2008-02-07 08:00:00 CET
2008-02-07 08:03:06 CET
REGULATED INFORMATION
Neste Oil - Financial Statement Release
NESTE OIL'S FINANCIAL STATEMENTS FOR 2007
- Full-year comparable operating profit of EUR 626 million, up 5%
2007 in brief:
* Comparable operating profit of EUR 626 million (2006: 597
million)
* Operating profit of EUR 801 million (2006: 854 million)
* Earnings per share of EUR 2.25 (2006: 2.46)
* Strong balance sheet with a year-end leverage of 23.7% (31
Dec 2006: 25.6%)
* The Board of Directors proposes a dividend of EUR 1.00 per
share (0.90)
Fourth quarter in brief:
* Comparable operating profit of EUR 84 million (10-12/06:
87 million)
* Operational problems at the Porvoo refinery had a
significant negative impact
* Strong operational cash flow of EUR 220 million (10-12/06:
136 million)
* Investment decision to build a 800,000 t/a biodiesel plant
in Singapore
President & CEO Risto Rinne:"As a result of a prolonged shutdown of the new diesel line and
unplanned maintenance on some other units in November, our
performance in the final quarter fell short of expectations. These
outages unfortunately coincided with very strong diesel margins.
Our full-year profit was mainly shadowed by the delay of the new
diesel line, although many production records were broken at the
Porvoo refinery. Since its restart in December, the new line has been
running smoothly and should deliver much better results in 2008.
I'm happy that we proceeded with our strategic projects during the
year. Construction of the world's largest renewable diesel plant in
Singapore is about to commence, and we are continuing planning work
on other growth projects as well. Hopefully, we'll take decisions on
some of these later this year."
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 2007 results will be held today,
7 February 2008, at 11:30 am EET in the Akseli Gallén-Kallela Room at
Hotel Kämp, Pohjoisesplanadi 29, Helsinki. www.nesteoil.com will
feature English versions of the presentation materials.
A conference call in English for investors and analysts will be held
today, 7 February 2008, 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 3023
4426, US: +1 866 966 5335. Use the password: Neste Oil. An instant
replay of the call will be available for one week at +44 (0)20 8196
1998 for Europe and +1 866 583 1035 for the US, using access code
725434.
NESTE OIL FINANCIAL STATEMENTS, 1 JANUARY - 31 DECEMBER
2007
10-12/2007 and 10-12/2006 unaudited, full year 2007 and 2006 audited
Figures in parentheses refer to the full-year financial statements
for 2006, unless otherwise stated.
KEY FIGURES
EUR million (unless otherwise noted)
10-12/07 10-12/06 2007 2006
Sales 3,461 2,956 12,103 12,734
Operating profit before
depreciation 199 207 996 1,007
Depreciation, amortization
and impairment charges 56 40 195 153
Operating profit 143 167 801 854
Comparable operating profit
* 84 87 626 597
Profit before income tax 130 165 763 841
Earnings per share, EUR 0.40 0.54 2.25 2.46
Capital expenditure
and investments in shares 98 151 334 535
Net cash from operating
activities 220 136 541 512
31 Dec 2007 31 Dec 2006
Total equity 2,427 2,097
Interest-bearing net debt 755 722
Capital employed 3,234 2,890
Return on capital employed
pre-tax (ROCE), % 26.2 31.9
Return on average capital
employed after tax
(ROACE),% 15.5 15.4
Return on equity (ROE), % 25.6 34.3
Equity per share, EUR 9.47 8.15
Cash flow per share, EUR 2.11 2.00
Equity-to-assets ratio, % 49.9 48.4
Leverage ratio, % 23.7 25.6
Gearing, % 31.1 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 full-year results
Neste Oil's sales decreased by 5% to EUR 12,103 million in 2007,
compared to EUR 12,734 million in 2006, and mainly resulted from the
divestment of the Group's stake in Eastex Crude Company in early
2007. Excluding this, sales increased by 10%.
The Group's full-year operating profit totaled EUR 801 million (854
million). This includes an inventory gain of EUR 174 million (56
million), whereas the operating profit for 2006 included a EUR 210
million gain on asset sales.
The full-year comparable operating profit increased to EUR 626
million from EUR 597 million in 2006, thanks to higher refining
margin and increased volumes in Oil Refining. This positive
contribution was offset, however, by increased costs, including
maintenance costs, and higher depreciation in Oil Refining.
Oil Refining posted a comparable operating profit of EUR 582 million
(533 million), Oil Retail EUR 59 million (65 million), and Shipping
EUR 28 million (32 million).
Profits from associated companies and joint ventures totaled EUR 39
million (39 million).
The Group's profit before income taxes amounted to EUR 763 million
(841 million).
Income taxes for the period were EUR 183 million (205 million), and
the effective tax rate was 24.0% (24.3%).
Profit for the period 2007 totaled EUR 580 million (636 million) and
earnings per share, EUR 2.25 (2.46).
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 December, the rolling twelve-month
ROACE was 15.5% (2006 financial year: 15.4%).
The Group's fourth-quarter results
Sales at the Group amounted to EUR 3,461 in the last quarter of 2007
(10-12/06: 2,956 million).
The fourth-quarter operating profit was EUR 143 million (10-12/06:
167 million), which includes inventory gains of EUR 54 million
(10-12/06: 14 million). The figure for the last quarter of 2006
includes a EUR 83 million gain from asset sales.
The Group's comparable operating profit for the fourth quarter was
EUR 84 million (10-12/06: 87 million). The comparable operating
profit was positively impacted by higher refining margins and
biodiesel production. Negative impact was experienced across the
portfolio, most notably in the form of considerably lower base oil
profitability and increased fixed costs and depreciation. In
addition, lost production and maintenance costs related to planned
and unplanned outages at the Porvoo refinery totaled over EUR 60
million.
Oil Refining's comparable operating profit in the fourth quarter was
EUR 89 million (10-12/06: 78 million), Oil Retail's EUR 10 million
(10-12/06: 16 million), and Shipping's EUR -3 million (10-12/06: 1
million).
