NESTE OIL'S INTERIM REPORT FOR JANUARY-JUNE 2007 - Comparable operating profit increased by 19% to EUR 225 million in the second quarter The second quarter in brief: * Sales of EUR 3,207 million (Q2/06: 3,518 million) * Comparable operating profit of EUR 225 million (Q2/06: 189 million) * Operating profit of EUR 314 million (Q2/06: 280 million) * Earnings per share of EUR 0.88 (Q2/06: 0.76) * Cash flow from operations of EUR 460 million (Q2/06: 278 million) * Comparable operating profit of Oil Refining EUR 205 million (Q2/06: 178 million), Oil Retail EUR 16 million * (Q2/06: 15 million), and Shipping EUR 12 million (Q2/06: 5 million) * Total refining margin increased to USD 11.92 /bbl (Q2/06: 9.48) * The new diesel line started production at Porvoo Risto Rinne, President & CEO:"The second quarter saw an exceptionally strong gasoline market, following on from a similar trend in the first quarter. We benefited from this, thanks to smooth operations and good productivity at our refineries, as well as our ability to supply both European and US markets. Oil Refining's good volumes and high margins were the main contributors to our best-ever quarterly profit, and our other businesses also did well.""We completed two important investment projects at the Porvoo refinery during the quarter. Our new diesel line commenced production in June, and start-up of the NExBTL Renewable Diesel plant is continuing. The market seems attractive for both sulfur-free diesel and high-quality renewable diesel, and we are pushing forward to proceed with new strategic investments." Further information: Risto Rinne, President & CEO, tel. +358 10 458 4990 Petri Pentti, CFO, tel. +358 10 458 4490 News conference and conference call A press conference in Finnish on the second-quarter results will be held today, 3 August 2007, at 11:30 am EET in the Mirror Room at Hotel Kämp, Pohjoisesplanadi 29, Helsinki. www.nesteoil.com will feature English versions of the presentation materials. An international conference call for investors and analysts will be held today, 3 August 2007, at 3:00 pm Finland / 1:00 pm London / 8:00 am New York. A live webcast of the conference call can be followed at www.nesteoil.com. The call-in numbers are as follows: Europe: +44 (0)20 3023 4426, US: +1 866 966 5335. An instant replay of the call will be available for five days at +44 (0)20 8196 1998 for Europe and +1 866 583 1035 for the US, using access code 725434. NESTE OIL INTERIM REPORT 1 JANUARY - 30 JUNE 2007 Unaudited Figures in parenthesis refer to the second quarter of 2006, unless stated otherwise. KEY FIGURES EUR million, unless otherwise noted. Last 12 4-6/07 4-6/06 1-6/07 1-6/06 2006 months Sales 3,207 3,518 5,664 6,314 12,734 12,084 Operating profit before depreciation 359 317 562 508 1,007 1,061 Depreciation, amortization and impairment charges 45 37 84 75 153 162 Operating profit 314 280 478 433 854 899 Comparable operating profit * 225 189 383 308 597 672 Profit before income tax 304 277 465 430 841 876 Earnings per share, EUR 0.88 0.76 1.34 1.20 2.46 2.60 Capital expenditure and investment in shares 77 133 177 245 535 467 Net cash from operating activities 460 278 353 128 512 737 31 30 June 30 June Dec Last 12 2007 2006 2006 months Total equity 2,184 1,825 2,097 - Interest-bearing net debt 776 1,119 722 - Capital employed 3,032 3,032 2,890 3,032 Return on capital employed pre-tax, % 32.3 31.5 31.9 29.7 Return on average capital employed after tax, % - - 15.4 17.0 Return on equity, % 32.2 36.0 34.3 33.5 Equity per share, EUR 8.52 7.09 8.15 - Cash flow per share, EUR 1.38 0.50 2.00 2.88 Equity-to-assets ratio, % 47.2 38.5 48.4 - Leverage ratio, % 26.2 38.0 25.6 - Gearing, % 35.5 61.3 34.4 - * Comparable operating profit is calculated by excluding inventory gains/losses, gains/losses from sales of fixed assets, and unrealized changes in the fair value of oil and freight derivative contracts from the reported operating profit. The Group's second-quarter results Sales at the Neste Oil Group totaled EUR 3,207 million in the second quarter, compared to EUR 3,518 million in the corresponding period of 2006. Lower sales were mainly caused by the divestment of the Group's stake in Eastex Crude Company. Excluding this the sales grew by nearly 7%. The Group's operating profit for the period increased to EUR 314 million from EUR 280 million in 2006. Operating profit includes unrealized changes of oil derivatives valued at EUR 32 million (-2 million) and inventory gains of EUR 55 million (61 million). The second-quarter comparable operating profit totaled EUR 225 million, which represents an increase of 19% on the 2006 figure of EUR 189 million. The comparable operating profit was positively impacted by a higher total refining margin. This was somewhat offset, however, by increased fixed costs linked to growth projects and a higher level of depreciation. Oil Refining posted a comparable operating profit of EUR 205 million (178 million), Oil Retail EUR 16 million (15 million), and Shipping EUR 12 million (5 million). Profit before taxes was EUR 304 million in the second quarter (277 million), and taxes for the period totaled EUR 77 million (79 million). The effective tax rate was 25.5% (28.6%). Net profit for the period was EUR 227 million (198 million) and earnings per share EUR 0.88 (0.76). The Group's January-June results The Group's sales in the first