2009-02-05 08:00:00 CET
2009-02-05 08:02:58 CET
REGULATED INFORMATION
Neste Oil - Financial Statement Release
Neste Oil's Financial Statements for 2008
- Full-year comparable operating profit of EUR 602 million (2007: 626
million)
2008 in brief:
- Comparable operating profit of EUR 602 million (2007: 626 million)
- Strong total refining margin of USD 13.39 /bbl (2007: 10.46)
- IFRS-based operating profit of EUR 186 million (2007: 801 million),
including inventory losses of
453 million (2007: profit of 174 million)
- Cash flow from operations of EUR 512 million (2007: 541 million)
- Healthy liquidity position at the end of the year
- The Board of Directors proposes a dividend of EUR 0.80 per share
(2007: 1.00)
Fourth quarter in brief:
- Comparable operating profit of EUR 103 million (10-12/07: 84
million)
- Total refining margin of USD 15.05 /bbl (10-12/07: 9.88)
- EUR 19 million write-down on engineering for a hydrocracker planned
at Naantali
- Comparable operating profit at Oil Refining and Shipping increased
but Renewable Fuels, Specialty
Products, and Oil Retail posted lower comparable profits
- IFRS operating profit of EUR -352 million, as a result of inventory
losses (10-12/07: 143 million)
- Strong cash flow from operations of EUR 486 million (10-12/07: 220
million)
President & CEO Matti Lievonen:"The oil market witnessed an unprecedented fall in prices in the
second half of 2008. This resulted in exceptional inventory losses,
which weakened our IFRS numbers significantly compared to 2007. Our
comparable operating profit, at EUR 602 million, was around the level
we achieved in 2007, and our cash flow from operations healthy at EUR
512 million.""Our total refining margin increased significantly in 2008, and is
clear evidence that, as a refiner focused on diesel and other middle
distillates, we were better-placed than most refiners. It appears
likely that the middle distillate market will continue to perform
better than the gasoline market in 2009, but we expect global demand
for petroleum products generally to fall. Going forward, we will need
to focus on reducing costs and improving efficiency to safeguard our
profits and cash flow."
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 2008 results will be held today,
5 February 2009, at 12:00 noon 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, 5 February 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 here. 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
2008
10-12/2008 and 10-12/2007 unaudited, full year 2008 and 2007 audited
Figures in parentheses refer to the full-year financial statements
for 2007, unless otherwise stated.
KEY FIGURES
EUR million (unless otherwise noted)
10-12/08 10-12/07 2008 2007 2006
Sales 2,805 3,461 15,043 12,103 12,734
Operating profit before
depreciation -297 199 409 996 1,007
Depreciation, amortization,
and impairments 55 56 223 195 153
Operating profit -352 143 186 801 854
Comparable operating profit * 103 84 602 626 597
Profit before income tax -382 130 129 763 841
Earnings per share, EUR -1.14 0.40 0.38 2.25 2.46
Investments 185 98 508 334 535
Net cash from operating
activities 486 220 512 541 512
31 Dec 31 Dec 31 Dec
2008 2007 2006
Total equity 2,179 2,427 2,097
Interest-bearing net debt 1,004 755 722
Capital employed 3,237 3,234 2,890
Return on capital employed
pre-tax (ROCE), % 6.1 26.2 31.9
Return on average capital
employed after tax (ROACE),% 13.1 15.5 15.4
Return on equity (ROE), % 4.4 25.6 34.3
Equity per share, EUR 8.48 9.47 8.15
Cash flow per share, EUR 2.00 2.11 2.00
Equity-to-assets ratio, % 46.3 49.9 48.4
Leverage ratio, % 31.5 23.7 25.6
Gearing, % 46.1 31.1 34.4
* 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 full-year results for 2008
Sales at the Neste Oil Group totaled EUR 15,043 million in 2008,
compared to EUR 12,103 million in 2007.
The Group's comparable operating profit was EUR 602 million compared
to EUR 626 million in 2007. The comparable operating profit was
supported by a stronger total refining margin and good profitability
at Shipping, but this was offset by unfavorable US dollar hedging and
weaker profits at Oil Retail and the joint venture company Nynas AB.
Additional negative impact came in the form of exceptional costs,
which totaled around EUR 55 million.
Oil Refining's full-year comparable operating profit was EUR 510
million (484 million), Renewable Fuels' EUR 2 million (-13 million),
Specialty Products' EUR 50 million (109 million), Oil Retail's EUR 22
million (59 million), and Shipping's EUR 55 million (28 million).
Profits from associated companies and joint ventures totaled EUR 13
million (39 million).
Operating profit under IFRS was EUR 186 million in 2008. The major
decline from the EUR 801 million booked in 2007 is associated with
inventory losses that cumulated in the second half of 2008 as oil
prices softened rapidly. Under IFRS, inventories are accounted under
the first-in, first-out (FIFO) principle and valued at the lower of
cost or net realizable value. Inventory gains and losses are excluded
in the comparable operating profit, which is a better way to asses
the company's operating results in a volatile oil price environment.
Inventory losses totaled EUR 453 million in 2008, compared to a
profit of 174 million in 2007.
The full-year profit before taxes was EUR 129 million (763 million)
and the effective tax rate was 21.8% (24.0%). Profit for the period
2008 was EUR 101 million (580 million) and earnings per share were
EUR 0.38 (2.25).
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 calculation is based on comparable results.
At the end of December, the rolling twelve-month ROACE was 13.1%
(2007 financial year: 15.5%).
The Group's fourth-quarter results in 2008
Neste Oil's fourth-quarter sales totaled EUR 2,805 million (10-12/07:
3,461 million).
The Group's comparable operating profit increased to EUR 103 million,
compared to EUR 84 million in the last quarter of 2007. The increase
was mainly due to a higher total refining margin. The rapid decline
in oil prices had a significant negative impact on the comparable
operating profit at Specialty Products and Oil Retail. The figure
also includes a EUR 19 million write-down on basic engineering for a
hydrocracker originally planned for Naantali.
