Neste Announce Interim Report for January-June 2016
Strong performance continued – high operating profit and cash flow
Second quarter in brief:
• Comparable operating profit totaled EUR 282 million (Q2/2015: EUR 78 million)
• IFRS operating profit totaled EUR 280 million (Q2/2015: 63 million)
• Oil Products’ total refining margin was USD 11.19/bbl (Q2/2015: USD 10.83/bbl)
• Renewable Products’ comparable sales margin was USD 405/ton (Q2/2015: USD 210/ton)
• Cash flow before financing activities was EUR 346 million (Q2/2015: EUR 14 million)
January-June in brief:
• Comparable operating profit totaled EUR 457 million (1-6/2015: EUR 293 million)
• IFRS operating profit totaled EUR 534 million (1-6/2015: EUR 296 million)
• Cash flow before financing activities was EUR 420 million (1-6/2015: EUR -69 million)
• Return on average capital employed (ROACE) was 19.1% over the last 12 months (2015: 16.3%)
• Leverage ratio was 25.2% at the end of June (31.12.2015: 29.4%)
• Comparable earnings per share: EUR 1.41 (1-6/2015: EUR 0.80)
• Earnings per share: EUR 1.67 (1-6/2015: EUR 0.87)
President & CEO Matti Lievonen, Commented:
“Neste’s strong performance continued as we were able to improve our result by successful own actions, which were reflected in high additional margins. The reference margin in Oil Products was below last year’s level, but almost at par in Renewable Products. Neste recorded a comparable operating profit of EUR 282 million during the second quarter, compared to EUR 78 million last year, which was impacted by a scheduled major turnaround at the Porvoo refinery.
Oil Products generated a comparable operating profit of EUR 149 million (EUR 14 million) during the second quarter. Reference margin averaged USD 5.6/bbl, which was USD 3.1/bbl lower than in the same period last year. Although gasoline margins softened during the quarter, gasoline continued as the strongest part of the barrel. Diesel margins recovered during the quarter as refiners shifted to maximize gasoline production. Good operational performance and favorable sales structure enabled maintaining high additional margin at USD 5.6/bbl.
Renewable Products recorded a comparable operating profit of EUR 119 million (EUR 54 million) during the second quarter. Renewable Products’ reference margin remained almost at the same level as in the corresponding period last year. We continued to be able to increase our additional margin significantly by successful margin management, sales allocation, and by capturing a high share of the US Blender’s Tax Credit. Feedstock optimization continued, and the share of waste and residue feedstocks reached 93% of total inputs during the second quarter.
The major turnaround at the Rotterdam refinery has now been successfully completed and will help ensure the refinery’s performance and safety during the coming years. The turnaround had a EUR 35 million negative impact on the operating profit.
Oil Retail’s markets continued supportive, and we were able to increase profits by higher sales volumes particularly in the Baltic markets. The segment generated a comparable operating profit of EUR 23 million, higher than the EUR 22 million recorded in the second quarter of 2015.
Crude oil and renewable feedstock price changes, as well as demand balances, will be reflected in the oil and renewable fuel markets. Relatively low crude oil prices are expected to continue supporting product demand. Neste expects Oil Products’ reference margin to be somewhat lower in the second half of 2016 than in the first half of the year, as global product inventories are currently on a high level. The Porvoo refinery is expected to run at high utilization rate with no major maintenance shutdowns scheduled.
Renewable Products’ reference margin is expected to remain at approximately the average level of the year 2015, and the additional margin is expected to remain strong. Utilization rates of our renewable diesel production facilities are expected to be high.
In Oil Retail the sales volumes and unit margins are expected to follow the previous years’ seasonality pattern.
The year has continued well, and we are confident that the year 2016 will be another successful one for Neste.”
The Group’s second-quarter 2016 results
Neste’s revenue in the second quarter totaled EUR 2,927 million (EUR 2,605 million). The increase mainly resulted from higher sales volumes compared to the second quarter of 2015, which was impacted by the major turnaround at the Porvoo refinery.
The revenue growth was negatively impacted by lower overall sales prices caused by the oil price decline year-on-year.
The Group’s comparable operating profit totaled EUR 282 million (EUR 78 million).
Oil Products’ result was negatively impacted by lower reference margin, but that was compensated by higher additional margin and higher sales volumes in an operationally sound quarter. Renewable Products’ result improved mainly due to a significantly higher additional margin despite the major turnaround implemented at the Rotterdam refinery.
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