half of 2007 totaled EUR 5,664 million (6,314 million). Operating profit totaled EUR 478 million (433 million) and comparable operating profit EUR 383 million (308 million). The increase of 24% in the latter was primarily due to a higher total refining margin, supported by a strong gasoline market. Oil Refining posted a comparable operating profit of EUR 339 million (272 million), Oil Retail EUR 27 million (27 million), and Shipping EUR 33 million (27 million) during the first half of the year.. Profit before taxes was EUR 465 million (430 million), while taxes for the period totaled EUR 120 million (120 million). The effective tax rate was 25.9% (28.0%). Net profit for the period was EUR 345 million (310 million), and earnings per share EUR 1.34 (1.20). Given the capital-intensive nature of its business, Neste Oil uses return on average capital employed after tax (ROACE) as its primary financial indicator. At the end of June, the rolling twelve-month ROACE was 17.0% (2006 financial period: 15.4%). 4-6/07 4-6/06 1-6/07 1-6/06 LTM 2006 COMPARABLE OPERATING PROFIT 225 189 383 308 672 597 - changes in the fair value of open oil derivative positions 32 -2 6 -10 7 -9 - inventory gains/losses 55 61 84 103 37 56 - gains/losses from sales of fixed assets 2 32 5 32 183 210 OPERATING PROFIT 314 280 478 433 899 854 Capital expenditure Neste Oil's capital expenditure during the first six months of 2007 totaled EUR 177 million (1-6/06: 243 million). Oil Refining accounted for EUR 153 million of investments (1-6/06: 228 million), Oil Retail EUR 18 million (1-6/06: 13 million), and Shipping EUR 1 million (1-6/06: 3 million). Depreciation during the first half was EUR 84 million (1-6/06: 75 million). Financing Interest-bearing net debt amounted to EUR 776 million at the end of June (31 Dec 2006: 722 million). Net financial expenses between January and June were EUR 13 million (3 million). The average interest rate of borrowings at the end of June was 4.3%, and the average maturity 4.6 years. Net cash from operating activities between January and June was EUR 353 million (1-6/06: 128 million). This significant increase was mainly due to lower level of working capital. Equity-to-assets ratio at the end of June was 47.2% (31 Dec 2006: 48.4%), the gearing ratio 35.5% (31 Dec 2006: 34.4%), and the leverage ratio 26.2% (31 Dec 2006: 25.6%). Cash and cash equivalents and committed, unutilized credit facilities amounted to EUR 1,640 million at the end of June (31 Dec 2006: 1,667 million). Market overview The gasoline market remained exceptionally strong in the second quarter on the back of reduced supply caused by refinery outages, and high demand. West Africa and the Middle East increased their gasoline imports, which further tightened the market. Gasoline inventories in the US were at a historically low level and gasoline margins exceptionally wide through the quarter. Diesel, jet fuel, and heating oil margins remained wide and very stable. The continued growth in the popularity of diesel vehicles in Europe kept diesel margins strong, despite high inventories. Crude oil prices continued to rise during the second quarter, mostly supported by solid gasoline demand, as well as production cuts by OPEC, maintenance shutdowns in North Sea oil fields, political instability in some oil-producing countries, and investor activity. A tight crude market directed demand towards heavier crudes, which narrowed the price differential between Urals and Brent compared to the second quarter last year. European production capacity of first-generation methyl ester biodiesel (FAME) has increased rapidly during recent years, which has led to oversupply and lower profitability in the industry. At the same time, concerns over raw material availability are growing, highlighting the importance of feedstock flexibility. There is increased demand for high-quality biodiesel capable of meeting the need for higher bio content without compromising on fuel quality or automotive industry requirements. Tough competition has remained a feature of the gasoline retail market in Finland, whereas strong demand has continued in the Baltic Rim area. Crude freight rates in the North Sea, as well as from Primorsk, were largely unchanged from the second quarter of 2006. Key drivers 4-6/07 4-6/06 1-6/07 1-6/06 July 07 2006 IEA Brent cracking margin, USD/bbl 7.80 5.95 5.75 4.42 2.78 3.73 Neste Oil's total refining margin, USD/bbl 11.92 9.48 10.84 9.04 n.a. 9.11 Urals-Brent price differential, USD/bbl -3.45 -5.06 -3.51 -4.56 -2.36 -4.28 Brent dated crude oil, USD/bbl 68.76 69.62 63.26 65.69 77.01 65.14 Crude freight rates, Aframax WS points 126 125 144 134 124 145 SEGMENT REVIEWS Neste Oil's businesses are grouped into four segments: Oil Refining, Oil Retail, Shipping, and Other. Biodiesel is included in Oil Refining. Oil Refining Oil Refining achieved an operating profit of EUR 288 million (234 million) and a comparable operating profit of EUR 205 million (178 million) in the second quarter - driven primarily by a stronger total refining margin compared to the same period last year. Neste Oil's total refining margin improved further in the second quarter, and reached a new quarterly record, averaging USD 11.92 /bbl (9.48), compared to an average of USD 7.80 /bbl (5.95) for the benchmark margin (IEA Brent Cracking). In addition to high product margins, good productivity