Oil Refining's comparable operating profit was EUR 131 million (85
million) in the fourth quarter, Renewable Fuels' EUR -10 million (3
million), Specialty Products' EUR -6 million (2 million), Oil Retail
EUR -5 million (10 million), and Shipping's EUR 3 million (-4
million).
The fourth-quarter operating profit under IFRS was EUR -352 million
(10-12/07: 143 million), as a result of an inventory loss of EUR 467
million (10-12/07: profit of 54 million).
Pre-tax profit was EUR -382 million (10-12/07: 130 million). Profit
for the period was -289 (10-12/07: 103 million) and earnings per
share EUR -1.14 (10-12/07: 0.40).
10-12/08 10-12/07 2008 2007 2006
COMPARABLE OPERATING PROFIT 103 84 602 626 597
- inventory gains/losses -467 54 -453 174 56
- changes in the fair value of open
oil derivatives 10 4 24 -5 -9
- capital gains/losses 2 1 13 6 210
OPERATING PROFIT -352 143 186 801 854
Capital expenditure and financing
Investments totaled EUR 508 million in 2008 compared to EUR 334
million in 2007. Oil Refining's capital spending was EUR 132 million
(193 million), Renewable Fuels' EUR 249 million (69 million),
Specialty Products' EUR 30 million (5 million), Oil Retail's EUR 63
million (51 million), and Shipping's EUR 3 million (2 million).
Investments in the Other segment totaled EUR 31 million (14 million).
Depreciation in 2008 was EUR 223 million (195 million).
The Group's interest-bearing net debt was EUR 1,004 million at the
end of the year (31 Dec 2007: EUR 755). Net financial expenses
between January and December were EUR 57 million (38 million). The
average interest rate of borrowings at the end of 2008 was 4.0%, and
the average maturity 4.4 years.
Net cash from operating activities between January and December was
EUR 512 million (541 million). Neste Oil's balance sheet remained
healthy during 2008. The year-end equity-to-assets ratio was 46.3%
(31 Dec 2007: 49.9%), the leverage ratio 31.5% (31 Dec 2007: 23.7%),
and the gearing ratio 46.1% (31 Dec 2007: 31.1%).
The Group's liquidity remained strong. Cash and cash equivalents and
committed, unutilized credit facilities amounted to EUR 1,536 million
at the end of December (31 Dec 2007: 1,492 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.
Main events during the reporting period
Strategy implementation
Neste Oil continued to implement its clean fuel strategy in 2008. In
line with this, the company's current capital projects consist of new
plants designed to increase production of renewable diesel and
high-quality base oil. The company is also investing in an
isomerization unit to improve gasoline quality.
Strategic projects
Neste Oil announced on 13 June 2008 that it will build an 800,000 t/a
plant to produce NExBTL renewable diesel in Rotterdam in the
Netherlands. Construction started immediately and the facility is
scheduled to be completed in 2011. The total cost of the investment
was projected to be EUR 670 million. Construction of a similar-sized
renewable diesel plant in Singapore proceeded according to the plan
in 2008, scheduled to be in operation at the end of 2010. At the end
of the year, Neste Oil and OMV decided to discontinue planning of a
jointly owned NExBTL diesel plant in Austria.
On 16 June 2008, Neste Oil and Bahrain's Oil & Gas Holding Company
(OGHC) and the Bahrain Petroleum Company (Bapco) announced that they
will establish a joint venture known as the Bahrain Base Oil Company
to build 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 an estimated share of the investment cost is EUR
115-135 million.
Neste Oil announced on 4 June 2008 that it would build a new
isomerization unit, costing approximately EUR 80 million, at its
Porvoo refinery. The new unit will be capable of processing 600,000
t/a of lower-value gasoline fractions into higher-value,
premium-quality gasoline, and will increase the refinery's total
gasoline output by 200,000 t/a. Construction of the new unit will
begin in 2009, and it is scheduled to come on stream in 2011.
Other events
The latest addition to the Porvoo refinery, Production Line 4,
suffered from operational constraints between early April and early
October. This resulted in lower-than-planned diesel output and a
lower refining margin.
Neste Oil announced on 3 January that its subsidiary, Neste Jacobs,
would acquire the engineering company, Rintekno. Following the
acquisition, Neste Jacobs became the leading provider of engineering
services for the chemical and biotechnology industries in the Nordic
region, employing a total of some 800 people.
Neste Oil announced on 1 April that the disagreement relating to the
final financial settlement for the mechanical installation work on
Production Line 4 at the Porvoo refinery had been put before the
Court of Arbitration. Neste Oil's claims against YIT Industrial and
Network Services initially amounted to around EUR 36 million and
mainly comprise damages based on the delay to the contract. In
September, Neste Oil clarified its claims as totaling some EUR 107
million. YIT has lodged counter claims against Neste Oil for an
amount of around EUR 25 million. Both parties contest each other's
claims.
Neste Oil commercially launched a new renewable diesel, Neste Green
diesel, in Finland at the beginning of May. Neste Green diesel
contains at least 10% renewable fuel in the form of the company's
unique NExBTL component. Distribution of the new fuel has initially
been concentrated in Greater Helsinki.
Market overview
Crude oil prices were very volatile in 2008. Prices continued to rise
in the first half of the year and Brent Dated recorded an all-time
high of USD 144/bbl in July. Good demand, especially in China and
India, and concerns about the long-term supply-demand balance drove
the market up. As the global financial crisis escalated, however,
prices started to decline sharply. Simultaneously, concerns about a
recession resulted in reduced demand forecasts. Although OPEC
announced production cuts to support the market, crude prices kept
falling until finally stabilizing in December, when Brent Dated
leveled at around USD 40/bbl. Brent Dated averaged USD 97/bbl (73)
during the year as a whole; while the average for the fourth quarter
was USD 55/bbl (89).
The price differential between heavy and light crude was also
volatile, widening during the first few months of 2008 but narrowing
as crude oil prices fell. Demand for heavier crude improved due to
new conversion capacity and good marine bunker demand. The average
differential between Urals and Brent Dated in 2008 was USD -2.95 /bbl
(-3.10). During the fourth quarter, the differential averaged USD
-1.82 /bbl (-2.88).
