2009-07-30 08:00:00 CEST
2009-07-30 08:13:39 CEST
REGULATED INFORMATION
Neste Oil - Interim report (Q1 and Q3)
Neste Oil's Interim Report for January-June 2009
- Comparable operating profit in Q2 was EUR 47 million (Q2/2008: 181
million)
Second quarter in brief:
- Diesel margins remained weak during the entire quarter
- Neste Oil's total refining margin was USD 7.87 /bbl
(4-6/08: 12.38
- Comparable operating profit came in at EUR 47 million
(4-6/08: 181 million)
- IFRS operating profit was EUR 118 million (4-6/08: 290
million)
- Cash flow from operations totaled EUR 223 million (4-6/08:
314 million)
- Investments totaled EUR 210 million, of which 149 million
was allocated to Renewable Fuels
- The second NExBTL renewable diesel production plant was
commissioned at the Porvoo refinery
President & CEO Matti Lievonen:"Refining margins continue to be weak, dampened by depressed demand,
and no rapid recovery seems to be in sight. Despite these difficult
circumstances and the two-month maintenance shutdown at Production
Line 4 at the Porvoo refinery, we were able to stay in the black.
However, a quarterly profit of 47 million euros is not satisfactory
and the current market conditions mean that we must further improve
our cost and operational efficiency. This is something that we will
continue to concentrate on during the second half of the year. We
have already seen an improvement in our working capital management,
and this has had a positive impact on our operating cash flow.""We remain committed to proceeding with our strategic projects and
I'm pleased to say that the start-up of our second NExBTL renewable
diesel plant has been very smooth and the plant has reached its
nameplate capacity. Our partners published some very promising
results during the second quarter from long-term field tests of using
NExBTL renewable diesel commercially. These field tests prove that
NExBTL's quality is second to none when it comes to performance and
emissions."
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 second quarter results will be
held today, 30 July 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, 30 July 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 website. 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 - 30 JUNE 2009
1-6/2009 and 1-6/2008 unaudited, full year 2008 audited
Figures in parentheses refer to the second quarter of 2008, unless
otherwise stated.
KEY FIGURES
EUR million (unless otherwise noted)
4-6/09 4-6/08 1-3/09 1-6/09 1-6/08 2008
Revenue 2,592 4,420 2,053 4,645 7,717 15,043
Operating profit before 174 343 150 324 606 409
depreciation
Depreciation, amortization,
and impairments 56 53 55 111 112 223
Operating profit 118 290 95 213 494 186
Comparable operating profit 47 181 56 103 300 602
*
Profit before income tax 109 284 81 190 475 129
Earnings per share, EUR 0.35 0.83 0.24 0.58 1.38 0.38
Investments 210 110 174 384 192 508
Net cash from operating 223 314 17 240 201 512
activities
30 June 30 June 31 Dec
2009 2008 2008
Total equity 2,144 2,509 2,179
Interest-bearing net debt 1,409 1,017 1,004
Capital employed 3,660 3,600 3,237
Return on capital employed pre-tax (ROCE), % 12.5 29.2 6.1
Return on average capital employed after tax 8.8 12.7 13.1
(ROACE)**, %
Return on equity (ROE), % 13.9 28.8 4.4
Equity per share, EUR 8.34 9.78 8.48
Cash flow per share, EUR 0.94 0.79 2.00
Equity-to-assets ratio, % 41.3 43.5 46.3
Leverage ratio, % 39.7 28.8 31.5
Gearing, % 65.7 40.5 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. As from 1 April 2009, the calculation of comparable
operating profit has been amended by including the change in fair
value of all trading inventories to inventory gains/losses. This
amendment has no effect on previously reported figures.
** Rolling 12 months
The Group's second-quarter financial results
Revenue at the Neste Oil Group totaled EUR 2,592 million in the
second quarter of 2009. The substantial reduction from EUR 4,420
million in the same quarter of 2008 resulted from lower petroleum
product prices.
The Group's comparable operating profit was EUR 47 million (181
million) in the second quarter. The significant drop compared to the
same quarter in 2008 was largely due to a lower total refining
margin, which was negatively affected by an approximately 75%
reduction in the diesel margin year-on-year and a narrow differential
between Urals and Brent crude. This was only partially compensated
for by a stronger gasoline margin. The Group's hedged EUR/USD
exchange rate was 1.43 in the second quarter.
Oil Products' second-quarter comparable operating profit was EUR 37
million (162 million), Renewable Fuels' EUR -7 million (13 million),
Oil Retail's EUR 14 million (11 million), and Others' EUR -1 million
(-4 million). Others includes profits from associated companies and
joint ventures (mainly Nynas AB), which totaled EUR 9 million (10
million).
