Neste Corporation
Interim Report
5 August 2015 at 9 am. (EET)
Neste's Interim Report for
January-June 2015
Continuing strong refining market enabled good
result despite the scheduled major turnaround at the Porvoo
refinery
Second quarter in brief:
-
Comparable operating profit totaled EUR 78
million (Q2/2014: EUR 86 million)
-
Negative impact of the Porvoo refinery
turnaround on comparable operating profit was EUR 130 million
-
Total refining margin was USD 10.83/bbl
(Q2/2014: USD 8.33/bbl)
-
Renewable Products' comparable sales margin was
USD 210/ton (Q2/2014: USD 200/ton)
-
Net cash from operations totaled EUR 227 million
(Q2/2014: EUR 219 million)
January-June in brief:
-
Comparable operating profit totaled EUR 293
million (1-6/2014: EUR 136 million)
-
Return on average capital employed (ROACE) was
12.5% over the last 12 months (2014: 10.1%)
-
Leverage ratio was 40.3% as of the end of June
(31.12.2014: 37.9%)
-
Comparable earnings per share: EUR 0.80
(1-6/2014: EUR 0.30)
President & CEO Matti
Lievonen:
"The second quarter was characterized by a strong
refining margin environment, and the major turnaround at our Porvoo
refinery. Neste recorded a comparable operating profit of EUR 78
million during the second quarter, compared to the EUR 86 million
during the corresponding period last year. As announced on 16 June,
the turnaround had a negative impact of approximately EUR 130
million on comparable operating profit.
Oil Products generated a comparable operating
profit of EUR 14 million (EUR 33 million) during the second
quarter. Neste's reference margin averaged USD 8.7/bbl, which was
more than double that in the same period last year. Gasoline
margins continued particularly high, supported by global demand
growth and the summer driving season. The maintenance turnaround
implemented during the second quarter was the largest in the
history of the Porvoo refinery. It has now been successfully
completed and will help ensure the refinery's performance and
safety for the next five years.
Renewable Products recorded a comparable operating
profit of EUR 54 million (EUR 32 million) during the second
quarter. Renewable Products' additional margin and a stronger US
dollar had a positive effect on the result compared to the same
period last year. Feedstock optimization continued, and the share
of waste and residue feedstocks reached 67% of total inputs. The
Porvoo turnaround reduced renewable diesel production by more than
10% of total production capacity during the second quarter.
Oil Retail's markets continued competitive, but we
were able to increase profits by higher sales volumes particularly
in the Baltic markets, and improving margins. The segment generated
a comparable operating profit of EUR 22 million, higher than the
EUR 20 million booked in the second quarter of 2014.
Global oil demand growth estimates for 2015 have
been generally upgraded to 1.3-1.5 million bbl/day, and the forward
refining margin outlook for the coming quarters is stronger than
that seen in April. Current crude oil price level promotes oil
product demand, and there seems to be limited upside potential in
oil price.
Our result guidance remains unchanged: Neste
estimates the Group's full-year 2015 comparable operating profit to
remain robust and to be higher than that reached in 2014."
The Group's second-quarter 2015
results
Neste's revenue in the second quarter totaled EUR
2,605 million (EUR 4,104 million). The decrease mainly resulted
from lower sales volumes due to the Porvoo refinery turnaround,
which had an impact of EUR 1.1 billion, and lower sales prices
caused by the oil price decline, which had a negative impact of EUR
0.7 billion. The change in USD/EUR exchange rate had a positive
impact of EUR 0.3 billion on the revenue year-on-year. The Group's
comparable operating profit came in at EUR 78 million (EUR 86
million). Oil Products' result was negatively impacted by the
planned major turnaround at the Porvoo refinery, but positively
impacted by reference refining margins, which were higher than in
the second quarter of 2014. Renewable Products' result improved
mainly due to higher additional margin and a favorable USD/EUR
exchange rate. Oil Retail's result was positively impacted by
higher sales volumes and margins year-on-year. The Others segment
recorded a lower comparable operating profit compared to the second
quarter of 2014.
Oil Products' second-quarter comparable operating
profit was EUR 14 million (33 million), Renewable Products' EUR 54
million (32 million), and Oil Retail's EUR 22 million (20 million).
The comparable operating profit of the Others segment totaled EUR
-14 million (2 million).
The Group's IFRS operating profit was EUR 63
million (70 million), which was impacted by inventory gains
totaling EUR 78 million (2 million), changes in the fair value of
open oil derivatives totaling EUR -91 million (-18 million), mainly
related to hedging of inventories, and non-recurring items totaling
EUR -3 million (0 million). Pre-tax profit was EUR 52 million (48
million), profit for the period EUR 42 million (39 million), and
earnings per share EUR 0.17 (0.15). The Group's effective tax rate
was 20% (18%).
