Neste Oil's interim report for January-September 2010
(Thomson Reuters ONE) -
Stock Exchange Release
Neste Oil Corporation
29 October 2010 at 9 am (EET)
Neste Oil's interim report for January-September 2010
- Refining margins and operating profit improved in the third quarter
Third quarter in brief:
* Comparable operating profit of EUR 57 million (Q3/2009: 42 million)
* IFRS operating profit of EUR 143 million (Q3/2009: 113 million)
* Total refining margin of USD 7.48/bbl (Q3/2009: 5.97)
* Net cash from operations of EUR 5 million (Q3/2009: 162 million)
* Investments totaled EUR 190 million (Q3/2009: 216 million)
* Start-up of the renewable diesel plant in Singapore proceeded well, with
operations scheduled to begin during the fourth quarter
President & CEO Matti Lievonen:
"As we anticipated in July, the Oil Products segment reported a good result in
the third quarter. This was thanks to our focus on diesel fuel, which saw higher
margins, good operational performance at our refineries, and a strong
contribution by the base oils business compared to the same period in 2009. I'm
also pleased to report improved profitability at Oil Retail, which underlines
the success of our efforts to enhance cost efficiency. These programs have been
implemented across the Group and we expect their results to be in line with what
we indicated last year.
Our first world-scale renewable diesel plant in Singapore is due to start up in
the near future and will mark an important strategic milestone for Neste Oil.
The plant will be ramped-up in steps to the full capacity."
Further information:
Matti Lievonen, President & CEO, tel. +358 10 458 11
Ilkka Salonen, CFO, tel. +358 10 458 4490
Investor Relations, tel. +358 10 458 5132
News conference and conference call
A press conference in Finnish on the third quarter results will be held today,
29 October 2010, 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
on 29 October 2010 at 3:00 pm Finnish / 1:00 pm London / 8:00 am New York. The
call-in numbers are as follows: Europe: +44 (0)20 3140 8286, US +1 718 354 1152
(confirmation code: 2472238). The conference call can be followed at company's
website. An instant replay of the call will be available until 5 November 2010
at +44 (0)20 7111 1244 for Europe and +1 347 366 9565 USA for the US
(confirmation code: 2472238#).
NESTE OIL FINANCIAL STATEMENTS, 1 JANUARY - 30 SEPTEMBER 2010
Quarterly figures are unaudited, full-year figures are audited
Figures in parentheses refer to the corresponding period for 2009, unless
otherwise stated.
KEY FIGURES
EUR million (unless otherwise noted)
7-9/10 7-9/09 4-6/10 1-9/10 1-9/09 2009
------------------------------------------------------------------------------
Revenue 3,065 2,500 2,576 8,366 7,145 9,636
Operating profit before depreciation 207 171 -1 361 495 569
Depreciation, amortization,
and impairments 64 58 62 184 169 234
Operating profit 143 113 -63 177 326 335
Comparable operating profit * 57 42 5 150 145 116
Profit before income tax 136 102 -70 154 292 296
Earnings per share, EUR 0.42 0.29 -0.20 0.48 0.87 0.86
Investments 190 216 374 754 600 863
Net cash from operating activities 5 162 243 622 402 177
30 Sep 30 Sep 31 Dec
2010 2009 2009
------------------------------------------------------------------------------
Total equity 2,333 2,231 2,222
Interest-bearing net debt 2,117 1,414 1,918
Capital employed 4,505 3,714 4,257
Return on capital employed pre-tax (ROCE), % 5.7 12.6 9.0
Return on average capital employed after tax
(ROACE)**, % 2.6 5.1 2.5
Return on equity (ROE), % 7.2 13.6 10.2
Equity per share, EUR 9.07 8.68 8.64
Cash flow per share, EUR 2.43 1.57 0.69
Equity-to-assets ratio, % 37.6 41.8 39.1
Leverage (Net debt to capital), % 47.6 38.8 46.3
Gearing, % 90.7 63.4 86.3
* 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. Inventory
gains/losses include changes in the fair value of all trading inventories.
** Rolling 12 months
The Group's third-quarter result
Neste Oil's third-quarter sales in 2010 totaled EUR 3,065 million (2,500
million). Thanks to a higher total refining margin compared to the same period
in 2009, the Group's comparable operating profit increased to EUR 57 million (42
million). In addition to Oil Products, Oil Retail recorded a higher comparable
operating profit year-on-year, whereas Renewable Fuels and Others posted lower
profits.
Oil Products' third-quarter comparable operating profit was EUR 45 million (15
million), Renewable Fuels' EUR -12 million (-6 million) and Oil Retail's EUR 23
million (19 million). The comparable operating profit of the Others segment
totaled EUR 2 million (16 million) and included EUR 4 million (19 million) from
associated companies and joint ventures. This decrease mainly resulted from
lower volumes at Nynas AB.
The Group's third-quarter IFRS operating profit was EUR 143 million (113
million), which was impacted by inventory gains totaling EUR 86 million (62
million). Pre-tax profit was EUR 136 million (102 million), profit for the
period EUR 110 million (74 million) and earnings per share EUR 0.42 (0.29).