Refining margins were slightly lower compared to 2007, and were
mainly driven by middle distillates, as gasoline demand suffered from
high prices. Margins peaked in September, when hurricanes forced
refineries to shut down in the US Gulf. The international reference
refining margin for complex refineries in Northwest Europe, IEA Brent
Cracking, averaged USD 4.74 /bbl (5.09) in 2008 and USD 4.26 /bbl
(4.27) in the fourth quarter.
Gasoline margins collapsed compared to 2007. Record high pump prices
and increasing ethanol blending eroded demand significantly in the
US, resulting in growing inventories. Low demand continued through
the US driving season, and margins were even negative in July. After
the hurricanes in September, inventories fell considerably and
margins improved, but as the economic situation worsened, the outlook
for gasoline remained very negative and margins fell again, virtually
to zero.
Boosted by increasing demand, middle distillate margins, which were
already strong, improved further in 2008, especially during the
second quarter. High prices and the worsening economic outlook did
not affect demand, which even improved when supply was disrupted by
refinery outages. At the end of the year, after holding up so long,
demand for middle distillates eventually started to show signs of
suffering from the economic recession and margins decreased.
Fuel oil margins remained negative throughout 2008, but improved in
the second half as crude oil prices declined. High-sulfur fuel oil
was temporarily strong due to low Russian exports and very good
bunker demand.
The European Union's Renewable Energy Directive was approved in
December 2008. The directive includes a binding renewable energy
target of 10% in the traffic and transportation in member states by
2010, together with sustainability criteria for biofuels.
Implementation of the directive still requires consultation, which is
estimated to last until the second half of 2009.
Demand for gasoline fell on the Finnish retail market by
approximately 5% in 2008. Diesel demand increased, but growth
decreased to approximately 2% as the economical situation worsened.
The downturn in the Baltic economies was reflected in reduced demand
for transportation fuels; in the St. Petersburg region, demand grew
but at a slower rate.
Unlike expected, Shipping freight rates were higher in 2008 than in
2007. North Sea crude freight rates increased by 32% and Baltic rates
by 22% overall; during the fourth quarter, rates were down 5% and up
21% respectively.
Key drivers
10-12/08 10-12/07 2008 2007 Jan 09 Jan 08
IEA Brent cracking
margin, USD/bbl 4.26 4.37 4.74 5.09 3.27 1.77
Total refining margin,
USD/bbl 15.05 9.88 13.39 10.46 n.a. n.a.
Urals-Brent price
differential, USD/bbl -1.82 -2.88 -2.95 -3.10 1.11 -2.34
Brent dated crude oil,
USD/bbl 54.91 88.69 96.99 72.52 43.59 92.00
USD/EUR exchange rate 1.32 1.45 1.47 1.37 1.32 1.47
Crude freights, Aframax
WS points 144 152 179 136 91 159
Production and sales
Several records were broken at Neste Oil's refineries in 2008,
including total annual production and total input at both refineries,
which exceeded 15 million tons for the first time. Diesel output
reached an all-time high, although the new diesel line operated at
only approximately 60% of its annual nameplate capacity.
Neste Oil refined a total of 15.2 million tons (14.6 million) of
crude oil and feedstocks in 2008, of which 12.4 million tons (11.8
million) at Porvoo. The Naantali refinery processed 2.8 million tons
(2.8 million).
During the fourth quarter, Neste Oil refined 3.3 million tons (2.8
million) at Porvoo and 0.7 million tons (0.7 million) at Naantali,
totaling 4.0 million tons (3.5 million).
The Naantali refinery operated at virtually full crude distillation
capacity in 2008 and reached a utilization rate of 97% (97%). At
Porvoo, utilization was lower at 92% (95%) due to problems with the
new diesel line.
The proportion of Russian Export Blend (REB) in Neste Oil's total
refinery input rose to 57% (51%) for the full-year and 57% (54%) in
the fourth quarter.
The proportion of diesel in Neste Oil's sales structure in 2008
increased to nearly 40%, while gasoline and heavy fuel oil declined.
The additional diesel volumes were mostly sold in Europe, resulting
in 25% higher sales volumes there. Growth was also seen in sales to
North America.
During the fourth quarter, some 400,000 tons (almost 3 million
barrels) of crude and products were stored and contracted.
Neste Oil's sales from in-house production, by product category
(1,000 t)
10-12/08 % 10-12/07 % 2008 % 2007 %
Motor gasolines 1,052 28 1,042 29 4,056 28 4,384 31
Gasoline components 33 1 68 2 253 2 357 2
Diesel fuel 1,585 42 1,298 36 5,583 38 5,137 36
Jet fuel 154 4 197 5 658 5 729 5
Base oils 58 2 77 2 278 2 304 2
Heating oil 245 7 225 6 763 5 764 5
Heavy fuel oil 220 6 322 9 981 7 1,097 8
LPG 70 2 61 2 340 2 317 2
NExBTL renewable
diesel 19 1 23 1 94 1 28 0
Other products 317 8 270 8 1,565 11 1,215 8
TOTAL 3,754 100 3,583 100 14,571 100 14,332 100
Neste Oil's sales from in-house production, by market area (1,000 t)
10-12/08 % 10-12/07 % 2008 % 2007 %
Finland 1,942 52 2,071 58 7,537 52 8,053 56
Other Nordic
countries 607 16 484 14 2,056 14 2,059 14
Other Europe 734 19 643 18 3,028 20 2,399 16
USA & Canada 467 12 337 9 1,857 13 1,703 12
Other countries 3 0 48 1 94 1 118 1
TOTAL 3,754 100 3,583 100 14,571 100 14,332 100
SEGMENT REVIEWS
In 2008, Neste Oil's businesses were grouped into six reporting
segments: Oil Refining, Renewable Fuels, Specialty Products, Oil
Retail, Shipping, and Other. The former Biodiesel division was
renamed Renewable Fuels in April 2008.
