Stock Exchange Release
Neste Oil Corporation
29 of April 2010 at 9.00 am EET
Neste Oil's Interim Report for January - March 2010
- Comparable operating profit of EUR 88 million (Q1/2009: 56 million), including
an insurance compensation
payment of EUR 47 million
First quarter in brief:
- Comparable operating profit of EUR 88 million (Q1/2009: 56 million), including
a EUR 47 million in the form of non-recurring insurance compensation received
for a fire at the Porvoo refinery in April 2008
- IFRS operating profit of EUR 97 million (Q1/2009: 95 million)
- Total refining margin of USD 7.83/bbl (Q1/2009: 9.44)
- Net cash from operations was strong at EUR 374 million (Q1/2009: 17 million)
- Investments totaled EUR 190 million (Q1/2009: 174 million)
- Major six-week maintenance shutdown began at the Porvoo refinery at the end of
March
President & CEO Matti Lievonen:
"The rapid improvement in refining margins seen in February and March, compared
to the end of 2009, was a positive surprise to us, and the benefits can be seen
in our operating profit and cash flow for the first quarter. Margins have
declined somewhat from the highs seen in March, as the industry's peak
maintenance period has now passed. Due to high inventory levels, coupled with
new refining capacity coming on stream, we expect the recovery of refining
margins to be a gradual one. Complex refiners, such as Neste Oil, look set to
benefit from wider heavy-light crude price differentials on the back of higher
oil prices and increasing supply.
The on-going maintenance turnaround at our Porvoo refinery, the most extensive
one in the site's history, has progressed on schedule, and I'm confident that
the refinery will be back in production in mid-May as planned. The next
important milestone for us will be achieving the mechanical completion of our
new renewable diesel plant in Singapore this summer and starting production
there in the fourth quarter. Our good progress to date means that we are well
set to deliver on our promises throughout 2010."
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 2010, at 11:30 am 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 2010 at 3:00 pm Finland / 1:00 pm London / 8:00 am New York. The
call-in numbers are as follows: Europe: +44 (0)20 3140 8286, US: +1
718 354 1152, using access code 1670348. The conference call can be followed
atcompany's website
<http://www.thomson-webcast.net/uk/dispatching/?event_id=c482d3bde22cb23b5561c7e
f5035bf67&portal_id=87cf8ed9b77cfb128c775d5a0751c499>. An instant replay of the
call will be available for one week at +44 (0)20 7111 1244 for Europe and +1
347 366 9565 for the US, using access code 1670348.
NESTE OIL FINANCIAL STATEMENTS, 1 JANUARY - 31 MARCH 2010
Quarterly figures are unaudited, full year figures audited
Figures in parentheses refer to the corresponding period for 2009, unless
otherwise stated.
KEY FIGURES
EUR million (unless otherwise noted)
1-3/10 1-3/09 10-12/09 2009
-----------------------------------------------------------------
Revenue 2,725 2,053 2,491 9,636
Operating profit before depreciation 155 150 74 569
Depreciation, amortization,
and impairments 58 55 65 234
Operating profit 97 95 9 335
Comparable operating profit * 88 56 -29 116
Profit before income tax 88 81 4 296
Earnings per share, EUR 0.25 0.24 -0.01 0.86
Investments 190 174 263 863
Net cash from operating activities 374 17 -225 177
31 March 31 March 31 Dec
2010 2009 2009
-----------------------------------------------------------------------
Total equity 2,291 2,229 2,222
Interest-bearing net debt 1,753 1,217 1,918
Capital employed 4,100 3,491 4,257
Return on capital employed pre-tax (ROCE), % 9.6 11.7 9.0
Return on average capital employed after tax 3.0 11.6 2.5
(ROACE)**, %
Return on equity (ROE), % 11.4 11.1 10.2
Equity per share, EUR 8.91 8.67 8.64
Cash flow per share, EUR 1.46 0.07 0.69
Equity-to-assets ratio, % 39.8 44.9 39.1
Leverage (Net debt to capital), % 43.3 35.3 46.3
Gearing, % 76.5 54.6 86.3
* Comparable operating profit is calculated by excluding inventory gains/losses,
capital gains/losses, and unrealized changes in the fair value of oil and
freight derivative contracts from the reported operating profit. Inventory
gains/losses include changes in the fair value of all trading inventories.
** Rolling 12 months
The Group's first-quarter 2010 results
Neste Oil's first-quarter sales, at EUR 2,725 million (2,053 million), increased
by almost 33% year-on-year, due to higher oil prices and higher sales volumes.
The Group's comparable operating profit was EUR 88 million (56 million) in the
first quarter, including non-recurring insurance compensation received totaling
EUR 47 million, which was booked in the Others segment. Comparable operating
profit increased significantly compared to the fourth quarter of 2009, thanks to
higher refining margins. The lower profit recorded, when compared to the first
quarter of 2009 and excluding the insurance compensation received, was due to a
larger-than-expected loss at Renewable Fuels and somewhat weaker results at Oil
Products and Oil Retail. Fixed costs were lower year-on-year.
Oil Products' first-quarter comparable operating profit was EUR 58 million (64
million), Renewable Fuels' EUR -18 million (-7 million), Oil Retail's EUR 6
million (12 million), and Others' EUR 44 million (-11 million). Profits from
associated companies and joint ventures totaled EUR -8 million (-7 million).
The Group's first-quarter IFRS operating profit was EUR 97 million (95 million),
and pre-tax profit EUR 88 million (81 million). Profit for the period was EUR
64 million (61 million) and earnings per share EUR 0.25 (0.24).