The Group's January-September 2010 results
Neste Oil's sales during January-September 2010 totaled EUR 8,366 million (7,145
million). The Group's comparable operating profit was EUR 150 million (145
million), including EUR 47 million from an insurance compensation payment
received in February and a negative impact of EUR 65 million from the Porvoo
refinery maintenance turnaround in April and May.
Oil Products' nine-month comparable operating profit was EUR 100 million (116
million), Renewable Fuels' EUR -52 million (-19 million), Oil Retail's EUR 42
million (45 million), and Others' EUR 61 million (3 million). Profits from
associated companies and joint ventures totaled EUR 16 million (21 million).
The IFRS operating profit during January-September was EUR 177 million (326
million).This was negatively impacted by the transfer of the Neste Oil Pension
Fund to insurance companies. Inventory gains amounted to EUR 60 million compared
to EUR 203 million in the first nine months of 2009. Pre-tax profit amounted to
EUR 154 million (292 million), profit for the period EUR 124 million (224
million), and earnings per share EUR 0.48 (0.87).
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 figures are based on comparable results. As of the end of September, the
rolling twelve-month ROACE was 2.6% (2009 financial year: 2.5%)
7-9/10 7-9/09 4-6/10 1-9/10 1-9/09 2009
--------------------------------------------------------------------------------
COMPARABLE OPERATING PROFIT 57 42 5 150 145 116
- inventory gains/losses 86 62 -42 60 203 261
- changes in the fair value of open oil
derivatives -2 8 27 18 -23 -43
- capital gains/losses 2 1 -53 -51 1 1
OPERATING PROFIT 143 113 -63 177 326 335
Cash flow, investments, and financing
Neste Oil Group's net cash from operating activities between January and
September was strong at EUR 622 million (402 million), resulting from the
release of funds from working capital and a EUR 85 million positive impact
related to the transfer of the liabilities of the Neste Oil Pension Fund to
insurance companies.
Investments totaled EUR 754 million during the first nine months (600 million),
of which EUR 110 million was related to the major maintenance turnaround at the
Porvoo refinery. Oil Products' capital spending was EUR 235 million (139
million), Renewable Fuels' EUR 435 million (431 million), and Oil Retail's EUR
23 million (19 million). Investments in the Others segment totaled EUR 61
million (11 million), of which EUR 51 million related to a non-cash purchase of
the company's head office building, a transaction that formed part of the
transfer of the liabilities associated with the Neste Oil Pension Fund.
Interest-bearing net debt was EUR 2,117 million as of the end of September
compared to EUR 1,918 at the end of 2009. Net financial expenses between January
and September were EUR 23 million (34 million). The average interest rate of
borrowings at the end of September was 2.8%, and the average maturity 3.6 years.
The equity-to-assets ratio was 37.6% (31 Dec 2009: 39.1%), the leverage ratio
47.6% (31 Dec 2009: 46.3%), and the gearing ratio 90.7% (31 Dec 2009: 86.3%).
The Group's cash and cash equivalents and committed, unutilized credit
facilities amounted to EUR 1,400 million as of the end of the September (31 Dec
2009: 1,407 million). The company issued a EUR 300 million bond, with a maturity
of 5 years and a coupon of 4.875% at the end of June. There are no financial
covenants in current 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.
Strategy implementation
Neste Oil continued to implement its clean fuel strategy during the first nine
months of 2010. The company's capital projects consist of new plants designed to
increase production of renewable diesel and high-quality base oil.
Strategic projects
Investments in the two major 800,000 t/a renewable diesel plants in Singapore
and Rotterdam is proceeding according to plan. Start-up procedures at the
Singapore plant have proceeded smoothly and the plant is expected to come on
stream in the fourth quarter. The Rotterdam plant is also proceeding well and is
expected to start up towards the end of the first half of 2011. The Singapore
plant is on-budget at EUR 550 million, while the Rotterdam plant is expected to
come in under its EUR 670 million budget.
Neste Oil has a 45% stake in a JV that is building a 400,000 t/a base oil plant
in Bahrain. The project is proceeding on-schedule and on-budget, and the plant
is scheduled to be completed in the second half of 2011. Neste Oil's share of
the investment cost is EUR 130 million.
Market overview
Crude oil prices increased until early August on the back of strong financial
markets and supply disruptions, but then retreated as a result of increasing
supply, high global oil stocks, and concerns over a slowdown in economic
recovery. Brent Dated traded between USD 70/bbl and USD 85/bbl during the
quarter. In late August, prices started to increase again, boosted by stronger
demand and the weakening US dollar, with Brent Dated ending the quarter at USD
80/bbl. The price differential between heavier and lighter crude widened in
July, as a result of low volumes of North Sea crude during seasonal maintenance
work, but narrowed again and were only marginal in September.
