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
