Neste Oil - Interim report (Q1 and Q3)

Neste Oil's Interim Report for January-June 2011

Neste Oil Corporation
Stock Exchange Release
28 July 2011 at 9.00 am (EET)

Neste Oil's Interim Report for January-June 2011


  * The second-quarter comparable operating profit was EUR 32 million (Q2/2010:
    5 million, which was negatively impacted by a major maintenance turnaround
    at the Porvoo refinery)
  * The refining market weakened towards the end of the quarter due to concerns
    over global economic developments
  * Renewable Fuels is expected to remain loss-making throughout the year



Second quarter in brief:
  * Comparable operating profit came in at EUR 32 million (Q2/2010: 5 million,
    which was negatively impacted by a major maintenance turnaround at the
    Porvoo refinery)
  * IFRS operating profit was EUR 109 million (Q2/2010: -63 million)
  * Total refining margin was USD 8.99/bbl (Q2/2010: 7.35)
  * Net cash from operations was EUR -126 million (Q2/2010: 243 million)
  * Investments totaled EUR 91 million (Q2/2010: 374 million), of which EUR 50
    million was spent on Renewable Fuels
  * Leverage ratio was 46.3% (31 Dec 2010: 42.6%)
  * The renewable diesel plant in Rotterdam achieved mechanical completion
  * New renewable feedstocks, such as soybean oil, camelina, and jatropha have
    been introduced



President & CEO Matti Lievonen:"While the start of the second quarter continued to be quite good in oil
refining, uncertainties over developments in the global economy saw margins
weaken in mid-May. Going forward, I am confident, however, that complex
refiners, such as Neste Oil, will be in a better position compared to many
others. We believe that diesel margins will continue to outperform other product
margins, thanks to seasonally good demand, and that the good base oil market
will also support us in the second half of 2011.

Sales of renewable diesel were disappointing during the first half, but volumes
are set to increase significantly in the third quarter, thanks to contracts with
new customers in Europe and the availability of more ISCC-certified feedstocks.
Our renewable diesel production network will be completed during the third
quarter with the start-up of the Rotterdam plant. Progress on the implementation
of biofuel legislation continues to be quite slow, however. We reached an
important milestone in July when Lufthansa began regularly scheduled flights
using Neste Oil's renewable aviation fuel. We are very proud of this development
and believe that there will be a lot of potential for renewable aviation fuel in
the future."

The Group's second-quarter 2011 results

Neste Oil's revenue increased to EUR 3,674 million in the second quarter
compared to EUR 2,576 million for the same period in 2010, as a result of higher
oil prices and higher volumes. The Group's comparable operating profit totaled
EUR 32 million (EUR 5 million, which included a negative impact of EUR 65
million resulting from a major maintenance turnaround at the Porvoo refinery).
The comparable operating profit was negatively impacted by a weaker result at
Renewable Fuels and a planned five-week maintenance turnaround on diesel
production line 4 at Porvoo, which had an impact of EUR 30 million.

Oil Products' second-quarter comparable operating result was EUR 60 million (-3
million), Renewable Fuels' EUR -55 million (-23 million), and Oil Retail's EUR
13 million (13 million). The comparable operating profit of the Others segment
totaled EUR 8 million (16 million). A profit of EUR 13 million (21 million) was
booked in the Others segment on the basis of Neste Oil's share of the profit of
its affiliate, Nynas AB.

The Group's IFRS operating profit was EUR 109 million (-63 million), which was
impacted by inventory gains totaling EUR 63 million (-42 million). Pre-tax
profit was EUR 98 million (-70 million), profit for the period EUR 64 million (-
50 million), and earnings per share EUR 0.25 (-0.20).


The Group's January-June 2011 results

Neste Oil's revenue totaled EUR 7,146 million in the first six months compared
to EUR 5,301 million for the same period in 2010, as a result of higher oil
prices and higher volumes. The Group's six-month comparable operating profit
totaled EUR 76 million. The corresponding figure for the same period in 2010 was
EUR 93 million, which included a positive impact of EUR 47 million resulting
from an insurance compensation payment and a negative impact of EUR 65 million
from the maintenance turnaround at the Porvoo refinery. In the first half of
2011, the comparable operating profit was negatively impacted by a planned five-
week maintenance turnaround on the diesel production line 4 at Porvoo, which had
an impact of EUR 30 million, and a weaker result at Renewable Fuels.

