2009-04-28 08:00:00 CEST
2009-04-28 08:02:59 CEST
REGULATED INFORMATION
Neste Oil - Interim report (Q1 and Q3)
Neste Oil's Interim Report for January-March 2009
- Comparable operating profit of EUR 56 million (Q1/2008: 119
million)
First quarter in brief:
- Diesel margins were down by almost 40% year-on-year
- Demand for transportation fuels was lower on the company's home
markets
- Total refining margin of USD 9.44 /bbl (1-3/08: 11.91)
- Comparable operating profit halved to EUR 56 million (1-3/08: 119
million)
- IFRS operating profit of EUR 95 million (1-3/08: 204 million)
- Cash flow from operations improved to EUR 17 million (1-3/08: -113
million)
- Major organizational restructuring initiated to improve efficiency
and customer orientation and put focus on the corporate strategy
President & CEO Matti Lievonen:"The economic recession is now clearly being reflected in lower
demand for petroleum products. Oil refiners feel the impact of this
clearly because the market downturn is amplified by new capacity due
to come on stream this year and next year. We have seen the largest
drop in demand in the diesel market, which is very much tied to
industrial activity and logistics. This was especially true in March,
which was a difficult month, and the market situation has not
improved during April.""Our major restructuring is, in part, a response to these challenges,
as it is designed to give us a more efficient and customer-oriented
structure that will enable us to implement our growth strategy more
effectively. We remain very much committed to seeing through our
ongoing projects to increase our NExBTL renewable diesel capacity and
grow the business.""I am happy to announce that we have recently received our first
batch of RSPO-certified palm oil. This is further evidence of Neste
Oil's strong commitment to sustainable products, processes and
procedures."
Further information:
Matti Lievonen, President & CEO, tel. +358 10 458 11
Ilkka Salonen, CFO, tel. +358 10 458 4490
News conference and conference call
A press conference in Finnish on the first quarter results will be
held today, 28 April 2009, 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 today, 28 April 2009,
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. A webcast of the call can be found at company's web site. 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 MARCH
2009
1-3/2009 and 1-3/2008 unaudited, full year 2008 audited
Figures in parentheses refer to the first quarter of 2008, unless
otherwise stated.
KEY FIGURES
EUR million (unless otherwise noted)
1-3/2009 1-3/2008 10-12/2008 2008 LTM
Revenue 2,053 3,297 2,805 15,043 13,799
Operating profit before 296
depreciation 150 263 -297 409
Depreciation, 219
amortization, and
impairments 55 59 55 223
Operating profit 95 204 -352 186 77
Comparable operating 539
profit * 56 119 103 602
Profit before income tax 81 191 -382 129 19
Earnings per share, EUR 0.24 0.56 -1.14 0.38 0.06
Investments 174 82 185 508 600
Net cash from operating 642
activities 17 -113 486 512
31 March 31 March 31 Dec
2009 2008 2008 LTM
Total equity 2,229 2,316 2,179 -
Interest-bearing net debt 1,217 1,212 1,004 -
Capital employed 3,491 3,591 3,237 3,491
Return on capital employed 2.6
pre-tax (ROCE), % 11.7 24.0 6.1
Return on average capital
employed after tax 11.6
(ROACE),% - - 13.1
Return on equity (ROE), % 11.1 24.2 4.4 0.8
Equity per share, EUR 8.67 9.03 8.48 -
Cash flow per share, EUR 0.07 -0.44 2.00 2.51
Equity-to-assets ratio, % 44.9 44.2 46.3 -
Leverage ratio, % 35.3 34.3 31.5 -
Gearing, % 54.6 52.3 46.1 -
* 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.
The Group's financial results
Revenue at the Neste Oil Group totaled EUR 2,053 million in the first
quarter of 2009, which represents a 38% reduction compared to EUR
3,297 million in the same quarter of 2008 and resulted from
significantly lower petroleum product prices.
The Group's comparable operating profit was EUR 56 million. The drop
compared to the EUR 119 million posted in the first quarter of 2008
was largely a consequence of a weaker total refining margin and
unfavorable US dollar hedging.
Oil Products' first-quarter comparable operating profit was EUR 64
million (113 million), Renewable Fuels' EUR -7 million (2 million),
Oil Retail's EUR 12 million (9 million), and Others' EUR -11 million
(-8 million). Others includes profits from associated companies and
joint ventures (Nynas AB), which totaled EUR -7 million (1 million).
Operating profit under IFRS was EUR 95 million (204 million) in the
first quarter. In addition to a lower comparable operating profit,
the decline compared to the figure for 2008 resulted from changes in
the fair value of open oil derivatives.
The first-quarter profit before taxes was EUR 81 million (191
million), net profit for the period was EUR 61 million (143 million)
and earnings per share were EUR 0.24 (0.56).
Given the capital-intensive nature of its business, Neste Oil uses
return on average capital employed after tax (ROACE) as its primary
financial target, based on comparable results. At the end of March,
the rolling twelve-month ROACE was 11.6% (31 March 2008: 14.1%).