Profits from associates and joint ventures in the fourth quarter were
EUR 8 million (10-12/06: 12 million). Profit before income taxes was
EUR 130 million (10-12/06: 165 million) and profit for the period EUR
103 million (10-12/06: 140 million).
Earnings per share was EUR 0.40 (10-12/06: 0.54).
10-12/07 10-12/06 2007 2006
COMPARABLE OPERATING PROFIT 84 87 626 597
- changes in the fair value of
open oil derivative positions 4 -17 -5 -9
- inventory gains 54 14 174 56
- gains from sales of fixed assets 1 83 6 210
OPERATING PROFIT 143 167 801 854
Capital expenditure
Capital spending was significantly lower in 2007 compared to 2006.
Investments totaled EUR 334 million (535 million), of which Oil
Refining accounted for EUR 272 million (478 million), Oil Retail EUR
51 million (44 million), and Shipping EUR 2 million (10 million).
Depreciation in 2007 was EUR 195 million (153 million).
Financing
The Group's interest-bearing net debt was EUR 755 million at the end
of the year (31 Dec 2006: EUR 722). Net financial expenses between
January and December were EUR 38 million (13 million).
The average interest rate of borrowings at the end of 2006 was 4.5%,
and the average maturity 4.6 years.
Net cash from operating activities between January and December was
EUR 541 million (512 million).
Neste Oil's balance sheet continued to strengthen during 2007. The
year-end equity-to-assets ratio was 49.9% (31 Dec 2006: 48.4%), the
gearing ratio 31.1% (31 Dec 2006: 34.4%), and the leverage ratio
23.7% (31 Dec 2006: 25.6%).
The Group's liquidity remained healthy. Cash and cash equivalents and
committed, unutilized credit facilities amounted to EUR 1,492 million
at the end of December (31 Dec 2006: 1,667 million).
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.
Market overview
After the record prices seen in 2006, crude oil prices remained
strong and climbed from USD 50 /bbl in January to close to USD 80
/bbl in July. Investor activity, OPEC production cuts, and lower US
crude oil stocks pushed prices even higher during the second half of
the year. Brent Dated recorded an all-time high of USD 96.02 /bbl in
late December. Brent Dated averaged USD 72.52 /bbl (65.14) in 2007 as
a whole; the average for the fourth quarter was USD 88.69 /bbl
(10-12/06: 59.68).
The price difference between heavy and light crude narrowed compared
to 2006. Demand for heavier crude improved, due to a tighter light
crude market. The average differential between Urals and Brent Dated
in 2007 was USD -3.10 /bbl (-4.28). During the fourth quarter, the
differential averaged USD -2.88 /bbl (10-12/06: -3.79).
Refining margins increased significantly compared to 2006,
particularly in the spring, when they were driven by strong gasoline
margins. The international reference refining margin for complex
refineries in Northwest Europe, IEA Brent Cracking, averaged USD 5.07
/bbl (3.73). In the fourth quarter, middle distillate margins were
exceptionally strong due to refinery outages, and IEA Brent Cracking
averaged USD 4.27 /bbl (10-12/06: 1.67).
Gasoline prices rose steadily during the first half of 2007, pushed
up both by high demand and historically low gasoline inventories in
the US due to both planned and unplanned refinery outages. Prices
softened as a result of higher refinery runs in the summer, but as
inventories remained low, gasoline margins were better than normal
also during the off-season.
The strong middle distillate market improved further in the second
half of 2007 because of lower inventories on both sides of the
Atlantic. Diesel margins remained healthy, due to growing demand and
occasional supply disruptions caused by refinery shutdowns. In
November, refinery problems led to limited diesel availability in
Northwest Europe, which resulted in very high margins. Jet fuel and
heating oil demand and margins also increased towards the end of the
year.
Fuel oil margins remained largely negative, but above market
expectations; the high-sulfur fuel oil market was temporarily tight
due to low Russian exports and very good bunker demand during the
last quarter.
The first-generation biodiesel (FAME) industry has continued to
suffer from over-capacity and low profitability. EU Commission's
draft proposal to promote renewable energy was released in January
2008. Discussion on raw material sustainability in the public domain
has intensified and the importance of sustainability criteria has a
central role also in the draft EU directive proposal. In addition,
the criteria for certifying palm oil production were approved by the
RSPO in November 2007, and implementation is expected to start in
2008. The demand for high quality renewable diesel, such as Neste
Oil's NExBTL, has remained healthy.
Prices for vegetable oil continued to increase in 2007, and this
accelerated in the second half, driven by high demand for rapeseed
oil to produce winter-grade FAME.
Competition for market share continued on the oil retail market in
Finland. During the last months of the year, the competition moved
away from gasoline to diesel, as diesel demand is continuing to
increase. Overall demand for traffic fuels continued to grow in the
Baltic Rim area. Rapidly increasing oil prices in the fourth quarter
put pressure on margins.
Crude freight rates on the North Sea market were a little lower, but
those on the Baltic market declined by 10% compared to 2006.
Trans-Atlantic product freight rates fell by some 8% compared to
2006. The freight market was weak in the fourth quarter, particularly
October-November.
Key drivers
10-12/07 10-12/06 2007 2006 Jan 2008
IEA Brent cracking margin,
USD/bbl 4.27 1.67 5.07 3.73 1.77
Neste Oil's total refining
margin, USD/bbl 9.88 7.46 10.46 9.11 n.a.
Urals - Brent price
differential, USD/bbl -2.88 -3.79 -3.10 -4.28 -2.34
Brent dated crude oil, USD/bbl 88.69 59.68 72.52 65.14 92.00
Crude freight rates, Aframax
WS points 152 165 136 145 159
SEGMENT REVIEWS
In 2007, Neste Oil's businesses were grouped into four reporting
segments: Oil Refining, Oil Retail, Shipping, and Other. The
Biodiesel and Specialty Products businesses were included in Oil
Refining.
Oil Refining
Oil Refining's full-year comparable operating profit was EUR 582
million (533 million), and its operating profit EUR 754 million (671
million).
