Neste Oil Makes First Profit in Renewables
Wednesday, April 24, 2013
Neste Oil Corporation
Neste Oil’s Interim Report for January-March 2013
First quarter in brief:
President & CEO Matti Lievonen:
Oil Products had a solid first quarter, thanks to reasonably high refining margins and good operational performance. Refining margins were driven by strong diesel margins; unseasonably high gasoline margins also made a contribution, especially in February and March. Overall, we are pleased with Oil Products’ first-quarter comparable operating profit of EUR 111 million.
Renewable Fuels made very good progress and for the first time recorded a clearly positive comparable operating profit of EUR 26 million. We were able to expand our customer base further and sales allocations were also successful. Price differentials between different vegetable oils remained favorable during the quarter.
Despite ongoing economic uncertainties, which have been reflected in the oil and renewable fuel markets, our guidance remains unchanged. We expect the Group’s full-year comparable operating profit and that of Renewable Fuels to improve from the levels seen in 2012, and be positive at Renewable Fuels.”
The Group’s first-quarter 2013 results
Oil Products’ first-quarter comparable operating profit was EUR 111 million (77 million), Renewable Fuels’ EUR 26 million (-2 million), and Oil Retail’s EUR 11 million (15 million). The comparable operating profit of the Others segment totaled EUR -12 million (-7 million); associated companies and joint ventures accounted for EUR -6 million (-6 million) of this figure.
The Group’s IFRS operating profit was EUR 86 million (191 million), which was impacted by inventory losses totaling EUR 35 million (gains of 64 million) and changes in the fair value of open oil derivatives totaling EUR -14 million (3 million). It should also be noted that the result during the corresponding period last year was positively impacted by a one-time capital gain of EUR 45 million. Pre-tax profit was EUR 65 million (169 million), profit for the period EUR 47 million (123 million), and earnings per share EUR 0.18 (0.48).
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 March, the rolling twelve-month ROACE was 5.9% (2012 financial year: 5.0%).
Diesel production line 4 at the Porvoo refinery is currently being shut down for maintenance for up to eight weeks. The shutdown will include a four-week regulatory pressure vessel inspection. Gasoline production at the Porvoo refinery was reduced by a three-week unplanned maintenance outage in April.
In Renewable Fuels, the focus will continue to be on sales, feedstock, and production optimization. The segment’s full-year comparable operating profit is expected to improve from that seen in 2012 and be positive.
The Group’s full-year comparable operating profit is expected to improve compared to 2012, assuming that Neste Oil’s reference refining margin remains at the average level of approx. USD 5/bbl typical of the last few years and that Renewable Fuels’ result develops as expected.