at the company's refineries and strong performance by the base oil business were the most important reasons for the improvement in Neste Oil's total refining margin. A lower price difference between Brent and Russian crude, however, had a negative impact. Oil Refining's comparable return on net assets (annualized) was 26.5% (25.0%). Key figures 4-6/07 4-6/06 1-6/07 1-6/06 LTM 2006 Sales, MEUR 2,673 3,056 4,602 5,364 10,006 10,768 Operating profit, MEUR 288 234 426 363 734 671 Comparable operating profit, MEUR 205 178 339 272 600 533 Capital expenditure, MEUR 63 123 153 228 403 478 Total refining margin, USD/bbl 11.92 9.48 10.84 9.04 10.01 9.11 Production Neste Oil refined 3.6 million tons (3.6 million) of crude oil and other feedstocks at its refineries in the second quarter, of which 2.9 million tons (2.9 million) at Porvoo and 0.7 million tons (0.7 million) at Naantali. Both the Porvoo and Naantali refineries operated at their full crude distillation capacity in the second quarter. Some 43% (43%) of total refinery input comprised heavier Russian Export Blend in the second quarter. Sales Sales volumes in Finland totaled 1.8 million tons in the second quarter (1.9 million), and export volumes 2.0 million tons (1.9 million). Gasoline sales to the North American market were 670,000 tons, slightly above last year's figure of 636,000 tons. Renewable diesel The start-up of the new NExBTL Renewable Diesel plant at Porvoo continued, and the first sales contracts were signed. The first deliveries to wholesale customers are planned for the third quarter. All the indicators point to healthy market demand for high-quality renewable diesel of this type. Sales from in-house production, by product category (1,000 t) 4-6/07 4-6/06 1-6/07 1-6/06 2006 Motor gasoline and components 1,413 1,550 2,437 2,630 4,974 Diesel fuel 1,301 1,251 2,418 2,387 4,821 Jet fuel 168 164 343 326 702 Base oils 79 73 153 154 302 Heating oil 128 109 375 358 684 Heavy fuel oil 269 223 595 575 1,069 NExBTL Renewable Diesel 0 0 0 0 0 Other products 433 446 793 762 1,543 TOTAL 3,791 3,816 7,114 7,192 14,095 Sales from in-house production, by market area (1,000 t) 4-6/07 4-6/06 1-6/07 1-6/06 2006 Finland 1,849 1,864 3,995 4,003 8,083 Other Nordic countries 586 520 941 945 1,906 Other Europe 658 634 1,106 1,175 2,420 Russia & the Baltic countries 12 6 16 10 53 USA & Canada 670 636 1,004 855 1,417 Other countries 16 156 52 204 216 TOTAL 3,791 3,816 7,114 7,192 14,095 Oil Retail Oil Retail posted an operating profit of EUR 18 million in the second quarter (17 million), and a comparable operating profit of EUR 16 million (15 million). Higher sales volumes and good profitability in Baltic Rim operations had a positive impact on the comparable operating profit. Figures for 2007 no longer include rental and other income from a number of service station properties sold in Finland in 2006. Oil Retail's comparable return on net assets (annualized) was 16.6% (14.8%). Key figures 4-6/07 4-6/06 1-6/07 1-6/06 LTM 2006 Sales, MEUR 843 817 1,617 1,629 3,268 3,280 Operating profit, MEUR 18 17 29 30 137 138 Comparable operating profit, MEUR 16 15 27 27 65 65 Capital expenditure, MEUR 11 8 18 13 49 44 Product sales volume, 1,000 m3 1,098 1,030 2,241 2,179 4,484 4,424 Gasoline sales at Neste Oil's stations in Finland declined by some 2% in the second quarter compared to the same quarter in 2006. Diesel sales increased by almost 5%, however, supported by good demand. Demand for heating oil has been depressed in Finland due to warm weather and the success of alternative forms of heating. Sales volumes increased in the Baltic Rim area by 28% compared to the second quarter 2006. Neste Oil continued to open new stations in the area, bringing the number of outlets to 248 at the end of June. Northwest Russia remains the primary growth area. Oil Retail sales volumes (1,000 m3) 4-6/07 4-6/06 1-6/07 1-6/06 2006 Gasoline 411 360 753 683 1,452 Diesel fuel 435 360 850 716 1,510 Heating oil 148 197 374 494 932 Heavy fuel oil 104 113 264 286 530 TOTAL 1,098 1,030 2,241 2,179 4,424 Oil Retail sales volumes by market area (1,000 m3) FINLAND 4-6/07 4-6/06 1-6/07 1-6/06 2006 Gasoline 169 173 312 327 652 Diesel fuel 263 251 521 497 1,008 Heating oil 147 168 365 421 814 Heavy fuel oil 104 113 264 286 530 TOTAL 683 705 1,462 1,531 3,004 BALTIC RIM 4-6/07 4-6/06 1-6/07 1-6/06 2006 Gasoline 242 187 441 356 800 Diesel fuel 172 109 329 219 502 Heating oil 1 29 9 73 118 TOTAL 415 325 779 648 1,420 LPG (1000 t) 57 62 122 128 254 Shipping Shipping's operating profit for the second quarter totaled EUR 16 million (38 million). Last year's figure included a EUR 30 million gain from the sale of assets. Comparable operating profit increased to EUR 12 million. This compares to EUR 5 million in the second quarter of 2006, when crude tanker capacity was temporarily low due to a fleet renewal program. Gasoline deliveries to North America and realized bunker hedges made a positive contribution. Shipping's comparable return on net assets (annualized) was 21.6% (17.0%). Key figures 4-6/07 4-6/06 1-6/07 1-6/06 LTM 2006 Sales, MEUR 115 69 225 155 363 293 Operating profit, MEUR 16 38 39 58 59 78 Comparable operating profit, MEUR 12 5 33 27 38 32 Capital expenditure, MEUR 0 2 1 3 8 10 Total fleet days 2,798 2,407 5,486 4,719 10,885 10,119 Fleet utilization rate, % 94 95 94 96 94 94 Shipping's total