1-3/09 1-3/08 10-12/08 2008 LTM
COMPARABLE OPERATING PROFIT 56 119 103 602 539
- inventory gains/losses 76 75 -467 -453 -452
- changes in the fair value of open
oil derivatives -37 2 10 24 -15
- capital gains/losses 0 8 2 13 5
OPERATING PROFIT 95 204 -352 186 77
Capital expenditure and financing
Investments totaled EUR 174 million in the first quarter (82
million). Oil Products' capital spending was EUR 43 million (33
million), Renewable Fuels' EUR 123 million (27 million), and Oil
Retail's EUR 4 million (8 million). Depreciation was EUR 55 million
(59 million).
The Group's interest-bearing net debt was EUR 1,217 million at the
end of March (31 Dec 2008: EUR 1,004). Net financial expenses between
January and March were EUR 14 million (13 million). The Group will
capitalize interest expenses related to major investment projects
during 2009. The average interest rate of borrowings at the end of
March was 2.8%, and the average maturity 3.8 years.
Net cash from operating activities between January and March was EUR
17 million (-113 million). Around EUR 150 million was tied in
contango storages of crude and products at the end of March. The
equity-to-assets ratio was 44.9% at the end of the period (31 Dec
2008: 46.3%), the leverage ratio 35.3% (31 Dec 2008: 31.5%), and the
gearing ratio 54.6% (31 March 2008: 46.1%).
Cash and cash equivalents and committed, unutilized credit facilities
amounted to EUR 1,485 million at the end of March (31 Dec 2008: 1,536
million). The company sees no major refinancing needs until 2012.
Short-term financing needs will continue to be met by revolving
credit and overdraft facilities. There are no financial covenants in
existing loan agreements.
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 collapsing in the second half of 2008, crude oil prices
stabilized at around USD 45-50 /bbl. Price differentials between
heavier and lighter crude have been quite narrow, reflecting
developments such as the cuts in production of heavier grades
instituted by OPEC.
Refining margins weakened on the back of the worsening global economy
and falling product demand.
Gasoline margins recovered from the lows seen in late 2008, due
mainly to reduced production, as well as relatively stable demand
thanks to lower consumer prices.
Demand for middle distillates was hit by the economic recession, and
margins for diesel and other middle distillates fell throughout Q1.
High inventories in the US and Europe also contributed to low
margins.
European margins on high-sulfur fuel oil were supported by reduced
supply and steady demand in Asia.
Demand for gasoline and diesel on the Finnish retail market fell by
3% and 6% respectively during the first two months of the year. The
drop in diesel demand from trucking companies has been even steeper.
Demand has fallen even more in the Baltic countries.
Biofuel prices were lower in the first quarter compared to the same
quarter in 2008 and the price differentials between biofuel
feedstocks have narrowed. The implementation of the EU's Renewable
Energy directive in member countries is expected to start in May.
Oil freight rates have almost halved in both the crude and product
market compared to the first quarter of 2008.
Key drivers
1-3/09 1-3/08 10-12/08 2008 April 09 April 08
IEA Brent cracking
margin, USD/bbl 2.34 3.26 4.91 4.90 1.18 6.59
Neste Oil total
refining margin,
USD/bbl 9.44 11.91 15.05 13.39 n.a. n.a.
Urals-Brent price
differential, USD/bbl -1.17 -2.91 -1.82 -2.95 -1.88 -4.05
NWE Gasoline margin*,
USD/bbl 6.39 5.80 2.69 5.34 9.4 7.29
NWE Diesel margin*,
USD/bbl 15.38 25.33 28.04 31.23 12.2 36.51
NWE Heavy fuel oil
margin*, USD/bbl -8.77 -27.44 -16.16 -25.16 -8.9 -32.67
Brent dated crude
oil, USD/bbl 44.40 96.90 54.87 96.98 50.44 108.97
USD/EUR exchange rate 1.30 1.50 1.32 1.47 1.32 1.58
Crude freights,
Aframax WS points 83 146 144 179 72 209
*Product margins Platt's fob Rotterdam
Production and sales
Neste Oil refined a total of 3.7 million tons (3.8 million) of crude
oil and feedstocks in the first quarter, of which 3.1 million tons
(3.1 million) at Porvoo and 0.6 million tons (0.7 million) at
Naantali. The Porvoo refinery operated at a crude distillation
capacity utilization rate of 90% (94%) during the quarter; while
Naantali operated at 86% (99%) utilization, as a result of planned
maintenance outages.
The proportion of Russian Export Blend in Neste Oil's total refinery
input was 63% (64%) in the first quarter.
The proportion of diesel in Neste Oil's sales structure remained at
close to 40%. Some diesel volumes were stored for sale later. The
majority of gasoline stored in late 2008 was sold during the first
quarter, mostly to North America.
At the end of March, Neste Oil's contango storage consisted of
550,000 tons (over 4 million barrels) of crude and products.
