Neste Oyj — Interim / Quarterly Report 2021

Oct 27, 2021

Neste's Interim Report for January–September 2021

Neste's Interim Report for January–September 2021

Neste Corporation, Interim Report, 27 October 2021 at 9 a.m. (EET)

Strong performance in the third quarter amid significantly higher energy prices

Third quarter in brief:

· Comparable operating profit totaled EUR 368 million (EUR 373 million)
· Operating profit totaled EUR 579 million (EUR 425 million)
· Renewable Products' comparable sales margin was USD 679/ton (USD 744/ton)
· Oil Products' total refining margin was USD 9.4/bbl (USD 5.9/bbl)
· Cash flow before financing activities was EUR 171 million (EUR 315 million)

January-September in brief:

· Comparable operating profit totaled EUR 910 million (EUR 1,036 million)
· Operating profit totaled EUR 1,499 million (EUR 830 million)
· Cash flow before financing activities was EUR -213 million (EUR -51 million)
· Cash-out investments were EUR 1,004 million (EUR 751 million)
· Return on average capital employed (ROACE) was 15.4% over the last 12 months
(2020: 17.3%)
· Leverage ratio was 5.9% at the end of September (31.12.2020: -4.7%)
· Comparable earnings per share: EUR 1.04 (EUR 1.16)
· Earnings per share: EUR 1.71 (EUR 0.92)

President and CEO Peter Vanacker:

“Neste had a strong performance during the third quarter. We posted a comparable
operating profit of EUR 368 million compared to EUR 373 million in the
corresponding period last year. Renewable Products achieved high sales volumes
and was able to maintain a healthy sales margin despite the tight feedstock
market. Oil Products improved its performance as a result of the uplift in
refining margin, which was partly offset by substantially higher utility costs
driven by high gas prices. Marketing & Services performed very well during the
summer period. Our ROACE over the last 12 months was 15.4%, and we had a
leverage ratio of 5.9% at the end of September.

Renewable Products posted a comparable operating profit of EUR 300 million (EUR
352 million) in the third quarter. The renewable diesel demand was robust, and
the feedstock markets remained tight as expected. Our sales volumes increased to
772,000 tons despite the scheduled maintenance at the Singapore refinery, which
was successfully completed slightly ahead of schedule. We were able to maintain
a healthy sales margin at USD 679/ton as a result of successful sales
performance and margin hedging. Feedstock mix optimization continued and the
share of waste and residue inputs was high at 91%.

Oil Products posted a comparable operating profit of EUR 47 million (EUR -1
million) in the third quarter. The global demand continued to recover, but was
still impacted by the COVID-19 pandemic. The reference margin, which reflects
the general market conditions, increased particularly during the latter part of
the quarter. The reference margin increase was partly offset by significantly
higher utility costs, and as there was no particular support from contango
inventory profits, our additional margin was clearly below last year’s third
quarter level. The increased utility costs had a negative impact of EUR 44
million on the segment’s comparable operating profit year-on-year. The cost
savings measures continued to have a positive impact on the results.

Marketing & Services posted a strong comparable operating profit of EUR 25
million (EUR 26 million) in the third quarter despite aviation and marine fuel
demand still being lower. We were able to increase sales volumes while the unit
margins were slightly lower than in the corresponding period last year.

Uncertainty on the further development of the COVID-19 pandemic and its impact
on the global economy continues. In addition, energy costs have increased
substantially. Amid these market turbulences we will continue to focus on our
strategy execution. We gave an update on our achievements, views of market
developments, and new strategic targets at our Capital Markets Day in September.
The Singapore renewables capacity expansion investment project is currently on
schedule for start-up by the end of the first quarter 2023. The EUR 1.5 billion
investment is planned to increase our renewable products capacity by 1.3 million
ton/a, and bring our total production capacity to 4.5 million tons annually. The
new production line will also include optionality to produce up to 1 million
tons/a Sustainable Aviation Fuels (SAF). Together with our Rotterdam SAF
optionality project, we expect to reach SAF production capability of 1.5 million
tons/a by the end of 2023. The project for a possible next worldscale renewables
refinery in Rotterdam is in the engineering phase, and its scope is similar to
the new Singapore unit. We are targeting investment decision readiness in early
2022 to continue to grow our business in renewables. Recently we announced an
agreement to acquire Agri Trading in the US to strengthen our feedstock sourcing
platform, and an agreement to sell our base oils business to Chevron. All of
these actions support our strategy to become a global leader in renewable and
circular solutions."

The Group's third quarter 2021 results

Neste's revenue in the third quarter totaled EUR 4,026 million (2,881 million).
The change in revenue resulted from higher market and sales prices, which had a
positive impact of approx. EUR 1.2 billion, and lower sales volumes mainly in
Oil Products, which had a negative impact of approx. EUR 100 million, also
related to the shutdown of the Naantali refinery.

The Group’s comparable operating profit was EUR 368 million (373 million).
Renewable Products' comparable operating profit was EUR 300 million (352
million), mainly due to a lower sales margin and higher fixed costs due to
preparing for future growth. Oil Products' comparable operating profit was EUR
47 million (-1 million), as a result of the improved refining market. Marketing
& Services’ comparable operating profit was EUR 25 million (26 million). The
Others segment's comparable operating profit was EUR -1 million (-5 million).