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 3.0% (2009 financial year: 2.5%).
1-3/10 1-3/09 10-12/09 2009
-------------------------------------------------------------------------------
COMPARABLE OPERATING PROFIT 88 56 -29 116
- inventory gains/losses 16 76 58 261
- changes in the fair value of open oil derivatives -7 -37 -20 -43
- capital gains/losses 0 0 0 1
OPERATING PROFIT 97 95 9 335
Cash flow, investments, and financing
Neste Oil Group's net cash from operating activities between January and March
was strong at EUR 374 million (17 million), resulting from lower working capital
and the EUR 47 million insurance compensation received. As of the end of March,
approximately EUR 210 million was tied up in products stored for sale during the
major maintenance shutdown at the Porvoo refinery in April and May.
Investments totaled EUR 190 million in the first quarter, compared to EUR 174
million in the same period in 2009. Oil Products' capital spending was EUR 54
million (43 million), Renewable Fuels' EUR 129 million (123 million), Oil
Retail's EUR 2 million (4 million), and Others' EUR 5 million (4 million).
Interest-bearing net debt decreased to EUR 1,753 million compared to EUR 1,918
at the end of 2009. Net financial expenses between January and March were EUR 9
million (14 million). The average interest rate of borrowings at the end of
March was 2.4%, and the average maturity 3.8 years.
The equity-to-assets ratio was 39.8% (31 Dec 2009: 39.1%), the leverage ratio
43.3% (31 Dec 2009: 46.3%), and the gearing ratio 76.5% (31 Dec 2009: 86.3%).
The Group's liquidity remained healthy. Cash and cash equivalents and committed,
unutilized credit facilities amounted to EUR 1,409 million at the end of March
(31 Dec 2009: 1,407 million). Existing loan agreements contain no financial
covenants.
In accordance with its hedging policy, Neste Oil has hedged the majority of its
net foreign currency exposure for the next 12 months, mainly using forward
contracts and currency options. The most important hedged currency is the US
dollar.
Strategy implementation
Neste Oil will continue to implement its clean fuel strategy in 2010. The
company's current capital projects consist of new plants designed to increase
production of renewable diesel and high-quality base oil.
Strategic projects
Construction of the two major 800,000 t/a renewable diesel plants in Singapore
and Rotterdam are proceeding according to plan. The plants are 90% and 70%
complete respectively. The plant in Singapore is due to achieve mechanical
completion in summer 2010 and start production during the fourth quarter.
Mechanical completion is expected to be reached in Rotterdam in spring of 2011,
with start-up the summer of 2011. The Singapore plant is on-budget at EUR 550
million, while the Rotterdam plant is expected to come in under its EUR 670
million budget.
Neste Oil has a 45% stake in a JV that is building a 400,000 t/a base oil plant
in Bahrain. The project is proceeding on-schedule and on-budget, and mechanical
completion is estimated to be achieved in the second half of 2011. Neste Oil's
share of the investment cost is EUR 130 million.
Market overview
Crude oil prices fluctuated during the first quarter, mainly driven by investor
activity, the strengthening of the US dollar, expectations for a world economy
recovery and geopolitical tensions in oil-producing countries. Brent Dated
traded in the USD 70-80 /bbl range, ending the quarter at close to USD 80 /bbl.
Price differentials between heavier and lighter crude were at their widest since
fall 2008, reflecting weakening fuel oil margins, increased supplies of heavier
crude, and refinery maintenance work.
Refining margins improved significantly from the lows seen at the end of 2009,
supported in particular by higher gasoline prices and lower product supply due
to the refinery maintenance season. Increasing gasoline margins reflected good
demand for deliveries to the Middle East, West Africa and South America, while
exports to the US remained low.
Margins for middle distillates recovered in March following the beginning of the
refinery maintenance season. In addition to lower supply, high demand for middle
distillates in West Africa and South America contributed to better margins.
Inventories were drawn down significantly during the first quarter, but remained
high at the end of March.
Fuel oil margins remained stable in January and February, supported by good
Asian demand. They weakened in March, however, reflecting higher crude oil
prices, increased Russian fuel oil supply, and reduced exports from Europe to
Asia.
In the biofuel market, the price differential between various feedstocks
continued to be narrower than they have been historically. The premium paid for
high-quality renewable diesel compared to conventional biodiesel remained
healthy.
Diesel sales for commercial use, such as trucking, increased in the Finnish oil
retail market during the first quarter, but volumes and margins declined in the
Baltic Rim area.
Freight rates for crude tankers in the North Sea were stronger year-on-year, due
to cold winter conditions in Europe.
Key drivers
1-3/10 1-3/09 10-12/09 2009 Apr 10 Apr 09
Reference refining margin, USD/bbl 4.20 5.03 1.73 3.14 4.70 3.94
Neste Oil total refining margin,
USD/bbl 7.83 9.44 5.85 7.35 n.a. n.a.
Urals-Brent price differential,
USD/bbl -1.35 -1.17 -0.68 -0.81 -2.47 -1.71
NWE Gasoline margin, USD/bbl 11.75 6.39 7.73 9.26 11.2 9.26
NWE Diesel margin, USD/bbl 11.25 15.38 10.14 11.18 13.6 11.58
NWE Heavy fuel oil margin, USD/bbl -6.91 -8.77 -6.41 -7.44 -12.8 -8.64
Brent Dated crude oil, USD/bbl 76.24 44.40 74.56 61.51 84.78 50.34
USD/EUR, market rate 1.38 1.30 1.48 1.39 1.34 1.32
USD/EUR, hedged 1.35 1.45 1.33 1.41 n.a. n.a.
