Neste’s Half-Year Financial Report for January-June 2019
Strong result supported by record sales in Renewable Products
Second quarter in brief:
- Comparable operating profit totaled EUR 367 million (EUR 277 million)
- Operating profit totaled EUR 358 million (EUR 172 million)
- Renewable Products’ comparable sales margin was USD 568/ton (USD 508/ton)
- Oil Products’ total refining margin was USD 9.42/bbl (USD 11.75/bbl)
- Marketing & Services’ comparable operating profit was EUR 25 million (EUR 20 million)
- Cash flow before financing activities was EUR 132 million (EUR 140 million)
January-June in brief:
- Comparable operating profit totaled EUR 746 million (EUR 679 million)
- Operating profit totaled EUR 740 million (EUR 592 million)
- Cash flow before financing activities was EUR 140 million (EUR 373 million)
- Cash-out investments were EUR 189 million (EUR 194 million)
- Return on average capital employed (ROACE) was 21.1% over the last 12 months (2018: 21.1%)
- Leverage ratio was 5.7% at the end of June (31.12.2018: -1.5%)
- Comparable earnings per share: EUR 0.77 (EUR 0.72)
- Earnings per share: EUR 0.76 (EUR 0.63)
President and CEO Peter Vanacker:
“Neste’s solid financial performance continued. We posted a comparable operating profit of EUR 367 million in the second quarter, compared to EUR 277 million in the corresponding period last year. Renewable Products’ quarterly sales and production volumes were the highest ever. Oil Products’ comparable operating profit was lower than in the second quarter of 2018, mainly due to a less supportive market. Marketing & Services improved its performance, and the segment’s comparable operating profit was the highest ever second-quarter result. Neste reached a ROACE of 21.1% over the last 12 months, and had a leverage ratio of 5.7% at the end of June.
Renewable Products posted a comparable operating profit of EUR 286 million (EUR 177 million). The renewable diesel market continued to be favorable, but feedstock prices increased as communicated earlier. Our sales volumes were 745,000 tons, and this new quarterly record was also supported by the excellent operational performance at the refineries. The higher sales volume had a positive impact of EUR 79 million on the comparable operating profit year-on-year. The comparable sales margin averaged at USD 568/ton, which was 12% higher compared to the corresponding period last year, leading to a positive impact of EUR 32 million on the operating profit. During the second quarter 65% of volumes were sold to the European markets and 35% to North America. During the quarter our renewable diesel production facilities operated at a very high average utilization rate of 105%, based on the nominal capacity of 2.9 Mton/a.
The share of waste and residues was 77% of the total renewable raw material inputs.
Oil Products posted a comparable operating profit of EUR 83 million (EUR 92 million) in the second quarter. The reference margin continued to be impacted by a weak product market and a narrow Urals-Brent price differential. The lower reference margin had a negative impact of EUR 18 million on the comparable operating profit year-on-year. Compared to the second quarter of 2018, Oil Products’ additional margin was burdened by a lower currency hedging result, higher utility costs and the narrow Urals-Brent price differential, and it averaged at USD 3.4/bbl.
A stronger US dollar rate improved the comparable operating profit by EUR 14 million year-on-year. Sales volumes were higher and had a positive impact of EUR 19 million on the comparable operating profit compared to the corresponding period 2018.
Marketing & Services posted a comparable operating profit of EUR 25 million (EUR 20 million) in the second quarter. It was the best ever second-quarter performance for the segment, mainly as a result of improved unit margins.
The Others segment’s comparable operating profit was EUR -28 million (EUR -11 million), mainly due to the weak financial performance of Nynas. Nynas continues to struggle with crude oil supply problems caused by the US sanctions against Venezuela.
We are making good progress in our strategy execution. The Singapore renewable production capacity expansion is proceeding as planned. The first commercial deliveries of renewable jet fuel and renewable polymers have taken place, and we expect sales volumes in these markets to slowly ramp up. We also continue to focus on our Operational Excellence program with a target to achieve at least EUR 100 million profit improvements by the end of 2022. Recruitment of the key people is ongoing, and we have nominated Ms. Mercedes Alonso as the new Executive Committee member responsible for Renewable Polymers and Chemicals.
Neste targets to become a global leader in renewable and circular solutions. In order to focus on our strategic priorities, we have agreed to divest our Russian fuel retail business to PJSC Tatneft. We have also agreed to create a strategic partnership with engineering consultancy services company Rejlers, which will strengthen the delivery capability and improve the focus of Neste Engineering Solutions (NES). As part of the partnership agreement, Rejlers will acquire the Regional Business Unit of NES. The divestments are subject to normal regulatory approvals.”
Source / More : Neste Corporation, Half-Year Financial Report
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