Neste Oil's refining margin increased to USD 10.46/bbl in 2007,
compared to USD 9.11 /bbl in 2006. This increase was due to higher
product margins, which is reflected in the reference refining margin
(IEA Brent cracking), which averaged USD 5.07 /bbl (3.73 /bbl). The
new diesel line contributed positively to the refining margin,
despite the limited amount of time that it was operational. Higher
production volumes also made a positive contribution to the segment's
profits. Negative impact resulted from higher costs and depreciation.
High feedstock prices put pressure on the base oil business in the
last quarter.
Oil Refining's comparable operating profit in the fourth quarter was
EUR 89 million (10-12/06: 78 million), and operating profit of EUR
151 million (10-12/06: 81 million).
Neste Oil's refining margin averaged USD 9.88 /bbl in the fourth
quarter (10-12/06: 7.46), helped by a favorable market and product
margins, as reflected in the IEA Brent cracking margin of USD 4.27
/bbl (10-12/06: 1.67). The high refining margin was offset by higher
costs, including maintenance, and significantly lower profitability
in the Specialty Products division.
Oil Refining's return on net assets (RONA) in 2007 was 28.9% (29.9%).
The comparable return on net assets was 22.3% (23.8%).
Key figures
10-12/07 10-12/06 2007 2006
Sales, MEUR 2,872 2,431 9,925 10,768
Operating profit, MEUR 151 81 754 671
Comparable operating profit, MEUR 89 78 582 533
Capital expenditure, MEUR 73 130 272 478
Total refining margin USD/bbl 9.88 7.46 10.46 9.11
Production
Many records were broken at Neste Oil's refineries in 2007. The most
important of these were total feed and total production, as well as
diesel and base oil production.
Neste Oil refined a total of 14.6 million tons (13.8 million) of
crude oil and feedstocks, of which 11.8 million tons (11.6 million)
at Porvoo. The Naantali refinery processed 2.8 million tons (2.2
million). A major maintenance shutdown took place at Naantali in
2006.
Neste Oil refined 3.5 million tons (3.5 million) during the fourth
quarter, of which 2.8 million tons (3.0 million) at Porvoo and 0.7
million tons (0.5 million) at Naantali.
Refineries operated almost at their full crude distillation capacity
in 2007. The Porvoo refinery experienced lower rates during the
first and fourth quarters, when utilization was 97% and 98%
respectively, as a result of unplanned maintenance. Porvoo reached a
100% capacity utilization in 2006, while Naantali's figure of 83% was
the result of the refinery's planned maintenance shutdown.
The start-up of the new diesel production line at Porvoo saw the
proportion of Russian Export Blend in Neste Oil's total refinery
input rise to 51% (43%). REB accounted for 54% (41%) in the fourth
quarter.
Sales
Sales volumes in Finland totaled 8.1 million tons in 2007 (8.1
million), and export volumes 6.3 million tons (6.0 million). Sales
volumes in Finland in the fourth quarter totaled 2.1 million tons
(10-12/06: 2.0 million) and exports 1.5 million tons (10-12/06: 1.5
million). Sales to North America increased by 20% compared to 2006.
Thanks to the new production line at Porvoo, diesel sales increased
in the second half of 2007 and exceeded sales in 2006 by 7%. 2007 was
another record-breaking year in base oils, such as VHVI, driven by
growing demand.
NExBTL Renewable Diesel
The first NExBTL plant was started up at the Porvoo refinery in the
summer, and the first deliveries were made in the second half of the
year. The NExBTL sales margin was healthy thanks to its premium
quality and favorable feedstock sourcing.
Specialty products
Base oils showed lower profits compared to 2006. Most of this
resulted from the weak last quarter, which was characterized by a
rapid increase in feedstock prices and lower availability at the
Porvoo base oil plant. Iso-octane profits remained at 2006 level.
Neste Oil's sales from in-house production, by product category
(1,000 t)
10-12/07 10-12/06 2007 2006
Motor gasoline and components 1,110 1,153 4,741 4,856
Diesel fuel 1,298 1,271 5,137 4,821
Jet fuel 197 178 729 702
Base oils 77 72 304 302
Heating oil 225 197 764 684
Heavy fuel oil 322 257 1,097 1,069
NExBTL Renewable Diesel 23 0 28 0
Other products 331 360 1,532 1,543
TOTAL 3,583 3,509 14,332 14,095
Neste Oil's sales from in-house production, by market area (1,000 t)
10-12/07 10-12/06 2007 2006
Finland 2,071 2,049 8,053 8,083
Other Nordic countries 484 445 2,059 1,906
Other Europe 643 734 2,399 2,473
USA & Canada 337 277 1,703 1,417
Other countries 48 4 118 216
TOTAL 3,583 3,509 14,332 14,095
Oil Retail
Oil Retail posted a comparable operating profit of EUR 59 million (65
million) in 2007. The figure for 2006 includes rental and other
income from service station properties in Finland sold in late 2006.
Excluding this item, Oil Retail's comparable operating profit
increased on 2006. Expansion of the station network in the Baltic Rim
and higher volumes contributed positively to the segment's profit.
Oil Retail's full-year operating profit for 2007 was EUR 60 million
compared to EUR 138 million in 2006. The latter includes a EUR 72
million gain from asset sales.
Comparable operating profit in the fourth quarter came in at EUR 10
million (10-12/06: 16 million) as a result of tighter margins,
notwithstanding the higher diesel volumes in 2007. It should be noted
that the fourth quarter of 2006 was exceptionally good for Oil
Retail.
Oil Retail's return on net assets (RONA) in 2007 was 17.4% (37.2%).
The comparable return on net assets was 17.1% (17.5%).
