Avantium First Half 2019 Results:

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Overig advies 20/08/2019 07:38
AMSTERDAM, 20 August 2019, 07:00 CET - Avantium N.V. (Euronext Amsterdam and Brussels: AVTX), a leading technology development company and forerunner in renewable chemistry, today reports its 2019 half year results.
Key Business Developments in the First Half of 2019:
? Avantium Renewable Polymers (formerly known as Synvina) was successfully integrated within Avantium, leading to a revised Scale-up and Market Launch Strategy:
o Intention to build a cash-flow positive flagship plant to start up in 2023 with a planned annual capacity of 5 kilotons of FDCA and PEF
o The design of a flagship plant has commenced with leading engineering services company Worley (formerly Jacobs Engineering) commissioned to execute the detailed pre-engineering studies
o Site selection in northwestern continental Europe is to be completed in the second half of 2019
o The most advanced technologies of Avantium Renewable Chemistries – Mekong and Dawn™ – are progressing towards commercialization:
o Avantium secured €3 million in European Union grants for its Mekong and Dawn™ Technologies
o The opening of the Mekong demonstration plant is scheduled for November 2019 in Delfzijl, the Netherlands

Key Financial Developments in the First Half of 2019:
. The cash position was €53.1 million at 30 June 2019 (31 December 2018: €83.3 million). The cash outflow in the first half of 2019 is mainly attributable to regaining full ownership of Renewable Polymers (€ 17.4 million) and investments in our Mekong demonstration plant (€3.1 million) in line with our strategic plan
. Total adjusted EBITDA decreased in line with plan to € -8.8 million in the first half of 2019 (€ -1.3 million in the corresponding period of 2018), mainly due to inclusion of Avantium Renewable Polymers as an Avantium business unit (€ -4.3 million) and investments in building the Mekong demonstration plant (€ -3.1 million)
. Consolidated first half 2019 revenues decreased by €1.2 million to €5.2 million (HY 2018: €6.4 million) mainly due to timing of Catalysis order intake – higher revenues in the first half of 2018 and new contracts negotiated towards the end of the first half of 2019 caused a shift in revenues, which was partly mitigated by Avantium Renewable Chemistries and Avantium Renewable Polymers revenue in HY 2019

? Operating expenses increased to €17.4 million (HY 2018: €9.9 million) due to the acquisition of 100% ownership of Synvina and its incorporation into Avantium’s cost base as Avantium Renewable Polymers
Tom van Aken, Chief Executive Officer of Avantium, comments: “The year started with the acquisition of 100% ownership of the Synvina joint venture, a review of the company strategy and technology portfolio and financing going forward. Our focus is on those technologies with the highest value potential. Our plant-to-plastics YXY technology to produce FDCA and PEF is progressing towards commercialization with leading engineering services company Worley conducting detailed pre-engineering studies for a 5 kilotons flagship plant. Our focus remains on delivering the milestones on our journey towards opening this flagship plant in 2023. Avantium aims to secure funding and make the investment decision for construction of this flagship by the end of 2020.
The Renewable Chemistries business unit is focused on progressing our partnership opportunities along with opening the Mekong demonstration plant in November 2019 and successfully operating the Dawn™ pilot biorefinery. I am pleased that we have been awarded €3 million in EU grants for our Mekong and Dawn™ technologies. This support is a strong signal for continuing our work to create and commercialize sustainable chemistry technology solutions.”

