Neste Oyj - Interim report (Q1 and Q3)

Neste's Interim Report for January-September 2017

Neste Corporation
Interim Report
26 October 2017 at 9 am (EET)

Neste's Interim Report for January-September 2017

Excellent quarter - strong performance in all business areas

Third quarter in brief:

· Comparable operating profit totaled EUR 350 million (EUR 264 million)

· Operating profit totaled EUR 339 million (EUR 319 million)

· Oil Products' total refining margin was USD 11.96/bbl (USD 9.40/bbl)

· Renewable Products' comparable sales margin was USD 435/ton (USD 375/ton)

· Cash flow before financing activities was EUR 283 million (EUR 147 million)

January-September in brief:

· Comparable operating profit totaled EUR 790 million (EUR 721 million)

· Operating profit totaled EUR 875 million (EUR 853 million)

· Cash flow before financing activities was EUR 340 million (EUR 567 million)

· Return on average capital employed (ROACE) was 17.3% over the last 12 months
(2016: 16.9%)

· Leverage ratio was 14.1% at the end of September (31 Dec 2016: 15.4%)

· Comparable earnings per share: EUR 2.32 (EUR 2.21)

· Earnings per share: EUR 2.60 (EUR 2.65)

President & CEO Matti Lievonen:

"Neste's strong performance continued in the third quarter, and we are on track
to deliver a very successful year 2017. Oil Products' results were supported by
a healthy refining margin environment and operational performance. Renewable
Products was able to exceed last year's very good performance with higher sales
volumes and strong additional margin, which we indicated in our Capital Markets
Day communication in September. Marketing & Services continued to improve its
profitability and delivered a strong quarterly operating profit. Neste recorded
a comparable operating profit of EUR 350 million during the third quarter,
compared to EUR 264 million in the corresponding period of 2016.

Oil Products posted a comparable operating profit of EUR 158 million, compared
to EUR 120 million in the third quarter of 2016. The refining market was strong
driven by good product demand and refinery outages particularly in the US.
Reference margin averaged USD 7.2/bbl, which was USD 3.3/bbl higher than in the
corresponding period last year. The Porvoo refinery operated at a high 97%
utilization rate. Despite the major turnaround held at the Naantali unit during
the quarter, we were able to reach a solid additional margin of USD 4.8/bbl. The
strategic refinery investments were completed in October, which will further
support the additional margin going forward to reach our average additional
margin target of at least USD 5.5/bbl.

Renewable Products recorded a comparable operating profit of EUR 171 million,
compared to EUR 124 million in the third quarter of 2016. The segment was able
to reach an excellent result through higher sales volumes and very successful
margin management. The reference margin was over 10% higher than in the third
quarter of 2016, and also the additional margin exceeded last year's high level.
The share of European sales volumes was 73%, while the share of North American
sales was 27%. Operational performance was high as the renewable diesel
production facilities operated at 99% utilization rate. The share of waste and
residue feedstock was 77% of total renewable inputs.

In Marketing & Services our sales volumes and unit margins were maintained at
the previous year's third quarter level. The segment generated a comparable
operating profit of EUR 27 million, compared to EUR 25 million in the third
quarter of 2016.

Neste expects the Oil Products' reference refining margin to decrease from the
peak levels seen during the third quarter, reflecting the end of the driving
season. However, the reference margin is expected to remain strong for the
season, supported by a healthy global distillates demand. The annual average
reference margin for 2017 is expected to be above the previous year's level. The
Porvoo refinery is expected to run at a high utilization rate, except for a
scheduled four-week decoking maintenance at the Production Line 4 during the
fourth quarter. At the Naantali unit the major two-month turnaround and
finalization of the conversion changes were completed according to schedule in
mid-October.

The Renewable Products' additional margin is expected to stay at a good level
during the fourth quarter. Sales volumes of the 100% renewable diesel delivered
to end-users are expected to grow from 15% in 2016 and we target to reach 25% of
the total sales volumes in 2017. The vegetable oil market is expected to remain
volatile, and Neste aims to expand the use of lower-quality waste and residue
feedstock. Utilization rates of our renewable diesel facilities are expected to
be high, except for a two-week shutdown of the Singapore refinery due to a
hydrogen supplier's planned maintenance outage in November. The biopropane unit
at the Rotterdam refinery is getting ready for the first product deliveries.

In Marketing & Services the sales volumes and unit margins are expected to
follow the previous years' seasonality pattern.

The year has continued well, and we expect the year 2017 to be very successful
for Neste."

The Group's third-quarter 2017 results

Neste's revenue in the third quarter totaled EUR 3,229 million (3,034 million).
The increase mainly resulted from higher sales prices, which had a positive
impact of approx. EUR 300 million on the revenue. A weaker USD exchange rate had
a negative impact of almost EUR 100 million. The Group's comparable operating
profit was EUR 350 million (264 million). Oil Products' result was higher than
in the third quarter of 2016, mainly due to the higher reference margin and
operational performance. Renewable Products' sales volumes and reference margin
were higher than last year. Marketing & Services continued to improve its
performance and had a higher comparable operating profit compared to the third
quarter of 2016. The Others segment's comparable operating profit also exceeded
the level of the corresponding period of 2016.

Oil Products' third-quarter comparable operating profit was EUR 158 million (120
million), Renewable Products' EUR 171 million (124 million), and Marketing &
Services' EUR 27 million (25 million). The comparable operating profit of the
Others segment totaled EUR -2 million (-6 million); Nynas accounted for EUR 3
million (-3 million) of this figure.