Refining margins fell in July, particularly in Northwest Europe where refineries
ramped up after maintenance outages and increased supplies were met by limited
demand. They rose in August as middle distillates, in particular, improved on
tighter supplies, but fell again in late September as product prices failed to
keep pace with increasing crude prices.
Gasoline margins declined during the quarter, in line with typical seasonal
patterns, with the end of the driving season and a switch to winter grades
occurring toward the end of the quarter. Inventories in North America were
relatively high compared to historical levels, whereas those in Europe were
normal.
Margins for middle distillates strengthened throughout the quarter. At the
beginning of the quarter, the diesel market benefited from increased contango
storage. In September, middle distillate prices were lifted by pre-stocking
ahead of the winter and maintenance-related supply tightness, and margins
strengthened despite higher crude prices.
Margins for low-sulfur fuel oils improved in July, supported by increased use at
power plants. In August, margins started weakening again as supplies increased.
The price differential between different biofeedstocks widened somewhat, and
prices increased in the third quarter. Progress in finalizing biofuel
legislation has been little slower than anticipated both in Europe and the US.
The Finnish oil retail market saw a 6-7% increase in heavy vehicle traffic and a
2-3% increase in light vehicle traffic between July and August. Demand recovery
in Estonia and Lithuania benefited from market development there. Volumes also
grew in Northwestern Russia.
Oil tanker freight rates were stable, but soft throughout the third quarter.
Key drivers
7-9/10 7-9/09 4-6/10 1-9/10 1-9/09 2009 Oct 10 Oct 09
Reference refining
margin, USD/bbl 3.52 2.20 5.23 4.26 3.62 3.14 5.11 2.50
Neste Oil total refining
margin, USD/bbl 7.48 5.97 7.35 7.55 7.80 7.35 n.a. n.a.
Urals-Brent price
differential, USD/bbl -0.92 -0.46 -1.80 -1.36 -0.85 -0.81 -1.27 -0.44
NWE Gasoline margin,
USD/bbl 7.60 10.09 11.11 10.15 9.77 9.26 8.8 8.36
NWE Diesel margin,
USD/bbl 13.77 9.24 14.79 13.27 11.53 11.18 16.7 11.63
NWE Heavy fuel oil
margin, USD/bbl -10.35 -5.95 -10.46 -9.24 -7.78 -7.44 11.9 -6.39
Brent Dated crude oil,
USD/bbl 76.86 68.27 78.31 77.14 57.15 61.51 82.73 72.75
USD/EUR, market rate 1.29 1.43 1.27 1.32 1.52 1.39 1.39 1.48
USD/EUR, hedged 1.39 1.40 1.38 1.37 1.43 1.41 n.a. n.a.
Crude freights, WS points
(TD7) 99 70 119 113 191 81 102 77
--------------------------------------------------------------------------------
Production and sales
Neste Oil's total production in the third quarter was 3.8 million tons (3.7
million), of which NExBTL renewable diesel accounted for 0.1 million tons (0.1
million).
Neste Oil's production, by plant (1,000 t)
7-9/10 7-9/09 4-6/10 1-9/10 1-9/09 2009
Porvoo refinery 2,999 2,939 1,499 7,397 8,516 11,520
Naantali refinery 619 651 632 1,822 1,781 2,438
Beringen polyalfaolefin plant 11 10 8 33 26 35
Edmonton iso-octane plant (Neste Oil's
share) 54 70 60 162 197 256
NExBTL plants 99 74 50 218 149 219
The Porvoo refinery operated at an average capacity utilization rate of 90%
(84%) in the third quarter, while the utilization rate of the Naantali refinery
was 84% (91%), impacted by a small fire in August. The proportion of Russian
Export Blend in Neste Oil's total refinery input was 67% (64%) during the third
quarter. Refinery production costs totaled USD 3.2/bbl (3.8).
Neste Oil's sales from in-house production, by product category (1,000 t)
7-9/10 % 7-9/09 % 4-6/10 % 1-9/10 % 1-9/09 % 2009 %
Motor gasoline 1,069 29 1,146 32 747 27 2,896 28 3,380 32 4,218 30
Gasoline
components 66 2 62 2 74 3 186 2 219 2 270 2
Diesel fuel 1,393 37 1,292 37 1,043 37 3,944 38 3,779 36 5,228 37
Jet fuel 205 5 136 4 83 3 428 4 422 4 613 4
Base oils 78 2 66 2 76 3 231 2 195 2 257 2
Heating oil 131 4 99 3 134 5 532 5 453 4 631 4
Heavy fuel oil 289 8 308 9 166 6 667 7 1,008 9 1,300 9
LPG 35 1 27 1 51 2 177 2 169 2 220 2
NExBTL
renewable
diesel 102 3 68 2 72 2 211 2 143 1 209 1
Other products 370 9 318 8 339 12 979 10 850 8 1,232 9
--------------------------------------------------------------------------------
TOTAL 3,739 100 3,522 100 2,785 100 10,251 100 10,619 100 14,178 100
Neste Oil's sales from in-house production, by market area (1,000 t)
7-9/10 % 7-9/09 % 4-6/10 % 1-9/10 % 1-9/09 % 2009 %
Finland 1,962 52 1,831 52 1,628 59 5,607 55 5,546 53 7,580 53
Other Nordic
countries 735 20 580 16 568 20 1,878 18 1,627 15 2,210 16
Other Europe 625 17 692 20 402 14 1,951 19 1,860 17 2,488 18
USA & Canada 366 10 357 10 178 6 714 7 1,457 14 1,686 12
Other
countries 52 1 62 2 9 1 101 1 130 1 214 1
--------------------------------------------------------------------------------
TOTAL 3,739 100 3,522 100 2,785 100 10,251 100 10,619 100 14,178 100
SEGMENT REVIEWS
Neste Oil's businesses are grouped into four reporting segments: Oil Products,
Renewable Fuels, Oil Retail, and Others.