fleet days amounted to 2,798 in the second quarter, up 16% on the corresponding period in 2006 (2,407). Fleet days for crude fleet totaled 546 (417), and 2,252 (1,990) for the product fleet. Shipping's total fleet days represent the number of days vessels have been operational, including repair and waiting days. Neste Oil owned or controlled through contracts a total of 31 (26) tankers as of the end of June. Expansion of the fleet has focused on larger crude and product tankers. Crude carrying capacity as of the end of June was 680,407 dwt (426,657), and for products 604,125 dwt (488,353), totaling 1,284,532 dwt (915,010). Fleet utilization rate for the period remained high, at 94% (95%). Shares, share trading, and ownership A total of 120,209,954 Neste Oil shares were traded in the second quarter, totaling EUR 3.3 billion. The share price reached EUR 29.13 at its highest and EUR 25.42 at its lowest, and closed the quarter at EUR 29.13 or 94% above the subscription price in April 2005, giving the company a market capitalization of EUR 7.5 billion as of 30 June 2007. A total of 2.0 million shares were traded daily on average, equivalent to 0.8% of the company's shares. Neste Oil's share capital registered with the Company Register as of 30 June 2007 totaled EUR 40 million, and the total number of shares outstanding is 256,403,686. The company does not hold any of its own shares, and the Board of Directors has no authorization to buy back company shares or issue convertible bonds, share options, or new shares. At the end of June, the Finnish state owned 50.1% of outstanding shares, foreign institutions 28.3%, Finnish institutions 15.3%, and Finnish households 6.4%. Corporate Governance Neste Oil's Board of Directors elected the members of its two Committees in April. Timo Peltola was elected Chairman and Michiel A.M. Boersma, Mikael von Frenckell, and Ainomaija Haarla members of the Personnel and Remuneration Committee. Nina Linander was elected Chairman and Antti Tanskanen, Pekka Timonen, and Maarit Toivanen-Koivisto members of the Audit Committee. Personnel The Group employed an average of 4,761 (4,673) employees in the second quarter. The number of employees at the end of June totaled 4,956 (30 June 2006: 4,902). Health, safety, and the environment The main indicator for safety performance used by Neste Oil - cumulative lost workday injury frequency (LWIF, number of cases per million hours worked) for all work done for the company, combining the company's own personnel and contractors - stood at 3.3 (3.5) at the end of June 2007. Performance in this area is continuing to improve. During the quarter Neste Oil reported the 2006 carbon dioxide emissions, which equaled the allowances the company had. The carbon dioxide allowances for 2007 are expected to be roughly equal to the carbon dioxide emissions for the year and it is likely that no allowances will need to be obtained from the market by the end of 2007. In May, Neste Oil became one of the founding investors in the Fine Carbon Fund, which invests in projects aimed at reducing emissions in developing and in industrialized countries under the Kyoto protocol. The EU's REACH chemical legislation came into force on 1 June. Implementation of REACH requirements has progressed according to plan. Update on growth projects Neste Oil will continue to implement its clean fuel strategy through a number of projects aimed at building new capacity to produce NExBTL Renewable Diesel and review alternatives for investing in new conversion capacity at its existing refineries. Diesel Project The new diesel production line at the Porvoo refinery began commercial production in late June, after a somewhat prolonged start-up. The project took less than four years to complete and represents an investment of approximately EUR 750 million. The company estimates that the new line will contribute an additional refining margin of more than USD 2 /bbl on its total output of approximately 100 million barrels a year on a long-term basis. NExBTL Renewable Diesel Neste Oil aims to become the world's leading producer of renewable diesel. The cornerstone of this strategy is the company's proprietary NExBTL technology, which produces a premium-quality diesel fuel that clearly outperforms both existing biodiesel and crude oil-based diesel grades currently on the market. The construction of the first NExBTL plant at the Porvoo refinery was completed within the project's EUR 100 million budget, and the start-up of the plant is now under way. A second NExBTL plant is under construction at Porvoo and proceeding according to plan. This second plant will have the same capacity, 170,000 t/a, as the first unit and is scheduled to be commissioned at the end of 2008. Planning work and a lengthy Environmental Impact Assessment (EIA) on a jointly owned NExBTL plant with OMV in Austria is continuing. Neste Oil is also planning other NExBTL projects around the world. In addition, the company is committed to further research and development aimed at utilizing a wider range of renewable raw materials. Potential short-term risks Oil markets have proved very volatile. Oil refiners are exposed to a variety of political and economic trends and events, as well as natural phenomena, which tend to affect the short-term supply of and demand for products companies produce and sell. Sudden and unplanned outages