Crude freights, WS points (TD7) 122 83 97 81 112 71
--------------------------------------------------------------------------------
Production and sales
Neste Oil's total production in the first quarter was 3.6 million tons (3.5
million), of which 0.1 million tons (0.0 million) was NExBTL renewable diesel.
Neste Oil's production, by plant (1,000 t)
1-3/10 1-3/09 10-12/09 2009
Porvoo refinery 2,899 2,852 3,004 11,520
Naantali refinery 571 573 657 2,438
Beringen polyalfaolefin plant 10 8 10 35
Edmonton iso-octane plant (Neste Oil's share) 48 67 60 256
NExBTL plants 70 37 69 219
The Porvoo refinery operated at an average capacity utilization rate of 91%
(92%) during the quarter, while Naantali reached 85% (82%). The performance of
Production Line 4 improved compared to the corresponding period in 2009. Unit
shutdowns in preparation for the major six-week maintenance turnaround at Porvoo
started there towards the end of March. The re-dredged fairway to the Naantali
refinery was opened in March, allowing 100,000-ton crude tankers to discharge
full loads there.
The proportion of Russian Export Blend in Neste Oil's total refinery input was
66% (63%) in the first quarter. Refinery production costs totaled USD 4.3/bbl
(4.0). The small increase year-on-year is largely explained by the weaker US
dollar.
Sales from in-house production increased from both the previous quarter and the
same quarter in 2009, thanks to high domestic diesel demand and increased
gasoline and diesel exports to Europe. The proportion of diesel in the company's
sales mix remained at 40%, while sales of gasoline, which were lower in the
previous quarter due to the build-up of contango storage, accounted for 30%.
As of the end of March, Neste Oil's contango storage consisted of 480,000 tons
of crude and products. The plan is to sell all of this during the second quarter
of 2010.
Neste Oil's sales from in-house production, by product category (1,000 t)
1-3/10 % 1-3/09 % 10-12/10 % 2009 %
Motor gasoline 1,080 29 940 27 837 24 4,218 30
Gasoline components 46 1 64 2 51 1 270 2
Diesel fuel 1,508 40 1,306 38 1,449 41 5,228 37
Jet fuel 139 4 148 4 191 5 613 4
Base oils 76 2 57 2 62 2 257 2
Heating oil 267 7 223 7 178 5 631 4
Heavy fuel oil 212 6 354 10 291 8 1,300 9
LPG 92 3 59 2 51 1 220 2
NExBTL renewable diesel 41 1 31 1 66 2 209 1
Other products 270 7 246 7 382 11 1,233 9
---------------------------------------------------------------------
TOTAL 3,730 100 3,430 100 3,559 100 14,178 100
Neste Oil's sales from in-house production, by market area (1,000 t)
1-3/10 % 1-3/09 % 10-12/09 % 2009 %
Finland 2,017 54 1,860 54 2,034 57 7,580 53
Other Nordic countries 575 15 537 16 581 16 2,210 16
Other Europe 923 25 558 16 629 18 2,488 18
USA & Canada 170 5 472 14 229 7 1,686 12
Other countries 45 1 3 0 86 2 214 1
--------------------------------------------------------------------
TOTAL 3,730 100 3,430 100 3,559 100 14,178 100
SEGMENT REVIEWS
Neste Oil's businesses are grouped into four reporting segments: Oil Products,
Renewable Fuels, Oil Retail, and Others.
Oil Products
1-3/10 1-3/09 10-12/09 2009
Revenue, MEUR 2,272 1,582 1,987 7,631
Comparable operating profit, MEUR 58 64 -11 105
Operating profit, MEUR 65 106 27 318
Total refining margin, USD/bbl 7.83 9.44 5.85 7.35
Oil Products recorded a slightly lower comparable operating profit, EUR 58
million, compared to the EUR 64 million booked during the same quarter in 2009.
This mainly resulted from the lower profitability of the base oil business.
Refining performance was strong, despite a lower total refining margin of USD
7.83/bbl during the quarter, partially explained by low base oil margins. Total
refining margin was down by 17% year-on-year but up by 34% compared to the
fourth quarter of 2009, and was positively impacted by a beneficial Urals-Brent
spread and high gasoline margins in March in particular. First-quarter sales
volumes were high and supported by increased winter diesel sales on the domestic
market.
Along with the refining business, oil tanker chartering also posted a better
profit year-on-year. Base oils and gasoline components suffered from low
margins, although demand is improving.
Oil Products' comparable return on net assets was 8.2% (10.0%) in the first
quarter.
Renewable Fuels
1-3/10 1-3/09 10-12/09 2009
Revenue, MEUR 36 24 61 182
Comparable operating profit, MEUR -18 -7 -10 -30
Operating profit, MEUR -16 -10 -11 -25
-------------------------------------------------------------
Renewable Fuels' comparable operating profit was EUR -18 million in the first
quarter, compared to EUR -7 million in the same quarter of 2009. This was the
result of lower margins and higher costs related to the expansion of the
business and R&D. Some volumes produced during the first quarter were stored for
sale in the second quarter during maintenance turnaround at the Porvoo refinery.
Renewable Fuels' comparable return on net assets was -7.1% (-6.6%) in the first
quarter.