Neste Oil's sales from in-house production, by product category
(1,000 t)
1-3/09 % 1-3/08 % 10-12/08 % 2008 %
Motor gasolines 940 27 794 24 1,052 28 4,056 28
Gasoline components 64 2 78 2 33 1 253 2
Diesel fuel 1,306 38 1,383 42 1,585 42 5,583 38
Jet fuel 148 4 137 4 154 4 658 5
Base oils 57 2 76 2 58 2 278 2
Heating oil 223 6 180 5 245 7 763 5
Heavy fuel oil 354 10 207 6 220 6 981 7
LPG 59 2 98 3 70 2 340 2
NExBTL renewable diesel 31 1 18 1 19 1 94 1
Other products 246 7 304 9 317 8 1,565 11
TOTAL 3,430 100 3,274 100 3,754 100 14,571 100
Neste Oil's sales from in-house production, by market area (1,000 t)
1-3/09 % 1-3/08 % 10-12/08 % 2008 %
Finland 1,860 54 1,768 54 1,942 52 7,537 52
Other Nordic countries 537 16 427 13 607 16 2,056 14
Other Europe 558 16 744 23 734 20 3,028 20
USA & Canada 472 14 266 8 467 12 1,857 13
Other countries 3 0 68 2 3 0 94 1
TOTAL 3,430 100 3,274 100 3,754 100 14,571 100
SEGMENT REVIEWS
As of 1 April 2009, Neste Oil's businesses are grouped into four
reporting segments: Oil Products, Renewable Fuels, Oil Retail, and
Others. Quarterly figures for 2008 according to these segments were
published on 23 April 2009.
Oil Products
Key figures
1-3/09 1-3/08 10-12/08 2008 LTM
Revenue, MEUR 1,582 2,715 2,221 12,641 11,508
Comparable operating profit,
MEUR 64 113 154 602 553
Operating profit, MEUR 106 197 -301 183 92
Total refining margin, USD/bbl 9.44 11.91 15.05 13.39 12.69
Oil Products' first-quarter comparable operating profit was EUR 64
million (113 million). This decrease resulted from a lower total
refining margin and unfavorable US dollar hedging. Neste Oil's total
refining margin was USD 9.44 /bbl during the quarter, compared to USD
11.91 /bbl in the corresponding quarter of 2008. All the main drivers
affecting the total refining margin (diesel margin, price
differential between Urals and Brent crude, and the IEA Brent
cracking reference margin) were weaker year-on-year.
Demand for base oils decreased by 25% compared to the first quarter
of 2008, but this was somewhat offset by higher margins. The slight
recovery seen in the US gasoline market and lower feedstock prices
have helped the gasoline components business and iso-octane in
particular.
The fleet utilization rate remained high at 93%, but the collapse of
freight rates meant that the shipping business made only a minimal
contribution to the bottom line. This was further diluted by the
closing of freight derivative positions, which had a EUR 3 million
negative effect.
Oil Products' 12-month comparable return on net assets was 19.4%
(19.8%).
Renewable Fuels
1-3/09 1-3/08 10-12/08 2008 LTM
Revenue, MEUR 24 23 20 116 117
Comparable operating profit, MEUR -7 2 -10 2 -7
Operating profit, MEUR -10 1 -9 2 -9
Renewable Fuels' first-quarter comparable operating profit was EUR -7
million (2 million). Margins for renewable diesel were lower
year-on-year as a result of lower product prices and termination of
fixed-priced feedstock contract. The price premium of NExBTL
renewable diesel over conventional biodiesel remained healthy. The
segment's higher costs relate to expansion of the business and R&D.
NExBTL renewable diesel has been approved and registered in the most
important European markets, as well as in the US and Canada.
Renewable Fuels' 12-month comparable return on net assets was -2.3%
(-4.7%).
Oil Retail
Key figures
1-3/09 1-3/08 10-12/08 2008 LTM
Revenue, MEUR 691 948 915 4,073 3,816
Comparable operating profit, MEUR 12 9 -5 22 25
Operating profit, MEUR 12 11 -6 25 26
Total sales volume*, 1,000 m3 1,021 1,056 1,141 4,358 4,318
- gasoline station sales, 1,000 m3 329 334 376 1,479 1,474
- diesel station sales, 1,000 m3 320 341 356 1,406 1,385
- heating oil, 1,000 m3 214 198 219 759 775
- heavy fuel oil, 1,000 m3 89 97 105 356 348
*includes both station and terminal sales
Oil Retail's comparable operating profit increased to EUR 12 million
(9 million) in the first quarter, thanks in large part to good
margins in northwestern Russia. This more than offset the negative
development seen in sales volumes, which affected all products except
heating oil.
Sales volumes of gasoline were lower on the Finnish market than
during the same quarter in 2008. In the diesel area, the largest
reduction was seen in trucking, while sales to private motorists
increased. Margins were broadly flat on the Finnish market. Lubricant
sales have been hit significantly by soft demand.
Volumes increased a little outside Finland, thanks to new stations
opened around the Baltic Rim in 2008 and the efficiency of the
unmanned station network.