Operating profit under IFRS was EUR 118 million (290 million) in the
second quarter, as inventory gains were just half those booked in
2008.
The second-quarter profit before taxes was EUR 109 million (284
million), net profit for the period was EUR 89 million (213 million),
and earnings per share were EUR 0.35 (0.83).
The Group's January-June financial results
Revenue at the Group during the first six months amounted to EUR
4,645, compared to EUR 7,717 during the same period in 2008. The
decrease resulted from lower oil product prices.
Neste Oil's comparable operating profit in January-June was EUR 103
million (1-6/08: 300 million). This reduction resulted primarily from
a weaker total refining margin. The company's hedged EUR/USD exchange
rate was 1.44 in January-June.
Oil Products' six-month comparable operating profit was EUR 101
million (1-6/08: 275 million), Renewable Fuels' EUR -14 million
(1-6/08: 15 million), Oil Retail's EUR 26 million (1-6/08: 20
million), and Others' EUR -12 million (1-6/08: -12 million). Others
includes profits from associated companies and joint ventures (mainly
Nynas AB), which totaled EUR 2 million (1-6/08: 11 million).
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 June,
the rolling twelve-month ROACE was 8.8% (30 June 2008: 12.7%).
4-6/09 4-6/08 1-3/09 1-6/09 1-6/08 2008
COMPARABLE OPERATING PROFIT 47 181 56 103 300 602
- inventory gains/losses 65 119 76 141 194 -453
- changes in the fair value 6 -10 -37 -31 -8 24
of open oil derivatives
- capital gains/losses 0 0 0 0 8 13
OPERATING PROFIT 118 290 95 213 494 186
Capital expenditure and financing
Investments totaled EUR 384 million during the first six months
(1-6/08: 192 million). Oil Products' capital spending was EUR 94
million (1-6/08: 72 million), Renewable Fuels' EUR 273 million
(1-6/08: 77 million), and Oil Retail's EUR 10 million (23 million).
Depreciation was EUR 111 million (112 million).
The Group's interest-bearing net debt was EUR 1,409 million at the
end of June (31 Dec 2008: EUR 1,004 million). Net financial expenses
between January and June were EUR 23 million (19 million). The Group
will capitalize interest expenses related to major investment
projects during 2009. The average interest rate of borrowings at the
end of June was 2.3%, and the average maturity 3.4 years.
Net cash from operating activities between January and June was EUR
240 million (1-6/08: 201 million). This increase in cash flow was
largely the result of more effective working capital management.
Around EUR 85 million was tied up in contango storages of petroleum
products at the end of June. The equity-to-assets ratio was 41.3% at
the end of June (31 Dec 2008: 46.3%), the leverage ratio 39.7% (31
Dec 2008: 31.5%), and the gearing ratio 65.7% (31 Dec 2008: 46.1%).
Cash and cash equivalents and committed, unutilized credit facilities
amounted to EUR 1,357 million at the end of June (31 Dec 2008: 1,536
million). 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
Crude oil prices strengthened during the second quarter, following
the rise of equity and commodity prices and the weakening of the US
dollar. Brent Dated reached USD 70/bbl in mid-June after OPEC decided
to keep its production quotas unchanged and crude oil inventories
started to draw down. Price differentials between heavier and lighter
grades were narrow throughout the quarter.
Refining margins were weak, leading to low refinery runs because of
maintenance activity and economic run cuts.
Gasoline margins continued to improve as demand increased seasonally
and production cuts reduced supply. In late June, margins fell again
due to increasing production and a buildup of inventories.
Margins for middle distillates suffered from reduced demand caused by
the global economic recession and sank to their lowest level in five
years. Despite lower refinery runs, inventories continued to build.
In June, margins gradually recovered.
Fuel oil margins were relatively strong, supported by demand in Asia
and cuts in refinery runs. In addition, due to reduced crude oil use,
some fuel oil was used in crackers to produce light products.
On the Finnish retail market, demand for gasoline fell by
approximately 4% and diesel by close to 10% during the second quarter
compared to the same quarter in 2008. The drop in diesel demand from
trucking companies has been even greater. Demand has also fallen in
the Baltic countries, in line with the decline of their GDP.
Biofuel prices remained lower and the price difference between
biofeedstocks were narrower year-on-year. The price premium of
higher-quality renewable fuels remains healthy.
Oil freight rates collapsed in both the crude and product market
compared to the second quarter of 2008.