Oil Retail
1-3/10 1-3/09 10-12/09 2009
Revenue, MEUR 849 691 791 2,998
Comparable operating profit, MEUR 6 12 5 50
Operating profit, MEUR 6 12 6 50
Total sales volume*, 1,000 m3 1,034 1,022 1,030 4,002
- gasoline station sales, 1,000 m3 295 329 333 1,405
- diesel station sales, 1,000 m3 332 321 345 1,331
- heating oil, 1,000 m3 221 214 200 714
- heavy fuel oil, 1,000 m3 103 89 78 287
* includes both station and terminal sales
Weak volumes and margins saw Oil Retail's first-quarter 2010 comparable
operating profit reduced to EUR 6 from the EUR 12 million posted a year earlier.
Pressure on margins was seen virtually across the board and in North-West Russia
in particular, where gasoline margins peaked in the first quarter of 2009.
Oil Retail's comparable return on net assets was 7.8% (14.3%) in the first
quarter.
Shares, share trading, and ownership
Neste Oil's shares are traded on NASDAQ OMX Helsinki Ltd. The share price closed
the first quarter at EUR 12.91. At its highest during the quarter, the share
price reached EUR 13.29, while at its lowest the price stood at EUR 10.45, with
the weighted average for the quarter coming in at EUR 10.85. Market
capitalization was EUR 3.3 billion as of 31 March 2010. An average total of 1.1
million shares were traded daily. This represents 0.4% of the company's shares.
Neste Oil's share capital registered with the Company Register as of 31 March
2010 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 to issue
convertible bonds, share options, or new shares.
As of the end of March, the Finnish State owned 50.1% (50.1%) of outstanding
shares, foreign institutions 15.9% (17.4%), Finnish institutions 20.2% (20.4%),
and Finnish households 13.8% (12.0%).
Personnel
Neste Oil employed an average of 5,056 (5,252) employees in the first quarter,
of which 1,445 (1,273) are based outside Finland. As of the end of March, the
company had 5,058 employees (5,264), of which 1,473 (1,293) are located outside
Finland.
Health, safety, and the environment
The main indicator for safety performance used by Neste Oil - total recordable
injury frequency (TRIF, number of cases per million hours worked) for all work
done for the company, combining the company's own personnel and contractors -
stood at 3.1 (3.1) at the end of March 2010. The target for 2010 is below 3.
Lost workday injury frequency (LWIF) stood at 2.2. The target is below 1.
The Sustainability Yearbook 2010 was published in January, ranking the best
performers in Dow Jones sustainability Index. Altogether 66 oil and gas
companies were assessed and Neste Oil ranks in Silver class. Two companies
ranked in gold, five in silver, and one in bronze class.
Neste Oil has been selected for the Global 100, a list of the world's 100 most
sustainable companies for the fourth consecutive year. The Global 100 is based
on an analysis of 3,000 publicly traded companies. The Global 100 includes
companies from 24 countries encompassing all sectors of the economy.
Annual General Meeting
Neste Oil's Annual General Meeting (AGM) was held after the reporting period on
15 April in Helsinki. The AGM adopted the company's financial statements and
consolidated financial statements for 2009 and discharged the Supervisory Board,
the Board of Directors, and management from liability for 2009. The AGM also
approved the Board of Directors' proposal regarding the distribution of the
company's profit for 2009, sanctioning payment of a dividend of EUR 0.25 per
share. The dividend was paid on 27 April.
In accordance with the proposal made by the AGM Nomination Committee, the AGM
confirmed the membership of the Board of Directors at eight members, and the
following were re-elected to serve until the end of the next AGM: Mr Timo
Peltola, Mr Mikael von Frenckell, Mr Michiel Boersma, Ms Ainomaija Haarla, Ms
Nina Linander, Mr Hannu Ryöppönen and Mr Markku Tapio. Ms Maija-Liisa Friman was
elected as a new member. Mr Timo Peltola will continue as Chairman and Mr Mikael
von Frenckell as Vice Chairman. The AGM decided to keep the remuneration to the
Board members unchanged.
The AGM confirmed that the Supervisory Board shall comprise seven members and
the following members were elected: Ms Heidi Hautala (Chairman), Mr Kimmo
Tiilikainen (Vice Chairman), Mr Esko Ahonen, Mr Timo Heinonen, Mr Markus
Mustajärvi and Ms Anne-Mari Virolainen. Ms Miapetra Kumpula-Natri was elected
for the first time. Members are all Finnish Members of Parliament, with the
exception of Ms Heidi Hautala, who is a Member of the European Parliament. No
changes were made to the remuneration paid to the Supervisory Board. A proposal
to dissolve the Supervisory Board was not accepted.
In accordance with a proposal by the Board of Directors, Ernst & Young Oy,
Authorized Public Accountants, were appointed as the company's Auditor, with
Authorized Public Accountant Anna-Maija Simola as Responsible Auditor, until the
end of the next AGM. Payment for their services shall be made in accordance with
their invoice.
In accordance with a proposal by the Board of Directors, Subsection 1 of Section
11 of the Articles of Association has been amended and now requires that the
invitation to an AGM should be made at least three weeks prior to a meeting and
at least nine days prior to the record date set for the meeting as defined in
Subsection 2 of Section 2 of Chapter 4 of the Companies Act.
Following a proposal by the Prime Minister's Office, representing the Finnish
State, the AGM decided to establish a Nominations Committee to prepare proposals
covering the members of the Board of Directors and their remuneration for
consideration by the next AGM. The Nomination Committee comprises
representatives of the Company's three largest shareholders and shall also
include, as an expert member, the Chairman of the Board. The right to appoint
the shareholder representatives on this Committee will lie with the three
shareholders holding the largest number of votes associated with all the
company's shares on 1 November preceding the AGM. The Chairman of the Board of
Directors will be responsible for convening the Committee, and the Committee's
members will appoint a Chairman from among themselves. The Nominations Committee
will present their proposal to the Board of Directors by 1 February prior to the
AGM at the latest.