Key figures
10-12/07 10-12/06 2007 2006
Sales, MEUR 965 810 3,435 3,280
Operating profit, MEUR 9 85 60 138
Comparable operating profit, MEUR 10 16 59 65
Capital expenditure, MEUR 24 20 51 44
Product sales volume, 1,000 m3 1,190 1,174 4,519 4,424
Total gasoline sales increased by almost 7% in 2007, whereas diesel
sales jumped almost 15% compared to 2006. Diesel sales in the fourth
quarter were up by almost 18% and gasoline sales flat compared to the
same period in 2006.
Neste Oil's retail market share in Finland was 27.6% (26.2%) in
gasoline and 39.8% (40.9%) in diesel fuel. At the end of 2007, the
company had 899 outlets in Finland. Gasoline volumes in Finland were
flat compared to 2006, but diesel volumes continued to increase
steadily. Both increased in the fourth quarter, by 8% and 5%
respectively. Sales of heating oil continued to fall due to mild
weather and lower demand.
In November, Neste Oil signed a lubricant production agreement with
Ashland Nederland B.V. to guarantee the continued production of Neste
Oil lubricants when the company's plant in Helsinki closes at the end
of 2008.
Oil Retail started a project designed to enhance its profitability
and position on the domestic market in 2007. This will include a
rebranding of service stations.
Outside Finland, the company expanded its network by 33 stations in
2007. At the end of the year, Neste Oil had 45 stations in Russia,
41 in Estonia, 48 in Latvia, 37 in Lithuania, and 100 in Poland.
Sales through the Baltic Rim station network continued to increase
during 2007, by over 12% in gasoline and close to 27% in diesel.
Gasoline sales in the fourth quarter increased by almost 7% and
diesel volumes by 25%.
Oil Retail sales volumes (1,000 m3)
10-12/07 10-12/06 2007 2006
Gasoline 392 390 1,551 1,452
Diesel fuel 475 403 1,733 1,510
Heating oil 217 246 762 932
Heavy fuel oil 106 135 473 530
TOTAL 1,190 1,174 4,519 4,424
Oil Retail sales by market area (1,000 m3)
FINLAND 10-12/07 10-12/06 2007 2006
Gasoline 162 150 656 652
Diesel fuel 273 260 1,059 1,008
Heating oil 217 216 753 814
Heavy fuel oil 106 135 473 530
TOTAL 758 761 2,941 3,004
BALTIC RIM 10-12/07 10-12/06 2007 2006
Gasoline, station sales 210 195 812 722
Gasoline, direct and terminal sales 20 45 83 78
Diesel fuel, station sales 100 80 359 283
Diesel fuel, direct and terminal sales 102 63 315 219
Heating oil 0 30 9 118
TOTAL 432 413 1,578 1,420
Jet fuel (1,000 m3) 68 74 292 270
LPG (1000 t) 62 67 235 254
Shipping
Shipping's comparable operating profit totaled EUR 28 million in 2007
(32 million), and was negatively impacted by higher docking and
time-charter costs, as well as lower crude freight rates. These were
somewhat offset by successful bunker hedging. The full-year operating
profit was EUR 30 million (78 million). The figure for 2006 includes
an asset sale gain of EUR 49 million.
A soft freight market in the fourth quarter, together with higher
costs, especially related to dockings and repairs, had a negative
effect on Shipping's performance. The comparable operating profit for
the period totaled EUR -3 million (10-12/06: 1 million) and operating
profit EUR -5 million (9 million).
Shipping's return on net assets (RONA) was 9.9% (25.0%) in 2007. The
comparable return on net assets was 9.3% (10.3%).
Key figures
10-12/07 10-12/06 2007 2006
Sales, MEUR 87 73 394 293
Operating profit, MEUR -5 9 30 78
Comparable operating profit, MEUR -3 1 28 32
Capital expenditure, MEUR 0 1 2 10
Total fleet days 2,872 2,633 11,107 10,120
Fleet utilization rate, % 93 92 94 94
Shipping's total fleet days (the number of days vessels are
operational, including repair and waiting days) amounted to 11,107 in
2007 (10,120). Fleet days for the crude fleet totaled 2,078 (1,813),
and 9,029 (8,307) for the product fleet.
Total fleet days in the fourth quarter were 2,872 (2,633), of which
the crude fleet accounted for 552 (586) and the product fleet 2,320
(2,047). Docking of the crude carrier Mastera had a negative effect
on the crude fleet's utilization rate.
Neste Oil owned or controlled through contracts a total of 31 (30)
tankers as of the end of December. Crude carrying capacity as of the
end of December was 680,407 dwt (563,407), and for products 609,713
dwt (493,764), totaling 1,290,120 dwt (1,057,171).
The fleet utilization rate remained high in 2007, at 94% (94%).
Divisional restructuring and changes in segment reporting
Neste Oil announced a new divisional structure and new heads for four
divisions on 27 September, to provide the company better focus to
implement its strategy going forward. A new division, Specialty
Products, was formed, and includes the base oil and gasoline
component businesses and is also responsible for Neste Oil's holding
in the Nynäs Petroleum joint venture.
The heads of the five divisions are as follows: Jorma Haavisto (Oil
Refining), Jarmo Honkamaa (Biodiesel), Kimmo Rahkamo (Specialty
Products), Sakari Toivola (Oil Retail), and Risto Näsi (Shipping).
Jarmo Honkamaa was appointed Deputy CEO. These changes came into
effect on 16 October.
Neste Oil changed its segment reporting as of 1 January 2008, and the
performance of all five divisions will now be reported separately.
The figures for Biodiesel and Specialty Products came under Oil
Refining segment in 2007.
Shares, share trading, and ownership
Neste Oil's share price closed 2007 at EUR 24.13 and was up by 4.7%
compared to the end of 2006. At its highest during 2007, the share
price reached EUR 30.03, while at its lowest the price stood at EUR
21.65, with the weighted average for the year coming in at EUR 25.48.
The market capitalization was EUR 6.2 billion as of 31 December 2007.
An average total of 1.9 million shares were traded daily. This
represents 0.7% of the Company's shares. An average of 39 million
shares was traded monthly. During the year as a whole, 470 million
shares, or 183% of the total number of shares, were traded, making
Neste Oil one of the most traded stocks on the Nordic Exchange,
Helsinki.
