May 23-25         Spring Conference, Frankfurt
June 3               Ordinary AGM, Ahaus
September 5     Consolidated financial statements for H1 2022
September 5-6       Autumn Conference, Frankfurt
November 21         Q3 key figures and business trends
November 28-30    German Equity Conference, Frankfurt

IR contact
2G Energy AG
Benzstrasse 3, 48619 Heek
Phone: +49 (0) 2568 93 47-2795
Fax: +49 (0) 2568 93 47-15
Email: ir@2-g.de
Internet: www.2-g.de