As of the end of the first quarter, Neste Oil had 881 (898) stations
in Finland and 288 (273) in the Baltic Rim and Russia.
Oil Retail's 12-month comparable return on net assets was 7.1%
(16.3%).
Shares, share trading, and ownership
A total of 76,134,442 Neste Oil shares were traded in the first
quarter, totaling EUR 0.8 billion. The share price reached EUR 11.62
at its highest and EUR 8.80 at its lowest, and closed the quarter at
EUR 10.02, giving the company a market capitalization of EUR 2.6
billion as of 31 March 2009. An average of 1.2 million shares were
traded daily, equivalent to 0.5% of shares outstanding.
Neste Oil's share capital registered with the Company Register as of
31 March 2009 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 March, the Finnish state owned 50.1% of outstanding
shares, foreign institutions 17.4%, Finnish institutions 20.4%, and
Finnish households 12.0%.
Organizational restructuring
Neste Oil announced on 5 February 2009 that it intended reorganizing
its operations around three business areas and seven common
functions. The new structure is designed to give the company a more
cost-efficient and customer-driven operating model, and one that will
be better capable of implementing the corporate strategy. The new
matrix organization will ensure that the best practices and know-how
of business areas and functions will benefit the entire company, and
that new international units, such as the renewable diesel plants
currently being built, can be integrated into the Group's operations
more effectively and that reporting will be more efficient.
The new organization reflecting this was introduced on 1 April 2009.
The new business areas will act as profit centers and will be
responsible for their customers, products, and business development.
The business areas are as follows: Oil Products, Renewable Fuels, and
Oil Retail. Activities outside these business areas are grouped under
Others. The common functions are: Production & Logistics, Finance,
Human Resources, Sustainability & HSE, Technology & Strategy,
Communications, and Legal Affairs.
The Specialty Products Division has been amalgamated into the Oil
Products business area. Shipping operations are reported in the
business areas that use them, and the Shipping business has been
incorporated into Production & Logistics.
As of 1 April, the Neste Executive Board (NEB) comprises the
following members: Matti Lievonen, President & CEO; Matti Lehmus,
Executive Vice President, Oil Products; Jarmo Honkamaa, Executive
Vice President, Renewable Fuels, Deputy CEO; Sakari Toivola,
Executive Vice President, Oil Retail; Ilkka Poranen, Senior Vice
President, Production & Logistics; Ilkka Salonen, CFO; Hannele
Jakosuo-Jansson, Senior Vice President, Human Resources, Simo
Honkanen, Senior Vice President, Sustainability & HSE; Osmo Kammonen,
Senior Vice President, Communications, Marketing and Public Affairs;
and Lars Peter Lindfors, Senior Vice President, Technology &
Strategy. Matti Hautakangas, General Counsel, acts as secretary to
the NEB.
The Neste Executive Management Board comprises the President & CEO,
business area executive vice presidents, the CFO, and the Senior Vice
President, Production & Logistics.
Annual General Meeting
Neste Oil's Annual General Meeting 2009 was held after the reporting
period on 3 April at the Helsinki Fair Centre. The AGM adopted the
company's financial statements and consolidated financial statements
for 2008 and discharged the Supervisory Board, Board of Directors,
and management from liability for 2008. The AGM also approved the
Board of Directors' proposal regarding the distribution of the
company's profit for 2008, sanctioning payment of a dividend of EUR
0.80 per share. Payment was made on Friday, 17 April 2009.
In accordance with a 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. Markku Tapio
and Ms. Maarit Toivanen-Koivisto. Mr. Hannu Ryöppönen 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 pay the
following remuneration to the Board: Chairman EUR 66,000 a year, Vice
Chairman EUR 49,200 a year, and members EUR 35,400 a year. In
addition, those participating at Board meetings and meetings convened
by the Board's committees will receive a payment of EUR 600 per
meeting, together with their traveling costs, in accordance with the
company's travel policy. A payment of double this, EUR 1,200 per
meeting, will be made to Board members living outside Finland.
The AGM confirmed that the Supervisory Board shall comprise eight
members and the following members were elected: Ms. Heidi Hautala
(Chairman), Mr. Kimmo Tiilikainen (Vice Chairman), Mr. Esko Ahonen,
Mr. Mikael Forss, Mr. Timo Heinonen, Mr. Markus Mustajärvi, Ms. Jutta
Urpilainen, and Ms. Anne-Mari Virolainen. Mr. Kimmo Tiilikainen was
elected for the first time. Members are all Finnish Members of
Parliament, with the exception of Mr. Mikael Forss, who is a Director
at the Social Insurance Institution of Finland. No changes were made
to the remuneration paid to the Supervisory Board, which remains as
follows: Chairman EUR 1,000 a month, Vice Chairman EUR 600 a month,
and members EUR 500 a month. In addition, those participating at
Supervisory Board meetings receive a payment of EUR 200 per meeting.
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
that is accepted by the company.
