Neste’s Interim Report for January-September 2019

Neste’s revenue in the third quarter totaled EUR 3,961 million (3,884 million). The revenue increase mainly resulted from higher sales volumes. The Group’s comparable operating profit was EUR 435 million (395 million). Renewable Products’ comparable operating profit was higher than in the third quarter of 2018, mainly as a result of higher sales volumes.

Oil Products’ result was lower than in the third quarter of 2018, mainly due to lower sales volumes and additional margin. Marketing & Services’ higher unit margins drove improvement in the segment’s comparable operating profit year-on-year. The Others segment’s comparable operating profit was still weaker than in the corresponding period of 2018, mainly due to the poor performance of Nynas, which was caused by the impacts of the US sanctions on the company’s business.

Renewable Products’ third quarter comparable operating profit was EUR 305 million (228 million), Oil Products’ EUR 113 million (146 million), and Marketing & Services’ EUR 28 million (24 million). The comparable operating profit of the Others segment totaled EUR -13 million (-4 million); Nynas’ net profit accounted for EUR -8 million (-3 million) of this figure.

The Group’s operating profit was EUR 444 million (250 million), which was impacted by inventory valuation losses of EUR 13 million (8 million), and changes in the fair value of open commodity and currency derivatives totaling EUR 54 million (-49 million), mainly related to margin hedging. As a result of normal impairment testing, we booked an asset writedown of EUR 34 million regarding our shareholding in Nynas AB. Our Nynas shareholding is now fully written off. Profit before income taxes was EUR 343 million (229 million), and net profit EUR 269 million (168 million). Comparable earnings per share were EUR 0.35 (0.40), and earnings per share EUR 0.35 (0.22).

Third quarter in brief:

Comparable operating profit totaled EUR 435 million (EUR 395 million)
Operating profit totaled EUR 444 million (EUR 250 million)
Renewable Products’ comparable sales margin was USD 635/ton (USD 645/ton)
Oil Products’ total refining margin was USD 12.07/bbl (USD 12.41/bbl)
Marketing & Services’ comparable operating profit was EUR 28 million (EUR 24 million)
Cash flow before financing activities was EUR 71 million (EUR 108 million)
January-September in brief:

Comparable operating profit totaled EUR 1,181 million (EUR 1,073 million)
Operating profit totaled EUR 1,184 million (EUR 842 million)
Cash flow before financing activities was EUR 211 million (EUR 481 million)
Cash-out investments were EUR 346 million (EUR 285 million)
Return on average capital employed (ROACE) was 21.0% over the last 12 months (2018: 21.1%)
Leverage ratio was 6.6% at the end of September (31 Dec 2018: -1.5%)
Comparable earnings per share: EUR 1.12 (EUR 1.12)
Earnings per share: EUR 1.11 (EUR 0.85)

President and CEO Peter Vanacker:

“Neste had an excellent financial performance in the third quarter. We posted a comparable operating profit of EUR 435 million (EUR 395 million), which was the highest quarterly result ever. Renewable Products improved its sales margin compared to the previous quarter, and sales volumes were at a high level. Oil Products’ comparable operating profit was solid despite the maintenance activities implemented in the third quarter. Marketing & Services had one of their best quarterly performances ever. Neste reached a ROACE of 21.0% over the last 12 months, and had a leverage ratio of 6.6% at the end of September.

Renewable Products posted a comparable operating profit of EUR 305 million (EUR 228 million) in the third quarter. The renewable diesel market continued to be favorable, but feedstock markets remained tight. Our sales optimization worked well and sales volumes were 716,000 tons, which was more than 30% higher than in the corresponding period last year. The comparable sales margin averaged at USD 635/ton, which was up 12% from the second quarter, and almost at the level of the corresponding period last year. During the third quarter, our renewable diesel production facilities operated at a high average utilization rate of 101%. The share of waste and residues was 81% of the total renewable raw material inputs.

Oil Products posted a comparable operating profit of EUR 113 million (EUR 146 million) in the third quarter. The reference margin, reflecting the general market conditions, improved towards the end of the quarter. The reference margin averaged at USD 7.3/bbl, slightly higher than in the corresponding period last year. The planned decoking maintenance at the Porvoo refinery Production Line 4 was brought forward and implemented in September. The maintenance activities had a negative impact on additional margin and sales volumes, which were lower than in the third quarter of 2018. A stronger US dollar rate improved the comparable operating profit year-on-year.

Marketing & Services posted a comparable operating profit of EUR 28 million (EUR 24 million) in the third quarter, which was one of the highest quarterly results ever. The segment was again able to improve its unit margins from the corresponding period last year.

The Others segment’s comparable operating profit was EUR -13 million (EUR -4 million), mainly due to the weak financial performance of Nynas. Nynas continued to struggle with crude oil supply problems caused by the US sanctions against Venezuela.

We continued to make good progress in our strategy execution. The Singapore renewables production capacity expansion is proceeding as planned. We opened an office in Shanghai and started renewable raw material sourcing operations in China. The first certified volumes of used cooking oil from China have been successfully procured. New sales agreements for renewable jet fuel have been signed with Lufthansa and other major airlines. Recruitment of key people proceeded, and Thorsten Lange was appointed as the new Executive Committee member responsible for Renewable Aviation business unit. We also continued to focus on our Operational Excellence program with expected operating profit impact on target.”

Source / More : Neste

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