Key drivers
4-6/09 4-6/08 1-3/09 1-6/09 1-6/08 2008 July09
IEA Brent cracking
margin, USD/bbl 1.23 5.87 2.34 1.92 4.57 4.90 0.14
Neste Oil total
refining margin,
USD/bbl 7.87 12.38 9.44 8.65 12.14 13.39 n.a.
Urals-Brent price
differential,
USD/bbl -0.94 -4.44 -1.17 -1.05 -3.68 -2.95 -0.43
NWE Gasoline
margin*, USD/bbl 12.84 6.36 6.39 9.62 6.08 5.34 10.7
NWE Diesel margin*,
USD/bbl 9.98 39.15 15.38 12.68 32.24 31.23 8.7
NWE Heavy fuel oil
margin*, USD/bbl -8.61 -37.22 -8.77 -8.69 -28.75 -25.16 -5.6
Brent dated crude
oil, USD/bbl 58.79 121.38 44.40 51.60 109.14 96.98 64.06
USD/EUR exchange
rate 1.36 1.56 1.30 1.33 1.53 1.47 1.41
Crude freights,
Aframax WS points 74 228 83 78 187 179 73
*Product margins Platt's fob Rotterdam
Production and sales
Neste Oil refined a total of 3.5 million tons (3.6 million) of crude
oil and feedstocks in the second quarter, of which 2.9 million tons
(2.9 million) at Porvoo and 0.6 million tons (0.7 million) at
Naantali.
The proportion of Russian Export Blend in Neste Oil's total refinery
input was 57% (54%) in the second quarter.
Diesel fuel accounted for a lower-than-normal proportion of Neste
Oil's sales due to a shutdown at Production Line 4 at the Porvoo
refinery and gasoline sales from contango storage.
At the end of June, Neste Oil's contango storage consisted of 170,000
tons, or approximately 1.3 million barrels, and mainly consisted of
middle distillates. Sales from contango storage were quite large in
the second quarter, as storage volumes stood at 550,000 tons at the
end of March.
Neste Oil's sales from in-house production, by product category
(1,000 t)
4-6/09 % 4-6/08 % 1-3/09 % 1-6/09 % 1-6/08 % 2008 %
Motor
gasolines 1,294 35 1,322 35 940 27 2,234 31 2,116 30 4,056 28
Gasoline
components 92 3 75 2 64 2 157 2 153 2 253 2
Diesel
fuel 1,181 32 1,226 32 1,306 38 2,487 35 2,609 37 5,583 38
Jet fuel 137 4 169 4 148 4 286 4 306 4 658 5
Base oils 73 2 75 2 57 2 130 2 152 2 278 2
Heating
oil 131 4 134 4 223 6 354 5 314 4 763 5
Heavy fuel
oil 346 9 309 8 354 10 700 10 516 7 981 7
LPG 83 2 87 2 59 2 142 2 185 3 340 2
NExBTL
renewable
diesel 43 1 35 1 31 1 74 1 53 1 94 1
Other
products 286 8 358 9 246 7 532 8 662 9 1,565 11
TOTAL 3,666 100 3,790 100 3,430 100 7,096 100 7,066 100 14,571 100
Neste Oil's sales from in-house production, by market area (1,000 t)
4-6/09 % 4-6/08 % 1-3/09 % 1-6/09 % 1-6/08 % 2008 %
Finland 1,854 51 1,805 48 1,860 54 3,714 52 3,573 51 7,537 52
Other
Nordic
countries 512 14 500 13 537 16 1,048 15 926 13 2,056 14
Other
Europe 610 16 748 20 558 16 1,168 16 1,496 21 3,028 20
USA &
Canada 627 17 729 19 472 14 1,099 16 995 14 1,857 13
Other
countries 63 2 6 0 3 0 66 1 76 1 94 1
TOTAL 3,666 100 3,790 100 3,430 100 7,096 100 7,066 100 14,571 100
SEGMENT REVIEWS
As of 1 April 2009, Neste Oil's businesses have been grouped into
four reporting segments: Oil Products, Renewable Fuels, Oil Retail,
and Others. Quarterly figures for 2008 based on these segments were
published on 23 April 2009.
Oil Products
Key figures
4-6/09 4-6/08 1-3/09 1-6/09 1-6/08 2008
Revenue, MEUR 2,091 3,798 1,582 3,673 6,513 12,641
Comparable operating 37 162 64 101 275 602
profit, MEUR
Operating profit, MEUR 105 272 106 211 469 183
Total refining margin, 7.87 12.38 9.44 8.65 12.14 13.39
USD/bbl
Oil Products' second-quarter comparable operating profit was EUR 37
million (162 million). This decrease was mainly due to a lower total
refining margin of USD 7.87/bbl, which compares to USD 12.38/bbl in
the same quarter last year. The total refining margin was depressed
by significantly weaker middle distillate margins and a very narrow
price differential between Urals and Brent crude.