The Group's January-June 2015
results
Neste's revenue during the first six months
totaled EUR 5,348 million (EUR 7,613 million). The decrease mainly
resulted from lower overall sales prices caused by the oil price
decline, which had an impact of EUR 1.9 billion, and lower sales
volumes due to the Porvoo refinery maintenance during the second
quarter, which had a negative impact of EUR 1.1 billion. The change
in USD/EUR exchange rate had a positive impact of EUR 0.7 billion
on the revenue year-on-year. The Group's comparable operating
profit came in at EUR 293 million (EUR 136 million). Oil Products'
result was positively impacted by reference refining margins, which
were clearly higher than during the first half of 2014. However,
the scheduled major turnaround at the Porvoo refinery negatively
impacted the segment's result during the second quarter. Renewable
Products improved as a result of successful margin management,
feedstock optimization and a favorable USD/EUR exchange rate. Oil
Retail's result was positively impacted by increased sales volumes
and margins. The Others segment recorded a lower comparable
operating profit compared to the first half of 2014.
Oil Products' six-month comparable operating
profit was EUR 170 million (65 million), Renewable Products' EUR 96
million (44 million), and Oil Retail's EUR 39 million (34 million).
The comparable operating profit of the Others segment totaled EUR
-11 million (-9 million).
The Group's IFRS operating profit was EUR 296
million (120 million), which was impacted by inventory gains
totaling EUR 2 million (losses of 1 million), changes in the fair
value of open oil derivatives totaling EUR -73 million (-13
million), mainly related to hedging of inventories, and
non-recurring items totaling EUR 74 million (-2 million), mainly
related to the capital gain from the disposal of the Porvoo
electricity grid. Pre-tax profit was EUR 257 million (81 million),
profit for the period EUR 223 million (66 million), and earnings
per share EUR 0.87 (0.25). The Group's effective tax rate was 13%
(20%) mainly due to the tax-exempt items, such as the sale proceeds
of the shares of Kilpilahden Sähkönsiirto Oy, electricity grid
company.
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 growth estimates for 2015 have
been increased and are generally at 1.3-1.5 million bbl/d, as
especially gasoline demand growth has been healthy. The forward
reference refining margin outlook for the coming quarters is
stronger than that seen in April. While the refining capacity
growth in Asia and the Middle East and ending of the refinery
maintenance season are expected to increase product supply, the
transatlantic supply demand balance is also dependent on demand
growth and possible refinery shutdowns. Lifting of the economic
sanctions against Iran could increase the supply of medium heavy
crude oil in the European market in the future.
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. Feedstock prices have been on a
downward trend, but vegetable oil price differentials have remained
narrower than the historical average. Market volatility in
feedstock and oil prices is expected to continue, which will have
an impact on the Renewable Products segment's profitability.
Crude oil price changes, supply and demand
balances, together with uncertainties related to political
decision-making on biofuel mandates, the US Blender's Tax Credit
(BTC) and other incentives will be reflected in the oil and
renewable fuel markets. Reintroduction of the BTC would have a
positive impact on Neste's comparable operating profit, and it is
not included in the company's current result guidance.
Neste's guidance remains unchanged: Neste
estimates the Group's full-year 2015 comparable operating profit to
remain robust and to be higher than that reached 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 second-quarter
2015 results will be held today, 5 August 2015, at 11:30 a.m. EET
at the company's headquarters at Keilaranta 21, Espoo.
www.neste.com will feature English versions of the presentation
materials. A conference call in English for investors and analysts
will be held on 5 August 2015 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 9543, rest of Europe: +44 (0)20 3427 1906, US: +1646 254
3362, using access code 6785568. The conference call can be
followed at the company's web site. An instant replay of the call
will be available until 12 August 2015 at +358(0)9 2310 1650 for
Finland, +44(0)20 3427 0598 for Europe and +1 347 366 9565 for the
US, using access code 6785568.
Neste in brief
Neste is a pioneer in oil refining and renewable
solutions. We provide our customers with premium-quality products
for cleaner traffic and industrial products based on world-class
research. Our sustainable operations have received recognition in
the Dow Jones Sustainability World Index and the Global 100 list of
the world's most sustainable companies, among others. Our net sales
for 2014 amounted to approximately EUR 15 billion, and our shares
are listed on NASDAQ Helsinki. Cleaner traffic, energy and life are
moved forward by about 5,000 professionals. More information:
neste.com/en
Neste interim report Q2
2015
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 Oyj via Globenewswire
HUG#1943713