Neste Oyj — Interim / Quarterly Report 2021

Apr 29, 2021

Neste's Interim Report for January-March 2021

Neste's Interim Report for January-March 2021

Neste Corporation, Interim Report, 29 April 2021 at 9 a.m. (EET)

Resilient Renewable Products business – challenging market in Oil Products
continued

First quarter in brief:

· Comparable operating profit totaled EUR 302 million (EUR 408 million)
· Operating profit totaled EUR 458 million (EUR 197 million)
· Renewable Products' comparable sales margin was USD 699/ton (USD 685/ton)
· Oil Products' total refining margin was USD 6.73/bbl (USD 11.03/bbl)
· Cash flow before financing activities was EUR -645 million (EUR -120
million)
· Return on average capital employed (ROACE) was 15.3% over the last 12 months
(2020: 17.3%)
· Leverage ratio was 7.8% at the end of March (31.12.2020: -4.7%)

President and CEO Peter Vanacker:
“Neste’s 2021 started in the same way as the previous year ended: with a
resilient Renewable Products business and challenging market in Oil Products. We
posted a comparable operating profit of EUR 302 million in the first quarter,
compared to EUR 408 million in the corresponding period last year. Renewable
Products’ sales margin was healthy, sales volumes were high, and our production
facilities reached a new quarterly production record. Oil Products continued to
suffer from a weak refining market and oversupply caused by the COVID-19
pandemic. Marketing & Services showed strong performance in a normally low
season quarter. A weaker US dollar had a negative impact of EUR 57 million on
the Group’s comparable operating profit year-on-year. Our cash flow before
financing activities was impacted by a significant inventory build-up in
preparation for the Porvoo refinery major turnaround and completion of the
acquisition of Bunge’s refinery in Rotterdam.
Renewable Products posted a comparable operating profit of EUR 294 million (EUR
329 million) in the first quarter. The renewable diesel demand was robust, but
the feedstock markets remained very tight. In this market situation we were very
pleased to reach a healthy comparable sales margin of USD 699/ton, which was
higher than in the corresponding period last year. As communicated earlier, we
expect a lower contribution from margin hedging compared to 2020, which was an
exceptional year. Our global sales volume allocation optimization model enabled
us to deliver again good results. Our sales volumes were 743,000 tons, slightly
higher than in the corresponding period last year. A weaker US dollar had a
negative impact of EUR 37 million on the segment’s comparable operating profit
year-on-year. During the first quarter our renewables production facilities
operated at an average 104% utilization rate, and reached a new quarterly
production record of 829,000 tons. Feedstock mix optimization continued, and the
share of waste and residue inputs increased to 90%.
Oil Products posted a comparable operating profit of EUR -8 million (EUR 74
million) in the first quarter. The reference margin, reflecting the general
market conditions, was still weak due to the COVID-19 pandemic. The reference
margin was significantly lower than in the corresponding period last year, which
had a negative impact of EUR 59 million on the comparable operating profit.
Sales volumes were also about 18% lower than in the first quarter of 2020 due to
lower demand and preparations for the Porvoo refinery major turnaround, and the
Naantali refinery closure in March. The lower sales volumes had a negative
impact of EUR 38 million on the comparable operating profit year-on-year. Our
short-term cost reduction measures were effective.
Marketing & Services generated a comparable operating profit of EUR 16 million
(EUR 8 million) in the first quarter. Although sales volumes were still impacted
by the COVID-19 related restrictions, we were able to increase our unit margins,
which, together with good cost management lead to an improved result.
Neste continues to take the risks relating to the COVID-19 pandemic seriously.
Our primary objective is to ensure the health and safety of our employees,
customers, contractors and other partners as well as to ensure the continuity of
our operations and secure supply of products to our customers. This is
particularly important for the Porvoo refinery major turnaround, which is being
implemented during the second quarter.
Uncertainty on the further development of the COVID-19 pandemic and its impact
on the global economy continues. However, we are focusing on the implementation
of our growth strategy and continue to make progress in many areas. The refinery
operations in Naantali were shut down in March, and we will focus the site on
terminal and harbor operations. In the second phase of the transformation, the
Porvoo refinery will be developed towards co-processing renewable and circular
raw materials. In the short term, the focus is on the successful implementation
of the Porvoo turnaround.
The Singapore renewables capacity expansion project is proceeding according to
the revised schedule. It will expand our annual renewables production capacity
by up to 1.3 million tons with full optionality by the first quarter of 2023.
