Neste Corporation, Interim Report, 25 April 2024 at 9 a.m. (EET)
Demonstrating resilience in a weak renewables market

First quarter in brief:

• Comparable EBITDA totaled EUR 551 million (EUR 830 million) 
• EBITDA totaled EUR 442 million (EUR 463 million)
• Renewable Products' comparable sales margin was USD 562/ton (USD 945/ton)
• Oil Products' total refining margin was USD 20.4/bbl (USD 21.8/bbl)
• Cash flow before financing activities was EUR -340 million (EUR -102 million)
• Comparable return on average capital employed (Comparable ROACE) was 20.1% over the last 12 months (31.8%)
• Leverage ratio was 27.9% at the end of March (31.12.2023: 22.7%)
• Full-year guidance unchanged

President and CEO Matti Lehmus:

"Our focus was on defending margins in a more challenging market as the market situation in renewable diesel was clearly weaker in the first quarter of 2024 compared to the previous year. In Oil Products the refining margin remained healthy, although somewhat lower compared to previous year's corresponding period. Our comparable EBITDA in the first quarter reached EUR 551 million compared to EUR 830 million last year. Neste's operations in Finland were impacted by political strikes during the first quarter, with a total comparable EBITDA impact of approximately EUR -10 to -15 million. Our cash flow before financing activities was EUR -340 (-102) million, impacted by higher inventories mainly due to preparing for the upcoming major turnaround in Porvoo and sustainable aviation fuel (SAF) base inventory build-up.

In Renewable Products, our comparable EBITDA totaled EUR 242 (415) million in the first quarter, impacted by a clearly weaker market in renewable diesel. Our comparable sales margin was USD 562 (945)/ton. Our sales volume was 849 (678) thousand tons as demand was seasonally lower. Sales volumes were also affected by the build-up of inventories in the SAF supply chain and the preparation for the upcoming maintenance turnarounds during 2024. Production at the Singapore second line was stable during the quarter and production of SAF was ramped up according to plan. During the first quarter the share of waste and residue inputs was 91%.

In Oil Products, comparable EBITDA totaled EUR 278 (393) million in the first quarter. Operational performance at the Porvoo refinery was solid with a utilization rate of 91% (81%) and the total refining margin during the quarter reached 20.4 (21.8) USD/bbl. The domestic sales volume in the quarter was impacted by the political strikes in Finland, which was also reflected in the inventory build-up.

In Marketing & Services, our comparable EBITDA was EUR 23 (23) million in the first quarter. Neste's market share remained on a high level in spite of the logistics challenges caused by the political strike.

We completed our organizational change process during the quarter. With a simplified organizational structure and operational model, we strengthen our long-term competitiveness and improve our cost efficiency. The restructuring is expected to result in total annual cost savings of approximately EUR 50 million going forward.

We hosted an analyst day in Rotterdam in March, reviewing Neste's resilient growth strategy and unique competitive advantages as well as our latest market view in renewables. Our growth strategy in renewable and circular solutions is based on expansion in the most attractive market segments, while at the same time continuing to strengthen our global feedstock sourcing platform and optimization capabilities. Driven by regulatory developments and expected voluntary demand development, we updated our long-term demand forecast upwards compared to our earlier view. Neste's focus in 2024 is on operational execution related to our growth projects, a substantial increase of our SAF sales and streamlining our cost base."

The Group's first quarter 2024 results

Neste's revenue in the first quarter totaled EUR 4,801 million (5,298 million). The decrease in revenue was driven by lower market and sales prices, which had a negative impact of approx. EUR 0.3 billion. Sales volumes had a negative impact of approx. EUR 0.1 billion in total as Renewable Products' volume increase offsets the decrease in Oil Products' volumes year-over-year. Slightly weaker US dollar had a minor negative impact on the revenue compared to the corresponding period last year. Also other drivers decreased revenue by approx. EUR 0.1 billion driven by lower trading volumes, mainly in Oil Products.

The Group's comparable EBITDA was EUR 551 million (830 million). Renewable Products' comparable EBITDA was EUR 242 million (415 million), mostly driven by a lower sales margin as a result of a weaker market, higher sales volume and increased fixed costs compared to the first quarter of 2023. Oil Products' comparable EBITDA totaled EUR 278 million (393 million), following the somewhat lower refining margins and reduced sales volume due to the upcoming turnaround. Marketing & Services comparable EBITDA was EUR 23 million (23 million). The Others segment's comparable EBITDA was EUR 8 million (2 million).

The Group's EBITDA was EUR 442 million (463 million), which was impacted by inventory valuation losses of EUR -129 million (-274 million), and changes in the fair value of open commodity and currency derivatives totaling EUR 30 million (-98 million). Profit before income taxes was EUR 189 million (276 million), and net profit EUR 162 million (238 million). Comparable earnings per share were EUR 0.33 (0.72), and earnings per share EUR 0.21 (0.31).

One-off costs related to restructuring, totaling EUR 13 million, had an impact on the first quarter 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 and is expected to continue creating market volatility. In Renewable Products, bioticket and renewable credit prices and renewable diesel price premiums are expected to remain at a lower level compared to 2023. Feedstock prices continue to be volatile. In Oil Products, the refining market continues to be impacted by geopolitical tensions.

Guidance for 2024

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 0.5-1.0 Mton. Renewable Products' full-year 2024 average comparable sales margin is expected to be in the range of USD 600-800/ton.

Oil Products' total sales volume in 2024 is expected to be lower than in 2023, impacted by the planned 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, Singapore is scheduled to have a 6-week and Rotterdam 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) and the Singapore new line to reach full capacity. In Singapore, SAF production was ramped up during the first quarter. SAF sales are expected to increase from the second quarter onwards, growing toward the end of the year. The Martinez facility is currently operating at slightly below 50% of nameplate capacity, following the fire at the end of 2023. Work is ongoing to proceed with repairs to ensure safe and reliable operations.

In Oil Products, the Porvoo major turnaround is scheduled for the second quarter with an estimated capex of EUR 390 million and a comparable EBITDA impact of approximately EUR 190 million for Oil Products and EUR 40 million for Renewable Products.

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 somewhat 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.

Conference call

A conference call in English for investors and analysts will be held on 25 April 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/BId82705c08f0d41c8a1ddb895b3cf280c. The conference call can also be followed as a webcast (https://edge.media-server.com/mmc/p/7de44bzv/).

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