Oil Products
7-9/10 7-9/09 4-6/10 1-9/10 1-9/09 2009
Revenue, MEUR 2,491 1,971 2,064 6,827 5,644 7,631
Comparable operating profit, MEUR 45 15 -3 100 116 105
IFRS operating profit, MEUR 116 80 -18 163 291 318
Total refining margin, USD/bbl 7.48 5.97 7.35 7.55 8.65 7.35
Oil Products' comparable operating profit for the third quarter was EUR 45
million compared to EUR 15 million during the same quarter in 2009. The increase
was the result of higher refining margins and better performance in the base
oils business. The total refining margin of USD 7.48/bbl in the third quarter
was clearly better than the USD 5.97/bbl recorded during the same quarter in
2009. Total refining margin was supported by higher year-on-year diesel margins
in particular.
The base oils business benefited from improved demand and margins, whereas
gasoline components performance was stable. The profitability of the oil tanker
chartering business improved slightly, despite soft freight rates.
Oil Products' comparable return on net assets was 4.9% (6.0%) in the third
quarter.
Renewable Fuels
7-9/10 7-9/09 4-6/10 1-9/10 1-9/09 2009
Revenue, MEUR 120 59 60 216 121 182
Comparable operating profit, MEUR -12 -6 -23 -52 -19 -29
IFRS operating profit, MEUR 2 -1 -19 -32 -13 -24
-------------------------------------------------------------------------
Renewable Fuels' comparable operating profit was EUR -12 million in the third
quarter, compared to EUR -6 million in the same quarter of 2009. This decrease
resulted from costs related to increased activity at the Singapore plant before
its start-up in the fourth quarter, and a higher than planned level of
activities at the site in Rotterdam. Costs were lower compared to the previous
quarter due to some costs being delayed to the following quarter. Renewable
diesel margins were somewhat weaker in the third quarter year-on-year due to a
narrow price differential between different biofeedstocks. The price premium
commanded by high-quality renewable diesel remained healthy.
Renewable Fuels' comparable return on net assets was -5.9% (-4.7%) in the third
quarter.
Oil Retail
7-9/10 7-9/09 4-6/10 1-9/10 1-9/09 2009
Revenue, MEUR 917 789 884 2,650 2,207 2,998
Comparable operating profit, MEUR 23 19 13 42 45 50
IFRS operating profit, MEUR 24 19 14 44 44 50
Total sales volume*, 1,000 m3 1,023 986 973 3,029 2,973 4,002
- gasoline station sales, 1,000 m3 362 374 341 998 1,073 1,405
- diesel station sales, 1,000 m3 365 340 347 1,044 986 1,331
- heating oil, 1,000 m3 156 156 143 520 514 714
- heavy fuel oil, 1,000 m3 69 57 70 242 208 287
* includes both station and terminal sales
Oil Retail posted a third-quarter comparable operating profit of EUR 23 million
compared to EUR 19 million in the same period in 2009. Performance benefited
from increased demand for diesel in Finland and Russia, as well as stronger
economic development in the Baltic countries.
Oil Retail's comparable return on net assets was 18.1% (18.8%) in the third
quarter.
Shares, share trading, and ownership
Neste Oil's shares are traded on NASDAQ OMX Helsinki Ltd. The share price closed
the third quarter at EUR 11.46. At its highest during the quarter, the share
price reached EUR 12.60, while at its lowest the price stood at EUR 10.62.
Market capitalization was EUR 2.9 billion as of 30 September 2010. An average of
856,000 shares were traded daily, representing 0.3% of the company's shares.
Neste Oil's share capital registered with the Company Register as of 30
September 2010 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.
As of the end of September, the Finnish State owned 50.1% (50.1%) of outstanding
shares, foreign institutions 16.8% (17.0%), Finnish institutions 19.6% (18.5%),
and Finnish households 13.4% (14.4%).
Personnel
Neste Oil employed an average of 5,078 (5,336) employees during January and
September, of which 1,452 (1,311) are based outside Finland. As of the end of
September, the company had 4,921 employees (5,205), of which 1,437 (1,371) are
located outside Finland.