Contango sales of both crude and products had a positive impact on
the total refining margin and made a major positive contribution to
Oil Products' comparable operating profit.
The result of the base oils business was roughly flat year-on-year
but margins were softer compared to the first quarter. Gasoline
components showed a slightly lower profit than last year.
The oil tanker chartering business suffered from record-low freight
rates during the second quarter.
Oil Products' 12-month comparable return on net assets was 15.4%
(17.9%).
Renewable Fuels
4-6/09 4-6/08 1-3/09 1-6/09 1-6/08 2008
Revenue, MEUR 38 46 24 62 69 116
Comparable operating profit, -7 13 -7 -14 15 2
MEUR
Operating profit, MEUR -3 12 -10 -13 13 2
Renewable Fuels' second-quarter comparable operating profit was EUR
-7 million (13 million). Although sales volumes developed positively,
lower sales price and the termination of a fixed-priced feedstock
contract earlier this year put pressure on renewable diesel margins.
The price premium of NExBTL renewable diesel over conventional
biodiesel remained healthy. While the first NExBTL plant at Porvoo
posted a profit, the segment's costs continued to increase as a
result of the expansion of the business and R&D.
Renewable Fuels' 12-month comparable return on net assets was -7.0%
(7.9%).
Oil Retail
Key figures
4-6/09 4-6/08 1-3/09 1-6/09 1-6/08 2008
Revenue, MEUR 727 1,078 691 1,418 2,026 4,073
Comparable operating profit, 14 11 12 26 20 22
MEUR
Operating profit, MEUR 13 11 12 25 22 25
Total sales volume*, 1,000
m3 964 1,051 1,021 1,985 2,107 4,353
- gasoline station sales,
1,000 m3 370 380 329 699 714 1,479
- diesel station sales,
1,000 m3 326 352 320 646 693 1,406
- heating oil, 1,000 m3 145 161 214 359 359 759
- heavy fuel oil, 1,000 m3 61 77 89 150 174 356
*includes both station and terminal sales
Oil Retail's comparable operating profit increased to EUR 14 million
(11 million) in the second quarter, supported by somewhat better
margins on the Finnish market than in 2008 and reduction of fixed
costs in the Finnish organization. Russian operations generated a
slightly lower level of profit compared to the same quarter in 2008,
while performance in the Baltic Rim was flat.
Sales volumes were lower on the Finnish market than during the second
quarter of 2008, with the exception of diesel sold to private
motorists. The largest reduction has been seen in trucking, which
reflects domestic industrial production. Lubricant sales have also
been hit significantly.
Neste Oil's volumes were roughly flat outside Finland, while demand
was down significantly. This was supported by the new stations opened
around the Baltic Rim in 2008 and the efficiency of the unmanned
station network.
Oil Retail's 12-month comparable return on net assets was 8.2%
(14.1%).
Shares, share trading, and ownership
A total of 73,768,025 Neste Oil shares were traded in the second
quarter, totaling EUR 0.8 billion. The share price reached EUR 11.53
at its highest and EUR 9.46 at its lowest, and closed the quarter at
EUR 9.90, giving the company a market capitalization of EUR 2.5
billion as of 30 June 2009. An average of 1.2 million shares was
traded daily, equivalent to 0.5% of shares outstanding.
Neste Oil's share capital registered with the Company Register as of
30 June 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 June, the Finnish state owned 50.1% of outstanding
shares, foreign institutions 15.0%, Finnish institutions 20.6%, and
Finnish households 14.3%.
Personnel
Neste Oil employed an average of 5,328 (5,099) employees during the
first half of the year. At the end of June, the company had 5,547
employees (30 June 2008: 5,477).
Health, safety, and the environment
The company's safety performance has developed positively. 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 2.8 (5.2) at the end of June 2009. The
target for 2009 is below 4.
Lost workday injury frequency (LWIF) stood at 2.0. LWIF for 2008 was
3.2. The target for 2009 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 renewable diesel plants in Singapore and Rotterdam
has proceeded according to plan. Mechanical completion of the
Singapore plant is expected to be achieved in summer 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.