at production units or facilities also represent a risk. The key market drivers for Neste Oil's financial performance are international refining margins, the price differential between Russian Export Blend (REB) and Brent crude, and the USD/EUR exchange rate. Short-term changes in crude oil prices impact Neste Oil's financial results mainly in the form of inventory gains or losses. For more detailed information on Neste Oil's risks and risk management, please refer to the company's Annual Report and Financial Statements for 2006. Outlook The International Energy Agency has recently revised upwards its estimate for global petroleum products demand in 2007. As a result of healthy demand and the limited amount of new capacity due to come on stream in the near future, the outlook for refiners with complex capacity should remain favorable. However, the market is highly volatile, and the average refining margin in July was clearly lower than during April-June. Neste Oil's new diesel production line is expected to bring visible contribution to the total refining margin from the third quarter onwards. A short maintenance shutdown could be needed later this year to optimize the new line. The start-up of the NExBTL Renewable Diesel production plant is proceeding and some test batches have already been produced. Production is expected to be ramped up gradually. Although demand for high-quality lubricant base oils remains strong, the supply situation looks set to remain restrained, which is likely to keep the profitability of base oils good. Oil Retail's growth is likely to continue in the Baltic Rim area. Shipping's market is expected to stay challenging. Docking costs of the crude fleet will have an impact in the second half. Neste Oil's capital expenditure is expected to be approximately EUR 350 million in 2007. Reporting date for the third-quarter 2007 results Neste Oil will publish its third-quarter results on 30 October 2007 at approximately 9:00 am EET. Espoo, 2 August 2007 Neste Oil Corporation Board of Directors The preceding information contains, or may be deemed to contain,"forward-looking statements". These statements relate to future events or our future financial performance, including, but not limited to, strategic plans, potential growth, planned operational changes, expected capital expenditures, future cash sources and requirements, liquidity and cost savings that involve known and unknown risks, uncertainties, and other factors that may cause Neste Oil Corporation's or its businesses' actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, such forward-looking statements can be identified by terminology such as "may,""will,""could,""would,""should,""expect,""plan,""anticipate,""intend,""believe,""estimate,""predict,""potential," or "continue," or the negative of those terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Future results may vary from the results expressed in, or implied by, the forward-looking statements, possibly to a material degree. All forward-looking statements made in this report are based on information presently available to management and Neste Oil Corporation assumes no obligation to update any forward-looking statements. Nothing in this report constitutes investment advice and this report shall not constitute an offer to sell or the solicitation of an offer to buy any securities or otherwise to engage in any investment activity. NESTE OIL GROUP JANUARY- JUNE 2007 Unaudited CONSOLIDATED INCOME STATEMENT MEUR Note 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ Last 12 months 2007 2006 2007 2006 2006 Sales 2, 4 3207 3518 5664 6314 12734 12084 Other income 9 42 17 47 238 208 Share of profit 4 13 11 14 7 39 46 (loss) of associates and joint ventures Materials and -2674 -3046 -4691 -5450 -11183 -10424 services Employee -64 -60 -127 -116 -224 -235 benefit costs Depreciation, 4 -45 -37 -84 -75 -153 -162 amortization and impairment charges Other expenses -132 -148 -315 -294 -597 -618 Operating profit 314 280 478 433 854 899 Financial income and expenses Financial 2 3 4 4 8 8 income Financial -9 -4 -13 -5 -16 -24 expenses Exchange rate -3 -2 -4 -2 -5 -7 and fair value gains and losses Total financial -10 -3 -13 -3 -13 -23 income and expenses Profit before 304 277 465 430 841 876 income taxes Income tax -77 -79 -120 -120 -205 -205 expense Profit for the 227 198 345 310 636 671 period Attributable to: Equity holders 226 196 343 308 631 666 of the company Minority 1 2 2 2 5 5 interest 227 198 345 310 636 671 Earnings per share from profit attributable to the equity holders of the Company 0,88 0,76 1,34 1,20 2,46 2,60 basic and diluted (in euro per share) CONSOLIDATED BALANCE SHEET 30 June 30 June 31 Dec MEUR Note 2007 2006 2006 ASSETS Non-current assets Intangible assets 5 38 48 38 Property, plant and equipment 5 2396 2162 2310 Investments in associates and joint 155 136 161 ventures Long-term interest-bearing receivables 2 14 3 Pension assets 79 71 73 Deferred tax assets 5 16 8 Derivative financial instruments 6 37 15 22 Other financial assets 3 2 3 Total non-current assets 2715 2464 2618 Current assets Inventories 795 897 697 Trade and other receivables 943 988 808 Derivative financial instruments 6 112 201 77 Cash and cash equivalents 71 88 62 Total current assets 1921 2174 1644 Non-currents assets classified as held 2 0 100 78 for sale Total assets 4636 4738 4340 