Health, safety, and the environment
The main 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 4.3 (2.8) at the end of September. The target for 2010 is below 3. Lost
workday injury frequency (LWIF) stood at 2.9 (2.0). The target is below 1.
Safety performance at the renewable diesel sites in Singapore and Rotterdam has
continued to be good. TRIF performance in Singapore was 0.95 and the LWIF figure
was 0.22 at the end of September, as measured from the start of the project.
Over 11 million hours have been worked there without any injuries resulting in
lost working days. The TRIF for the Rotterdam project was 2.8 and the LWIF 2.5,
and some 1.5 million hours have been worked there without any lost working day
injuries. The safety indicator figures for these projects are not included in
Neste Oil's overall safety numbers.
Neste Oil is prioritizing the broader utilization of proactive safety tools to
maintain and further improve safety performance and culture. A total of 16,300
(+ 5,000 during the Porvoo turnaround) safety observation tours have been
conducted this year. Safety performance improved in the third quarter, resulting
in a TRIF of 2.8 and a LWIF of 2.5.
Implementation of best safety procedures across the company will continue to be
a priority during the remainder of 2010.
Neste Oil's voluntary scheme for Renewable Energy Directive (RED) compliance has
been filed with the European Commission for registration. The scheme is intended
to ensure the eligibility of Neste Oil's biofuels on the European market.
In September, Neste Oil was once again accepted for inclusion in the Dow Jones
Sustainability World Index, for the fourth year in succession. DJSI World is the
world's most important sustainability index and features 318 companies.
Companies are required to demonstrate continuous improvement every year with
regard to sustainability for inclusion. In addition, Neste Oil has been awarded
'Best in Class' recognition for its social accountability by the Norwegian
banking group, Storebrand, featured in the Ethibel Pioneer Investment Register,
and included four times in Innovest's Global 100 list of the world's most
sustainable corporations. Forest Footprint Disclosure (FFD) has ranked Neste Oil
as the best performer in the oil & gas sector.
Events after the reporting period
Neste Oil and Stora Enso announced on 11 October that their joint venture, NSE
Biofuels Oy, is to commence environmental impact assessments for a commercial-
scale biorefinery at Porvoo or Imatra in Finland. The two locations are seen as
potential alternative sites for a unit capable of producing approximately
200,000 t/a of premium-quality renewable diesel from wood biomass.
Potential short-term and long-term risks
The oil market has been and is expected to continue to be 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 over the short term continues to be the pace of the
recovery of the world economy, which is likely to have a material impact on the
demand for petroleum products generally and diesel fuel in particular.
Sudden and unplanned outages at Neste Oil's production units or facilities
continue to represent a short-term operational 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. Risks also
include any problems or delays in completing the company's NExBTL renewable
diesel investments or failure to capture the anticipated benefits from these
investments. Over the longer term, failure to protect Neste Oil's proprietary
technology or the introduction and implementation of competing renewable fuel
technologies or hybrid and electric engines may have a negative impact on the
company's results.
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 2009.
Outlook
There have been no major changes in the oil market since the previous outlook
was published in July. The International Energy Agency has increased its global
oil demand estimates for 2010 and 2011, but this is not expected to result in a
sudden or significant strengthening of refining margins due to high inventories.
Neste Oil anticipates that it will benefit from a somewhat stronger diesel
market during the remainder of 2010, thanks to high shutdown activity and other
temporary outages in the early part of the quarter, and increasing demand for
the fuel. The outlook for gasoline margins is softer, mainly due to seasonality.
In terms of crude price differentials, the Urals discount to Brent is expected
to average around USD 1.0 /bbl during the rest of the year. Neste Oil's
reference refining margin in this environment is expected to somewhat increase
in the fourth quarter compared to the third.
Neste Oil's new renewable diesel plant in Singapore is anticipated to come on-
stream during the fourth quarter. The ramp-up of the plant will be carried out
in steps to full capacity and there will be a time lag before output reaches the
sales channel due to logistics reasons. Together with full costs and
depreciation, this will mean that the Renewable Fuels segment will book a loss
in the fourth quarter. The Renewable Energy Directive (RED) shall be
incorporated into the national legislation of member states by 5 December.
Implementation of the directive is now under way in member states.
Oil Retail is likely to face tougher price competition in Finland and other
markets in the fourth quarter.
The Group's fixed costs in 2010 are estimated to be similar to those in 2009.
The Group's cash investments in 2010 are expected to be around EUR 920 million
(870 million), of which strategic investments will account for EUR 580 million
(670 million), maintenance investments EUR 310 million (160 million), and
productivity investments EUR 30 million (40 million).
