Neste Release Financial Statements for 2016
2016 Highlights: • Comparable operating profit totaled EUR 983 million (EUR 925 million) • IFRS operating profit totaled EUR 1,155 million (699 million) • Oil Products’ total refining margin was USD 10.38/bbl (USD 11.79/bbl) • Renewable Products’ comparable sales margin was USD 348/ton (USD 299/ton) • Cash flow before financing activities totaled EUR 834 million (EUR 480 million) • Return on average capital employed (ROACE) was 16.9% (16.3%) • Leverage ratio was 15.4% at the end of December (31.12.2015: 29.4%) • Comparable earnings per share were EUR 3.10 (EUR 2.84) • The Board of Directors will propose a dividend of EUR 1.30 per share (1.00), totaling EUR 332 million (EUR 256 million). President & CEO Matti Lievonen Comments: “Neste had another successful year in 2016, as we posted a comparable operating profit of EUR 983 million compared to EUR 925 million in 2015. For the first time Renewable Products had the largest full-year profit contribution, which reflects the continuing strategic transformation of the company. I am very pleased to note that all business areas improved their result from the previous year. We also generated strong cash flow and further strengthened our balance sheet. All key financial indicators showed improvement, and the return on average capital employed after tax reached 16.9%, which was over the long term target level of 15%. Oil Products posted a comparable operating profit of EUR 453 million (EUR 439 million). Our reference margin averaged USD 4.9/bbl, which was USD 2.9/bbl lower than the exceptionally high level in 2015. Global oil product supply and demand were reasonably balanced, but high product inventories limited the upside on refining margins. Oil Products’ additional margin was increased to USD 5.5/bbl level, which was USD 1.5/bbl higher than in 2015. This resulted from operational performance and successful leveraging of contango opportunities, with sales volumes back on track after the Porvoo refinery turnaround year 2015. Renewable Products recorded a full-year comparable operating profit of EUR 469 million (EUR 402 million). Reference margin and additional margin averaged higher than in 2015. Our sales volumes reached 2.22 million tons, only 2% below the previous year, despite of the scheduled major turnaround implemented at the Rotterdam refinery in the second quarter. A slightly higher share of the sales volume was allocated to the North American market compared to 2015. In the US market the Environmental Protection Agency (EPA) finalized increased volume mandates for biomass-based diesel for 2017 and 2018 in November 2016. Feedstock optimization continued, and the share of waste and residue feedstocks was successfully expanded to 78% of total renewable inputs in 2016. Acquisition of a new feedstock pretreatment facility in the Netherlands will further enhance our capability to process lower quality wastes and residues. In Oil Retail we were able to increase profits by growing sales volumes and improving unit margins particularly in the Baltic markets. The segment continued to improve its performance and generated a full-year comparable operating profit of EUR 90 million (EUR 84 million). Crude oil and renewable feedstock price changes, as well as supply and demand balances, will be reflected in the oil and renewable product markets. Crude oil prices are expected to increase moderately as crude oil supply and demand is expected to become more balanced. Neste expects Oil Products’ reference refining margin to be quite similar to that in 2016 on average. Our Porvoo refinery is expected to run at a high utilization rate as only normal unit maintenances are planned. A major two month turnaround at the Naantali unit is scheduled for the third quarter. We are targeting at least USD 5.5/bbl additional margin after mid-2017 as the ongoing strategic investments are completed. Renewable Products’ reference margin is expected to be at approximately the average level of the year 2016. Neste continues to optimize sales allocation based on the total margin, and we have new attractive markets in Europe. For example, Norway has set a biofuel target in traffic growing from 7.5% in 2017 to 20% in 2020. California continues to be an important market for Neste. Sales volumes of the renewable diesel delivered as 100% to end-users are expected to continue growing from 15% in 2016 to 25% of the total renewable sales volumes in 2017. The vegetable oil market is expected to remain volatile, and we aim to expand the use of lower quality waste and residue feedstock further. The completed acquisition of the new feedstock pretreatment and storage facility in the Netherlands will support this goal. A new nameplate capacity of 2.6 million tons is effective 1 January, 2017, and utilization rates of our renewable diesel facilities are expected to be high. In Oil Retail the sales volumes and unit margins are expected to follow the previous years’ seasonality pattern. Neste will continue to implement its global renewables growth strategy. The demand for renewable products is expected to continue growing globally. Neste’s renewables capacity increase program will include both debottlenecking of the existing production capacity to 3 million tons by 2020, and building of new capacity. We are currently evaluating the feasibility of options to invest in new production capacity.
The options under review include locations in the US and Singapore.
Dividend distribution proposal