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Neste Oil Oyj: Neste Oil's Interim Report for January-June 2014

2014-08-05 08:01:00
Ticker Giełda ISIC Kraj Miasto
NES1V XHEL Finland Espoo






Neste Oil Corporation

Interim Report

5 August at 9 a.m. (EET)



Neste Oil's Interim Report for January-June 2014



Internal improvement actions started to bear fruit in a challenging market.



Second quarter in brief:



* Comparable operating profit totaled EUR 85 million (Q2/2013: EUR 88 million)

* Total refining margin was USD 8.35 /bbl (Q2/2013: USD 8.82/bbl)

* Renewable Products' reference margin was USD 214/ton (Q2/2013: USD 346/ton)

* Renewable Products' additional margin was USD 155/ton (Q2/2013: USD 88/ton)

* Net cash from operations totaled EUR 219 million (Q2/2013: EUR 312 million)

January-June in brief:



* Comparable operating profit totaled EUR 140 million (1-6/2013: EUR 223

million)

* Return on average capital employed (ROACE) was 10.6% over the last 12 months

(2013: 11.8%)

* Leverage ratio was 36.1% as of the end of June (31.12.2013: 30.0%)

* Comparable earnings per share: EUR 0.31 (1-6/2013: EUR 0.56)

President & CEO Matti Lievonen:



"Although the challenging market situation has continued, Neste Oil has

successfully taken a number of actions to compensate for the low reference

margins in Oil Products and Renewable Products. We recorded a comparable

operating profit of EUR 85 million during the second quarter, compared to EUR

88 million during the corresponding period last year.



Oil Products' reference refining margin was at its lowest in May, as diesel

imports to Europe continued to run at a high level. The reference refining

margin averaged USD 4.2/bbl compared to USD 5.7/bbl in the second quarter of

2013. Oil Products' result was also impacted by an unscheduled 40-day

maintenance outage on production line 4 at the Porvoo refinery. Our additional

margin averaged a reasonable USD 4.1/bbl, however, and enabled Oil Products to

record a comparable operating profit of EUR 33 million compared to EUR 30

million in the second quarter of 2013.



Renewable Products' market situation has improved slightly, but decisions on US

biofuel regulation for 2014 are still pending. Sales volumes allocated to North

America were approx. one third of total in the second quarter. The profitability

of our European business was impacted by the narrow price differential between

FAME biodiesel and palm oil. Sales volumes were high, at 566,000 tons, and our

NEXBTL renewable diesel refineries continued to operate at high utilization

rates. We further increased our usage of waste and residues to 66% of total

renewable inputs. Renewable Products recorded a comparable operating profit of

EUR 31 million compared to EUR 33 million in the second quarter of 2013.



Oil Retail continued to perform well, achieving reasonable margins in all

markets. The segment generated a comparable operating profit of EUR 20 million,

slightly below the EUR 22 million booked in the second quarter of 2013.



We expect the Group's full-year comparable operating profit to be within the

earlier guided EUR 450 million +/- 10% range in 2014. As Neste Oil's reference

refining margin is currently expected to average USD 3.5/bbl rather than the

earlier estimated USD 4.0/bbl in 2014, our full-year comparable operating profit

is likely to be at the lower end of the guidance range. We will continue to

implement a series of performance improvement initiatives related to both

variable and fixed costs aimed at improving comparable operating profit by at

least EUR 50 million in 2014, which will contribute to reaching the guided

result level."



The Group's second-quarter 2014 results



Neste Oil's revenue in the second quarter totaled EUR 4,248 million (EUR 3,970

million). This increase resulted mainly from higher sales in Oil Products and

Renewable Products. The Group's comparable operating profit came in at EUR 85

million. Comparable operating profit for the corresponding period in 2013 was

EUR 88 million. Oil Products' result was negatively impacted by reference

refining margins, which were lower than in the second quarter of 2013, as well

as a 40-day unscheduled maintenance outage at the Porvoo refinery. The solid

additional margin helped secure the segment's overall result. Renewable

Products' comparable operating profit was similar to that recorded in the second

quarter of 2013. The impact of Renewable Products' lower reference margin was

largely compensated for by higher sales volumes and the higher additional margin

achieved by internal measures designed to optimize the sales and feedstock mix.

Oil Retail's solid performance continued, as it delivered virtually the same

comparable operating profit as in the corresponding period in 2013, despite the

negative currency effect. The result of the Others segment improved marginally

compared to the second quarter of 2013.



Oil Products' second-quarter comparable operating profit was EUR 33 million (30

million), Renewable Products' EUR 31 million (33 million), and Oil Retail's EUR

20 million (22 million). The comparable operating profit of the Others segment

totaled EUR 2 million (-1 million).



The Group's IFRS operating profit was EUR 69 million (112 million) and reflected

inventory gains totaling EUR 2 million (losses of 26 million) and changes in the

fair value of open oil derivatives totaling EUR -18 million (7 million). Pre-tax

profit was EUR 47 million (96 million), profit for the period EUR 38 million (90

million), and earnings per share EUR 0.15 (0.35).