Espoo, 28 October 2010
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- SEPTEMBER
2010
Unaudited
CONSOLIDATED INCOME
STATEMENT
MEUR
Note Last 12
7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009 months
Revenue 3 3 065 2 500 8 366 7 145 9 636 10 857
Other income 7 9 71 23 29 77
Share of profit
(loss) of associates
and joint
ventures 3 4 19 16 21 20 15
Materials and
services -2 677 -2 164 -7 411 -5 987 -8 167 -9 591
Employee benefit
costs -69 -59 -295 -221 -301 -375
Depreciation,
amortization and
impairments 3 -64 -58 -184 -169 -234 -249
Other expenses -123 -134 -386 -486 -648 -548
Operating profit 143 113 177 326 335 186
Financial income and
expenses
Financial income 4 2 8 6 10 12
Financial expenses -11 -11 -33 -36 -44 -41
Exchange rate and
fair value gains and
losses 0 -2 2 -4 -5 1
Total financial
income and expenses -7 -11 -23 -34 -39 -28
Profit before income
taxes 136 102 154 292 296 158
Income tax expense -26 -28 -30 -68 -71 -33
Profit for the period 110 74 124 224 225 125
Profit attributable
to:
Owners of the parent 109 74 122 222 221 121
Non-controlling
interests 1 0 2 2 4 4
110 74 124 224 225 125
Earnings per share
from profit
attributable to the
owners
of the parent basic
and
diluted (in euro per
share) 0,42 0,29 0,48 0,87 0,86 0,47
STATEMENT OF
COMPREHENSIVE INCOME
7-9 7-9 1-9 1-9 1-12 Last 12
MEUR 2010 2009 2010 2009 2009 months
Profit for the period 110 74 124 224 225 125
Other comprehensive
income for the
period,
net of tax:
Translation
differences -12 9 32 6 9 35
Cash flow hedges
recorded in equity 50 9 6 5 3 4
transferred to income
statement 12 -4 20 26 15 9
Net investment hedges -1 0 -3 0 0 -3
Hedging reserves in
associates and joint
ventures 0 0 1 -2 -2 1
Other comprehensive
income for the
period,
net of tax 49 14 56 35 25 46
Total comprehensive
income for the period 159 88 180 259 250 171
Total comprehensive
income attributable
to:
Owners of the parent 158 85 178 254 246 170
Non-controlling
interests 1 0 2 2 4 4
159 85 180 256 250 174
CONSOLIDATED
BALANCE SHEET
30 Sep 30 Sep 31 Dec
MEUR Note 2010 2009 2009
ASSETS
Non-current assets
Intangible assets 5 46 49 48
Property, plant
and equipment 5 3 764 3 069 3 235
Investments in
associates and
joint
ventures 296 202 216
Non-current
receivables 7 3 3
Pension assets 0 111 111
Deferred tax
assets 18 12 11
Derivative
financial
instruments 6 32 10 3
Available-for-sale
financial assets 3 2 1
Total non-current
assets 4 166 3 458 3 628
Current assets
Inventories 1 125 932 1 148
Trade and other
receivables 796 769 757
Derivative
financial
instruments 6 82 115 50
Cash and cash
equivalents 55 69 117
Total current
assets 2 058 1 885 2 072
Total assets 6 224 5 343 5 700
EQUITY
Capital and
reserves
attributable to
the owners
of the parent
Share capital 40 40 40
Other equity 2 2 281 2 181 2 170
Total 2 321 2 221 2 210
Non-controlling
interests 12 10 12
Total equity 2 333 2 231 2 222
LIABILITIES
Non-current
liabilities
Interest-bearing
liabilities 1 869 1 213 1 590
Deferred tax
liabilities 346 325 328
Provisions 17 26 22
Pension
liabilities 37 10 10
Derivative
financial
instruments 6 19 27 15
Other non-current
liabilities 1 0 0
Total non-current
liabilities 2 289 1 601 1 965
Current
liabilities
Interest-bearing
liabilities 303 270 445
Current tax
liabilities 19 14 5
Derivative
financial
instruments 6 38 84 83
Trade and other
payables 1 242 1 143 980
Total current
liabilities 1 602 1 511 1 513
Total liabilities 3 891 3 112 3 478
Total equity and
liabilities 6 224 5 343 5 700
CONSOLIDATED STATEMENT OF
CHANGES IN TOTAL EQUITY
Attributable to equity holders of the
Company
Share Reserve Fair Translation Re- Non- Total
ca- fund value diffe- tained cont- equity
pital and rences ear- rolling
other nings inte-
MEUR reserves rests
Total equity at 1
January 2009 40 10 -7 -54 2 182 8 2 179
Dividend paid -205 -205
Share-based
compensation -2 -2
Transfer from
retained earnings 1 -1 0
Changes in non-
controlling
interests 0 0
Total
comprehensive
income for the
period 29 6 222 2 259
Total equity at
30 September
2009 40 11 20 -48 2 198 10 2 231
Share Reserve Fair Translation Re- Non- Total
ca- fund value diffe- tained cont- equity
pital and rences ear- rolling
other nings inte-
MEUR reserves rests
Total equity at 1
January 2010 40 11 9 -45 2 195 12 2 222
Dividend paid -64 -2 -66
Share-based
compensation -3 -3
Transfer from
retained earnings 1 -5 4 0
Changes in non-
controlling
interests 0 0
Total
comprehensive
income for the
period 1 27 28 122 2 180
Total equity at
30 September
2010 40 13 31 -17 2 254 12 2 333
CONDENSED
CONSOLIDATED CASH
FLOW STATEMENT
7-9 7-9 1-9 1-9 1-12
MEUR 2010 2009 2010 2009 2009
Cash flow from
operating
activities
Profit before
taxes 136 102 154 292 296
Adjustments,
total 73 26 306 187 268
Change in
working
capital -104 27 233 -105 -450
Cash generated
from
operations 105 155 693 374 114
Finance cost,
net -95 0 -62 -9 20
Income taxes
paid -5 7 -9 37 43
Net cash
generated from
operating
activities 5 162 622 402 177
Capital
expenditure -177 -184 -699 -568 -816
Acquisition of
shares in
subsidiaries 0 - -8 - -
Acquisition of
associates and
joint ventures -13 -32 -44 -32 -47
Acquisition of
other shares 0 - -3 - 0
Proceeds from
sales of
shares in
subsidiaries - 0 6 0 -
Proceeds from
sales of fixed
assets 2 1 3 6 7
Change in
other
investments -5 48 17 -13 -29
Cash flow
before
financing
activities -188 -5 -106 -205 -708
Net change in
loans and
other
financing
activities 187 -33 109 424 975
Dividends paid
to the owners
of
the parent - 0 -64 -205 -205
Dividends paid
to
non-
controlling
interests - - -2 - -
Net increase
(+)/decrease
(-) in cash
and cash
equivalents -1 -38 -63 14 62
KEY FINANCIAL
INDICATORS
30 Sep 30 Sep 31 Dec Last 12
2010 2009 2009 months
Capital
employed, MEUR 4 505 3 714 4 257 4 505
Interest-
bearing net
debt, MEUR 2 117 1 414 1 918 -
Capital
expenditure and
investment in
shares, MEUR 754 600 863 1 017
Return on average
capital employed,
after tax, ROACE % - - 2,5 2,6
Return on
capital
employed, pre-
tax, ROCE % 5,7 12,6 9,0 4,8
Return on
equity, % 7,2 13,6 10,2 5,4
Equity per
share, EUR 9,07 8,68 8,64 -
Cash flow per
share, EUR 2,43 1,57 0,69 1,55
Equity-to-
assets ratio,
% 37,6 41,8 39,1 -
Leverage
ratio, % 47,6 38,8 46,3 -
Gearing, % 90,7 63,4 86,3 -
Average number
of shares 255 913 686 255 903 686 255 903 960 255 911 439
Number of
shares at the
end of
the period 255 913 686 255 903 686 255 913 686 255 913 686
Average number
of personnel 5 078 5 336 5 286 -
NOTES TO THE CONDENSED
CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
1. BASIS OF
PREPARATION AND
ACCOUNTING POLICIES
The interim report 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 2009, with the exception of the following changes due to the
adoption of the new and revised IFRS standards and IFRIC interpretations.
- IFRS 3 (revised), Business combinations. Neste Oil applies the revised
standard to business combinations taking place on or after 1 January 2010.
- IAS 27 (revised),
Consolidated and
Separate Financial
Statements
- IAS 39 (amendment) Financial Instruments:
Recognition and Measurement - Eligible
hedged items
- IFRS 2 (amendment) Share-
based Payment - Group cash-
settled transactions
- IFRIC 17
Distributions of
Non-cash Assets to
Owners
- Annual
improvements
2009.
The above mentioned amendments do not have a material impact on the
reported income statement, balance sheet or notes.
2. TREASURY
SHARES
In 2007 Neste Oil entered into an agreement with a third party service provider
concerning the administration of the 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 possible future
payment of the rewards, which will take place partly in Neste Oil shares and
partly in cash during 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. As at 30 September 2010 there were 490,000
shares accounted for as treasury shares.
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, Nynas AB and also as of Q2/2010
NSE Biofuels Oy are included in the Others segment. The comparative figures have
been adjusted accordingly.
REVENUE Last 12
MEUR 7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009 months
Oil Products 2 491 1 971 6 827 5 644 7 631 8 814
Renewable Fuels 120 59 216 121 182 277
Oil Retail 917 789 2 650 2 207 2 998 3 441
Others 38 37 132 120 164 176
Eliminations -501 -356 -1 459 -947 -1 339 -1 851
Total 3 065 2 500 8 366 7 145 9 636 10 857
OPERATING PROFIT Last 12
MEUR 7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009 months
Oil Products 116 80 163 291 318 190
Renewable Fuels 2 -1 -32 -13 -24 -43
Oil Retail 24 19 44 44 50 50
Others 2 17 3 4 -7 -8
Eliminations -1 -2 -1 0 -2 -3
Total 143 113 177 326 335 186
COMPARABLE
OPERATING PROFIT Last 12
MEUR 7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009 months
Oil Products 45 15 100 116 105 89
Renewable Fuels -12 -6 -52 -19 -29 -62
Oil Retail 23 19 42 45 50 47
Others 2 16 61 3 -8 50
Eliminations -1 -2 -1 0 -2 -3
Total 57 42 150 145 116 121
DEPRECIATION,
AMORTIZATION AND
IMPAIRMENTS Last 12
MEUR 7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009 months
Oil Products 48 43 137 130 178 185
Renewable Fuels 5 4 15 8 14 21
Oil Retail 8 8 24 23 31 32
Others 3 3 8 8 11 11
Total 64 58 184 169 234 249
CAPITAL EXPENDITURE AND
INVESTMENTS IN SHARES Last 12
MEUR 7-9/2010 7-9/2009 1-9/2010 1-9/2009 1-12/2009 months
Oil Products 23 45 235 139 198 294
Renewable Fuels 157 158 435 431 619 623
Oil Retail 8 9 23 19 29 33
Others 2 4 61 11 17 67
Total 190 216 754 600 863 1 017
TOTAL ASSETS 30 Sep 30 Sep 31 Dec
MEUR 2010 2009 2009
Oil Products 3 699 3 597 3 750
Renewable Fuels 1 575 869 1 065
Oil Retail 572 544 545
Others 380 301 296
Unallocated
assets 220 207 234
Eliminations -222 -175 -190
Total 6 224 5 343 5 700
NET ASSETS 30 Sep 30 Sep 31 Dec
MEUR 2010 2009 2009
Oil Products 2 610 2 573 2 943
Renewable
Fuels 1 468 752 925
Oil Retail 316 308 305
Others 299 249 249
Eliminations -2 4 1
Total 4 691 3 886 4 423
RETURN ON NET
ASSETS, % 30 Sep 30 Sep 31 Dec Last 12
2010 2009 2009 months
Oil Products 8,0 15,1 12,0 7,0
Renewable
Fuels -3,6 -3,2 -3,9 -3,9
Oil Retail 19,0 18,4 15,8 16,2
COMPARABLE
RETURN ON NET
ASSETS, % 30 Sep 30 Sep 31 Dec Last 12
2010 2009 2009 months
Oil Products 4,9 6,0 4,0 3,3
Renewable
Fuels -5,9 -4,7 -4,7 -5,7
Oil Retail 18,1 18,8 15,8 15,2
QUARTERLY
SEGMENT
INFORMATION
QUARTERLY
REVENUE
MEUR 7-9/2010 4-6/2010 1-3/2010 10-12/2009 7-9/2009 4-6/2009 1-3/2009
Oil Products 2 491 2 064 2 272 1 987 1 971 2 091 1 582
Renewable
Fuels 120 60 36 61 59 38 24
Oil Retail 917 884 849 791 789 727 691
Others 38 45 49 44 37 41 42
Eliminations -501 -477 -481 -392 -356 -305 -286
Total 3 065 2 576 2 725 2 491 2 500 2 592 2 053
QUARTERLY
OPERATING
PROFIT
MEUR 7-9/2010 4-6/2010 1-3/2010 10-12/2009 7-9/2009 4-6/2009 1-3/2009
Oil Products 116 -18 65 27 80 105 106
Renewable
Fuels 2 -19 -15 -11 -1 -2 -10
Oil Retail 24 14 6 6 19 13 12
Others 2 -42 43 -11 17 -2 -11
Eliminations -1 2 -2 -2 -2 4 -2
Total 143 -63 97 9 113 118 95
QUARTERLY COMPARABLE
OPERATING PROFIT
MEUR 7-9/2010 4-6/2010 1-3/2010 10-12/2009 7-9/2009 4-6/2009 1-3/2009
Oil Products 45 -3 58 -11 15 37 64
Renewable
Fuels -12 -23 -17 -10 -6 -6 -7
Oil Retail 23 13 6 5 19 14 12
Others 2 16 43 -11 16 -2 -11
Eliminations -1 2 -2 -2 -2 4 -2
Total 57 5 88 -29 42 47 56
QUARTERLY DEPRECIATION,
AMORTIZATION AND IMPAIRMENTS
MEUR 7-9/2010 4-6/2010 1-3/2010 10-12/2009 7-9/2009 4-6/2009 1-3/2009
Oil Products 48 47 42 48 43 43 44
Renewable
Fuels 5 5 5 6 4 2 2
Oil Retail 8 8 8 8 8 8 7
Others 3 2 3 3 3 3 2
Total 64 62 58 65 58 56 55
QUARTERLY
CAPITAL
EXPENDITURE
AND
INVESTMENTS IN
SHARES
MEUR 7-9/2010 4-6/2010 1-3/2010 10-12/2009 7-9/2009 4-6/2009 1-3/2009
Oil Products 23 158 54 59 45
Unternehmensinformation / Kurzprofil:
Datum: 29.10.2010 - 08:01 Uhr
Sprache: Deutsch
News-ID 47216
Anzahl Zeichen: 0
contact information:
Town:
Espoo
Kategorie:
Business News
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Die Pressemitteilung mit dem Titel:
"Neste Oil's interim report for January-September 2010"
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