Neste Oil's share capital registered with the Company Register as of
31 December 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 to issue convertible bonds, share options,
or new shares.
At the end of 2007, the Finnish state owned 50.1% of outstanding
shares, foreign institutions 26.3%, Finnish institutions 16.5%, and
Finnish households 7.1%.
Personnel
Neste Oil employed an average of 4,810 (4,678) employees in 2007. At
the end of December, the company had 4,807 employees (Dec 2006:
4,740), of which 3,655 (Dec 2006: 3,506) worked in Finland.
Health, safety, and the environment
No serious environmental accidents resulting in liability, or
accidents resulting in significant interruptions to production at
existing process units, occurred at Neste Oil's refineries or other
production facilities in 2007. The Naantali refinery received a new
environmental permit in late November.
The environmental emissions of Neste Oil operations remained at a low
level throughout the year. Wastewater treatment plants at the
refineries operated without interruption. The oil content of
waterborne emissions was 0.13 g/ton of crude oil processed. This is
less than 5% of the 3 g/ton recommended by the Baltic Marine
Environment Protection Commission.
The current 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 2.9 at the end
of December 2007 (3.8), and the company achieved its combined LWIF
target of less than 3.5 for 2007. The total recordable injury
frequency (TRIF) was 5.7 (8.7). The target for this new key safety
indicator is less than 5 for 2008.
Neste Oil participated in carbon dioxide (CO2) emissions trading by
buying and selling a minor number of December 2007 emission rights.
The company has successfully fulfilled all the requirements related
to carbon dioxide emissions in 2007. The verification of emissions
for 2007 has taken place, and the company is able to report and
surrender allowances equal to its total emissions in 2007.
The REACH (Registration, Evaluation and Authorization of Chemicals)
regulation entered into force in the EU on 1 June 2007. The
implementation period stretches over 11 years, of which the four
first years are the most important for Neste Oil. Neste Oil has
contributed to joint work carried out under the framework of the
European oil companies' organization, Concawe, and the company's
project for meeting REACH requirements has progressed according to
plan.
Neste Oil retained or was selected for inclusion in several
sustainability indexes during 2007. Neste Oil has been accepted into
the Dow Jones Sustainability World Index. It was also awarded 'Best
in Class' recognition for its social accountability by the Norwegian
banking group, Storebrand, included in Innovest's Global 100 list of
the world's most responsible companies, and featured in the Ethibel
Pioneer Investment Register.
Research and development
Research and development focusing on both crude oil-based and
renewable fuels is crucial in implementing Neste Oil's strategy.
Neste Oil's R&D expenditure increased by 26% compared to 2006 and
totaled EUR 28 million (22 million). The main R&D projects were
related to extending the raw material base for renewable diesel.
Strategy implementation
Neste Oil continued to implement its clean fuel strategy in 2007. It
will continue to review further investments in renewable diesel
production abroad and in new conversion capacity at its refineries in
Finland to increase diesel production. There are also good prospects
for increasing base oil capacity and expanding Oil Retail's operation
in the Baltic Rim.
Diesel Project
The new diesel production line at the Porvoo refinery, started up in
June, was stopped for a planned maintenance shutdown at the end of
September. The shutdown was prolonged because over 500 valves with
material defects were identified and replaced. A leakage in the line
delayed the restart. The line has been in production again since
early December.
Over the long term, the company estimates that the new line will
contribute an additional refining margin of more than USD 2 /bbl on
its total capacity of approximately 100 million barrels a year.
NExBTL Renewable Diesel
Neste Oil's target to become the world's leading biodiesel producer
will translate into future production volumes of millions of tons
annually. The cornerstone of the strategy is the company's
proprietary NExBTL technology, which produces a premium-quality
renewable diesel fuel that clearly outperforms both the existing
biodiesel products (FAME) and crude oil-based diesel products
currently on the market. The fuel is based on a long-term R&D effort
and can be produced from practically any vegetable oil or animal fat.
The first NExBTL plant at the Porvoo refinery was initially started
up in July. The NExBTL technology is now proven on an industrial
scale and planned production rates and targeted product qualities
have been reached. However, various opportunities for improving the
process and catalysts have been identified and some amendments have
been made also to the Porvoo unit.
A second NExBTL plant at Porvoo is under construction at Porvoo and
is now scheduled to be commissioned in 2009. The delay compared to
the original plan has resulted from improvements based on learnings
from the first unit. The capital cost of the second unit is estimated
to exceed EUR 100 million. The plant will have the same capacity,
170,000 t/a, as the first unit.
Neste Oil announced in November that it will build a NExBTL plant in
Singapore with an annual capacity of 800,000 tons of renewable
diesel. The investment cost of the project will be EUR 550 million,
and it is expected to be completed by the end of 2010.
Planning work on a project with the Austrian oil and gas group, OMV,
to jointly build a NExBTL plant in Austria has continued, and the
lengthy Environmental Impact Assessment process is still under way.
Neste Oil and Total decided in February 2007 to discontinue plans for
a project to build a NExBTL plant in France, due to
higher-than-expected costs.
Public discussion on the sustainability of biofuel feedstocks
accelerated during 2007. Neste Oil has prioritized the importance of
excellent sustainability throughout the entire value chain, from
cultivation to logistics to refining and end use, and now has a palm
oil traceability system in place. The company's policy is not to
procure feedstock obtained from high-biodiversity land (forest with
no significant human intervention) or land with a high carbon stock,
such as tropical wetlands.
The company will continue to be active in R&D in the biofuels area,
with the long-term aim of switching to alternative non-food
feedstocks such as wood chips. As a demonstration, Neste Oil joined
forces with Stora Enso in March to develop technology for producing
new-generation biofuels from wood residues, and the two have decided
to design and build a demonstration plant at Stora Enso's Varkaus
Mill in Finland. The plant, owned on a 50/50 basis by the two
companies, is expected to start up in 2009.
Base oils
The project with Bapco to build a 400,000 t/a base oil plant in
Bahrain has proceeded and an investment decision is expected in 2008.