Potential short-term and long-term risks
The oil market has been and is expected to continue to be very volatile. Oil
refiners are exposed to a variety of political and economic trends and events,
as well as natural phenomena that affect the short- and long-term supply of and
demand for the products that they produce and sell.
The largest uncertainty over the short term continues to be the pace of the
anticipated recovery of the world economy, which is likely to have a material
impact on the demand for petroleum products generally and diesel fuel in
particular.
Sudden and unplanned outages at Neste Oil's production units or facilities
continue to represent a short-term operational risk.
Rapid and large changes in feedstock and product prices may lead to significant
inventory gains or losses, or change in working capital. These may have a
material impact on the company's IFRS operating profit and net cash from
operations.
Over the longer term, access to funding and rising capital costs, as well as
challenges in procuring and developing new competitive and reasonably priced raw
materials, may impact the company's growth plans.
The implementation of biofuel legislation in the EU and other key market areas
may influence the speed at which the demand for these fuels develops. Risks
include also any problems or delays in completing the NExBTL renewable diesel
investments or failure to capture the anticipated benefits from these
investments. In the longer term, failure to protect Neste Oil's proprietary
technology or introduction and implementation of competing renewable fuel
technologies or hybrid and electric engines may have a negative impact on the
company's results.
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.
For more detailed information on Neste Oil's risks and risk management, please
refer to the company's Annual Report and Financial Statements for 2009.
Outlook
As the company stated in the outlook published in the Financial Statements for
2009 in early February, it expects the market environment to remain challenging
throughout 2010. It is anticipated, however, that market conditions will
continue to improve slowly but steadily. Economic growth is seen as likely to be
the strongest outside Europe, and is anticipated to translate into a 2.0%
increase in oil demand compared to 2009, according to International Energy
Agency.
Despite the expectation of an all-time high in global oil demand in 2010, the
outlook for refining margins remains subdued compared to levels seen in previous
years. This is because of the high middle distillate inventories held in OECD
countries and the new refining capacity set to come on stream in 2010. Refinery
utilization rates are expected to be lower than normal, which indicates
potential for increased supply if margins strengthen.
A positive development in early 2010 has been the widening spread between Urals
and Brent crude prices compared to the end of 2009. Due to increased supply by
producers of heavier crude, Neste Oil expects that the discount of Urals crude
to Brent will average between USD 1.5-2.0/bbl in 2010.
Diesel and middle distillate margins have strengthened in 2010 so far, and this
is expected to continue. As stated in February, these margins are not expected
to increase significantly before high inventories have been drawn down and
demand has recovered, however. Gasoline margins were surprisingly strong in the
first quarter, but the outlook for the second half of the year is softer.
The negative impact of the major planned turnaround at the Porvoo refinery on
the second-quarter comparable operating profit is estimated to be around EUR 50
million. This results from loss of production volumes, which is only partially
compensated for by sales of stored products, totaling close to 500,000 tons
(around 3.5 million barrels). Work on the turnaround has proceeded according to
schedule and budget, and the refinery is expected to be back in normal
production by the middle of May. The ramp-up of the refinery after the shutdown
will be reflected in increased working capital in the second quarter.
The Renewable Fuels business is anticipated to report negative results until
sales volumes increase significantly, which is expected during the last few
months of 2010 when the new plant in Singapore is scheduled to come on stream.
The price differential between palm oil and rapeseed oil is anticipated to widen
moderately during 2010.
In the Oil Retail business, the Finnish market appears likely to see improving
demand for diesel and declining demand for gasoline. Diesel sales will be
supported by commercial vehicle demand in particular. Due to the slow pace
economic recovery, consumer fuel demand is set to stay below 2009 levels in
Baltic Rim countries.
A non-recurring charge of around EUR 60-70 million will be booked in the second
quarter against the IFRS operating profit related to the transfer of the pension
liabilities of the Neste Oil Pension Fund to insurance companies. The transfer
will have a positive impact of approximately EUR 80 million on operational cash
flow during the second quarter. Around EUR 50 million of this is planned to be
used to acquire the company's current head office building.
The Group's fixed costs are estimated to be similar to those in 2009.
The Group's cash investments are expected to be around EUR 920 million (870
million) in 2010, of which strategic investments will account for EUR 580
million (670 million), maintenance investments EUR 310 million (160 million),
and productivity investments EUR 30 million (40 million). Investment will be at
their highest during the second quarter due to the forthcoming completion of the
Singapore renewable diesel plant and the Porvoo turnaround.
Reporting date for the second-quarter 2010 results
Neste Oil will publish its second-quarter results for 2010 on 29 July 2010 at
approximately 9:00 a.m. EET.
