Neste Oyj - Half Year financial report

Neste's Half-Year Financial Report for January-June 2024

Neste Corporation, Half-Year Financial Report, 25 July 2024 at 9 a.m. (EET)

Focus on operational excellence in a weak renewables market
Second quarter in brief:

  · Comparable EBITDA totaled EUR 240 million (EUR 784 million)
  · EBITDA totaled EUR 119 million (EUR 523 million)
  · Renewable Products' comparable sales margin was USD 382/ton (USD 800/ton)
  · Oil Products' total refining margin was USD 15.1/bbl (USD 16.7/bbl)
  · Cash flow before financing activities was EUR -461 million (EUR -24 million)

January-June in brief:

  · Comparable EBITDA totaled EUR 791 million (EUR 1,614 million)
  · EBITDA totaled EUR 561 million (EUR 986 million)
  · Cash flow before financing activities was EUR -801 million (EUR -126
million)
  · Cash-out investments were EUR 758 million (EUR 946 million)
  · Comparable ROACE was 14.4% over the last 12 months (2023: 23.9%)
  · Solid financial position, leverage ratio 34.5% at the end of June
(31.12.2023: 22.7%)
  · Comparable earnings per share: EUR 0.28 (EUR 1.35)
  · Earnings per share: EUR 0.02 (EUR 0.64)