Neste Oil's ownership will be 45%.
In late 2007, Neste Oil signed a Heads of Terms agreement with
Takreer of Abu Dhabi and OMV of Austria to form a joint venture and
build a base oil plant at Ruwais in Abu Dhabi. The joint venture will
be 60% owned by Takreer and 20% by Neste Oil and OMV respectively.
The planned facility will be capable of producing 500,000 t/a of base
oils. The final investment decision will be made in 2009 following
Front End Engineering Design (FEED), which is expected to commence by
the second quarter of 2008.
Initially, Neste Oil will be responsible for marketing of the whole
production of both new base oil facilities.
Oil Retail
Expansion of Neste Oil's station network will continue in the Baltic
Rim area, where the focus will be on Northwest Russia.
Divestments
In February, Neste Oil closed its divestment of its 70% holding in
Texas-based Eastex Crude Company for USD 15.5 million to Eastex Crude
Holding Company, and announced the sale of its into-plane aviation
fuels business at Riga International Airport to Statoil.
Events after the reporting period
Neste Oil announced at the beginning of January 2008 that its
subsidiary, Neste Jacobs, will acquire the Rintekno engineering
company. Following the acquisition, Neste Jacobs will become the
leading provider of engineering services for the chemical and
biotechnology industries in the Nordic region, employing a total of
some 750 people. The parties have agreed not to disclose the value of
the transaction.
Potential short-term and long-term risks
The oil market continues to prove 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 the products that companies produce and
sell. Sudden and
unplanned outages at production units or facilities also represent a
risk. Rising investment costs
and challenges in developing new competitive raw materials may impact
the company's growth
plans.
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.
Outlook
Global oil demand forecasts were revised down at the beginning of
2008. Growth is still projected in Asia, but the biggest question
mark overall continues to be the development of US demand amid fears
of an economic slowdown.
Higher investment costs and a lack of engineering resources are
likely to jeopardize some of the new refining capacity due to come on
stream in the near future. This indicates that a favorable refining
market will continue and that margins are likely to remain firm for
complex refineries at least, given that there will be no major drop
in demand for transportation fuels.
Gasoline margins have been seasonally depressed in January, and
inventories are at normal levels. The gasoline market is expected to
tighten towards the end of the first quarter as refiners switch to
summer grade and the maintenance season kicks in.
Diesel margins are expected to remain at a good level, supported by
demand growth as dieselization of the car fleet continues. Refinery
turnarounds will also support the diesel market.
No full-scale maintenance turnarounds are scheduled for Neste Oil's
refineries in 2008. The new diesel line should start to deliver as
expected, despite that the line is due for maintenance during the
year.
Demand for NExBTL Renewable Diesel is expected to remain healthy and
the Porvoo plant should operate normally.
Oil Retail's volumes will continue to increase in the Baltic Rim,
although some of the countries in the area might show slightly slower
economic growth. Diesel demand is expected to increase in Finland.
The tanker freight market will remain challenging, while time-charter
costs appear to be holding at exceptionally high levels. This is
likely to put pressure on Shipping's earnings.
Subject to final investment decisions, the Group's capital
expenditure is expected to be approximately EUR 500 million in 2008.
Dividend distribution proposal and the AGM
The Board of Directors will propose to the Annual General Meeting
that Neste Oil should pay a dividend of EUR 1.00 per share for 2007,
totaling EUR 256.4 million.
The Annual General Meeting will be held on 14 March 2008 at 11:00
a.m. EET at the Finnish National Opera.
The Board of Directors will also propose to the AGM that Ernst &
Young Oy, Authorized Public Accountants, should be appointed as the
company's Auditor, with Authorized Public Accountant Anna-Maija
Simola as Auditor, until the end of the next AGM.
Reporting date for the first-quarter 2008 results
Neste Oil will publish its first-quarter results form 2008 on 24
April 2008 at approximately 9:00 a.m. EET.
Espoo, 6 February 2008
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- DECEMBER 2007
10-12/2007 and 10-12/2006 unaudited, full year 2007 and 2006 audited
CONSOLIDATED INCOME
STATEMENT
MEUR
Note
10-12/2007 10-12/2006 1-12/2007 1-12/2006
Sales 2, 4 3 461 2 956 12 103 12 734
Other income 6 91 27 238
Share of profit
(loss) of
associates and
joint
ventures 4 8 12 39 39
Materials and
services -3 042 -2 635 -10 279 -11 183
Employee benefit
costs -69 -56 -256 -224
Depreciation,
amortization and
impairments -56 -40 -195 -153
Other expenses -165 -161 -638 -597
Operating profit 143 167 801 854
Financial income and
expenses
Financial income 2 2 8 8
Financial
expenses -14 -3 -40 -16
Exchange rate and fair
value gains and
losses -1 -1 -6 -5
Total financial income
and expenses -13 -2 -38 -13
Profit before income
taxes 130 165 763 841
Income tax
expense -27 -25 -183 -205