In June, Neste Oil - together with Daimler AG, Deutsche Post DHL, the
energy group OMV, and the Stuttgarter Straßenbahnen AG public
transportation company - published the initial results of a joint
pilot test project focusing on the use of NExBTL renewable diesel in
commercial transportation. The test shows significant emission
reductions and a positive CO2 balance when the fuel and its feedstock
are produced sustainably. It was also shown that NExBTL performs very
well and is tolerated very well by diesel engines currently in use.
Also in June, Neste Oil and Stora Enso took an important step in
efforts to convert forest residues into transportation fuels with the
inauguration of a demonstration plant at Varkaus, Finland for biomass
to liquids (BtL) production. The companies' 50/50 joint venture will
develop and test the necessary technology and plans to produce
biocrude for renewable diesel subsequently.
A joint venture between Neste Oil and the Bahrain Petroleum Company
(Bapco) is continuing 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 Porvoo was postponed in
April.
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 continues to be the slowdown of the world
economy, which is reducing the demand for petroleum products. This
has already materialized during the last couple of quarters and has
significantly decreased the 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 changes 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 overall picture for oil refiners has not changed since the
previous outlook published in April. The global economy has not
improved over the last few months. The International Energy Agency's
global oil demand forecast for 2009 remains at -2.9%, with the
steepest reduction predicted for OECD countries.
Low demand and new refining capacity coming onstream in 2009 are
likely to keep refining margins below those seen in recent years,
unless serious disruptions occur on the supply side. Diesel margins
are expected to stay under pressure until economical activity picks
up. High inventory levels will continue to put pressure on diesel
margins. On the other hand, the indications are that diesel margins
could improve a little towards the end of the year. Seasonal support
for the gasoline market is anticipated to diminish during the second
half.
Demand for base oils has shown a slight recovery, but margins have
weakened. Neste Oil has again shut down its PAO plant in Beringen,
Belgium for four weeks in July-August and made temporary lay-offs.
Freight rates for oil tankers are set to stay low throughout 2009.
Production volumes at Renewable Fuels will increase during the second
half, thanks to the start-up of the second NExBTL plant. This will be
offset, however, by increasing costs linked to the expansion of the
business.
Low demand will continue to be the key feature of the Oil Retail
business.
Performance at Neste Oil's refineries should be better in the second
half of 2009. Production Line 4 at Porvoo, which was shut down for
maintenance during the second quarter, is expected to operate
normally.
Neste Oil does not expect to book major contango profits during the
third quarter. As a result, if refining margins stay at the level
seen in July, the Group's third-quarter comparable operating profit
will be significantly lower than in the second quarter.
The Group is currently working on an additional cost-savings and
efficiency program to reduce its fixed costs.
The Group's investments are estimated to be around EUR 890 million in
2009. Maintenance investments will account for around EUR 160
million, productivity investments around EUR 40 million, and
strategic investments around EUR 690 million.
Capital Markets Day 2009
Neste Oil will hold a Capital Markets Day for investors and analysts
on 29 September 2009 in Finland. Details will be published on the
company's website soon.
Reporting date for the third-quarter 2009 results
Neste Oil will publish its third-quarter results for 2009 on 29
October 2009 at approximately 9:00 a.m. EET.
Espoo, 29 July 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- JUNE
2009
Unaudited
CONSOLIDATED
INCOME
STATEMENT
MEUR
Last
Note 12
4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008 months
Revenue 3 2592 4420 4645 7717 15043 11971
Other income 7 9 14 25 44 33
Share of
profit (loss)
of associates
and joint
ventures 3 9 10 2 11 13 4
Materials and
services -2195 -3824 -3823 -6640 -13657 -10840
Employee
benefit costs -83 -79 -162 -154 -315 -323
Depreciation,
amortization
and
impairments 3 -56 -53 -111 -112 -223 -222
Other expenses -156 -193 -352 -353 -719 -718
Operating
profit 118 290 213 494 186 -95
Financial
income and
expenses
Financial
income 3 2 4 4 8 8
Financial
expenses -8 -11 -25 -24 -70 -71
Exchange rate
and fair value
gains and
losses -4 3 -2 1 5 2
Total
financial
income and
expenses -9 -6 -23 -19 -57 -61
Profit before
income taxes 109 284 190 475 129 -156
Income tax