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 expert members, the
Chairman of the Board, together with one member elected by the Board
from among its members unaffiliated with any of the Company's major
shareholders. 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 2
November preceding the AGM. In the event that a shareholder does not
wish to exercise his right to appoint a representative, this right
shall pass to the next-largest shareholder. The company's largest
shareholders shall be determined on the basis of the information on
holdings registered in the book-entry system, with the proviso that
the holdings of a shareholder required under securities legislation
to flag certain changes in his holdings, and with shares spread
across a number of funds, for example, shall be combined if the
shareholder informs the company of his wishes to this effect in
writing by 30 October 2009. 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.
Convening after the Annual General Meeting, Neste Oil's Board of
Directors elected the members of its two Committees. Timo Peltola was
elected Chairman and Michiel Boersma, Mikael von Frenckell, and
Ainomaija Haarla as members of the Personnel and Remuneration
Committee. Nina Linander was elected Chairman and Hannu Ryöppönen,
Markku Tapio, and Maarit Toivanen-Koivisto as members of the Audit
Committee.
Personnel
Neste Oil employed an average of 5,252 (4,912) employees in
January-March period. At the end of March, the company had 5,264
employees (31 March 2008: 5,114).
Health, safety, and the environment
The 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 2.9 (5.2) at the end of
March 2009. The target for 2009 is below 4.
The lost workday injury frequency (LWIF) stood at 2.0. The target is
below 2.
Strategy implementation
Neste Oil'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 renewable diesel plants in Singapore and
Rotterdam has proceeded according to plan. Mechanical completion of
the plant is expected to be achieved in summer 2010. The start-up is
scheduled for the third quarter of 2010. The project is proceeding in
line with its original budget of EUR 550 million.
The Rotterdam plant is scheduled for completion in the first half of
2011. The project is proceeding according to schedule and its
original budget of EUR 670 million.
A joint venture between Neste Oil and the Bahrain Petroleum Company
(Bapco) has started construction of a high-quality lubricant base oil
plant in Bahrain. The plant will have an annual capacity of 400,000
tons of VHVI (Very High Viscosity Index) base oil for use in blending
top-tier lubricants. Completion is scheduled for the end of 2011.
Neste Oil's share of the JV is 45% and its estimated share of the
investment cost is EUR 115-135 million.
Construction of an isomerization unit at the Porvoo refinery has been
postponed.
Potential short-term and long-term risks
The oil market has been 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 here continues to be the slowdown of the
world economy, which is likely to reduce the demand for petroleum
products. This has already materialized during the last couple of
quarters and has now extended to demand for diesel, which is Neste
Oil's most important product. The problems on the international
financial market have also increased the level of uncertainty. As a
consequence, managing customer receivables risks has become even more
important. Sudden and unplanned outages at Neste Oil's production
units or facilities continue to represent a short-term risk.
Rapid and large changes in feedstock and product prices may lead to
significant inventory gains or losses, or change in working capital
that 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.
The key market drivers for Neste Oil's financial performance continue
to be 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 2008.
Outlook
The outlook for the global economy has not improved during the first
months of 2009, and oil demand forecasts have been revised down
continuously. In April, the International Energy Agency forecasted
that oil demand is likely to decrease globally by 2.8% and in OECD
countries by 4.9% in 2009.
This reduction in demand will coincide with new refining capacity
coming on stream, which will put further pressure on refining
margins. Together with a lower level of economical activity, this has
already had a negative impact on diesel margins, which are expected
to stay well lower compared to those seen in previous years. A modest
recovery is expected in the US gasoline market, and slightly better
gasoline margins are now expected compared to the previous outlook
published in February.
Demand for base oils is likely to stay weaker compared to 2008, due
to the soft market for lubricants. As a result, Neste Oil will shut
down its PAO plant in Beringen, Belgium in May for four weeks and
make temporary lay-offs. Freight rates for oil tankers look set to
remain very weak throughout the year.
The Renewable Fuels segment is unlikely to report positive results in
2009, due to increasing costs linked to the expansion of the
business. This is despite the second facility at Porvoo coming on
stream in the third quarter of 2009.
Low demand will continue to be reflected in Oil Retail's sales
volumes and margins. The devaluation of local currencies in some
countries is likely to put pressure on operations outside of Finland.
Despite planned maintenance at some units, operational performance at
Neste Oil's refineries should be better in 2009 than in 2008. A
planned two-month maintenance and process improvement shutdown
started on Production Line 4 at Porvoo in mid-April to enhance the
line's productivity.
As already disclosed in the Financial Statements for 2008 in
February, the Group will continue to address its fixed costs. Results
from this will be discussed in the second half of 2009.
The Group's investments are estimated to be around EUR 890 million in
2009, which is lower than the previous forecast of EUR 950 million
published in February. Maintenance investments will account for
around EUR 160 million (previously 180 million), productivity
investments around EUR 40 million (previously 60 million), and
strategic investments around EUR 690 million (previously 710
million).
Reporting date for the second-quarter 2009 results
Neste Oil will publish its second-quarter results for 2009 on 30 July
2009 at approximately 9:00 a.m. EET.