Espoo, 28 April 2010
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
1 JANUARY- 31 MARCH
2010
Unaudited
CONSOLIDATED INCOME STATEMENT
MEUR
Note Last 12
1-3/2010 1-3/2009 1-12/2009 months
Revenue 3 2 725 2 053 9 636 10 308
Other income 53 7 29 75
Share of profit (loss) of
associates and joint
ventures 3 -8 -7 20 19
Materials and services -2 385 -1 628 -8 167 -8 924
Employee benefit costs -81 -79 -301 -303
Depreciation,
amortization and
impairments 3 -58 -55 -234 -237
Other expenses -149 -196 -648 -601
Operating profit 97 95 335 337
Financial income and expenses
Financial income 2 1 10 11
Financial expenses -12 -17 -44 -39
Exchange rate and fair value gains and
losses 1 2 -5 -6
Total financial income and expenses -9 -14 -39 -34
Profit before income taxes 88 81 296 303
Income tax expense -24 -20 -71 -75
Profit for the period 64 61 225 228
Profit attributable to:
Owners of the parent 64 60 221 225
Minority interest 0 1 4 3
64 61 225 228
Earnings per share from profit
attributable to the owners
of the parent basic and
diluted (in euro per share) 0,25 0,24 0,86 0,88
STATEMENT OF COMPREHENSIVE INCOME
1-3 1-3 1-12 Last 12
MEUR 2010 2009 2009 months
Profit for the period 64 61 225 228
Other comprehensive
income for the period,
net of tax:
Translation differences
and other changes 26 -5 9 40
Cash flow hedges
recorded in equity -13 -25 3 15
transferred to income
statement -4 20 15 -9
Net investment hedges -1 0 0 -1
Hedging reserves in associates and
joint ventures - - -2 -2
Other comprehensive income for the
period, net of tax 8 -10 25 43
Total comprehensive
income for the period 72 51 250 271
Total comprehensive
income attributable to:
Owners of the parent 72 50 246 268
Minority interest 0 1 4 3
72 51 250 271
CONSOLIDATED BALANCE
SHEET
31 31
March March 31 Dec
MEUR Note 2010 2009 2009
ASSETS
Non-current assets
Intangible assets 4 47 51 48
Property, plant and
equipment 4 3 363 2 779 3 235
Investments in
associates and joint
ventures 232 153 216
Non-current receivables 4 1 3
Pension assets 110 104 111
Deferred tax assets 9 12 11
Derivative financial
instruments 5 17 10 3
Available-for-sale
financial assets 4 2 1
Total non-current
assets 3 786 3 112 3 628
Current assets
Inventories 1 110 905 1 148
Trade and other
receivables 789 799 757
Derivative financial
instruments 5 33 118 50
Cash and cash
equivalents 56 46 117
Total current assets 1 988 1 868 2 072
Total assets 5 774 4 980 5 700
EQUITY
Capital and reserves
attributable to the owners
of the parent
Share capital 40 40 40
Other equity 2 2 239 2 180 2 170
Total 2 279 2 220 2 210
Minority interest 12 9 12
Total equity 2 291 2 229 2 222
LIABILITIES
Non-current
liabilities
Interest-bearing
liabilities 1 502 974 1 590
Deferred tax
liabilities 321 290 328
Provisions 20 25 22
Pension liabilities 10 11 10
Derivative financial
instruments 5 23 27 15
Other non-current
liabilities 1 3 0
Total non-current
liabilities 1 877 1 330 1 965
Current liabilities
Interest-bearing
liabilities 307 289 445
Current tax
liabilities 22 5 5
Derivative financial
instruments 5 119 159 83
Trade and other
payables 1 158 968 980
Total current
liabilities 1 606 1 421 1 513
Total liabilities 3 483 2 751 3 478
Total equity and
liabilities 5 774 4 980 5 700
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL
EQUITY
Attributable to equity holders of the
Company
Share Reserve Fair Translation Re- Mi- Total
ca- fund value diffe- tained nority equity
pital and rences ear- inte-
other nings rest
MEUR reserves
Total equity at 1
January 2009 40 10 -7 -54 2 182 8 2 179
Share-based
compensation -1 -1
Transfer from
retained earnings 1 -1 0
Change in minority 0 0
Total comprehensive
income for the
period -5 -5 60 1 51
Total equity at 31
March
2009 40 11 -13 -59 2 241 9 2 229
Share Reserve Fair Translation Re- Mi- Total
ca- fund value diffe- tained nority equity
pital and rences ear- inte-
other nings rest
MEUR reserves
Total equity at 1
January 2010 40 11 9 -45 2 195 12 2 222
Share-based
compensation -3 -3
Transfer from
retained earnings 2 -5 3 0
Change in minority 0 0
Total comprehensive
income for the period -17 25 64 0 72
Total equity at 31
March
2010 40 13 -13 -20 2 259 12 2 291
CONDENSED CONSOLIDATED CASH
FLOW STATEMENT
1-3 1-3 1-12
MEUR /2010 /2009 /2009
Cash flow from
operating activities
Profit before taxes 88 81 296
Adjustments, total 86 108 268
Change in working
capital 187 -224 -450
Cash generated from
operations 361 -35 114
Finance cost, net 14 14 20
Income taxes paid -1 38 43
Net cash generated from
operating activities 374 17 177
Capital expenditure -173 -174 -816
Acquisition of
associates and joint
ventures -14 - -47
Acquisition of other
shares -3 - -
Proceeds from sales of
fixed assets 1 3 7
Change in other
investments -8 -56 -29
Cash flow before
financing activities 177 -210 -708
Net change in loans and
other financing
activities -240 201 975
Dividends paid to the
owners of
the parent - - -205
Net increase
(+)/decrease (-) in
cash -63 -9 62
and cash equivalents
KEY FINANCIAL
INDICATORS
31 March 31 March 31 Dec Last 12
2010 2009 2009 months
Capital employed, MEUR 4 100 3 491 4 257 4 100
Interest-bearing net
debt, MEUR 1 753 1 217 1 918 -
Capital expenditure and
investment in shares, MEUR 190 174 863 879
Return on average capital
employed, after tax, ROACE % - - 2,5 3,0
Return on capital
employed, pre-tax, ROCE
% 9,6 11,7 9,0 9,0
Return on equity, % 11,4 11,1 10,2 10,1
Equity per share, EUR 8,91 8,67 8,64 -
Cash flow per share,
EUR 1,46 0,07 0,69 2,09
Equity-to-assets ratio,
% 39,8 44,9 39,1 -
Leverage ratio, % 43,3 35,3 46,3 -
Gearing, % 76,5 54,6 86,3 -
Average number of
shares 255 913 686 255 903 686 255 903 960 255 906 426
Number of shares at the
end of the period 255 913 686 255 903 686 255 913 686 255 913 686
Average number of
personnel 5 056 5 252 5 286 -
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION AND
ACCOUNTING POLICIES
The interim report has been prepared in accordance with IAS 34, Interim
Financial Reporting, as adopted by EU. The accounting policies adopted are
consistent with those of the Group's annual financial statements for the year
ended 31 December 2009.