expense -20 -71 -40 -119 -28 51
Profit for the
period 89 213 150 356 101 -105
Profit
attributable
to:
Owners of the
parent 88 212 148 354 97 -109
Minority
interest 1 1 2 2 4 4
89 213 150 356 101 -105
Earnings per
share from
profit
attributable
to the owners
of the parent
basic and
diluted (in
euro per
share) 0,35 0,83 0,58 1,38 0,38 -0,42
STATEMENT OF
COMPREHENSIVE
INCOME
Last
4-6 4-6 1-6 1-6 1-12 12
MEUR 2009 2008 2009 2008 2008 months
Profit for the
period 89 213 150 356 101 -105
Other
comprehensive
income for the
period,
net of tax
Translation
differences 2 1 -3 -15 -44 -32
Cash flow
hedges
recorded in
equity 21 0 -4 37 -23 -64
transferred to
income
statement 10 -20 30 -39 -25 44
Net investment
hedges 0 0 0 0 0 0
Hedging reserves in
associates and
joint ventures -2 -1 -2 -1 -1 -2
Other
comprehensive
income for the
period,
net of tax 31 -20 21 -18 -93 -54
Total
comprehensive
income for the
period 120 193 171 338 8 -159
Total
comprehensive
income
attributable
to:
Owners of the
parent 119 192 169 336 4 -163
Minority
interest 1 1 2 2 4 4
120 193 171 338 8 -159
CONSOLIDATED
BALANCE SHEET
30 30
June June 31 Dec
MEUR Note 2009 2008 2008
ASSETS
Non-current assets
Intangible assets 4 51 53 51
Property, plant
and equipment 4 2937 2500 2675
Investments in
associates and
joint
ventures 153 190 152
Non-current
receivables 12 8 13
Pension assets 108 84 105
Deferred tax
assets 14 7 16
Derivative
financial
instruments 5 16 64 16
Available-for-sale
financial assets 1 2 1
Total non-current
assets 3292 2908 3029
Current assets
Inventories 752 1422 637
Trade and other
receivables 916 1164 786
Derivative
financial
instruments 5 134 218 213
Cash and cash
equivalents 107 74 55
Total current
assets 1909 2878 1691
Total assets 5201 5786 4720
EQUITY
Capital and
reserves
attributable to
the owners
of the parent
Share capital 40 40 40
Other equity 2 2094 2463 2131
Total 2134 2503 2171
Minority interest 10 6 8
Total equity 2144 2509 2179
LIABILITIES
Non-current
liabilities
Interest-bearing
liabilities 1158 880 926
Deferred tax
liabilities 308 292 297
Provisions 26 14 24
Pension
liabilities 10 11 12
Derivative
financial
instruments 5 31 67 32
Other non-current
liabilities 2 3 3
Total non-current
liabilities 1535 1267 1294
Current
liabilities
Interest-bearing
liabilities 358 211 133
Current tax
liabilities 9 60 1
Derivative
financial
instruments 5 135 191 197
Trade and other
payables 1020 1548 916
Total current
liabilities 1522 2010 1247
Total liabilities 3057 3277 2541
Total equity and
liabilities 5201 5786 4720
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 2342 4 2427
Dividend paid -256 -256
Share-based
compensation 0 0
Transfer from
retained earnings 1 -1 0
Change in minority 0 0
Total
comprehensive
income for the
period -3 -15 354 2 338
Total equity at 30
June
2008 40 11 39 -26 2439 6 2509
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 2182 8 2179
Dividend paid -205 -205
Share-based
compensation -1 -1
Transfer from
retained earnings 1 -1 0
Change in minority 0 0
Total
comprehensive
income for the
period 24 -3 148 2 171
Total equity at 30
June
2009 40 11 16 -57 2124 10 2144
CONDENSED
CONSOLIDATED CASH
FLOW STATEMENT
4-6 4-6 1-6 1-6 1-12
MEUR 2009 2008 2009 2008 2008
Cash flow from
operating
activities
Profit before
taxes 109 284 190 475 129
Adjustments, total 53 57 161 135 249
Change in working
capital 92 17 -132 -320 248
Cash generated
from operations 254 358 219 290 626
Finance cost, net -23 -9 -9 -32 -29
Income taxes paid -8 -35 30 -57 -85
Net cash generated
from operating
activities 223 314 240 201 512
Capital
expenditure -210 -107 -384 -182 -497
Acquisition of
subsidiary - -3 - -10 -10
Acquisition of
associates and
joint ventures - - - - -1
Proceeds from
sales of fixed
assets 2 1 5 3 9
Proceeds from
sales of shares 0 0 0 7 12
Change in other
investments -5 -2 -61 -26 -8
Cash flow before
financing
activities 10 203 -200 -7 17
Net change in
loans and other
financing
activities 256 -182 457 286 244
Dividends paid to
the owners of
the parent -205 -11 -205 -256 -256
Net increase
(+)/decrease (-)
in cash
and cash
equivalents 61 10 52 23 5
KEY FINANCIAL
INDICATORS
30 June 30 June 31 Dec Last 12
2009 2008 2008 months
Capital employed,
MEUR 3660 3600 3237 3660
Interest-bearing
net debt, MEUR 1409 1017 1004 -
Capital expenditure
and acquisition of
subsidiary, MEUR 384 192 508 700
Return on average
capital employed,
after tax, ROACE % - - 13,1 8,8
Return on capital
employed, pre-tax,
ROCE % 12,5 29,2 6,1 -2,3
Return on equity,
% 13,9 28,8 4,4 -4,5
Equity per share,
EUR 8,34 9,78 8,48 -
Cash flow per
share, EUR 0,94 0,79 2,00 2,15
Equity-to-assets
ratio, % 41,3 43,5 46,3 -
Gearing, % 65,7 40,5 46,1 -
Leverage ratio, % 39,7 28,8 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 5328 5099 5174 -
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
- IFRIC 16 Hedges of a
Net Investment in a
Foreign Operation
- 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.