Profit for the
period 103 140 580 636
Attributable to:
Equity holders of
the company 102 138 577 631
Minority
interest 1 2 3 5
103 140 580 636
Earnings per share
from profit
attributable to
the equity holders
of the Company
basic and
diluted (in euro
per share) 0,40 0,54 2,25 2,46
CONSOLIDATED BALANCE SHEET
31 Dec 31 Dec
MEUR Note 2007 2006
ASSETS
Non-current assets
Intangible assets 5 41 38
Property, plant and equipment 5 2 436 2 310
Investments in associates and joint
ventures 178 161
Non-current receivables 3 4
Pension assets 81 73
Deferred tax assets 7 8
Derivative financial instruments 6 22 22
Available-for-sale financial assets 2 2
Total non-current assets 2 770 2 618
Current assets
Inventories 968 697
Trade and other receivables 955 808
Derivative financial instruments 6 126 77
Cash and cash equivalents 52 62
Total current assets 2 101 1 644
Non-current assets classified as held for
sale 2 0 78
Total assets 4 871 4 340
EQUITY
Capital and reserves attributable to the equity
holders
of the company
Share capital 40 40
Other equity 3 2 383 2 049
Total 2 423 2 089
Minority interest 4 8
Total equity 2 427 2 097
LIABILITIES
Non-current liabilities
Interest-bearing liabilities 662 516
Deferred tax liabilities 289 239
Provisions 8 12
Pension liabilities 11 12
Derivative financial instruments 6 22 21
Other non-current liabilities 5 4
Total non-current liabilities 997 804
Current liabilities
Interest-bearing liabilities 145 267
Current tax liabilities 14 43
Derivative financial instruments 6 77 38
Trade and other payables 1 211 1 027
Total current liabilities 1 447 1 375
Liabilities directly associated with 0 64
non-current assets classified as held for
sale 2
Total liabilities 2 444 2 243
Total equity and liabilities 4 871 4 340
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 Note reserves
Total equity at 1
January 2006 40 9 -33 8 1581 7 1 612
Dividend paid -205 -205
Income and expenses
recognized
directly in equity
Translation differences
and other
changes -9 4 -5
Cash flow hedges
recorded in equity, net
of taxes 63 63
transferred to income
statement,
net of tax -7 -7
Net investment hedges,
net of taxes 4 4
Share-based
compensation 3 3
Available-for-sale
investments
amount recognized
directly in equity
net of tax 63 63
amount removed
from equity and
recognized in
income statement,
net of tax -63 -63
Change in minority -4 -4
Items recognized
directly in equity 59 -5 4 -4 54
Profit for the
period 631 5 636
Total recognized income
and
expenses 59 -5 635 1 690
Total equity at 31
December
2006 40 9 26 3 2 011 8 2 097
Share Reserve Fair Translation Re- Mi- Total
ca- fund value diffe- tained nority equity
pital and rences ear- inte-
other nings rest
MEUR Note reserves
Total equity at
1 January 2007 40 9 26 3 2 011 8 2 097
Dividend
paid -231 -231
Treasury
shares 3 -12 -12
Income and
expenses
recognized
directly in
equity
Translation
differences and
other
changes 1 -10 -3 -12
Cash flow
hedges
recorded in
equity, net of
taxes -30 -30
transferred to
income
statement,
net of tax 43 43
Net investment
hedges,
net of
taxes -4 -4
Share-based
compensation 2 2
Hedging
reserves
in
associates
and joint
ventures 1 1
Change in
minority -7 -7
Items
recognized
directly in
equity 1 16 -14 -3 -7 -7
Profit for
the period 577 3 580
Total
recognized
income and
expenses 1 16 -14 574 -4 573
Total equity at
31 December
2007 40 10 42 -11 2 342 4 2 427
CONDENSED CONSOLIDATED CASH
FLOW STATEMENT
MEUR 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Cash flow from
operating activities
Profit before taxes 130 165 763 841
Adjustments, total 63 -51 184 -85
Change in working
capital 65 60 -189 -106
Cash generated from
operations 258 174 758 650
Finance cost, net -16 -4 -40 -7
Income taxes paid -22 -34 -177 -131
Net cash generated from
operating activities 220 136 541 512
Capital expenditures -98 -151 -334 -526
Acquisition of shares 0 0 0 -9
Proceeds from sales of
fixed assets 0 20 14 77
Proceeds from sales of
shares 0 122 -5 201
Change in other
investments 8 1 -22 20
Cash flow before
financing activities 130 128 194 275
Net change in loans and
other financing
activities -132 -165 20 -74
Dividends paid to the
equity holders of
the company 0 0 -231 -205
Net increase
(+)/decrease (-) in
cash -2 -37 -17 -4
and cash equivalents
KEY RATIOS
31 Dec 31 Dec 2007 2006
Capital employed, MEUR 3234 2890
Interest-bearing net debt, MEUR 755 722
Capital expenditure and investments in
shares, MEUR 334 535
Return on average capital employed, after
tax, ROACE % 15,5 15,4
Return on capital employed, pre-tax, ROCE
% 26,2 31,9
Return on equity, % 25,6 34,3
Equity per share, EUR 9,47 8,15
Cash flow per share, EUR 2,11 2,0
Price/earnings ratio (P/E) 10,71 9,36
Equity-to-assets ratio, % 49,9 48,4
Gearing, % 31,1 34,4
Leverage ratio, % 23,7 25,6
Dividend per share 1) 1,00 0,90
Dividend payout ratio, % 1) 44,4 36,6
Dividend yield, % 1) 4,1 3,9
Average number of shares 255971365 256403686
Number of shares at the end of the period 255903686 256403686
Average number of personnel 4810 4678
1) Board of Directors proposal to the
Annual General Meeting
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
This report on Annual Financial Statements has been prepared in
accordance with IFRS accounting principles.
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 Applying the Restatement Approach under IAS 29 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.