Operational Developments
Avantium Renewable Polymers (formerly known as Synvina) – Changing the Nature of Plastics
Avantium’s YXY plants-to-plastics Technology catalytically converts plant-based sugars into FDCA (furandicarboxylic acid) and materials such as the new plant-based packaging material PEF (polyethylene furanoate). Avantium has successfully demonstrated its YXY Technology at its pilot plant in Geleen, the Netherlands.
In January 2019, Avantium has retaken full ownership of its YXY Technology through the purchase of BASF’s shares in the Synvina joint venture. Avantium paid BASF €17.4 million, with the transfer taking place on 25 January 2019. Synvina became a business unit of Avantium, alongside the Catalysis and Renewable Chemistries business units. Avantium appointed Marcel Lubben Managing Director of the new business unit with a mandate to lead the commercialization of the YXY technology. In June 2019, the Synvina business unit was renamed Avantium Renewable Polymers.
After taking full ownership of the YXY Technology, Avantium has explored different scenarios with potential partners and customers to redefine the commercialization strategy of PEF that meets both market and capital requirements. This has led to a revised scale-up and market launch strategy that Avantium outlined at its Technology & Markets Day for investors and other stakeholder on 6 June 2019. Avantium intends to build a cash-flow positive flagship plant with a planned annual capacity of 5 kilotons of FDCA (built, owned and operated by Avantium) and 5 kilotons of PEF (produced in partnerships).
Engineering company Worley (formerly known as Jacobs Engineering) has started detailed pre-engineering studies for the intended FDCA flagship plant slated for a 2023 start-up. Site selection in northwestern continental Europe is aimed to be completed in the second half of 2019. Avantium expects to need €150 million (± 20% contingency) for the flagship plant, consisting of CAPEX (ISBL + OSBL), start-up costs, working capital and ongoing Renewable Polymers expenses until cash-flow positive (2019-2023). Avantium aims to have funding (national and regional grants, bank loans, own resources and resources from strategic partners) in place before the end of 2020. Avantium intends to make an investment decision for the construction of the flagship plant by the end of 2020.
The plant will produce products for high-value markets and performance applications. This includes specialty films that can be used in electronics and displays (LCD/OLED), PEF-enhanced bottles for premium beverages and cosmetics, and plant-based recycle-ready or recyclable flexible packaging. Avantium announced in April 2019 that it has produced the first plant-based pouches using its biaxially oriented polyethylene furanoate (BOPEF) film. Avantium has jointly developed BOPEF film together with Japan’s leading manufacturer Toyobo. The pouches consist of a two-layer laminate of BOPEF and a plant-based polyethylene (PE) sealing layer. The pouches are suitable for dry and liquid products, such as such as cheese & dairy, dry snacks, sauces and cosmetics. Avantium and Toyobo continue to find new features of BOPEF film for various applications.
In its launch strategy, Avantium particularly focuses on value chain partnerships: feedstock providers, future licensees, polymer converters and consumer brands. Discussions between Renewable Polymers and potential customers are progressing. Amongst them are both niche users that require PEF’s unique features, and premium first movers in larger markets.
Revenues of €0.2 million were realized from joint development and material transfer agreements.
Avantium Renewable Chemistries
The Renewable Chemistries business unit continues its focus on developing innovative chemistry technologies that utilize renewable sources of carbon instead of fossil carbon. The technologies enable the production of chemical building blocks and plastic materials. Significant progress has been made in the three lead programs of Avantium Renewable Chemistries in an effort to accelerate the transition to a fossil-free world. In the first half year of 2019, the revenues from collaboration agreements more than doubled to €0.5 million (HY 2018: €0.2 million).
Mekong Technology
Avantium’s proprietary Mekong Technology converts glucose into plant-based mono-ethylene glycol (MEG). This is a major drop-in component used in the production of many materials, including polyesters. Avantium will officially open a demonstration plant for its Mekong technology in Delfzijl, the Netherlands in November 2019. This demonstration plant is a pre-commercial facility with a nameplate capacity of 10 tons of plant-based MEG per year. In August, the demonstration plant will be delivered fully assembled and ready for commissioning to Avantium’s site at the Chemiepark in Delfzijl from engineering partner Zeton in Enschede, the Netherlands.
The opening of the demonstration plant is a major step forward in commercializing the Mekong technology in that Avantium will scale from lab to a size that mimics the conditions at a commercial-scale plant. Based on the results of the demonstration plant, Avantium will be able to validate the technical performance and refine the economic opportunity. If testing on demonstration plant scale is successful, Avantium intends to make an investment decision regarding a possible commercial-scale flagship plant in 2022.
In the first half of 2019, Avantium progressed its partnership opportunities to bring Mekong to full-scale commercialization by signing several collaboration agreements around the globe.
In March 2019, Avantium received a €2.0 million grant from the European Regional Development Fund, facilitated by Partnership Northern Netherlands (Samenwerkingsverband Noord-Nederland). This grant aims to accelerate innovation in the quest for a low-carbon economy.
In June 2019, Avantium announced that it has been awarded €1.3 million for both its Dawn™ and Mekong Technologies from the Bio Based Industries Joint Undertaking (BBI JU) under the European Union’s Horizon 2020 Research and Innovation Program. This commits Avantium to participate in the VEHICLE consortium whose members aim to widen the business and market opportunities of existing and future biorefineries by demonstrating the applicability of their sugar streams in several downstream options. The role of Avantium in VEHICLE is to provide sugar streams from non-food feedstock over a 4-year program. This sugar is produced in the Dawn™ pilot biorefinery in Delfzijl, the Netherlands. Avantium will also convert industrial sugars from the consortium partners (including the sugars from Avantium’s Dawn™ pilot biorefinery) into plant-based mono-ethylene glycol (MEG) through its Mekong Technology.
Dawn Technology™ - The Future of Biorefining
Avantium’s proprietary Dawn Technology™ produces industrial sugars and lignin from forestry residues in its pilot biorefinery in Delfzijl. These sugars are an excellent raw material for chemistry and fermentation processes to produce a broad range of chemicals and materials. The lignin is energy dense and ideal for energy generation as well as other higher value applications like asphalt. With proven technical and economic feasibility, the pilot biorefinery is the prelude to a commercial-scale flagship plant. The investment decision regarding a possible Dawn flagship plant is expected by 2021.
Dawn™ is a feedstock flexible technology which means that future biorefineries can use its own locally sourced non-food biomass like forestry and agricultural residues. Avantium aims to globally deploy the technology via licenses and is steadily progressing its partnership opportunities around the world.
Volta Technology
Avantium’s Volta program is a platform technology that uses electrochemistry to convert CO2 to higher value products and chemical building blocks. The Volta team is currently scaling up from lab scale towards pre-pilot installations. The first units aim to capture CO2 from the atmosphere and are part of consortia where Avantium will operate the units at the Prodock building in the Port of Amsterdam.
Avantium actively participates in industry associations and currently cooperates with over 35 partners in European grant consortia, providing the company with over €5 million in grants.