The Group's January-June 2014 results



Neste Oil's revenue totaled EUR 7,902 million during the first six months of the

year compared to EUR 8,228 million during the same period last year. This

decline resulted mainly from lower sales in Oil Products in the first quarter

and the disposal of the retail business in Poland. The Group's six-month

comparable operating profit totaled EUR 140 million compared to EUR 223 million

in the first half of 2013. The main reason for the reduced comparable operating

profit was the lower reference margins in both Oil Products and Renewable

Products, which had a total negative impact of EUR 173 million. Higher sales

volumes in Renewable Products and higher additional margins saw the comparable

operating profit come in EUR 83 million below the figure booked during the first

six months of 2013.



Oil Products' six-month comparable operating profit was EUR 66 million (141

million), Renewable Products' EUR 46 million (59 million), and Oil Retail's EUR

35 million (33 million). The comparable operating profit of the Others segment

totaled EUR -9 million (-13 million).



The Group's IFRS operating profit was EUR 124 million (198 million), which was

impacted by inventory losses totaling EUR 1 million (61 million) and net capital

losses totaling EUR 2 million (gains 43 million). The pre-tax profit was EUR 85

million (161 million), profit for the period EUR 69 million (137 million), and

earnings per share EUR 0.27 (0.53).



Outlook



Developments in the global economy have been reflected in the oil, renewable

fuel, and renewable feedstock markets, and volatility in these markets is

expected to continue. Global oil demand is generally anticipated to increase by

more than 1 million bbl/d in 2014, but this growth will be more than compensated

for by new refining capacity in Asia and the Middle East. This is expected to

lead to continued high middle distillate imports into Europe from the Middle

East and the US. Gasoline margins are expected to follow normal seasonality,

which supports the reference margin during the summer driving season.



Vegetable oil price differentials are expected to vary, depending on crop

outlooks, weather phenomena, and variations in demand for different feedstocks,

but no fundamental changes in the drivers influencing long-term average

feedstock price differentials are expected. Consequently, price differentials

during 2014 are likely to widen from the current narrow levels in both Europe

and North America.



Uncertainties regarding political decision-making in the US are likely to be

reflected in the renewable fuel market. Examples of pending decisions include

volume targets for biomass-based diesel and the possible reintroduction of the

Blender's Tax Credit (BTC), which both impact the US market. Reintroduction of

the BTC for 2014 and 2015 has been proposed in the US Congress, but is not

likely to make any progress until the mid-term elections in November.

Reintroduction would have a positive impact on Neste Oil's result. It is not

included in the present result guidance.



The NEXBTL refinery in Singapore is scheduled for a major turnaround lasting

approx. eight weeks during the third and fourth quarter of 2014.



Neste Oil expects the Group's full-year comparable operating profit to be within

the earlier guided EUR 450 million +/- 10% range in 2014. As Neste Oil's

reference refining margin is currently expected to average USD 3.5/bbl rather

than the earlier estimated USD 4.0/bbl in 2014, the full-year comparable

operating profit is likely to be at the lower end of the guidance range. Neste

Oil will continue to implement a series of performance improvement initiatives

related to both variable and fixed costs aimed at improving the Group's

comparable operating profit by at least EUR 50 million in 2014, which will

contribute to reaching the guided result level.



Further information:



Matti Lievonen, President & CEO, tel. +358 10 458 11

Jyrki Mäki-Kala, CFO, tel. +358 10 458 4098

Investor Relations, tel. +358 10 458 5292



News conference and conference call



A press conference in Finnish on the second-quarter results will be held today,

5 August 2014, at 11:30 a.m. EET at the company's headquarters at 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 5 August 2014 at 3 p.m. Finland / 1 p.m. London / 8 a.m. New York. The call-

in numbers are as follows: Finland: +358 (0)9 6937 9543, Europe: +44 (0)20

3427 1908, US: +1 212 444 0895, using access code 8887105. The conference call

can be followed at the company's web site. An instant replay of the call will be

available until 12 August 2014 at +358 (0)9 2310 1650 for Finland at +44 (0)20

3427 0598 for Europe and +1 347 366 9565 for the US, using access code 8887105#.



Neste Oil in brief

Neste Oil Corporation is a refining and marketing company concentrating on low-

emission, high-quality traffic fuels. The company produces a comprehensive range

of major petroleum products and is the world's leading supplier of renewable

diesel. Neste Oil had net sales of EUR 17.5 billion in 2013 and employs around

5,000 people, and is listed on NASDAQ OMX Helsinki.



Neste Oil is included in the Dow Jones Sustainability World Index, and has

featured in The Global 100 list of the world's most sustainable corporations for

many years. Forest Footprint Disclosure (FFD) has ranked Neste Oil as one of the

best performers in the oil & gas sector. Further information: www.nesteoil.com









Neste Oil Interim Report Q2 2014:

http://hugin.info/133386/R/1846474/643623.pdf







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Source: Neste Oil Oyj via GlobeNewswire

[HUG#1846474]





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