Oil Refining
Key figures
10-12/08 10-12/07 2008 2007
Sales, MEUR 2,097 2,740 12,030 9,348
Operating profit, MEUR -292 139 123 640
Comparable operating profit, MEUR 131 85 510 484
Capital expenditure, MEUR 34 46 132 193
Total refining margin USD/bbl 15.05 9.88 13.39 10.46
Oil Refining's full-year comparable operating profit was EUR 510
million (484 million). Neste Oil's total refining margin increased to
USD 13.39 /bbl in 2008, compared to USD 10.46 /bbl in 2007. The total
refining margin was boosted by strong diesel and middle distillates
margins. US dollar, write-downs, and unscheduled maintenance costs
had a negative impact.
Oil Refining's comparable operating profit during the fourth quarter
was EUR 131 million (10-12/07: 85 million). This was boosted by a
record-high total refining margin of USD 15.05 /bbl (10-12/07: 9.88),
most of which is explained by strong diesel margins and increased
diesel production, as well as good refinery productivity. A EUR 19
million write-down on the Naantali hydrocracker project and US dollar
hedges had a negative impact.
Oil Refining's operating profit according to IFRS was EUR 123 million
(640 million). Full-year inventory losses totaled EUR 422 million,
compared to an inventory profit of EUR 161 million in 2007.
Oil Refining's comparable return on net assets was 21.7% (22.7%) in
2008.
Renewable Fuels
10-12/08 10-12/07 2008 2007
Sales, MEUR 20 27 116 40
Operating profit, MEUR -9 2 2 -12
Comparable operating profit, MEUR -10 3 2 -13
Capital expenditure, MEUR 108 22 249 69
Renewable Fuels' full-year comparable operating profit was EUR 2
million (-13 million), thanks to the first NExBTL plant being
operational at Porvoo for part of the year. Higher costs were related
to growth projects and R&D.
The fourth-quarter comparable operating profit of Renewable Fuels was
EUR -10 million, down from EUR 3 million during the same quarter in
2007. This was mainly due to the planned full-scale maintenance
shutdown of the Porvoo plant.
The full-year comparable return on net assets of Renewable Fuels was
0.9% (-12.3%).
Specialty Products
10-12/08 10-12/07 2008 2007
Sales, MEUR 112 138 591 649
Operating profit, MEUR -37 10 19 122
Comparable operating profit, MEUR -6 2 50 109
Capital expenditure, MEUR 11 2 30 5
The full-year comparable operating profit of Specialty Products stood
at EUR 50 million (109 million). Weaker profit performance resulted
from lower profits at Neste Oil's joint venture, Nynas AB, volatile
base oil margins and continued weak demand for gasoline components.
Specialty Products posted a comparable operating profit of EUR -6
million in the fourth quarter, compared to EUR 2 million in the same
quarter of 2007. The majority of this decline was associated with
inventory losses at Nynas. Base oils had a good quarter, with strong
margins. Demand for gasoline components remained weak.
Specialty Products' full-year comparable return on net assets was
13.9% (32.9%).
Oil Retail
Key figures
10-12/08 10-12/07 2008 2007
Sales, MEUR 915 965 4,073 3,435
Operating profit, MEUR -6 9 25 60
Comparable operating profit, MEUR -5 10 22 59
Capital expenditure, MEUR 22 24 63 51
Total sales volume*, 1,000 m3 1,141 1,191 4,353 4,519
- gasoline station sales, 1,000 m3 376 370 1,479 1,457
- diesel station sales, 1,000 m3 356 348 1,406 1,329
- heating oil, 1,000 m3 219 217 759 763
- heavy fuel oil, 1,000 m3 105 106 356 473
Oil Retail's comparable operating profit declined to EUR 22 million
in 2008 (59 million). The majority of this resulted from a EUR 15
million write-down on receivables and EUR 10 million inventory
losses.
Oil Retail's comparable operating profit during the fourth quarter
was EUR -5 million (10 million), which resulted from EUR 17 million
in inventory losses.
Sales volumes of gasoline fell in the Finnish market, while diesel
sales volume increased by approximately 5%. The company's market
share in both products increased. Margins were as tight as in 2007.
Oil Retail continued implementation of the project designed to
enhance its profitability and position in the Finnish market. The
planned decrease in the number of personnel in Finland is 35% during
the period 2008-2011. This target is intended to be met without
terminations. Revamping of the Finnish station network proceeded
according to plan in 2008 and will be completed in 2011.
Volume growth in the Baltic Rim network totaled 7%, thanks to
increasing sales at unmanned stations. Margins in the Baltic Rim were
roughly unchanged year-on-year, with some modest strengthening being
seen in the last quarter.
The downturn in the economic situation towards the end of the year
had a negative impact on demand for, and volumes of, lubricants and
LPG.
As of the end of 2008, Neste Oil had 887 (899) stations in Finland
and 286 (271) in the Baltic Rim.
Oil Retail's comparable return on net assets was 6.0% (17.1%) in
2008.
Shipping
Key figures
10-12/08 10-12/07 2008 2007
Sales, MEUR 100 87 437 394
Operating profit, MEUR 2 -5 54 30
Comparable operating profit, MEUR 3 -4 55 28
Capital expenditure, MEUR 2 0 3 2
Fleet utilization rate, % 96 93 96 94
Shipping's comparable operating profit totaled EUR 55 million in 2008
(28 million). Average freight rates were significantly higher in 2008
than in 2007. Shipping's operations ran smoothly throughout 2008,
which was reflected in a very high fleet utilization rate.
The comparable operating profit for the fourth quarter totaled EUR 3
million (10-12/07: -4 million). A EUR 9 million negative item on
freight derivatives is included in the fourth-quarter figure. Higher
costs related to dockings and repairs had a negative impact in the
corresponding quarter of 2007.
Shipping's comparable return on net assets was 19.2% (9.3%) in 2008.