Espoo, 27 April 2009
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- MARCH 2009
Unaudited
CONSOLIDATED INCOME STATEMENT
MEUR Note Last 12
1-3/2009 1-3/2008 1-12/2008 months
Revenue 3 2 053 3 297 15 043 13 799
Other income 7 16 44 35
Share of profit (loss)
of associates and joint 0
ventures 3 -7 1 13 5
Materials and
services -1 628 -2 816 -13 657 -12 469
Employee benefit
costs -79 -75 -315 -319
Depreciation,
amortization and
impairments 3 -55 -59 -223 -219
Other expenses -196 -160 -719 -755
Operating profit 95 204 186 77
Financial income and expenses
Financial income 1 2 8 7
Financial expenses -17 -13 -70 -74
Exchange rate and fair value
gains and
losses 2 -2 5 9
Total financial income and
expenses -14 -13 -57 -58
Profit before income taxes 81 191 129 19
Income tax expense -20 -48 -28 0
Profit for the period 61 143 101 19
Profit attributable
to:
Owners of the parent 60 142 97 15
Minority interest 1 1 4 4
61 143 101 19
Earnings per share from
profit
attributable to the
owners
of the parent basic and
diluted (in euro per
share) 0,24 0,56 0,38 0,06
STATEMENT OF
COMPREHENSIVE INCOME
1-3 1-3 1-12 Last 12
MEUR 2009 2008 2008 months
Profit for the period 61 143 101 19
Other comprehensive
income for the
period,
net of tax
Translation
differences -5 -16 -44 -33
Cash flow hedges
recorded in equity -25 37 -23 -85
transferred to income
statement 20 -19 -25 14
Net investment hedges 0 0 0 0
Hedging reserves in
associates and joint
ventures 0 0 -1 -1
Other comprehensive
income for the period,
net of tax -10 2 -93 -105
Total comprehensive
income for the period 51 145 8 -86
Total comprehensive
income attributable
to:
Owners of the parent 50 144 4 -90
Minority interest 1 1 4 4
51 145 8 -86
CONSOLIDATED
BALANCE SHEET
31 31
March March 31 Dec
MEUR Note 2009 2008 2008
ASSETS
Non-current assets
Intangible assets 4 51 53 51
Property, plant and
equipment 4 2 779 2 444 2 675
Investments in
associates and joint
ventures 144 181 152
Non-current receivables 11 5 13
Pension assets 104 82 105
Deferred tax
assets 12 6 16
Derivative financial
instruments 5 10 20 16
Available-for-sale
financial assets 1 2 1
Total non-current
assets 3 112 2 793 3 029
Current assets
Inventories 905 1 221 637
Trade and other
receivables 799 1 012 786
Derivative financial
instruments 5 118 157 213
Cash and cash
equivalents 46 63 55
Total current
assets 1 868 2 453 1 691
Total assets 4 980 5 246 4 720
EQUITY
Capital and reserves
attributable to the owners
of the parent
Share capital 40 40 40
Other equity 2 2 180 2 270 2 131
Total 2 220 2 310 2 171
Minority interest 9 6 8
Total equity 2 229 2 316 2 179
LIABILITIES
Non-current
liabilities
Interest-bearing
liabilities 974 1 111 926
Deferred tax
liabilities 290 299 297
Provisions 25 15 24
Pension
liabilities 11 11 12
Derivative financial
instruments 5 27 24 32
Other non-current
liabilities 3 2 3
Total non-current
liabilities 1 330 1 462 1 294
Current
liabilities
Interest-bearing
liabilities 289 164 133
Current tax
liabilities 5 22 1
Derivative financial
instruments 5 159 86 197
Trade and otherpayables 968 1 196 916
Total current
liabilities 1 421 1 468 1 247
Total liabilities 2 751 2 930 2 541
Total equity and
liabilities 4 980 5 246 4 720
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 2008 40 10 42 -11 2 342 4 2 427
Dividend paid -256 -256
Share-based
compensation -1 -1
Transfer from
retained earnings 1 -1 0
Change in minority 1 1
Total
comprehensive
income for the
period 18 -16 142 1 145
Total equity at 31
March
2008 40 11 59 -27 2 227 6 2 316
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
CONDENSED CONSOLIDATED CASH
FLOW STATEMENT
1-3 1-3 1-12
MEUR /2009 /2008 /2008
Cash flow from operating
activities
Profit before taxes 81 191 129
Adjustments, total 108 78 249
Change in working
capital -224 -337 248
Cash generated from
operations -35 -68 626
Finance cost, net 14 -23 -29
Income taxes paid 38 -22 -85
Net cash generated from
operating activities 17 -113 512
Capital expenditure -174 -75 -497
Acquisition of
subsidiary - -7 -10