The Group's operating profit was EUR 339 million (319 million), which was
impacted by inventory gains of EUR 61 million (18 million), and changes in the
fair value of open commodity and currency derivatives of EUR -68 million (24
million), mainly related to hedging of inventories. Profit before income taxes
was EUR 331 million (294 million), and net profit EUR 268 million (253 million).
Comparable earnings per share were EUR 1.08 (0.80), and earnings per share EUR
1.04 (0.99).

The Group's January-September 2017 results

Neste's revenue during the first nine months totaled EUR 9,580 million (8,268
million). The revenue increase mainly resulted from higher sales prices, which
had a positive impact of approx. EUR 1,100 million. Higher sales volumes
increased the revenue by approx. EUR 200 million. The Group's comparable
operating profit was EUR 790 million (721 million). Oil Products' result was
positively impacted by a higher reference margin compared to the corresponding
period last year. Renewable Products' higher reference margin and sales volumes
compensated the effect of lower additional margin, which was mainly due to
expiry of the US Blender's Tax Credit at the end of 2016. Marketing & Services'
result has been negatively impacted by lower unit margins. The Others segment
recorded a similar comparable operating profit as in the first nine months of
2016.

Oil Products' nine-month comparable operating profit was EUR 406 million (355
million), Renewable Products' EUR 352 million (323 million), and Marketing &
Services' EUR 57 million (70 million). The comparable operating profit of the
Others segment totaled EUR -24 million (-25 million); Nynas accounted for EUR -5
million (2 million) of this figure.

The Group's operating profit was EUR 875 million (853 million), which was
impacted by inventory gains totaling EUR 33 million (229 million), and changes
in the fair value of open commodity and currency derivatives totaling EUR 37
million (-107 million), mainly related to hedging of inventories. Profit before
income taxes was EUR 807 million (778 million), and net profit EUR 669 million
(681 million). Comparable earnings per share were EUR 2.32 (2.21), and earnings
per share EUR 2.60 (2.65).

Outlook

Developments in the global economy have been reflected in the oil, renewable
fuel, and renewable feedstock markets; and volatility in these markets is
expected to continue.

Global crude oil inventories are expected to stay high for the foreseeable
future in spite of the OPEC production cuts as the crude oil supply is expected
to remain high. Global oil demand growth estimates for 2017 by recognized
experts currently vary between 1.3 and 1.6 million bbl/d. In light of the
expected refining capacity growth the global product supply and demand looks
relatively balanced.

Vegetable oil price differentials are expected to vary, depending on crop
outlooks, weather phenomena, and variations in demand for different feedstocks.
Market volatility in feedstock prices is expected to continue, which will have
an impact on the Renewable Products segment's profitability.

Neste expects Oil Products' reference refining margin to decrease from the peak
levels seen during the third quarter, reflecting the end of the driving season.
However, the reference margin is expected to remain strong for the season,
supported by a healthy global distillates demand. The annual average reference
margin for 2017 is expected to be above the previous year's level. The Porvoo
refinery is expected to run at a high utilization rate, except for a scheduled
four-week decoking maintenance at the Production Line 4 during the fourth
quarter. At the Naantali unit the major two-month turnaround and finalization of
the conversion changes were completed according to schedule in mid-October.

Renewable Products' additional margin is expected to stay at a good level during
the fourth quarter. Sales volumes of the 100% renewable diesel delivered to end-
users are expected to grow from 15% in 2016 and we target to reach 25% of the
total sales volumes in 2017. The vegetable oil market is expected to remain
volatile, and Neste aims to expand the use of lower-quality waste and residue
feedstock. Utilization rates of our renewable diesel facilities are expected to
be high, except for a two-week shutdown of the Singapore refinery due to a
hydrogen supplier's planned maintenance outage in November. The biopropane unit
at the Rotterdam refinery is getting ready for the first product deliveries.

In Marketing & Services the sales volumes and unit margins are expected to
follow the previous years' seasonality pattern.

The year has continued well, and we expect the year 2017 to be very successful
for Neste.

Further information:

Matti Lievonen, President & CEO, tel. +358 10 458 11
Jyrki Mäki-Kala, CFO, tel. +358 10 458 4098
Investor Relations, tel. +358 10 458 5292
Conference call

A conference call in English for investors and analysts will be held today, 26
October 2017, at 3 p.m. Finland / 1 p.m. London / 8 a.m. New York. The call-in
numbers are as follows: Finland: +358 (0)9 2310 1620, rest of Europe: +44 (0)20
3427 1913, US: +1 646 254 3360, using access code 9532061. The conference call
can be followed at the company's web site. An instant replay of the call will be
available until 2 November 2017 at +358 (0)9 8171 0562 for Finland, +44 (0)20
7660 0134 for Europe and +1 719 457 0820 for the US, using access code 9532061.

Neste in brief

Neste (NESTE, Nasdaq Helsinki) creates sustainable choices for the needs of
transport, businesses and consumers.  Our global range of products and services
allows customers to reduce their carbon footprint by combining high-quality
renewable products and oil products to tailor-made service solutions. We are the
world's largest producer of renewable diesel refined from waste and residues,
and we are also bringing renewable solutions to the aviation and plastics
industries. We want to be a reliable partner, whose expertise, R&D and
sustainable practices are widely respected. In 2016, Neste's net sales stood at
EUR 11.7 billion, and we were on the Global 100 list of the 100 most sustainable
companies in the world. Read more: neste.com




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Neste Interim Report Q3 2017.pdf