Shares, share trading, and ownership
Neste Oil's share price closed 2008 at EUR 10.58, which is 52% lower
compared to the end of 2007, and roughly in line with the European
refining sector in general. At its highest during 2008, the share
price reached EUR 24.90, while at its lowest the price stood at EUR
9.47, with the weighted average for the year coming in at EUR 17.95.
Market capitalization was EUR 2.7 billion as of 31 December 2008.
An average total of 1.5 million shares were traded daily. This
represents 0.5% of the Company's shares. An average of 32 million
shares was traded monthly. During the year as a whole, 382 million
shares, or 149% of the total number of shares, were traded.
Neste Oil's share capital registered with the Company Register as of
31 December 2008 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 2008, the Finnish State owned 50.1% of outstanding
shares, foreign institutions 20.6%, Finnish institutions 19.5%, and
Finnish households 9.8%.
Changes in senior management
President & CEO Risto Rinne retired as of 1 October 2008 after more
than 30 years of service with the company. Mr. Matti Lievonen was
appointed the new President & CEO and joined the company on 1
December.
The Chief Financial Officer, Petri Pentti, left Neste Oil at the end
of September, and Mr. Ilkka Salonen was appointed CFO in November,
joining Neste Oil in January 2009.
Personnel
Neste Oil employed an average of 5,174 (4,810) employees in 2008. At
the end of December, the company had 5,262 employees (Dec 2007:
4,807). Wages and salaries paid by the company totaled EUR 251
million in 2008 (210 million).
Health, safety, and the environment
No serious environmental accidents resulting in liability occurred at
Neste Oil's refineries or other
production facilities in 2008. The environmental emissions of Neste
Oil operations remained low throughout the year. Wastewater treatment
plants at the refineries operated very well. The oil content of
waterborne emissions was 0.1 g/ton of crude oil processed. This is
less than 3.5% of the 3 g/ton maximum emission recommendation by the
Baltic Marine Environment Protection Commission.
Finland's Supreme Court fined Neste Oil EUR 500,000 for damage caused
to the environment as a result of an oil leak in 2001. The Turku
Court of Appeal and the Turunseutu District Court had previously
rejected the prosecution's call for a fine against the company.
The main indicator for safety performance used by Neste Oil -
cumulative 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 5.2
(5.8) at the end of December 2008. The target for 2008 was less than
5. The cumulative number of lost workday injuries was 54 at the end
of December, resulting in a LWIF of 3.2 (2.9). The target is below 3.
Neste Oil has successfully fulfilled all the requirements related to
carbon dioxide emissions in 2008. The verification of emissions for
2008 is scheduled, and the company is able to report and surrender
allowances equal to its total emissions in 2008. The company has
received emission rights for 3.6 million tons of CO2 emissions a year
between 2008 and 2012, and will need to acquire rights from the
market to cover expected future emissions.
The REACH (Registration, Evaluation and Authorization of Chemicals)
regulation came into force
in the EU on 1 June 2007. 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. The company
successfully preregistered the substances it uses and produces in
compliance with the deadline at end of November 2008.
Neste Oil retained its position in or was selected for inclusion in a
number of sustainability indexes during 2008. It was again included
in the Dow Jones Sustainability World Index, which features 320
companies from 24 countries that excel in their commitment to a more
sustainable future. Neste Oil has been awarded 'Best in Class'
recognition for its social accountability by the Norwegian banking
group, Storebrand, included twice 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 32% compared to 2007 and
totaled EUR 37 million (28 million). The main R&D projects were
related to extending the raw material and technological base for
renewable fuels.
Events after the reporting period
Neste Oil announced on 5 February 2009 that it will reorganize its
operations around three business areas and seven common functions,
and will introduce a new organization reflecting this 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 new business areas are as follows: Oil Products, Renewable Fuels,
and Oil Retail. Activities outside these business areas will be
grouped under Others. The new common functions will be: Production &
Logistics, Finance, Human Resources, HSSE, Technology & Strategy,
Communications, and Legal Affairs.
The Specialty Products Division will be amalgamated into the Oil
Products business area. Shipping operations will be reported in
connection with the business areas that use them, and the Shipping
business incorporated into Production & Logistics.
Neste Oil's financial reporting will be based on these business areas
from 28 April 2009 onwards when the Q1/2009 figures are announced.
Comparative figures for 2008 will be published before that in April.
The new common functions will be: Production & Logistics, Finance,
Human Resources, HSSE, Technology & Strategy, Communications, and
Legal Affairs.
After these changes, the Neste Executive Board will comprise 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, HSE; Osmo Kammonen, Senior Vice
President, Communications; Lars Peter Lindfors, Senior Vice
President, Technology & Strategy; Matti Hautakangas*, General
Counsel.
* Secretary to the Neste Executive Board, not a member
The Neste Executive Management Board will comprise the President &
CEO, business area executive vice presidents, the CFO, and the Senior
Vice President, Production & Logistics.
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 in the foreseeable future relates to the
continued slowdown of the world economy, which is likely to reduce
the demand for petroleum products and gasoline in particular. The
problems on the international financial market have also increased
uncertainties. 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.
These may have a material impact on the company's IFRS operating
profit and net cash from operations.
Over the longer term, access to funding and rising capital costs, as
well as challenges in procuring and developing new competitive and
reasonably priced raw materials, may impact the company's growth
plans.
The implementation of biofuel legislation in the EU and other key
market areas may influence the speed at which the demand for these
fuels develops.
The key market drivers for Neste Oil's financial performance are
international refining margins, the price differential between
Russian Export Blend (REB) and Brent crude, and the USD/EUR exchange
rate.
For more detailed information on Neste Oil's risks and risk
management, please refer to the company's Annual Report and Financial
Statements for 2008.
Outlook
The outlook for the global economy is depressed, and this is
reflected in oil demand forecasts, which have been revised down. The
International Energy Agency (IEA) estimated in January that global
oil demand will continue to decrease in 2009. The decrease in OECD
countries is expected to be 2.5%.