Acquisition of
associates and joint
ventures - - -1
Proceeds from sales of
fixed assets 3 2 9
Proceeds from sales of
shares 0 7 12
Change in other
investments -56 -24 -8
Cash flow before
financing activities -210 -210 17
Net change in loans and
other financing
activities 201 468 244
Dividends paid to the
owners of
the parent - -245 -256
Net increase
(+)/decrease (-) in cash -9 13 5
and cash equivalents
KEY FINANCIAL
INDICATORS
31 March 31 March 31 Dec Last 12
2009 2008 2008 months
Capital employed, MEUR 3 491 3 591 3 237 3 491
Interest-bearing net
debt, MEUR 1 217 1 212 1 004 -
Capital expenditure and
acquisition of subsidiary,
MEUR 174 82 508 600
Return on average capital
employed, after tax, ROACE
% - - 13,1 11,6
Return on capital
employed, pre-tax, ROCE
% 11,7 24,0 6,1 2,6
Return on equity, % 11,1 24,2 4,4 0,8
Equity per share, EUR 8,67 9,03 8,48 -
Cash flow per share, EUR 0,07 -0,44 2,00 2,51
Equity-to-assets ratio,
% 44,9 44,2 46,3 -
Gearing, % 54,6 52,3 46,1 -
Leverage ratio, % 35,3 34,3 31,5 -
Average number of shares 255903686 255903686 255903686 255903686
Number of shares at the
end of the period 255903686 255903686 255903686 255903686
Average number of
personnel 5 252 4 912 5 174 -
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. BASIS OF PREPARATION AND
ACCOUNTING POLICIES
The interim financial statements has been prepared in accordance
with IAS 34, Interim Financial Reporting, as adopted by EU. The
interim report should be read in conjunction with the annual
financial statements for the period ended 31 December 2008.
The accounting policies adopted are consistent with those of the
Group's annual financial statements for the year ended 31 December
2008.
The Group applies revised standard IAS 1 Presentation of Financial
Statements as of 1 January 2009. This revised standard separates
changes in equity of an entity arising from transactions with owners
from other changes in equity.
The following interpretations are mandatory for the
financial year ending 31 December 2009, but not relevant
for the Group:
- IFRIC 12 Service
Concession
Arrangements
- IFRIC 13
Customer Loyalty
Programs
- Amendment to IFRS 2 Share
based payments: Vesting
Conditions and Calcellations
- Annual
improvements
2008.
2. TREASURY
SHARES
In 2007 Neste Oil 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
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.
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 1-3/2009 1-3/2008 1-12/2008 months
Oil Products 1 582 2 715 12 641 11 508
Renewable Fuels 24 23 116 117
Oil Retail 691 948 4 073 3 816
Others 42 31 143 154
Eliminations -286 -420 -1 930 -1 796
Total 2 053 3297 15043 13799
OPERATING PROFIT Last 12
MEUR 1-3/2009 1-3/2008 1-12/2008 months
Oil Products 106 197 183 92
Renewable Fuels -10 1 2 -9
Oil Retail 12 11 25 26
Others -11 -8 -29 -32
Eliminations -2 3 5 0
Total 95 204 186 77
COMPARABLE OPERATING
PROFIT Last 12
MEUR 1-3/2009 1-3/2008 1-12/2008 months
Oil Products 64 113 602 553
Renewable Fuels -7 2 2 -7
Oil Retail 12 9 22 25
Others -11 -8 -29 -32
Eliminations -2 3 5 0
Total 56 119 602 539
DEPRECIATION, AMORTIZATION AND
IMPAIRMENTS Last 12
MEUR 1-3/2009 1-3/2008 1-12/2008 months
Oil Products 44 46 175 173
Renewable Fuels 2 2 7 7
Oil Retail 7 8 31 30
Others 2 3 10 9
Total 55 59 223 219
CAPITAL EXPENDITURE AND
INVESTMENTS IN SHARES Last 12
MEUR 1-3/2009 1-3/2008 1-12/2008 months
Oil Products 43 33 165 175
Renewable Fuels 123 27 249 345
Oil Retail 4 8 63 59
Others 4 14 31 21
Total 174 82 508 600
TOTAL ASSETS 31 March 31 March 31 Dec
MEUR 2009 2008 2008
Oil Products 3 565 4 078 3 352
Renewable Fuels 549 198 450
Oil Retail 537 635 568
Others 274 294 265
Eliminations -167 -189 -155
Total 4 758 5 016 4 480
NET ASSETS 31 March 31 March 31 Dec
MEUR 2009 2008 2008
Oil Products 2 660 2 951 2 436
Renewable Fuels 462 167 381
Oil Retail 321 362 351
Others 207 220 201
Eliminations 3 3 4
Total 3653 3703 3373
RETURN ON NET
ASSETS, % 31 March 31 March 31 Dec Last 12
2009 2008 2008 months
Oil Products 16,6 28,3 6,4 3,2