The following interpretations are mandatory for the financial year ending 31
December 2010, but not relevant for the Group:
- Annual
improvements
2009
- Amendments to IFRS 2 Share-Based Payment: Group Cash-settled Share-based
Payment Transactions
2. TREASURY
SHARES
In 2007 Neste Oil entered into an agreement with a third party service provider
concerning the administration of the share-based management share performance
arrangement for key management personnel. As part of the agreement, the service
provider 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 possible future
payment of the rewards, which will take place partly in Neste Oil shares and
partly in cash during 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. As at 31 March there where 490.000 shares
accounted for as treasury shares.
3. SEGMENT
INFORMATION
Neste Oil's operations are grouped into four segments: Oil Products, Renewable
Fuels, Oil Retail and Others. Group administration,
shared service functions as well as Research and Technology, Neste Jacobs and
Nynas AB are included in the Others segment.
REVENUE Last 12
MEUR 1-3/2010 1-3/2009 1-12/2009 months
Oil Products 2 272 1 582 7 631 8 321
Renewable Fuels 36 24 182 194
Oil Retail 849 691 2 998 3 156
Others 49 42 164 171
Eliminations -481 -286 -1 339 -1 534
Total 2 725 2 053 9 636 10 308
OPERATING PROFIT Last 12
MEUR 1-3/2010 1-3/2009 1-12/2009 months
Oil Products 65 106 318 277
Renewable Fuels -16 -10 -25 -31
Oil Retail 6 12 50 44
Others 44 -11 -6 49
Eliminations -2 -2 -2 -2
Total 97 95 335 337
COMPARABLE OPERATING
PROFIT Last 12
MEUR 1-3/2010 1-3/2009 1-12/2009 months
Oil Products 58 64 105 99
Renewable Fuels -18 -7 -30 -41
Oil Retail 6 12 50 44
Others 44 -11 -7 48
Eliminations -2 -2 -2 -2
Total 88 56 116 148
DEPRECIATION, AMORTIZATION AND
IMPAIRMENTS Last 12
MEUR 1-3/2010 1-3/2009 1-12/2009 months
Oil Products 42 44 178 176
Renewable Fuels 5 2 14 17
Oil Retail 8 7 31 32
Others 3 2 11 12
Total 58 55 234 237
CAPITAL EXPENDITURE AND
INVESTMENTS IN SHARES Last 12
MEUR 1-3/2010 1-3/2009 1-12/2009 months
Oil Products 54 43 198 209
Renewable Fuels 129 123 625 631
Oil Retail 2 4 29 27
Others 5 4 11 12
Total 190 174 863 879
TOTAL ASSETS 31 March 31 March 31 Dec
MEUR 2010 2009 2009
Oil Products 3 730 3 565 3 750
Renewable Fuels 1 212 549 1 080
Oil Retail 572 537 545
Others 312 274 281
Unallocated assets 172 222 234
Eliminations -224 -167 -190
Total 5 774 4 980 5 700
NET ASSETS 31 March 31 March 31 Dec
MEUR 2010 2009 2009
Oil Products 2 748 2 660 2 943
Renewable Fuels 1 081 462 940
Oil Retail 307 321 305
Others 244 207 234
Eliminations -4 3 1
Total 4 376 3 653 4 423
RETURN ON NET ASSETS, % 31 March 31 March 31 Dec Last 12
2010 2009 2009 months
Oil Products 9,1 16,6 12,0 10,2
Renewable Fuels -6,3 -9,5 -4,0 -4,0
Oil Retail 7,8 14,3 15,8 14,3
COMPARABLE RETURN ON NET ASSETS, % 31 March 31 March 31 Dec Last 12
2010 2009 2009 months
Oil Products 8,2 10,0 4,0 3,7
Renewable Fuels -7,1 -6,6 -4,8 -5,3
Oil Retail 7,8 14,3 15,8 14,3
QUARTERLY SEGMENT INFORMATION
QUARTERLY REVENUE
MEUR
1-3 10-12 7-9 4-6 1-3
/2010 /2009 /2009 /2009 /2009
Oil Products 2 272 1 987 1 971 2 091 1 582
Renewable Fuels 36 61 59 38 24
Oil Retail 849 791 789 727 691
Others 49 44 37 41 42
Eliminations -481 -392 -356 -305 -286
Total 2 725 2 491 2 500 2 592 2 053
QUARTERLY OPERATING PROFIT
MEUR
1-3 10-12 7-9 4-6 1-3
/2010 /2009 /2009 /2009 /2009
Oil Products 65 27 80 105 106
Renewable Fuels -16 -11 -1 -3 -10
Oil Retail 6 6 19 13 12
Others 44 -11 17 -1 -11
Eliminations -2 -2 -2 4 -2
Total 97 9 113 118 95
QUARTERLY COMPARABLE OPERATING PROFIT
MEUR
1-3 10-12 7-9 4-6 1-3
/2010 /2009 /2009 /2009 /2009
Oil Products 58 -11 15 37 64
Renewable Fuels -18 -10 -6 -7 -7
Oil Retail 6 5 19 14 12
Others 44 -11 16 -1 -11
Eliminations -2 -2 -2 4 -2
Total 88 -29 42 47 56
QUARTERLY DEPRECIATION, AMORTIZATION AND IMPAIRMENTS
MEUR
1-3 10-12 7-9 4-6 1-3
/2010 /2009 /2009 /2009 /2009
Oil Products 42 48 43 43 44
Renewable Fuels 5 6 4 2 2
Oil Retail 8 8 8 8 7
Others 3 3 3 3 2
Total 58 65 58 56 55
QUARTERLY CAPITAL EXPENDITURE