Demand for gasoline, together with gasoline margins, looks likely to
be very weak throughout 2009. Diesel and other middle distillates are
expected to be the strongest part of the barrel and practically the
only positive contributors to refining margins. Continued lower
economical activity, however, is likely to put pressure on diesel
margins as well.
Demand for base oils is likely to be weaker than in previous years,
due to an anticipated decline in demand for lubricants.
Demand for all products is forecast to decrease in Oil Retail.
Devaluation of local currencies may put pressure on the Baltic Rim
operations.
Operational performance at Neste Oil's refineries, including the
NExBTL plant, should be better in 2009 than in 2008. A planned
two-month maintenance and process improvement shutdown will be
carried out on Production Line 4 during the second quarter to enhance
the line's productivity.
Shipping's fleet utilization rate is expected to remain high and
operations smooth.
The Group will address its fixed costs and maintenance expenditure to
secure cash flow
The Group's investments are estimated to be around EUR 950 million in
2009 (508 million in 2008), of which maintenance investments will
account for around EUR 180 million (218 million in 2008),
productivity investments around EUR 60 million (14 million in 2008)
and strategic investments around EUR 710 million (276 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 0.80 per share for 2008,
totaling EUR 205 million.
The Annual General Meeting will be held on 3 April 2009 at 11:00 a.m.
EET at the Helsinki Fair Centre.
Reporting date for the first-quarter 2009 results
Neste Oil will publish its first-quarter results for 2009 on 28 April
2009 at approximately 9:00 a.m. EET.
Espoo, 4 February 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-
DECEMBER 2008
10-12/2008 and 10-12/2007
unaudited, full year 2008
and 2007 audited
CONSOLIDATED INCOME
STATEMENT
MEUR
Note
10-12/2008 10-12/2007 1-12/2008 1-12/2007
Sales 3 2 805 3 461 15 043 12 103
Other income 7 6 44 27
Share of profit
(loss) of
associates and
joint
ventures 3 -26 8 13 39
Materials and
services -2 789 -3 042 -13 657 -10 279
Employee benefit
costs -84 -69 -315 -256
Depreciation,
amortization and
impairments 3 -55 -56 -223 -195
Other expenses -210 -165 -719 -638
Operating profit -352 143 186 801
Financial income and
expenses
Financial income 2 2 8 8
Financial
expenses -28 -14 -70 -40
Exchange rate and fair
value gains and
losses -4 -1 5 -6
Total financial income
and expenses -30 -13 -57 -38
Profit before income
taxes -382 130 129 763
Income tax
expense 93 -27 -28 -183
Profit for the
period -289 103 101 580
Attributable to:
Equity holders of
the company -290 102 97 577
Minority
interest 1 1 4 3
-289 103 101 580
Earnings per share
from profit
attributable to
the equity holders
of the Company
basic and
diluted (in euro
per share) -1,14 0,40 0,38 2,25
CONSOLIDATED BALANCE SHEET
31 Dec 31 Dec
MEUR Note 2008 2007
ASSETS
Non-current assets
Intangible assets 5 51 41
Property, plant and equipment 5 2 675 2 436
Investments in associates and joint
ventures 152 178
Non-current receivables 13 3
Pension assets 105 81
Deferred tax assets 16 7
Derivative financial instruments 6 16 22
Available-for-sale financial
assets 1 2
Total non-current assets 3 029 2 770
Current assets
Inventories 637 968
Trade and other receivables 786 955
Derivative financial instruments 6 213 126
Cash and cash equivalents 55 52
Total current assets 1 691 2 101
Total assets 4 720 4 871
EQUITY
Capital and reserves attributable to the equity
holders
of the company
Share capital 40 40
Other equity 2 2 131 2 383
Total 2 171 2 423
Minority interest 8 4
Total equity 2 179 2 427
LIABILITIES
Non-current liabilities
Interest-bearing liabilities 926 662
Deferred tax liabilities 297 289
Provisions 24 8
Pension liabilities 12 11
Derivative financial instruments 6 32 22
Other non-current liabilities 3 5
Total non-current liabilities 1 294 997
Current liabilities
Interest-bearing liabilities 133 145
Current tax liabilities 1 14
Derivative financial instruments 6 197 77
Trade and other payables 916 1 211
Total current liabilities 1 247 1 447
Total liabilities 2 541 2 444
Total equity and liabilities 4 720 4 871
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 2007 40 9 26 3 2011 8 2 097
Dividend
paid -231 -231
Treasury
shares 2 -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
tax 56 56
transferred to
income statement,
net of tax -43 -43
Net investment
hedges,
net of tax -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
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
Income and
expenses
recognized
directly in
equity
Translation
differences and
otherchanges 0 -43 -1 -44
Cash flow
hedges
recorded in
equity, net of
tax -23 -23
transferred to
income statement,
net of tax -25 -25
Net investment
hedges,
net of tax 0 0
Share-based
compensation 0 0
Hedging
reserves in
associates
and joint
ventures -1 -1
Change in
minority 0 0
Items recognized
directly in
equity 0 -49 -43 -1 0 -93
Profit for
the period 97 4 101
Total recognized
income and
expenses 0 -49 -43 96 4 8
Total equity at
31 December
2008 40 10 -7 -54 2 182 8 2 179
CONDENSED CONSOLIDATED
CASH FLOW STATEMENT
MEUR Note 10-12/2008 10-12/2007 1-12/2008 1-12/2007
Cash flow from
operating
activities
Profit before taxes -382 130 129 763
Adjustments, total 93 63 249 184
Change in working
capital 836 65 248 -189
Cash generated from
operations 547 258 626 758
Finance cost, net 6 -16 -29 -40
Income taxes paid -67 -22 -85 -177
Net cash generated
from operating
activities 486 220 512 541
Capital
expenditures -184 -98 -497 -334
Acquisition of
subsidiary 4 0 0 -10 0
Acquisition of
associates and
joint ventures -1 0 -1 0
Proceeds from sales
of fixed assets 5 0 9 14
Proceeds from sales
of shares 2 0 12 -5
Change in other
investments -12 8 -8 -22
Cash flow before
financing
activities 296 130 17 194
Net change in loans
and other financing
activities -346 -132 244 20
Dividends paid to
the equity holders
of
the company 0 0 -256 -231
Net increase
(+)/decrease (-) in
cash -50 -2 5 -17
and cash
equivalents
KEY FINANCIAL
INDICATORS
31 Dec 31 Dec
2008 2007
Capital employed,
MEUR 3237 3234
Interest-bearing
net debt, MEUR 1004 755
Capital expenditure and
acquisition of
subsidiary, MEUR 508 334
Return on average
capital employed, after
tax, ROACE % 13,1 15,5
Return on capital
employed, pre-tax,
ROCE % 6,1 26,2
Return on equity,
% 4,4 25,6
Equity per share,
EUR 8,48 9,47
Cash flow per
share, EUR 2,00 2,11
Price/earnings
ratio (P/E) 28,03 10,71
Equity-to-assets
ratio, % 46,3 49,9
Gearing, % 46,1 31,1
Leverage ratio, % 31,5 23,7
Dividend per
share 1) 0,80 1,00
Dividend payout
ratio, % 1) 211,9 44,4
Dividend yield,
% 1) 7,6 4,1
Average number of
shares 255903686 255971365
Number of shares at
the end of the
period 255903686 255903686
Average number of
personnel 5174 4810
1) Board of
Directors
proposal to the
Annual General
Meeting
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
AND ACCOUNTING POLICIES
The report on Annual Financial Statements has been prepared in
accordance with IAS 34, Interim Financial Reporting, as adopted by
EU.