Figures in parentheses refer to the corresponding period for 2023, unless
otherwise stated.
President and CEO Matti Lehmus:
“Our result in the second quarter reflects the significantly weaker renewables
market and the Porvoo refinery major turnaround. Compared to the first quarter
of the year, middle distillate prices, US bioticket and renewable credit prices
as well as renewable spot premiums in Europe decreased further. At the same
time, waste and residue feedstock average prices increased slightly, as
increasing renewable diesel production capacity supported feedstock demand.
In the midst of the very challenging renewables market environment, operational
performance at our refineries was solid. We were also able to conduct the
planned Porvoo major turnaround safely, on time and on budget. Following our
systematic cost efficiency improvement initiatives, we were able to decrease our
fixed costs year-on-year and compared to the first quarter.
In Renewable Products, comparable EBITDA totaled EUR 152 (513) million in the
second quarter, impacted by a clearly lower comparable sales margin of USD 382
(800)/ton. As a result of the rapidly changed market conditions, the second
-quarter comparable sales margin includes a one-off valuation loss in our
bioticket and credit inventories totaling EUR -36 million, equivalent to USD
-40/ton in comparable sales margin. The renewables sales volume during the
quarter totaled 955 (957) thousand tons, impacted by the preparation for the
upcoming maintenance shutdowns at our refineries both in Rotterdam and
Singapore. We continued our efforts to grow the sustainable aviation fuel (SAF)
business and we expect our SAF sales to grow clearly in the third and fourth
quarter. During the second quarter, the share of waste and residue inputs was
88% (96%).
In Oil Products, comparable EBITDA totaled EUR 62 (239) million in the second
quarter. Profitability was impacted by the planned Porvoo major turnaround.
Utilization rate was 34% (86%) due to the turnaround and the total refining
margin during the quarter reached 15.1 (16.7) USD/bbl.
In Marketing & Services, comparable EBITDA was EUR 24 (29) million in the second
quarter, impacted by lower unit margins particularly in Finland. Neste's market
shares continued to be strong.
We estimate the second quarter to be the weakest quarter of the year for Neste
in terms of results and cash flow to be substantially positive in the second
half of the year.
We continue executing our strategy with short-term priorities including growth
of our SAF sales, ramp up of the new production capacity, improved cash flow and
actions to improve our cost efficiency.”
The Group's second-quarter 2024 results
Neste's revenue in the second quarter totaled EUR 4,642 million (5,351 million).
The revenue decreased EUR 1.6 billion due to lower sales volumes compared to the
second quarter of 2023, mostly driven by the Porvoo major turnaround, whereas
the sales prices had a positive impact of approximately EUR 0.5 billion.
Currency exchange rates as well as higher trading volumes and prices in Oil
Products increased the revenue by approximately EUR 0.3 billion.
The Group's comparable EBITDA was EUR 240 million (784 million). Renewable
Products' comparable EBITDA was EUR 152 million (513 million), driven mostly by
lower sales volume and lower sales margin compared to the second quarter of
2023. Oil Products' comparable EBITDA was EUR 62 million (239 million), affected
by the Porvoo major turnaround. Marketing & Services comparable EBITDA was EUR
24 million (29 million). The Others segment's comparable EBITDA was EUR -1
million (0 million).
The Group's EBITDA was EUR 119 million (523 million), which was impacted by
inventory valuation losses of EUR 118 million (losses 305 million), and changes
in the fair value of open commodity and currency derivatives totaling EUR -4
million (38 million). Profit before income taxes was EUR -169 million (295
million), and net profit EUR -144 million (259 million). Comparable earnings per
share were EUR -0.05 (0.63), and earnings per share EUR -0.19 (0.34).
The Group's January-June 2024 results
Neste's revenue in the first six months totaled EUR 9,443 million (10,649
million). The revenue decreased EUR 1.6 billion due to lower sales volumes
compared to the first six months of 2023, mostly driven by the Porvoo major
turnaround, whereas sales prices had a positive impact of approximately EUR 0.3
billion. Currency exchange rates as well as higher trading volumes and prices in
Oil Products, increased the revenue by approximately EUR 0.2 billion.
The Group's comparable EBITDA was EUR 791 million (1,614 million). Renewable
Products' six-month comparable EBITDA was EUR 394 million (928 million), clearly
impacted by the weak market environment as sales margin decreased by EUR -515
million. Oil Products' comparable EBITDA was EUR 339 million (632 million),
affected mostly by the Porvoo major turnaround. Marketing & Services comparable
EBITDA was EUR 47 million (52 million). The Others segment's comparable EBITDA
was EUR 8 million (1 million).
The Group's EBITDA was EUR 561 million (986 million), which was impacted by
inventory valuation losses of EUR 246 million (losses 579 million), and changes
in the fair value of open commodity and currency derivatives totaling EUR 26
million (-60 million). Profit before income taxes was EUR 20 million (571
million), and net profit was EUR 18 million (497 million). Comparable earnings
per share were EUR 0.28 (1.35), and earnings per share were EUR 0.02 (0.64).
One-off costs related to restructuring, totaling EUR 13 million, had an impact
on the first-half results. These one-off costs have been eliminated from
comparable EBITDA.
Outlook
Market outlook for 2024
The uncertainty in the global economic outlook and geopolitical situation
continues to create market volatility. In Renewable Products, bioticket and
renewable credit prices and renewable diesel price premiums are expected to
remain at a low level compared to 2023 and feedstock prices are expected to
remain volatile. In Oil Products, the refining market continues to be impacted
by geopolitical tensions.
Guidance for 2024 specified
Renewable Products' total sales volume is expected to increase from 2023 and to
reach approximately 4.4 Mt (+/- 10%) in 2024, out of which SAF sales volume is
expected to be 0.5-0.7 (previously 0.5-1.0) Mton. Renewable Products' full-year
2024 average comparable sales margin is expected to be in the range of USD
480-580/ton (previously USD 480-650/ton).
Oil Products' total sales volume in 2024 is expected to be lower than in 2023,
impacted by the Porvoo major turnaround in the second quarter. Oil Products'
full-year 2024 total refining margin is expected to be lower than in 2023.
Additional information
In Renewable Products, SAF sales are expected to continue growing toward the end
of the year. Singapore refinery is scheduled to have a 6-week and Rotterdam
refinery a 4-week maintenance shutdown in the third quarter. Singapore's new
line is also scheduled to have an 8-week maintenance shutdown in the fourth
quarter, after which full capacity is expected to be reached. Renewable
Products' full-year sales volume is impacted by the planned maintenance
shutdowns and the ramp-up timeline of Martinez Renewables joint operation
(Martinez). Following the fire at the end of 2023, the Martinez facility has
been operating at slightly below 50% of nameplate capacity in the first half of
the year, but targeted to reach approximately 75% of nameplate capacity during
the third quarter and 100% by the end of the year. Work is ongoing to proceed
with repairs to ensure safe and reliable operations.
In Marketing & Services the sales volumes and unit margins are expected to
follow the previous years' seasonality pattern.
The Group's total fixed costs in 2024 are expected to be slightly higher than in
2023 due to the Porvoo major turnaround and the build-up of resources for the
growth projects under construction. The fixed costs growth trend is expected to
level out compared to 2023 due to cost saving and efficiency measures.
The Group's full-year 2024 cash-out capital expenditure excluding M&A is
estimated to be approximately EUR 1.4-1.6 billion. The share of maintenance and
strategic capex is expected to represent approximately 40% and 60%,
respectively, as the Porvoo major turnaround increases maintenance capex for
2024.
Conference call
A conference call in English for investors and analysts will be held on 25 July
2024, at 3 p.m. Finland / 1 p.m. London / 8 a.m. New York. In order to receive
the participant dial in numbers and a unique personal PIN, participants are
requested to register using this link:
https://register.vevent.com/register/BI504e0b7625e5420faee61b1a20ed1c63. The
conference call can also be followed as a webcast (https://edge.media
-server.com/mmc/p/waftychj/).

Further information:
Matti Lehmus, President and CEO, tel. +358 10 458 11
Martti Ala-Härkönen, CFO, tel. +358 40 737 6633
Anssi Tammilehto, Vice President, Investor Relations, tel. +358 50 458 8436

Neste in brief

Neste (NESTE, Nasdaq Helsinki) uses science and innovative technology to
transform waste and other resources into renewable fuels and circular raw
materials. The company creates solutions for combating climate change and
accelerating a shift to a circular economy. Being the world's leading producer
of sustainable aviation fuel (SAF) and renewable diesel and a forerunner in
developing renewable and circular feedstock solutions for polymers and
chemicals, the company aims to help its customers to reduce their greenhouse gas
emissions by at least 20 million tons annually by 2030.
The company's ambition is to make the Porvoo oil refinery in Finland the most
sustainable refinery in Europe. Neste is committed to reaching carbon-neutral
production by 2035, and will reduce the carbon emission intensity of sold
products by 50% by 2040. Neste has also set high standards for biodiversity,
human rights and the supply chain. The company has consistently been included in
the CDP and the Global 100 lists of the world's most sustainable companies. In
2023, Neste's revenue stood at EUR 22.9 billion. Read more:
neste.com (http://www.neste.com)

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