AND INVESTMENTS IN SHARES
MEUR
1-3 10-12 7-9 4-6 1-3
/2010 /2009 /2009 /2009 /2009
Oil Products 54 59 45 51 43
Renewable Fuels 129 191 161 150 123
Oil Retail 2 10 9 6 4
Others 5 3 1 3 4
Total 190 263 216 210 174
4. CHANGES IN INTANGIBLE ASSETS AND PROPERTY,
PLANT AND EQUIPMENT AND CAPITAL COMMITMENTS
CHANGES IN INTANGIBLE ASSETS AND PROPERTY,
PLANT AND EQUIPMENT 31 March 31 March 31 Dec
MEUR 2010 2009 2009
Opening balance 3 283 2 726 2 726
Depreciation, amortization and
impairments -58 -55 -234
Capital
expenditure 173 174 820
Disposals 0 -3 -21
Translation
differences 12 -12 -8
Closing balance 3 410 2 830 3 283
CAPITAL COMMITMENTS 31 March 31 March 31 Dec
MEUR 2010 2009 2009
Commitments to purchase property, plant
and equipment 439 570 431
Total 439 570 431
Capital commitments include EUR 111 million future commitments related to energy
and utility supply agreements, which will be accounted for as finance leases.
5. DERIVATIVE
FINANCIAL
INSTRUMENTS 31 March 31 March 31 Dec
2010 2009 2009
Interest rate
and currency
derivative
contracts and
share forward
contracts Nominal Net Nominal Net Nominal Net
fair fair fair
MEUR value value value value value value
Interest rate
swaps 725 -6 477 -18 723 -13
Forward foreign
exchange
contracts 2 005 -49 1 379 0 1 759 -7
Currency
options
Purchased 110 -4 230 -5 115 -1
Written 102 -2 178 -10 114 2
Share forward
contracts 0 0 9 -5 9 -4
Oil and freight
derivative Net fair Net fair Net fair
contracts Volume value Volume value Volume value
million million
million bbl Meur bbl Meur bbl Meur
Sales contracts 39 -42 42 27 18 -32
Purchase
contracts 15 11 31 -48 7 10
Purchased
options 2 -10 2 -9 1 -8
Written options 2 10 2 9 1 8
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.
6. RELATED PARTY
TRANSACTIONS
Details of transactions between the Group and
associates/joint ventures are disclosed below.
1-3 1-3 1-12
Transactions carried out with
associates and joint ventures /2010 /2009 /2009
Sales of goods and
services 6 4 70
Purchases of goods
and services 10 8 48
Receivables 24 6 23
Financial income and
expenses 0 0 0
Liabilities 6 1 2
7. CONTINGENT
LIABILITIES
31 March 31 March 31 Dec
MEUR 2010 2009 2009
Contingent
liabilities
On own behalf for
commitments
Real estate mortgages 26 26 26
Pledged assets 2 2 2
Other contingent
liabilities 45 41 48
Total 73 69 76
On behalf of
associates and joint
ventures
Guarantees 3 6 4
Other contingent
liabilities 2 1 2
Total 5 7 6
On behalf of others
Guarantees 19 12 18
Total 19 12 18
Total 97 88 100
31 March 31 March 31 Dec
MEUR 2010 2009 2009
Operating lease
liabilities
Due within one year 79 112 82
Due between one and five years 157 199 166
Due later than five
years 120 156 120
Total 356 467 368
The Group's operating lease commitments primarily relate to time charter
vessels, land and office space. In 2008 the lease commitments included operating
leases contained in hydrogen supply agreements. Based on updated information the
hydrogen supply agreements have been reassessed in 2009 and will be accounted
for as take-or-pay contracts. The previous years figures concerning operating
lease liabilities have been restated accordingly.
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.
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 sale of shares and non-financial assets - unrealized change in
fair value of oil and freight derivative contracts. Inventory gains/losses
include the change in fair value of all trading inventories.
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
period (adjusted for inventory gains/losses, gains/losses from sale of shares
and 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 tax)) /
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 including shareholder loans, pension
assets, inventories and interest-free receivables and liabilities allocated to
the business segment, provisions and pension liabilities
CALCULATION OF SHARE-RELATED INDICATORS
Earnings per share (EPS) = Profit for the period 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
[HUG#1409777]