Avantium Catalysis - Tomorrow’s Catalysis Today
Avantium Catalysis provides advanced catalysis testing systems and contract R&D. The Contract R&D business offers the execution of in-house customized contract research projects. The Systems business comprises Avantium’s unique and advanced Flowrence high-throughput catalyst testing systems, which are tailored to accelerate catalyst screening and to study catalyst deactivation.
Avantium Catalysis has developed a strong, international customer base, including several industry leaders. In May 2019, Shell renewed its long-running partnership with Avantium Catalysis for four additional years for the execution of catalyst testing programs with Avantium’s Flowrence technology platform. In June 2019, Avantium decided to significantly expand its capacity to test commercial catalysts for hydrotreating and hydrocracking applications, to serve the strong demand for its independent refinery catalyst testing services.
In the first half of 2019, Avantium Catalysis further enhanced its presence in the growing Asian Systems market with the progress of several projects destined for China, new orders in Japan, and the first ever order in South Korea.
Avantium Catalysis recorded lower revenues of €4.6 million in the first half of 2019 (HY 2018: € 6.2 million) due to the later than anticipated signing of several sales transactions in 2018. New sales in the first half of 2019 totals € 7 million.
Financial results
Consolidated Statement of Comprehensive Income and Segment Reporting
Consolidated first half year revenues decreased 19% from €6.4 million in 2018 to €5.2 million in 2019 driven by later than anticipated signing of contracts in the Catalysis business unit, partly mitigated by higher revenues in Renewable Chemistries and Renewable Polymers.
In the first half of 2019, operating expenses increased to €17.4 million (HY 2018: € 9.9 million) mainly due to the incorporation of Renewable Polymers into Avantium’s cost base following the 100% acquisition. Employee benefit expenses increased to €8.0 million mainly due to the full Renewable Polymers costs in P&L. The increase in depreciation, amortization and impairment charges of €2.9 million (HY 2018: €0.7 million) mainly reflects the new IFRS 16 accounting standard implementation which all lease liabilities moving to the balance sheet.
Net result for the first half year of 2019 amounts to € -12.6 million (HY 2018: € -6.5 million).
Total Adjusted EBITDA declined from € -1.3 million in the first half of 2018 to € -8.8 million in 2019. The Adjusted EBITDA of Catalysis declined as a result of decreased revenues. The lower Adjusted EBITDA of Renewable Chemistries is mainly due to investments in the Mekong demonstration plant. Renewable Polymers, with an Adjusted EBITDA of € -4.3 million, is a new business unit in Avantium following 100% ownership in January 2019. This can be compared to the 49% share in the results of the joint venture in the first half of 2018, being € -3.1 million.
Balance Sheet and Financial Position
Balance sheet total decreased to €101.3 million (31 December 2018: €113.9 million) with net equity of €78.9 million. The decrease is mainly due to the 100% acquisition of Synvina and Avantium’s investments in the Renewable Chemistries and Renewable Polymers programs. Cash and cash equivalents amounted to € 53.1 million in the first half of 2019 (31 December 2018: €83.3 million).
The first half of 2019 was in line with expectations with revenues in Avantium Catalysis being below expectations. Avantium still aims to deliver top-line growth in Catalysis in the mid-to-high single-digit range. For Avantium Renewable Polymers, Avantium intends to complete the site selection of the location for the 5Kta plant in the second half of 2019. The Renewable Chemistries business unit will open the new Mekong demonstration plant in Delfzijl in November 2019.
Overall, Avantium remains confident to deliver on the strategic objectives.
Management Board Composition
In July 2019, Avantium announced that Frank Roerink, Chief Financial Officer and member of the Management Board, will leave Avantium at the end of 2019. He will continue to fulfill his responsibilities for the remainder of the year allowing Avantium to look for a successor in parallel.