EQUITY Capital and reserves attributable to the equity holders of the company Share capital 40 40 40 Other equity 3 2141 1779 2049 Total 2181 1819 2089 Minority interest 3 6 8 Total equity 2184 1825 2097 LIABILITIES Non-current liabilities Interest-bearing liabilities 580 814 516 Deferred tax liabilities 267 239 239 Provisions 5 15 12 Pension liabilities 12 12 12 Derivative financial instruments 6 27 19 21 Other non-current liabilities 7 12 4 Total non-current liabilities 898 1111 804 Current liabilities Interest-bearing liabilities 268 393 267 Current tax liabilities 25 49 43 Derivative financial instruments 6 86 166 38 Trade and other payables 1175 1194 1027 Total current liabilities 1554 1802 1375 Liabilities directly associated with 0 0 64 non-current assets classified as held for 2 sale Total liabilities 2452 2913 2243 Total equity and liabilities 4636 4738 4340 CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY Attributable to equity holders of the company Share- Reser- Fair va- Trans- Retained Minority Total capital ve lue and lation earnings fund other diffe- reserves rences MEUR Note Total 40 9 -33 8 1581 7 1612 equity at 1 January 2006 Dividend -205 -205 paid Income and expense recognized directly in equity Translation -6 -6 differences and other changes Cash flow hedges recorded in 67 67 equity, net of taxes transferred to income statement, net of tax -14 -14 Net 1 1 investment hedges, net of taxes Available for sale investments recognized 63 63 in equity, net of tax removed from equity and recognized in income statement, net of tax Change in -3 -3 minority Items 116 -5 0 -3 108 recognized directly in equity Profit for 308 2 310 the period Total 116 -5 308 -1 418 recognized income and expenses Total 40 9 83 3 1684 6 1825 equity at 30 June 2006 Share Reserve Fair Transla- Retained Minority Total capital fund value tion earnings and dif- other ferences reserves MEUR Note Total 40 9 26 3 2011 8 2097 equity at 1 January 2007 Dividend -231 -231 paid Treasury 3 -12 -12 shares Income and expense recognized directly in equity Translation 1 1 -1 1 differences and other changes Cash flow hedges recorded in -26 -26 equity, net of taxes transferred to income statement, net of tax 18 18 Net -2 -2 investment hedges, net of taxes Share-based 1 1 compensa- tion Change in -7 -7 minority Items 1 -7 -1 -1 -7 -15 recognized directly in equity Profit for 343 2 345 the period Total 1 -7 -1 342 -5 330 recognized income and expenses Total 40 10 19 2 2110 3 2184 equity at 30 June 2007 CONDENSED CONSOLIDATED CASH FLOW STATEMENT MEUR 4-6/2007 4-6/2006 1-6/2007 1-6/2006 1-12/2006 Cash flow from operating activities Profit before taxes 304 277 465 430 841 Adjustments, total 1 -3 61 50 -85 Change in working 238 57 -59 -270 -106 capital Cash generated from 543 331 467 210 650 operations Finance cost, net -8 -15 -7 -16 -7 Income taxes paid -75 -38 -107 -66 -131 Net cash from 460 278 353 128 512 operating activities Capital expenditures -77 -132 -177 -243 -526 Acquisition of shares 0 -1 0 -2 -9 Proceeds from sales 9 42 12 43 77 of fixed assets Proceeds from sales 0 0 -5 0 201 of shares Change in other 52 -25 -13 -49 20 investments Cash flow before 444 162 170 -123 275 financing activities Net change in loans -198 -144 62 338 -74 and other financing activities Dividends paid to the -231 -10 -231 -205 -205 equity holders of the company Net increase 15 8 1 10 -4 (+)/decrease (-) in cash and marketable securities KEY RATIOS 30 June 30 June 31 Dec Last 12 2007 2006 2006 months Capital employed, MEUR 3032 3032 2890 3032 Interest-bearing net debt, 776 1119 722 - MEUR Capital expenditure and 177 245 535 0 investments in shares, MEUR Return on average capital - - 15,4 17,0 employed, after tax, ROACE % Return on capital employed, 32,3 31,5 31,9 29,7 pre-tax, ROCE % Return on equity, % 32,2 36,0 34,3 33,5 Equity per share, EUR 8,52 7,09 8,15 - Cash flow per share, EUR 1,38 0,50 2,00 2,88 Equity-to-assets ratio, % 47,2 38,5 48,4 - Gearing, % 35,5 61,3 34,4 - Leverage ratio, % 26,2 38,0 25,6 - Average number of shares 256040167 256403686 256403686 256223420 Number of shares at the end 255903686 256403686 256403686 255903686 of the period Average number of employees 4761 4673 4678 - NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. BASIS OF PREPARATION AND ACCOUNTING POLICIES The interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU . The interim financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2006. The accounting policies adopted are consistent with those of the Group's annual financial statements for the year ended 31 December 2006. The following interpretations are mandatory for the financial year ending 31 December 2007, but not relevant for the Group: - IFRIC 7 Financial Reporting in Hyperinflationary Economies - IFRIC 8 Scope of IFRS 2 - IFRIC 9 Reassessment of Embedded derivatives - IFRIC 10 Interim Financial Reporting and Impairment. 2. DISPOSALS Neste Oil closed the divestment of its 70 % holding in Eastex Crude Company in mid February. The company has been consolidated as a subsidiary in Neste Oil consolidated financial statements until the closing date and included in the Oil Refining segment. The company had an insignificant impact on Neste Oil's results, but has contributed significant revenues, accounting for EUR 1.8 billion of Neste Oil's total consolidated sales of EUR 12.7 billion in 2006. In 2007, Eastex Crude Company accounted for EUR 151 million of Neste Oil's sales (1-6/2006: EUR 923 million). Non-current assets classified as held for sale comprise of the carrying amount of Eastex Crude Company at 31 December 2006, and the fair value of Ibn Zahr shares at 30 June 2006. 