Oil Products' six-month comparable operating result was EUR 144 million (55
million), Renewable Fuels' EUR -91 million (-40 million), and Oil Retail's EUR
25 million (19 million). The comparable operating profit of the Others segment
totaled EUR -8 million (59 million). A profit of EUR 5 million (13 million) was
booked in the Others segment on the basis of Neste Oil's share of the profit of
its affiliate, Nynas AB.

The Group's IFRS operating profit was EUR 280 million (34 million), which was
impacted by inventory gains totaling EUR 203 million (-26 million). Pre-tax
profit was EUR 258 million (18 million), profit for the period EUR 182 million
(14 million), and earnings per share EUR 0.71 (0.05).

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 June, the
rolling twelve-month ROACE was 3.6% (2010 financial year: 4.6%).

Outlook

The fundamentals of the oil refining market continue to benefit producers with
complex refineries, such as Neste Oil. In particular, the diesel market is
expected to strengthen on the back of seasonally increasing demand. The discount
of Urals crude to Brent Dated is expected to average around USD 2.50-3.00 /bbl
for the year as a whole, which is more than in 2010, but less than the USD
3.00-3.50 /bbl projected in the previous outlook published in April. Concerns
about global economic developments have increased somewhat during the summer,
and continued negative sentiment in respect of economic growth could impact the
demand for petroleum products and refining margins. The base oil market is
expected to remain strong throughout 2011, which is likely to support Neste
Oil's total refining margin. Neste Oil's base oil plant in Bahrain is
anticipated to start up before the end of the year. Oil Products' full-year
2011 comparable operating profit is expected to be stronger than in 2010.
Another four-week maintenance shutdown is scheduled for diesel production line
4 at the Porvoo refinery in October to secure safe, uninterrupted operations
during the following twelve months.

The Renewable Fuels business will continue to be in ramp-up mode during 2011,
and, as stated previously, is expected to report a comparable operating loss
throughout 2011. Sales volumes are expected to grow significantly in the second
half of 2011, approximately doubling in the third quarter compared to the second
quarter. However, Renewable Fuels' third-quarter result is expected to be weaker
compared to the second quarter, as higher sales volumes and the better
availability of ISCC-certified feedstocks in the third quarter are unlikely to
be sufficient to compensate for the high unit costs and the start-up costs
associated with the new Rotterdam plant. Exports to Northern and Southern Europe
will increase during the second half of the year, and towards the end of the
year exports to the US market are also expected to grow despite the delays
experienced so far.

Oil Retail's full-year performance is likely to be broadly similar to that seen
in 2010.

The Group's fixed costs are estimated to be approximately EUR 650 million in
2011, compared to EUR 575 million in 2010, largely due to higher maintenance and
personnel costs at new plants.

The Group's cash investments are expected to be approximately EUR 300 million
(892 million), of which maintenance investments are estimated to account for EUR
176 million (245 million), strategic investments EUR 113 million (633 million),
and productivity investments EUR 11 million (14 million).

New disclosure procedure
Neste Oil follows the new disclosure procedure enabled by Standard 5.2b
published by the Finnish Financial Supervision Authority and hereby publishes
its interim report for January-June 2011 enclosed to this stock exchange
release. Neste Oil's interim report is available in its entirety on the
company's web site at http://www.nesteoil.com/ Neste Oil will follow this
procedure in disclosing interim reports and financial statements in future.

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 second-quarter results will be held today,
28 July 2011, 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 the same day at 3:00 pm Finnish / 1:00 pm London / 8:00 am New York. The
call-in numbers are as follows: Europe: +44 (0)20 7136 2051, US +1 212 444 0481
(access code: 2712947). The conference call can be followed at http://www.media-
server.com/m/p/s6yec6um. An instant replay of the call will be available until
4 August 2011 at +44 (0)20 7111 1244 for Europe and +1 347 366 9565 for the US
(access code: 2712947#).

[HUG#1534169]

Attachments:

Neste Oil s Interim Report Q2 2011.pdf