Neste Oil Corporation
Interim Report
25 April 2014 at 9 a.m. (EET)
Neste Oil's Interim Report
for January-March 2014
Satisfactory performance in
a weak market. Full-year guidance revised.
First quarter in brief:
· Comparable operating profit totaled EUR 55
million (Q1/2013: EUR 135 million)
· Total refining margin was USD 8.44/bbl (Q1/2013: USD
11.54/bbl)
· Renewable Fuels' reference margin was USD 206/ton (Q1/2013:
USD 365/ton)
· Renewable Fuels' additional margin was USD 146/ton (Q1/2013:
USD 66/ton)
· Net cash from operations totaled EUR -178 million (Q1/2013:
EUR -105 million)
· Return on average capital employed (ROACE) was 10.7% (2013:
11.8%)
· Leverage ratio was 34.2% as of the end of March (31.12.2013:
30.0%)
President & CEO Matti
Lievonen:
"The year started with a weak market situation,
but Neste Oil's good operational performance has continued,
resulting in reasonable additional margins for the Oil Products and
Renewable Fuels businesses. We recorded a comparable operating
profit of EUR 55 million during the first quarter compared to EUR
135 million in the corresponding period last year. The main reason
for this decline was an approx. 45% reduction in reference margins
at both Oil Products and Renewable Fuels.
Oil Products' reference refining margin was
seasonally low during the first quarter, and European demand for
petroleum products remained soft and imports continued at high
levels. The reference margin averaged USD 3.3/bbl compared to USD
6.3/bbl in the first quarter of 2013, which was unusually strong
for the early part of the year. Oil Products' result was also
impacted by the planned five-week maintenance outage on production
line 4 at Porvoo. Despite the outage, our additional margin
averaged USD 5.1/bbl. Oil Products recorded a comparable operating
profit of EUR 33 million compared to EUR 111 million in the first
quarter of 2013.
Renewable Fuels encountered a difficult market
situation, particularly in the US, where uncertainties related to
biofuel regulation had a negative impact on prices and demand.
Sales volumes were reallocated accordingly, and the proportion of
product going to North America was reduced to 27%. The
profitability of our European business was impacted by an unusually
narrow price differential between palm oil and rapeseed oil. Our
NEXBTL renewable diesel refineries operated at high utilization
rates, particularly in Singapore and Rotterdam. We increased our
usage of waste and residues to 62% of our total renewable inputs,
which was important as palm oil prices increased. Renewable Fuels
recorded a comparable operating profit of EUR 15 million compared
to EUR 26 million in the first quarter of 2013.
Oil Retail continued its solid performance, with
good margins in all markets. The segment generated a comparable
operating profit of EUR 15 million, an improvement of EUR 4 million
on the EUR 11 million booked in the first quarter of 2013.
First-quarter refining margins and renewable fuels
margins were softer than previously expected. We have revised our
guidance and now expect the Group's full-year comparable operating
profit to be EUR 450 million +/- 10% in 2014. Previously the
full-year operating profit was expected to be at the level of EUR
500 million. Neste Oil's reference refining margin is assumed to
average USD 4.0/bbl during the year compared to the previous
estimate of USD 4.5/bbl. We will also continue our performance
improvement actions to defend good profitability in 2014."
The Group's first-quarter
2014 results
Neste Oil's revenue in the first quarter totaled
EUR 3,654 million (EUR 4,258 million). This decline resulted from
lower sales in Oil Products due to a planned maintenance outage on
production line 4 at Porvoo, and the sale of the retail business in
Poland. The Group's comparable operating profit came in at EUR 55
million. Comparable operating profit for the corresponding period
in 2013 was EUR 135 million. Oil Products' result was negatively
impacted by reference refining margins, which were clearly lower
than in the first quarter of 2013, as well as the planned
maintenance outage at Porvoo. Renewable Fuels' result was lower due
to markedly less favorable markets, particularly in the US, and
higher palm oil prices. Oil Retail's performance continued to be
strong and was better than that during the corresponding period in
2013. Oil Retail's result was positively impacted by lower fixed
costs due to the disposal of non-core businesses in Poland and
Sweden. The Others segment posted a slightly smaller loss than in
the first quarter of 2013.
Oil Products' first-quarter comparable operating
profit was EUR 33 million (111 million), Renewable Fuels' EUR 15
million (26 million), and Oil Retail's EUR 15 million (11 million).