3. TREASURY SHARES Neste Oil has entered into an agreement with a third party service provider concerning the administration of the new share-based long-term incentive plan for key management personnel. As part of the agreement, the service provider has purchased a total of 500,000 Neste Oil shares in February 2007 in order to hedge part of Neste Oil's cash flow risk in relation to the future payment of the rewards, which will take place partly in Neste Oil shares and partly in cash during 2010 and 2013. Despite the legal form of the hedging arrangement, it has been accounted for as if the share purchases had been conducted directly by Neste Oil, as required by IFRS 2, Share based payments and SIC-12, Consolidation - Special purpose entities. The consolidated balance sheet and the consolidated changes in total equity reflect the substance of the arrangement with a deduction amounting to EUR 12 million in equity. This amount represents the consideration paid for the shares by the third party service provider. 4. SEGMENT INFORMATION Neste Oil's businesses are grouped into four segments for external reporting purposes: Oil Refining, Oil Retail, Shipping and Other. The biodiesel business is included in Oil Refining, Other segment includes corporate centre. SALES MEUR 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ Last 12 2007 2006 2007 2006 2006 months Oil Refining 2673 3056 4602 5364 10768 10006 Oil Retail 843 817 1617 1629 3280 3268 Shipping 115 69 225 155 293 363 Other 4 5 9 8 16 17 Eliminations -428 -429 -789 -842 -1623 -1570 Total 3207 3518 5664 6314 12734 12084 OPERATING PROFIT MEUR 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ Last 12 2007 2006 2007 2006 2006 months Oil Refining 288 234 426 363 671 734 Oil Retail 18 17 29 30 138 137 Shipping 16 38 39 58 78 59 Other -5 -9 -14 -18 -35 -31 Eliminations -3 0 -2 0 2 0 Total 314 280 478 433 854 899 COMPARABLE OPERATING PROFIT MEUR 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ Last 12 2007 2006 2007 2006 2006 months Oil Refining 205 178 339 272 533 600 Oil Retail 16 15 27 27 65 65 Shipping 12 5 33 27 32 38 Other -5 -9 -14 -18 -35 -31 Eliminations -3 0 -2 0 2 0 Total 225 189 383 308 597 672 DEPRECIATION, AMORTIZATION AND WRITE DOWNS MEUR 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ Last 12 2007 2006 2007 2006 2006 months Oil Refining 35 25 63 50 105 118 Oil Retail 7 7 13 14 27 26 Shipping 3 4 7 10 18 15 Other 0 1 1 1 3 3 Total 45 37 84 75 153 162 SHARE OF PROFITS IN ASSOCIATED COMPANIES AND JOINT VENTURES MEUR 4-6/ 4-6/ 1-6/ 1-6/ 1-12/ Last 12 2007 2006 2007 2006 2006 months Oil Refining 13 11 14 7 39 46 Oil Retail 0 0 0 0 0 0 Shipping 0 0 0 0 0 0 Other 0 0 0 0 0 0 Total 13 11 14 7 39 46 NET ASSETS 30 June 30 June 31 Dec MEUR 2007 2006 2006 Oil Refining 2552 2358 2389 Oil Retail 318 346 336 Shipping 311 307 298 Other 7 4 10 Eliminations 0 -4 -1 Total 3188 3011 3032 RETURN ON NET 30 June 30 June 31 Dec Last 12 ASSETS, % 2007 2006 2006 months Oil Refining 33,4 33,4 29,9 29,8 Oil Retail 17,9 16,5 37,2 39,3 Shipping 25,5 36,6 25,0 19,2 COMPARABLE 30 June 30 June 31 Dec Last 12 RETURN ON NET 2007 2006 2006 months ASSETS, % Oil Refining 26,5 25,0 23,8 24,4 Oil Retail 16,6 14,8 17,5 18,6 Shipping 21,6 17,0 10,3 12,4 QUARTERLY SEGMENT INFORMATION QUARTERLY SALES MEUR 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 2007 2007 2006 2006 2006 2006 Oil Refining 2673 1929 2431 2973 3056 2308 Oil Retail 843 774 810 841 817 812 Shipping 115 110 73 65 69 86 Other 4 5 4 4 5 3 Eliminations -428 -361 -362 -419 -429 -413 Total 3207 2457 2956 3464 3518 2796 QUARTERLY OPERATING PROFIT MEUR 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 2007 2007 2006 2006 2006 2006 Oil Refining 288 138 81 227 234 129 Oil Retail 18 11 85 23 17 13 Shipping 16 23 9 11 38 20 Other -5 -9 -9 -8 -9 -9 Eliminations -3 1 1 1 0 0 Total 314 164 167 254 280 153 QUARTERLY COMPARABLE OPERATING PROFIT MEUR 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 2007 2007 2006 2006 2006 2006 Oil Refining 205 134 78 183 178 94 Oil Retail 16 11 16 22 15 12 Shipping 12 21 1 4 5 22 Other -5 -9 -9 -8 -9 -9 Eliminations -3 1 1 1 0 0 Total 225 158 87 202 189 119 QUARTERLY DEPRECIATION, AMORTIZATION AND WRITE DOWNS MEUR 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 2007 2007 2006 2006 2006 2006 Oil Refining 35 28 30 25 25 25 Oil Retail 7 6 6 7 7 7 Shipping 3 4 3 5 4 6 Other 0 1 1 1 1 0 Total 45 39 40 38 37 38 QUARTERLY SHARE OF PROFITS IN ASSOCIATED COMPANIES AND JOINT VENTURES MEUR 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 2007 2007 2006 2006 2006 2006 Oil Refining 13 1 12 20 11 -4 Oil Retail 0 0 0 0 0 0 Shipping 0 0 0 0 0 0 Other 0 0 0 0 0 0 Total 13 1 12 20 11 -4 5. CHANGES IN INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT AND CAPITAL COMMITMENTS 30 June 30 June 31 Dec 2007 2006 2006 MEUR Opening balance 2348 2059 2059 Depreciation, amortization and impairment -84 -75 -153 Capital expenditure 177 243 526 Disposals -10 -12 -22 Disposal of a subsidiary 0 0 -39 Classified as assets held for sale 0 0 -10 Translation differences 3 -5 -13 Closing balance 2434 