The Group’s operating profit was EUR 579 million (425 million), which was
positively impacted by inventory valuation gains of EUR 63 million (68 million),
and changes in the fair value of open commodity and currency derivatives
totaling EUR 145 million (27 million), mainly related to margin hedging. Profit
before income taxes was EUR 582 million (407 million), and net profit EUR 512
million (347 million). Comparable earnings per share were EUR 0.42 (0.40), and
earnings per share EUR 0.66 (0.45).

The Group's January–September 2021 results

Neste's revenue in the first nine months totaled EUR 10,181 million (8,723
million). The change in revenue resulted from higher market and sales prices,
which had a positive impact of approx. EUR 4.8 billion, and lower sales volumes
mainly due to the Porvoo refinery major turnaround, which had a negative impact
of approx. EUR 3.0 billion. Additionally, a weaker US dollar had a negative
impact of approximately EUR 300 million on the revenue.

The Group’s comparable operating profit was EUR 910 million (1,036 million).
Renewable Products' nine-month comparable operating profit was EUR 880 million
(996 million), mainly due to the weaker US dollar and higher fixed costs than in
the corresponding period of 2020. Oil Products' nine-month comparable operating
profit was EUR -19 million (13 million), mainly due to lower sales volumes
caused by the scheduled Porvoo refinery major turnaround. Marketing & Services’
comparable operating profit was EUR 60 million (53 million), as a result of
lower fixed costs and higher unit margins compared to the first nine months of
2020. The Others segment's comparable operating profit was EUR -9 million (-30
million).

The Group’s operating profit was EUR 1,499 million (830 million), which was
impacted by inventory valuation gains of EUR 445 million (losses of 98 million),
and changes in the fair value of open commodity and currency derivatives
totaling EUR 139 million (-64 million), mainly related to margin hedging. Profit
before income taxes was EUR 1,462 million (807 million), and net profit EUR
1,318 million (709 million). Comparable earnings per share were EUR 1.04 (1.16),
and earnings per share EUR 1.71 (0.92).

Outlook

Visibility in the global economic development still remains low due to the COVID
-19 pandemic. As a consequence, we expect volatility in the oil products and
renewable feedstock markets to remain high. Based on our current estimates and a
hedging rate of approximately 80%, Neste's effective EUR/US dollar rate is
expected to be within the range of 1.18-1.20 in the fourth quarter of 2021.

Renewable Products’ sales volumes are expected to remain high in the fourth
quarter. Waste and residue markets are anticipated to continue tight as their
demand is robust. Our fourth-quarter sales margin is expected to remain healthy
based on the current feedstock and product market outlook. Utilization rates of
our renewables production facilities are forecast to remain high, except for the
scheduled four-week catalyst change at the Rotterdam refinery mainly in
November. The Rotterdam catalyst change is currently estimated to have a
negative impact of approximately EUR 50 million on the segment’s comparable
operating profit.

Oil Products’ market demand has recovered, but is still impacted by the COVID-19
pandemic. Reference margin has increased due to the ongoing energy crisis, and
it is expected to be volatile. The positive impact of the higher reference
margin is expected to be fully offset by the very high natural gas and
electricity costs in the segment’s fourth-quarter comparable operating profit.

In Marketing & Services, the sales volumes and unit margins are expected to
follow the previous years' seasonality pattern in the fourth quarter. The COVID
-19 pandemic continues to have some negative impact on the demand and sales
volumes.

Neste estimates the Group’s full-year 2021 cash-out capital expenditure to be
approximately EUR 1.1 billion, excluding M&A.

Conference call

A conference call in English for investors and analysts will be held today, 27
October 2021, 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 2311 3291, rest of Europe: +44 (0)
2071 928338, US: +1 646 741 3167, using access code 8892769. The conference call
can be followed at the company's website. (https://edge.media
-server.com/mmc/p/5dtsf6au) An instant replay of the call will be available
until 3 November 2021 at +44 (0) 333 300 9785 for Europe and +1 866 331 1332 for
the US, using access code 8892769.

Further information:

Peter Vanacker, President and CEO, tel. +358 10 458 11
Jyrki Mäki-Kala, CFO, tel. +358 10 458 4098
Investor Relations, tel. +358 10 458 5292

Neste in brief
Neste (NESTE, Nasdaq Helsinki) creates solutions for combating climate change
and accelerating a shift to a circular economy. We refine waste, residues and
innovative raw materials into renewable fuels and sustainable feedstock for
plastics and other materials. We are the world’s leading producer of renewable
diesel and sustainable aviation fuel, developing chemical recycling to combat
the plastic waste challenge. We aim at helping customers to reduce greenhouse
gas emissions with our renewable and circular solutions by at least 20 million
tons annually by 2030. As a technologically advanced refiner of high-quality oil
products with a commitment to reach carbon-neutral production by 2035, we are
also introducing renewable and recycled raw materials such as waste plastic as
refinery raw materials. We have consistently been included in the Dow Jones
Sustainability Indices and the Global 100 list of the world’s most sustainable
companies. In 2020, Neste's revenue stood at EUR 11.8 billion, with 94% of the
company’s comparable operating profit coming from renewable products. Read more:
neste.com (http://www.neste.com/en)

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