In an ad hoc announcement released Friday afternoon, CR Energy (CRE) informed shareholders that the company is expected to file for insolvency in the coming days.

According to the company, the anticipated filing is primarily due to current market developments and the lenders’ unwillingness to further extend working capital loans. Ongoing projects of the company’s subsidiaries are reportedly not affected. In the coming days, management intends to continue discussions with investors regarding the provision of equity or debt capital.

From our perspective, this development comes somewhat unexpectedly, as the company had not been reliant on external financing in recent years, reflected in a strong equity ratio of 97.6% as of H1 2024. Furthermore, according to the H1 report, the company anticipated cash inflows based on profit transfer agreements with its subsidiaries. In H1, these subsidiaries generated a combined net income of € 9.4m. CRE stated that “this amount, along with the profits earned in the second half of the year, will be fully transferred to CR Energy by year-end.”

Given that these profit transfer agreements result in profits and losses being passed on to CRE at year-end, the primary cause of the current situation must have arisen in H2 2024 - since the performance in H1 2025 would not yet impact CRE’s liquidity. This implies a severe deterioration in business performance during the second half of FY 2024. As noted earlier, this turn of events was unexpected by us and consensus.

This impression is further reinforced by the recently published annual report of MPH Healthcare AG - CRE’s majority shareholder (approx. 59%) - which was released last Wednesday (May 28). It stated: “CR Energy expects to maintain the positive development of its operating business throughout 2024. The construction projects are on schedule.” In light of that, CRE's news seems even more surprising to us.

In our view, it appears rather odd that just two days later that very company is putting such news.

That being said, it remains to be seen what will unfold in the coming days and whether management can secure the necessary funding to continue operations. In the meantime, we are suspending our rating for CRE and put the stock UNDER REVIEW.