2210 2348 CAPITAL COMMITMENTS 30 June 30 June 31 Dec MEUR 2007 2006 2006 Commitments to purchase property, plant and 59 54 44 equipment Commitments to purchase intangible assets 0 2 2 Total 59 56 46 6. DERIVATIVE FINANCIAL INSTRUMENTS 30 June 2007 30 June 2006 31 Dec 2006 Interest rate and currency derivative contracts and share forward Nomi- Net fair Nominal Net Nominal Net contracts nal value value fair value fair value value value MEUR Interest rate 299 3 304 3 301 2 swaps Forward foreign 1275 11 1159 17 992 23 exchange contracts Currency options Purchased 346 1 601 -4 290 4 Written 267 3 593 10 274 5 Share forward 17 6 8 3 8 1 contracts Oil and freight Volume Net fair Volume Net Volume Net derivative value fair fair contracts value value 1 000 bbl Meur 1 000 bbl Meur 1 000 bbl Meur Sales contracts 82841 -41 86101 25 79094 29 Purchase contracts 105239 54 106036 -20 106339 -25 Purchased options 1613 -1 4974 -18 0 0 Written options 1194 0 4512 18 0 0 The fair values of derivative financial instruments subject to public trading are based on market prices as of the balance sheet date. The fair values of other derivative financial instruments are based on the present value of cash flows resulting from the contracts, and, in respect of options, on evaluation models. The amounts also include unsettled closed positions. Derivative financial instruments are mainly used to manage the group's currency, interest rate and price risk. 7. CONTINGENT LIABILITIES 30 June 30 June 31 Dec MEUR 2007 2006 2006 Contingent liabilities On own behalf For debt Pledges 12 7 8 Real estate mortgages 26 28 25 For other commitments Real estate mortgages 0 1 0 Other contingent liabilities 28 18 28 Total 66 54 61 On behalf of associated companies Guarantees 4 14 6 Other contingent liabilities 1 2 1 Total 5 16 7 On behalf of others Guarantees 5 2 6 Other contingent liabilities 1 1 1 Total 6 3 7 Total 77 73 75 30 June 30 June 31 Dec MEUR 2007 2006 2006 Operating lease liabilities Due within a year 120 89 117 Due later than one year and not later than 5 184 106 191 years Due later than five years 136 62 165 Total 440 257 473 Other contingent liabilities Neste Oil Corporation has a collective contingent liability with Fortum Heat and Gas Oy of the demerged Fortum Oil and Gas Oy's liabilities based on the Finnish Companies Act's Chapter 17 Paragraph 16.6. NESTE OIL GROUP JANUARY - JUNE 2007 Unaudited CALCULATION OF KEY FIGURES CALCULATION OF KEY FINANCIAL INDICATORS Operating profit = Operating profit includes the revenue from the sale of goods and services, other income such as gain from sale of shares or non-financial assets, share of profits (loss) of associates and joint ventures, less losses from sale of shares or non-financial assets, as well as expenses related to production, marketing and selling activities, administration, depreciation, amortization, and impairment charges. Realized and unrealized gains or losses on oil and freight derivative contracts together with realized gains and losses from foreign currency and oil derivative contracts hedging cash flows of commercial sales and purchases that have been recycled in the income statement, are also included in operating profit. Comparable operating profit = Operating profit -/+ inventory gains/losses -/+ gains/losses from sales of fixed assets and investments - unrealized change in fair value of oil and freight derivative contracts Return on equity, (ROE) % = 100 x (Profit before taxes - taxes) / Total equity average Return on capital employed, pre-tax (ROCE) % = 100 x (Profit before taxes + interest and other financial expenses) / Capital employed average Return on average capital employed, after-tax (ROACE) % = 100 x (Profit for the year (adjusted for inventory gains/losses, gains/losses from sales of shares or non-financial assets and unrealized gains/losses on oil and freight derivative contracts, net of tax) + minority interest + interest expenses and other financial expenses related to interest-bearing liabilities (net of taxes)) / Capital employed average Capital employed = Total assets - interest-free liabilities - deferred tax liabilities -provisions Interest-bearing net debt = Interest- bearing liabilities - cash and cash equivalents Leverage ratio, % = 100 x Interest- bearing net debt / (Interest- bearing net debt + Total equity) Gearing, % = 100 x (Interest bearing net debt / Total equity) Equity-to assets ratio, % = 100 x Total equity / (Total assets - advances received) Return on net assets, % = 100 x Segment operating profit / Average segment net assets Comparable return on net assets, % = 100 x Segment comparable operating profit / Average segment net assets Segment net assets = Property, plant and equipment, intangible assets, investment in associates and joint ventures, pension assets, inventories and interest-free receivables and liabilities allocated to the business segment, provisions and pension liabilities CALCULATION OF KEY SHARE RATIOS Earnings per share (EPS) = Profit for the year attributable to the equity holders of the company / Adjusted average number of shares during the period Equity per share = Shareholder's equity attributable to the equity holders of the company/ Adjusted average number of shares at the end of the period Cash flow per share = Net cash generated from operating activities / Adjusted average number of shares during the period