The accounting policies adopted are consistent with those of the
Group's annual financial statements for the year ended 31 December
2007
with the exception that the Group
applies IFRS 8 Operating Segments as
of 1 January 2008.
The following interpretations are mandatory for the
financial year ending 31 December 2008, but not relevant
for the Group:
IFRIC 11 IFRS 2 -
Group and
Treasury Shares
IFRIC 14 IAS 19 - The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their
Interaction
Amendments to IAS 39 and
IFRS 7: Reclassification
of Financial Instruments.
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 businesses are grouped into six segments: Oil Refining,
Renewable Fuels, Specialty Products, Oil Retail, Shipping and Other.
Group administration, shared service functions as well as Research
and Technology and Neste Jacobs are included in the Other segment.
SALES
MEUR 10-12/2008 10-12/2007 1-12/2008 1-12/2007
Oil Refining 2097 2740 12030 9348
Renewable Fuels 20 27 116 40
Specialty
Products 112 138 591 649
Oil Retail 915 965 4073 3435
Shipping 100 87 437 394
Other 43 26 143 93
Eliminations -482 -522 -2347 -1856
Total 2805 3461 15043 12103
OPERATING
PROFIT
MEUR 10-12/2008 10-12/2007 1-12/2008 1-12/2007
Oil Refining -292 139 123 640
Renewable Fuels -9 2 2 -12
Specialty
Products -37 10 19 122
Oil Retail -6 9 25 60
Shipping 2 -5 54 30
Other -12 -9 -42 -37
Eliminations 2 -3 5 -2
Total -352 143 186 801
COMPARABLE
OPERATING
PROFIT
MEUR 10-12/2008 10-12/2007 1-12/2008 1-12/2007
Oil Refining 131 85 510 484
Renewable Fuels -10 3 2 -13
Specialty
Products -6 2 50 109
Oil Retail -5 10 22 59
Shipping 3 -4 55 28
Other -12 -9 -42 -39
Eliminations 2 -3 5 -2
Total 103 84 602 626
DEPRECIATION,
AMORTIZATION AND
IMPAIRMENTS
MEUR 10-12/2008 10-12/2007 1-12/2008 1-12/2007
Oil Refining 36 37 143 126
Renewable Fuels 2 2 7 5
Specialty
Products 4 3 16 13
Oil Retail 6 7 31 27
Shipping 4 4 15 15
Other 3 3 11 9
Total 55 56 223 195
SHARE OF PROFIT OF ASSOCIATES AND
JOINT VENTURES
MEUR 10-12/2008 10-12/2007 1-12/2008 1-12/2007
Oil Refining 0 0 0 0
Renewable Fuels 0 0 0 0
Specialty
Products -26 8 13 39
Oil Retail 0 0 0 0
Shipping 0 0 0 0
Other 0 0 0 0
Total -26 8 13 39
NET ASSETS 31 Dec 31 Dec
MEUR 2008 2007
Oil Refining 1972 2165
Renewable Fuels 371 142
Specialty
Products 327 324
Oil Retail 351 381
Shipping 272 297
Other 66 59
Eliminations 4 2
Total 3363 3370
RETURN ON NET
ASSETS, % 31 Dec 31 Dec
2008 2007
Oil Refining 5,2 30,1
Renewable Fuels 0,9 -11,4
Specialty Products 5,3 36,8
Oil Retail 6,8 17,4
Shipping 18,8 9,9
COMPARABLE RETURN ON NET ASSETS, % 31 Dec 31 Dec
2008 2007
Oil Refining 21,7 22,7
Renewable Fuels 0,9 -12,3
Specialty Products 13,9 32,9
Oil Retail 6 17,1
Shipping 19,2 9,3
QUARTERLY SEGMENT INFORMATION
QUARTERLY SALES
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2008 /2008 /2008 /2008 /2007 /2007 /2007 /2007
Oil Refining 2097 3763 3624 2546 2740 2310 2516 1782
Renewable Fuels 20 27 46 23 27 7 4 2
Specialty Products 112 149 164 166 138 164 181 166
Oil Retail 915 1132 1078 948 965 853 843 774
Shipping 100 114 123 100 87 82 115 110
Other 43 36 33 31 26 20 24 23
Eliminations -482 -700 -648 -517 -522 -458 -476 -400
Total 2805 4521 4420 3297 3461 2978 3207 2457
QUARTERLY OPERATING PROFIT
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2008 /2008 /2008 /2008 /2007 /2007 /2007 /2007
Oil Refining -292 -2 231 186 139 148 246 107
Renewable Fuels -9 -2 12 1 2 -7 -4 -3
Specialty Products -37 23 28 5 10 34 47 31
Oil Retail -6 9 11 11 9 22 18 11
Shipping 2 22 23 7 -5 -4 16 23
Other -12 -7 -14 -9 -9 -16 -6 -6
Eliminations 2 1 -1 3 -3 3 -3 1
Total -352 44 290 204 143 180 314 164
QUARTERLY COMPARABLE OPERATING PROFIT
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2008 /2008 /2008 /2008 /2007 /2007 /2007 /2007
Oil Refining 131 149 133 97 85 125 168 106
Renewable Fuels -10 -3 13 2 3 -6 -5 -5
Specialty Products -6 29 19 8 2 34 41 32
Oil Retail -5 7 11 9 10 21 17 11
Shipping 3 23 20 9 -4 -1 12 21
Other -12 -7 -14 -9 -9 -17 -5 -8
Eliminations 2 1 -1 3 -3 3 -3 1
Total 103 199 181 119 84 159 225 158
QUARTERLY DEPRECIATION, AMORTIZATION AND IMPAIRMENTS
MEUR
10-12 7-9 4-6 1-3 10-12 7-9 4-6 1-3
/2008 /2008 /2008 /2008 /2007 /2007 /2007 /2007
Oil Refining 36 35 34 38 37 36 29 24
Renewable Fuels 2 2 1 2 2 2 1 0
Specialty Products 4 4 4 4 3 3 4 3
Oil Retail 6 9 8 8 7 7 7 6
Shipping 4 3 4 4 4 4 3 4
Other 3 3 2 3 3 3 1 2
Total 55 56 53 59 56 55 45 39
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
/2008 /2008 /2008 /2008 /2007 /2007 /2007 /2007