Renewable Fuels -9,5 2,6 0,9 -3,0
Oil Retail 14,3 11,8 6,8 7,3
COMPARABLE RETURN ON NET
ASSETS, % 31 March 31 March 31 Dec Last 12
2009 2008 2008 months
Oil Products 10,0 16,2 21,2 19,4
Renewable Fuels -6,6 5,2 0,9 -2,3
Oil Retail 14,3 9,7 6,0 7,1
QUARTERLY SEGMENT INFORMATION
QUARTERLY REVENUE
MEUR
1-3 10-12 7-9 4-6 1-3
/2009 /2008 /2008 /2008 /2008
Oil Products 1 582 2 221 3 907 3 798 2 715
Renewable Fuels 24 20 27 46 23
Oil Retail 691 915 1 132 1 078 948
Others 42 43 36 33 31
Eliminations -286 -394 -581 -535 -420
Total 2053 2805 4521 4420 3297
QUARTERLY OPERATING PROFIT
MEUR
1-3 10-12 7-9 4-6 1-3
/2009 /2008 /2008 /2008 /2008
Oil Products 106 -301 15 272 197
Renewable Fuels -10 -9 -2 12 1
Oil Retail 12 -6 9 11 11
Others -11 -38 21 -4 -8
Eliminations -2 2 1 -1 3
Total 95 -352 44 290 204
QUARTERLY COMPARABLE
OPERATING PROFIT
MEUR
1-3 10-12 7-9 4-6 1-3
/2009 /2008 /2008 /2008 /2008
Oil Products 64 154 173 162 113
Renewable Fuels -7 -10 -3 13 2
Oil Retail 12 -5 7 11 9
Others -11 -38 21 -4 -8
Eliminations -2 2 1 -1 3
Total 56 103 199 181 119
QUARTERLY DEPRECIATION, AMORTIZATION AND IMPAIRMENTS
MEUR
1-3 10-12 7-9 4-6 1-3
/2009 /2008 /2008 /2008 /2008
Oil Products 44 44 44 41 46
Renewable Fuels 2 2 2 1 2
Oil Retail 7 6 9 8 8
Others 2 3 1 3 3
Total 55 55 56 53 59
QUARTERLY CAPITAL EXPENDITURE
AND INVESTMENTS IN SHARES
MEUR
1-3 10-12 7-9 4-6 1-3
/2009 /2008 /2008 /2008 /2008
Oil Products 43 47 46 39 33
Renewable Fuels 123 108 64 50 27
Oil Retail 4 22 18 15 8
Others 4 8 3 6 14
Total 174 185 131 110 82
4. CHANGES IN INTANGIBLE ASSETS AND PROPERTY,
PLANT AND EQUIPMENT AND CAPITAL COMMITMENTS
CHANGES IN INTANGIBLE ASSETS AND PROPERTY,
31
PLANT AND EQUIPMENT March 31 March 31 Dec
MEUR 2009 2008 2008
Opening balance 2 726 2 477 2 477
Depreciation, amortization and
impairments -55 -59 -223
Capital
expenditure 174 75 497
Disposals -3 -1 -8
Translation
differences -12 -6 -28
Acquired group
companies 0 11 11
Closing balance 2 830 2 497 2 726
31
CAPITAL COMMITMENTS March 31 March 31 Dec
MEUR 2009 2008 2008
Commitments to purchase property,
plant and equipment 570 143 540
Commitments to purchase intangible
assets 0 0 0
Total 570 143 540
5. DERIVATIVE
FINANCIAL INSTRUMENTS 31 March 31 March 31 Dec
2009 2008 2008
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 477 -18 368 -2 475 -13
Forward foreign
exchange
contracts 1 379 0 1 319 46 1 381 17
Currency options
Purchased 230 -5 450 25 336 -5
Written 178 -10 264 3 256 -11
Share forward
contracts 9 -5 14 -1 14 -8
Oil and freight Net Net Net
derivative fair fair fair
contracts Volume value Volume value Volume value
million million million
bbl Meur bbl Meur bbl Meur
Sales contracts 42 27 66 -41 28 166
Purchase
contracts 31 -48 79 36 32 -147
Purchased options 2 -9 1 0 1 -12
Written options 2 9 1 0 1 12
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 /2009 /2008 /2008
Sales of goods and
services 4 5 110
Purchases of goods and
services 8 10 72
Receivables 6 4 14
Financial income and
expenses 0 0 0
Liabilities 1 2 9
7. CONTINGENT LIABILITIES
31 31
March March 31 Dec
MEUR 2009 2008 2008
Contingent liabilities
On own behalf for debt
Pledged assets - 2 -
Total - 2 -
On own behalf for
commitments
Real estate mortgages 26 26 26
Pledged assets 2 2 3
Other contingent
liabilities 41 35 37
Total 69 63 66
On behalf of associates
and joint ventures
Guarantees 6 3 5
Other contingent
liabilities 1 1 2
Total 7 4 7
On behalf of others
Guarantees 12 12 12
Total 12 12 12
Total 88 81 85
31 31
March March 31 Dec
MEUR 2009 2008 2008
Operating lease
liabilities
Due within one year 112 103 106
Due between one and five years 253 187 262
Due later than five years 362 108 465
Total 727 398 833
The Group's operating lease liabilities primarily relate to
hydrogen supply contracts, time charter vessels, land and
office space.
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
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, 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
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