Last
REVENUE 12
MEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008 months
Oil Products 2091 3798 3673 6513 12641 9801
Renewable
Fuels 38 46 62 69 116 109
Oil Retail 727 1078 1418 2026 4073 3465
Others 41 33 83 64 143 162
Eliminations -305 -535 -591 -955 -1930 -1566
Total 2592 4420 4645 7717 15043 11971
OPERATING Last
PROFIT 12
MEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008 months
Oil Products 105 272 211 469 183 -75
Renewable
Fuels -3 12 -13 13 2 -24
Oil Retail 13 11 25 22 25 28
Others -1 -4 -12 -12 -29 -29
Eliminations 4 -1 2 2 5 5
Total 118 290 213 494 186 -95
COMPARABLE
OPERATING Last
PROFIT 12
MEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008 months
Oil Products 37 162 101 275 602 428
Renewable
Fuels -7 13 -14 15 2 -27
Oil Retail 14 11 26 20 22 28
Others -1 -4 -12 -12 -29 -29
Eliminations 4 -1 2 2 5 5
Total 47 181 103 300 602 405
DEPRECIATION,
AMORTIZATION Last
AND IMPAIRMENTS 12
MEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008 months
Oil Products 43 41 87 87 175 175
Renewable
Fuels 2 1 4 3 7 8
Oil Retail 8 8 15 16 31 30
Others 3 3 5 6 10 9
Total 56 53 111 112 223 222
CAPITAL
EXPENDITURE AND
INVESTMENTS IN Last
SHARES 12
MEUR 4-6/2009 4-6/2008 1-6/2009 1-6/2008 1-12/2008 months
Oil Products 51 39 94 72 165 187
Renewable
Fuels 150 50 273 77 249 445
Oil Retail 6 15 10 23 63 50
Others 3 6 7 20 31 18
Total 210 110 384 192 508 700
TOTAL ASSETS 30 June 30 June 31 Dec
MEUR 2009 2008 2008
Oil Products 3544 4527 3352
Renewable
Fuels 713 273 450
Oil Retail 527 685 568
Others 286 299 265
Eliminations -174 -210 -155
Total 4896 5574 4480
NET ASSETS 30 June 30 June 31 Dec
MEUR 2009 2008 2008
Oil Products 2602 2918 2436
Renewable
Fuels 601 217 381
Oil Retail 296 385 351
Others 223 241 201
Eliminations 5 1 4
Total 3727 3762 3373
RETURN ON
NET ASSETS,
% 30 June 30 June 31 Dec Last 12
2009 2008 2008 months
Oil Products 16,4 33,1 6,4 -2,7
Renewable
Fuels -5,4 14,8 0,9 -6,2
Oil Retail 15,5 11,7 6,8 8,2
COMPARABLE
RETURN ON
NET ASSETS,
% 30 June 30 June 31 Dec Last 12
2009 2008 2008 months
Oil Products 7,9 19,4 21,2 15,4
Renewable
Fuels -5,8 17,1 0,9 -7,0
Oil Retail 16,1 10,6 6,0 8,2
QUARTERLY
SEGMENT
INFORMATION
QUARTERLY
REVENUE
MEUR 4-6/2009 1-3/2009 10-12/2008 7-9/2008 4-6/2008 1-3/2008
Oil Products 2091 1582 2221 3907 3798 2715
Renewable
Fuels 38 24 20 27 46 23
Oil Retail 727 691 915 1132 1078 948
Others 41 42 43 36 33 31
Eliminations -305 -286 -394 -581 -535 -420
Total 2592 2053 2805 4521 4420 3297
QUARTERLY
OPERATING
PROFIT
MEUR 4-6/2009 1-3/2009 10-12/2008 7-9/2008 4-6/2008 1-3/2008
Oil Products 105 106 -301 15 272 197
Renewable
Fuels -3 -10 -9 -2 12 1
Oil Retail 13 12 -6 9 11 11
Others -1 -11 -38 21 -4 -8
Eliminations 4 -2 2 1 -1 3
Total 118 95 -352 44 290 204
QUARTERLY
COMPARABLE
OPERATING
PROFIT
MEUR 4-6/2009 1-3/2009 10-12/2008 7-9/2008 4-6/2008 1-3/2008
Oil Products 37 64 154 173 162 113
Renewable
Fuels -7 -7 -10 -3 13 2