The acquisition of Bunge's refinery plant in Rotterdam will increase our raw
material pretreatment capacity for the production of renewable products. After a
thorough study phase we also announced Rotterdam as the chosen location for our
possible next world scale renewable products refinery. We now move to detailed
engineering in preparation for a final investment decision late this year or
early 2022. We are also very pleased with the final investment decision made on
the Rotterdam Sustainable Aviation Fuel (SAF) optionality project. It will
extend our SAF capability by 500,000 tons by the end of 2023, and further
strengthen our leadership position in the sustainable aviation market.
In March we established a Green Finance Framework to further integrate our
sustainability ambitions into our financing, and successfully issued the first
EUR 500 million green bond under the framework. We will continue on our journey
to become a global leader in renewable and circular solutions.“
The Group's first quarter 2021 results
Neste's revenue in the first quarter totaled EUR 3,132 million (3,270 million).
The change in revenue resulted from higher prices, which had a positive impact
approx. EUR 500 million, and lower sales volumes, which had a negative impact of
approx. EUR 400 million. Additionally, a weaker US dollar had a negative impact
of approx. EUR 200 million on the revenue compared to the corresponding period
last year.
The Group’s comparable operating profit was EUR 302 million (408 million).
Renewable Products' comparable operating profit decreased to EUR 294 million
(329 million), mainly due to the weaker US dollar than in the first quarter of
2020. Oil Products' comparable operating profit decreased to EUR -8 million (74
million), due to the continued weak refining market. Marketing & Services
comparable operating profit was EUR 16 million (8 million), as a result of
higher unit margins compared to the first quarter of 2020. The Others segment's
comparable operating profit was EUR -1 million (-9 million).
The Group’s operating profit was EUR 458 million (197 million), which was
impacted by inventory valuation gains of EUR 175 million (losses of 293
million), and changes in the fair value of open commodity and currency
derivatives totaling EUR -20 million (82 million), mainly related to margin
hedging. Profit before income taxes was EUR 415 million (203 million), and net
profit EUR 374 million (201 million). Comparable earnings per share were EUR
0.31 (0.50), and earnings per share EUR 0.49 (0.26).
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 85%, Neste's effective EUR/US dollar rate is expected to be
within a range of 1.16-1.18 in the second quarter of 2021. The Porvoo refinery
major turnaround was started in early April and it is scheduled to last for
approximately twelve weeks.
Sales volumes of renewable diesel in the second quarter are expected to be on
the same level as in the previous quarter. Waste and residue markets are still
anticipated to remain tight as their demand continues to be robust. Our second
-quarter sales margin is expected to remain healthy. The margin hedging rate
will be lower than normal in the second quarter, and the sales margin is not
anticipated to be supported by similar hedging gains as in 2020. Utilization
rates of our renewables production facilities are forecasted to remain high,
except for the scheduled refinery maintenance. The Porvoo refinery turnaround is
currently estimated to have a negative impact of approximately EUR 30 million on
the Renewable Products segment’s comparable operating profit, mainly in the
second quarter. We have also scheduled a seven-week turnaround at the Singapore
refinery in the third quarter, and a four-week catalyst change at the Rotterdam
refinery in the fourth quarter of 2021. The Singapore turnaround is currently
estimated to have a negative impact of approximately EUR 80 million, and the
Rotterdam catalyst change a negative impact of approximately EUR 50 million on
the segment’s comparable operating profit.
Oil Products’ second-quarter market demand will continue to be depressed due to
several extended lockdowns as a result of the COVID-19 pandemic. The reference
margin is also expected to remain low and volatile. The Porvoo refinery
turnaround is currently estimated to have a negative impact of approximately EUR
110 million on the Oil Products segment’s comparable operating profit, mainly in
the second quarter.
In Marketing & Services the sales volumes and unit margins are expected to
follow the previous years' seasonality pattern in the second quarter. The COVID
-19 pandemic is anticipated 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 1.2 billion, excluding M&A.
Conference call
A conference call in English for investors and analysts will be held today, 29
April 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 7413167, using access code 3537688. The conference call
can be followed at the company's website. An instant replay of the call will be
available until 6 May 2021 at +44 (0) 333 300 9785 for Europe and +1 866 331
1332 for the US, using access code 3537688.
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)

Attachments: