Neste Oil Corporation
Stock Exchange Release
29 April 2011 at 1 pm (EET)
Neste Oil's Interim Report for January-March 2011
* The first-quarter comparable operating profit was EUR 44 million (Q1/2010:
88 million, which included a EUR 48 million insurance compensation payment)
* The market environment appears to remain favorable for complex refiners
* Renewable Fuels' sales volumes are expected to increase in the second half
of 2011, but the segment is projected to remain loss-making throughout 2011
First quarter in brief:
* Comparable operating profit was EUR 44 million (Q1/2010: 88 million, which
included a EUR 48 million insurance compensation payment)
* IFRS operating profit was EUR 171 million (Q1/2010: 97 million)
* Total refining margin was USD 8.92/bbl (Q1/2010: 7.83)
* Net cash from operations was EUR 58 million (Q1/2010: 374 million)
* Investments totaled EUR 120 million (Q1/2010: 190 million), of which EUR 96
million was spent on Renewable Fuels
* Leverage ratio was 42.5% (31 Dec 2010: 42.6%)
* Successful test run at nameplate capacity was carried out at the Singapore
renewable diesel plant
* Neste Oil entered into a base oil partnership with Abu Dhabi National Oil
Company
President & CEO Matti Lievonen:
"The beginning of 2011 has been promising for complex refiners. We have seen
demand for petroleum products increasing, particularly in the case of middle
distillates. This has coincided with a widening of the price differential
between heavier and lighter crude, which is another positive development for our
refining business. Another positive development for us has been the
strengthening of the base oil market, where our position will improve further
when the new plant in Bahrain is completed later this year. During the first
quarter, we also agreed on an important base oil partnership in Abu Dhabi.
In line with the guidance we issued in early February, our Renewable Fuels
business will be loss-making in 2011 as a whole and it seems that the second
quarter will be slightly weaker than the first due to bottlenecks in legislation
and ISCC-certified feedstock supplies. Sales volumes will gradually increase
during the second half of the year, however, as we have entered new market areas
and more ISCC-certified feedstocks will be available for the European market.
Our Rotterdam plant is already close to completion and is scheduled to start up
within a few months."
The Group's first-quarter 2011 results
Neste Oil's revenue increased to EUR 3,472 million in the first quarter from EUR
2,725 million reported for the same period in 2010. This increase resulted from
higher oil prices. The Group's comparable operating profit came in at EUR 44
million. Comparable operating profit for the corresponding period of 2010 was
EUR 88 million, which included a one-off insurance compensation payment of EUR
48 million. Oil Products and Oil Retail recorded higher comparable operating
profit year-on-year, whereas Renewable Fuels and Others posted lower results.
Oil Products' first-quarter comparable operating result was EUR 84 million (58
million), Renewable Fuels' EUR -36 million (-17 million), and Oil Retail's EUR
12 million (6 million). The comparable operating profit of the Others segment
totaled EUR -16 million (43 million). Associated companies and joint ventures
result accounted for EUR -10 million (-8 million) of the comparable operating
result booked in the Others segment.
The Group's IFRS operating profit was EUR 171 million (97 million), which was
impacted by inventory gains totaling EUR 140 million (16 million). Pre-tax
profit was EUR 160 million (88 million), profit for the period EUR 118 million
(64 million), and earnings per share EUR 0.46 (0.25).
Given the capital-intensive nature of its business, Neste Oil uses return on
average capital employed after tax (ROACE) as its primary financial target.
ROACE figures are based on comparable results. As of the end of March, the
rolling twelve-month ROACE was 3.6% (2010 financial year: 4.6%).
Outlook
As anticipated in the previous outlook published at the beginning of February,
the refining market has strengthened in 2011 compared to 2010. Market sentiment
seems to expect that the supply and demand balance will be tighter, supported by
stronger oil demand and a lower level of inventories compared to 2010. This will
benefit complex refiners such as Neste Oil. The diesel market is forecast to
remain strong and diesel margins are seen as likely to increase steadily towards
the end of the year. Gasoline margins are expected to remain volatile, with
support from higher demand in the second quarter. Heavy fuel oil margins are
anticipated to remain weak, benefiting complex refiners. The discount of Urals
crude to Brent dated is expected to average USD 3.00-3.50/bbl, which is wider
than in 2010. As a result, Oil Products' full-year 2011 comparable operating
profit is expected to be stronger than in 2010. Production line 4 at the Porvoo
refinery will be off-line for five weeks at the beginning of the second quarter
due to a planned annual coke removal.
The Renewable Fuels business will be in ramp-up mode during 2011, and, as stated
previously, is expected to report a comparable operating loss for 2011 as a
whole. Its second-quarter result is expected to be slightly weaker than the
first quarter due to delays in biofuel legislation, poor availability of ISCC-
certified feedstock volumes, and the start-up of the Rotterdam plant. Sales
volumes of renewable diesel will increase gradually during the second half,
thanks to the opening-up of the US market and a growing customer base in the EU.
Oil Retail's full-year performance is likely to be broadly similar to that seen
in 2010. Continued growth in diesel demand in Finland and a strong market in
North-West Russia are expected to contribute to a stronger overall market. These
factors are likely to be partly offset, however, by price competition and a
projected decrease in demand due to high oil prices in some Baltic countries.
The Group's fixed costs are estimated to be roughly EUR 650 million in 2011,
compared to EUR 575 million in 2010, largely due to higher maintenance and
personnel costs at the new plants.
The Group's cash investments are expected to be around EUR 300 million (892
million), of which maintenance investments will account for EUR 176 million (245
million), strategic investments EUR 113 million (633 million), and productivity
investments EUR 11 million (14 million).
New disclosure procedure
Neste Oil follows the new disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority and hereby publishes
its interim report for January-March 2011 enclosed to this stock exchange
release. Neste Oil's interim report is available in its entirety on the
company's web site atwww.nesteoil.com Neste Oil will follow this procedure in
disclosing interim reports and financial statements in future.
Further information:
Matti Lievonen, President & CEO, tel. +358 10 458 11
Ilkka Salonen, CFO, tel. +358 10 458 4490
Investor Relations, tel. +358 10 458 5132
News conference and conference call
A press conference in Finnish on the first-quarter results will be held today,
29 April 2011, at 2:00 p.m. EET at the company's headquarters, 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 29 April 2011 at 4:00 p.m. Finnish / 2:00 p.m. London / 9:00 a.m. New York.
The call-in numbers are as follows: Europe: +44 (0)20 7806 1956, US
+1 212 444 0413 (access code: 7846593). The conference call can be followed at
http://www.media-server.com/m/em/mitpx7y4/r/1 An instant replay of the call will
be available until 6 May 2011 at +44 (0)20 7111 1244 for Europe and
+1 347 366 9565 USA for the US (access code: 7846593#).
[HUG#1510792]