Oil Retail 14 12 -5 7 11 9
Others -1 -11 -38 21 -4 -8
Eliminations 4 -2 2 1 -1 3
Total 47 56 103 199 181 119
QUARTERLY DEPRECIATION,
AMORTIZATION AND
IMPAIRMENTS
MEUR 4-6/2009 1-3/2009 10-12/2008 7-9/2008 4-6/2008 1-3/2008
Oil Products 43 44 44 44 41 46
Renewable
Fuels 2 2 2 2 1 2
Oil Retail 8 7 6 9 8 8
Others 3 2 3 1 3 3
Total 56 55 55 56 53 59
QUARTERLY
CAPITAL
EXPENDITURE
AND
INVESTMENTS
IN SHARES
MEUR 4-6/2009 1-3/2009 10-12/2008 7-9/2008 4-6/2008 1-3/2008
Oil Products 51 43 47 46 39 33
Renewable
Fuels 150 123 108 64 50 27
Oil Retail 6 4 22 18 15 8
Others 3 4 8 3 6 14
Total 210 174 185 131 110 82
4. CHANGES IN
INTANGIBLE ASSETS AND
PROPERTY,
PLANT AND EQUIPMENT
AND CAPITAL
COMMITMENTS
CHANGES IN INTANGIBLE
ASSETS AND PROPERTY,
PLANT AND 30
EQUIPMENT June 30 June 31 Dec
MEUR 2009 2008 2008
Opening balance 2726 2477 2477
Depreciation,
amortization and
impairments -111 -112 -223
Capital
expenditure 384 182 497
Disposals -5 -2 -8
Translation
differences -6 -3 -28
Acquired group
companies 0 11 11
Closing balance 2988 2553 2726
CAPITAL 30
COMMITMENTS June 30 June 31 Dec
MEUR 2009 2008 2008
Commitments to
purchase property,
plant and equipment 539 213 540
Commitments to
purchase
intangible assets 0 0 0
Total 539 213 540
5. DERIVATIVE
FINANCIAL
INSTRUMENTS
30 June 2009 30 June 2008 31 Dec 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 474 -16 372 2 475 -13
Forward foreign
exchange
contracts 1611 28 1265 21 1381 17
Currency options
Purchased 121 -1 499 15 336 -5
Written 88 2 325 3 256 -11
Share forward
contracts 9 -5 14 -3 14 -8
Oil and freight
derivative
contracts Volume Net Volume Net Volume Net
million fair million fair million fair
bbl value bbl value bbl value
Meur Meur Meur
Sales contracts 35 -59 58 -104 28 166
Purchase
contracts 29 34 70 89 32 -147
Purchased options 2 -9 2 13 1 -12
Written options 2 8 2 -12 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.
1-6 1-6 1-12
Transactions carried out with
associates and joint ventures 2009 2008 2008
Sales of goods and
services 21 34 110
Purchases of goods and
services 21 30 72
Receivables 10 14 14
Financial income and
expenses 0 0 0
Liabilities 4 6 9
7. CONTINGENT
LIABILITIES
30 June 30 June 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 4 3
Other contingent
liabilities 45 36 37
Total 73 66 66
On behalf of associates
and joint ventures
Guarantees 6 13 5
Other contingent
liabilities 2 2 2
Total 8 15 7
On behalf of others
Guarantees 19 12 12
Total 19 12 12
Total 100 95 85
30 June 30 June 31 Dec
MEUR 2009 2008 2008
Operating lease
liabilities
Due within one year 98 105 106
Due between one and five
years 243 197 262
Due later than five
years 330 105 465
Total 671 407 833
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. Inventory gains/losses include the change in
fair value of all trading inventories.
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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