The comparable operating profit of the Others segment totaled EUR
-10 million (-12 million).
The Group's IFRS operating profit was EUR 55
million (86 million), which was impacted by inventory gains
totaling EUR 3 million (losses of 35 million) and changes in the
fair value of open oil derivatives totaling EUR -5 million (-14
million). Pre-tax profit was EUR 38 million (65 million), profit
for the period EUR 31 million (47 million), and earnings per share
EUR 0.12 (0.18).
Outlook
Developments in the global economy have been
reflected in the oil, renewable fuel, and renewable feedstock
markets, and volatility in these markets is expected to continue.
Global oil demand is generally anticipated to increase by more than
1 million bbl/d in 2014, but, as in 2013, this growth will be more
than compensated for by new refining capacity in Asia and the
Middle East. This is expected to lead to continued high product
imports from the Middle East and the US into Europe. Diesel is
projected to be the strongest part of the barrel, while gasoline
margins are expected to improve seasonally during the spring and
summer.
Vegetable oil price differentials are expected to
vary, depending on crop outlooks, weather phenomena, and variations
in demand for different feedstocks, but no fundamental changes in
the drivers influencing long term average feedstock price
differentials are expected. Consequently, price differentials are
likely to widen from the current narrow levels during 2014 in both
Europe and North America.
Uncertainties regarding political decision-making
in the US are likely to be reflected in the renewable fuel market.
Examples of pending decisions include volume targets for
biomass-based diesel and the possible reintroduction of the
Blender's Tax Credit (BTC), which both impact the US market.
Reintroduction of the BTC for 2014 and 2015 has made some progress
in the US Congress and would impact Neste Oil's result
positively.
The Singapore NEXBTL refinery is scheduled for a
major turnaround lasting approx. eight weeks during the third and
fourth quarter of 2014.
The Group's investments are expected to total
approx. EUR 300-350 million in 2014.
First-quarter refining margins and renewable fuels
margins were softer than previously expected. Neste Oil has revised
its guidance and now expects the Group's full-year comparable
operating profit to be EUR 450 million +/- 10% in 2014. Previously
the full-year operating profit was expected to be at the level of
EUR 500 million. Neste Oil's reference refining margin is assumed
to average USD 4.0/bbl during the year compared to the previous
estimate of USD 4.5/bbl. Narrow feedstock price differentials are
expected to weaken Renewable Fuels' profitability during the first
half of the year, but should gradually widen thereafter. The
company will also continue its performance improvement actions to
defend good profitability in 2014.
Further
information:
Matti Lievonen, President & CEO, tel. +358 10
458 11
Jyrki Mäki-Kala, CFO, tel. +358 10 458 4098
Investor Relations, tel. +358 10 458 5292
News conference and
conference call
A press conference in Finnish on the first-quarter
results will be held today, 25 April 2014, at 11:30 a.m. EET at the
company's headquarters at Keilaranta 21, Espoo. www.nesteoil.com
will feature English versions of the presentation materials. A
conference call in English for investors and analysts will be held
on 25 April 2014 at 3 p.m. Finland / 1 p.m. London / 8 a.m. New
York. The call-in numbers are as follows: Finland: +358 (0)9 6937
9590, Europe: +44 (0)20 3427 1907, US: +1 212 444 0481, using
access code 5706118. The conference call can be followed at the
company's web site. An instant replay of the call will be available
until 2 May 2014 at +358 (0)9 2310 1650 for Finland at +44 (0)20
3427 0598 for Europe and +1 347 366 9565 for the US, using access
code 5706118#.
Neste Oil in
brief
Neste Oil Corporation is a refining and marketing
company concentrating on low-emission, high-quality traffic fuels.
The company produces a comprehensive range of major petroleum
products and is the world's leading supplier of renewable diesel.
Neste Oil had net sales of EUR 17.5 billion in 2013 and employs
around 5,000 people, and is listed on NASDAQ OMX Helsinki.
Neste Oil is included in the Dow Jones
Sustainability World Index and the Ethibel Pioneer Investment
Register, and has featured in The Global 100 list of the world's
most sustainable corporations for many years. Forest Footprint
Disclosure (FFD) has ranked Neste Oil as one of the best performers
in the oil & gas sector. Further information:
www.nesteoil.com
Neste Oil Interim Report
Q1_2014
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Neste Oil Oyj via Globenewswire
HUG#1779924