Supervisory Board Composition
During the Annual General Meeting of Shareholders (AGM) held on 15 May 2019, the shareholders approved the appointment of Rob van Leen as member of the Supervisory Board for a term of four years. In addition, the AGM reappointed Denis Lucquin as member of the Supervisory Board for a term of two years. In this same meeting, Jonathan Wolfson and Gabrielle Reijnen stepped down and were discharged from liability for the performance of their duties as members of the Supervisory Board. The Supervisory Board now consists of: Kees Verhaar (chairman), Margret Kleinsman, Denis Lucquin and Rob van Leen. The Supervisory Board has started the selection process for a fifth Supervisory Board member.
Auditor’s Involvement
This Interim Report for the six months ended 30 June 2019, and the Condensed consolidated financial statements included herein have not been audited or reviewed by an external auditor.

The management team of Avantium has regularly reviewed the risk profile of the company in the first half of 2019 and will continue to do so throughout the rest of the year. For those risks deemed material, comprehensive mitigation action plans are developed and reviewed by the management team. The outcome of the company’s risk management process is shared and discussed with the audit committee of the Supervisory Board and with the Supervisory Board.
The risks as outlined in the risk management paragraph of the Avantium N.V. 2018 annual report remain and continue to require focused and decisive attention in the second half of 2019. Note that the specific risks in Renewable Polymers were thoroughly reviewed and included in the 2018 annual report published on 27 March 2019 (‘post-RNP-acquisition’). No new risks were identified in the first half of 2019. It should be noted that no matter how good a risk management and control system is, it cannot be assumed to be exhaustive nor can it provide certainty that it will prevent negative developments in Avantium’s business and business environment from occurring or that mitigation actions are fully effective. It is important to note that new risks could be identified that are not known currently.
Executive board compliance statement
The executive board of Avantium N.V. declares that, to the best of their knowledge, the condensed consolidated financial statements give a true and fair view of the assets, liabilities, financial position and the result of Avantium N.V. and its subsidiaries included in the condensed consolidated financial statements and the interim report includes a fair review of the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).
Amsterdam, 20 August 2019

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