Non-current assets classified as held for sale comprise of the
carrying amount of Eastex Crude Company at 31 December 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
management share performance arrangement 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 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Oil Refining 2872 2431 9925 10768
Oil Retail 965 810 3435 3280
Shipping 87 73 394 293
Other 7 4 21 16
Eliminations -470 -362 -1672 -1623
Total 3461 2956 12103 12734
OPERATING PROFIT
MEUR 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Oil Refining 151 81 754 671
Oil Retail 9 85 60 138
Shipping -5 9 30 78
Other -10 -9 -42 -35
Eliminations -2 1 -1 2
Total 143 167 801 854
COMPARABLE
OPERATING PROFIT
MEUR 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Oil Refining 89 78 582 533
Oil Retail 10 16 59 65
Shipping -3 1 28 32
Other -10 -9 -42 -35
Eliminations -2 1 -1 2
Total 84 87 626 597
DEPRECIATION,
AMORTIZATION AND
IMPAIRMENTS
MEUR 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Oil Refining 44 30 150 105
Oil Retail 7 6 27 27
Shipping 4 3 15 18
Other 1 1 3 3
Total 56 40 195 153
SHARE OF PROFIT OF ASSOCIATES AND
JOINT VENTURES
MEUR 10-12/2007 10-12/2006 1-12/2007 1-12/2006
Oil Refining 8 12 39 39
Oil Retail 0 0 0 0
Shipping 0 0 0 0
Other 0 0 0 0
Total 8 12 39 39
NET ASSETS 31 Dec 31 Dec
MEUR 2007 2006
Oil Refining 2672 2389
Oil Retail 381 336
Shipping 297 298
Other 19 10
Eliminations 1 -1
Total 3370 3032
RETURN ON NET
ASSETS, % 31 Dec 31 Dec
2007 2006
Oil Refining 28,9 29,9
Oil Retail 17,4 37,2
Shipping 9,9 25,0
COMPARABLE RETURN ON NET
ASSETS, % 31 Dec 31 Dec
2007 2006
Oil Refining 22,3 23,8
Oil Retail 17,1 17,5
Shipping 9,3 10,3
QUARTERLY SALES
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2007 /2007 /2007 /2007 /2006 /2006 /2006 /2006
Oil Refining 2872 2451 2673 1929 2431 2973 3056 2308
Oil Retail 965 853 843 774 810 841 817 812
Shipping 87 82 115 110 73 65 69 86
Other 7 5 4 5 4 4 5 3
Eliminations -470 -413 -428 -361 -362 -419 -429 -413
Total 3461 2978 3207 2457 2956 3464 3518 2796
QUARTERLY OPERATING PROFIT
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2007 /2007 /2007 /2007 /2006 /2006 /2006 /2006
Oil Refining 151 177 288 138 81 227 234 129
Oil Retail 9 22 18 11 85 23 17 13
Shipping -5 -4 16 23 9 11 38 20
Other -10 -18 -5 -9 -9 -8 -9 -9
Eliminations -2 3 -3 1 1 1 0 0
Total 143 180 314 164 167 254 280 153
QUARTERLY COMPARABLE OPERATING PROFIT
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2007 /2007 /2007 /2007 /2006 /2006 /2006 /2006
Oil Refining 89 154 205 134 78 183 178 94
Oil Retail 10 22 16 11 16 22 15 12
Shipping -3 -2 12 21 1 4 5 22
Other -10 -18 -5 -9 -9 -8 -9 -9
Eliminations -2 3 -3 1 1 1 0 0
Total 84 159 225 158 87 202 189 119
QUARTERLY DEPRECIATION, AMORTIZATION AND IMPAIRMENTS
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2007 /2007 /2007 /2007 /2006 /2006 /2006 /2006
Oil Refining 44 43 35 28 30 25 25 25
Oil Retail 7 7 7 6 6 7 7 7
Shipping 4 4 3 4 3 5 4 6
Other 1 1 0 1 1 1 1 0
Total 56 55 45 39 40 38 37 38
QUARTERLY SHARE OF PROFIT OF ASSOCIATES
AND JOINT VENTURES
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2007 /2007 /2007 /2007 /2006 /2006 /2006 /2006
Oil Refining 8 17 13 1 12 20 11 -4
Oil Retail 0 0 0 0 0 0 0 0
Shipping 0 0 0 0 0 0 0 0
Other 0 0 0 0 0 0 0 0
Total 8 17 13 1 12 20 11 -4
5. CHANGES IN INTANGIBLE ASSETS AND PROPERTY,
PLANT AND EQUIPMENT AND CAPITAL COMMITMENTS
CHANGES IN INTANGIBLE ASSETS AND PROPERTY,
PLANT AND EQUIPMENT 31 Dec 31 Dec
MEUR 2007 2006
Opening balance 2348 2059
Depreciation, amortization and impairments -195 -153
Capital expenditure 334 526
Disposals -12 -22
Disposal of a subsidiary 0 -39
Classified as assets held for sale 0 -10
Translation differences 2 -13
Closing balance 2477 2348
CAPITAL COMMITMENTS 31 Dec 31 Dec
MEUR 2007 2006
Commitments to purchase property, plant and
equipment 88 44
Commitments to purchase intangible assets 0 2
Total 88 46
6. DERIVATIVE FINANCIAL
INSTRUMENTS
31 Dec 2007 31 Dec 2006
Interest rate and
currency
derivative
contracts and
share forward
contracts Nominal Net Nominal Net fair fair
MEUR value value value value
Interest rate swaps 345 0 301 2
Forward foreign
exchange contracts 1189 35 992 23
Currency options
Purchased 353 11 290 4
Written 188 1 274 5
Share forward
contracts 17 2 8 1
Oil and freight
derivative Net fair Net fair
contracts Volume value Volume value
million bbl Meur million bbl Meur
Sales contracts 68 -66 79 29
Purchase contracts 74 65 106 -25
Purchased options 1 0 0 0
Written options 0 0 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
31 Dec 31 Dec
MEUR 2007 2006
Contingent liabilities
On own behalf
For debt
Pledges 4 8
Real estate mortgages 26 25
For other commitments
Real estate mortgages 0 0
Other contingent liabilities 42 28
Total 72 61
On behalf of associates and joint ventures
Guarantees 2 6
Other contingent liabilities 1 1
Total 3 7
On behalf of others
Guarantees 12 6
Other contingent liabilities 0 1
Total 12 7
Total 87 75
31 Dec 31 Dec
MEUR 2007 2006
Operating lease liabilities
Due within one year 108 117
Due between one and five years 183 191
Due later than five years 119 165
Total 410 473
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.
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 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 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
Research and development expenditures = Research and development
expenditure comprise of the expenses of the Research & technology
unit serving all divisions of the Group, as well as research and
technology expenses incurred in divisions, which are included in the
consolidated income statement. Depreciation and amortization are
included in the figure. The expenses are presented as gross, before
deducting grants received.
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
Price / earnings ratio (P/E) = Share price at the end of the period /
Earnings per share
Dividend payout ratio, % = 100 x Dividend per share / Earnings per
share
Dividend yield, % = 100 x Dividend per share / Share price at the end
of the period
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