Oil Refining 0 0 0 0 0 0 0 0
Renewable Fuels 0 0 0 0 0 0 0 0
Specialty Products -26 28 10 1 8 17 13 1
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 -26 28 10 1 8 17 13 1
4. ACQUISITIONS
Neste Jacobs, subsidiary of Neste Oil Group, acquired 90% of the
shares of an engineering company Rintekno, which employs 230 people.
The acquisition was closed on 29 February 2008. Prior to this Neste
Jacobs already owned 10% of the company. Rintekno is an engineering
company specialized in engineering services for oil refining,
chemicals and biopharma industries. Neste Jacobs and Rintekno have
worked together for a number of years in connection with engineering
of Neste Oil's investment projects.
On consolidation, intangible assets related to order backlog,
customer relationships and trade name have been recognized at fair
value in the balance sheet. Total amount recognized is EUR 1 million
and the assets are depreciated during their expected life time, in
1-5 years. Goodwill recognized in the consolidated balance sheet is
attributable to the experienced and capable personnel employed by
Rintekno Group and to synergies achieved in engineering projects due
to Rintekno's previous experience as a subcontractor in Neste Oil's
major investment projects.
The profit of Rintekno Group included in the Neste Oil consolidated
income statement 1 January - 31 December 2008 is immaterial. Also,
management estimates that Rintekno Group's effect on Neste Oil's
consolidated sales or profit for the period would have been
immaterial as at 31 December 2008, had the acquisition taken place
on 1 January 2008.
Assets and
liabilities of
Rintekno Group
Acquired Acquired
fair book
MEUR value value
Intangible assets 1 0
Property, plant and
equipment 1 1
Trade and other
receivables 5 5
Cash and cash
equivalents 6 6
Total assets 13 12
Trade and other
payables 5 5
Pension liabilities 1 1
Total liabilities 6 6
Acquired net assets 7 6
Purchase
consideration 16
Direct costs
related to the
acquisition 0
Goodwill 9
Purchase
consideration
settled in cash 16
Direct costs
related to the
acquisition 0
Cash and cash
equivalents in Rintekno
Group -6
Cash outflow on
acquisition 10
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 2008 2007
Opening balance 2477 2348
Depreciation, amortization and
impairments -223 -195
Capital expenditure 497 334
Disposals -8 -12
Translation differences -28 2
Acquired group
companies 11 -
Closing balance 2726 2477
CAPITAL COMMITMENTS 31 Dec 31 Dec
MEUR 2008 2007
Commitments to purchase property,
plant and equipment 540 88
Commitments to purchase intangible
assets 0 0
Total 540 88
6. DERIVATIVE FINANCIAL
INSTRUMENTS
31 Dec 2008 31 Dec 2007
Interest rate and
currency
derivative
contracts and
share forward
contracts Nominal Net Nominal Net
fair fair
MEUR value value value value
Interest rate swaps 475 -13 345 0
Forward foreign
exchange contracts 1381 17 1189 35
Currency options
Purchased 336 -5 353 11
Written 256 -11 188 1
Share forward
contracts 14 -8 17 2
Oil and freight Net
derivative fair Net fair
contracts Volume value Volume value million million
bbl Meur bbl Meur
Sales contracts 28 166 68 -66
Purchase contracts 32 -147 74 65
Purchased options 1 -12 1 0
Written options 1 12 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 2008 2007
Contingent liabilities
On own behalf for debt
Pledged assets - 2
Total - 2
On own behalf for
commitments
Real estate mortgages 26 26
Pledged assets 3 2
Other contingent
liabilities 37 42
Total 66 70
On behalf of associates and
joint ventures
Guarantees 5 2
Other contingent
liabilities 2 1
Total 7 3
On behalf of others
Guarantees 12 12
Total 12 12
Total 85 87 31 Dec 31 Dec
MEUR 2008 2007
Operating lease liabilities
Due within one year 106 108
Due between one and five years 262 183
Due later than five years 465 119
Total 833 410
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 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 expenditure = 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 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
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
Average share price = Amount traded in euros during the period /
Number of shares traded during the period
Market capitalization at the end of the period = Number of shares at
the end of the period x share price at the end of the period
Trading volume = Number of shares traded during the period, and in
relation to the weighted average number of shares during the period
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