Third quarter results 2017 Matti Lievonen, President & CEO 26 October 2017
Agenda 1. Q3/17 Group financials 2. January-September 2017 review 3. Q3/17 Segment reviews 4. Current topics 5. Appendix 2
Disclaimer The following 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 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 following forward-looking statements, possibly to a material degree. All forward-looking statements made in this presentation are based on information presently available to management and Neste Corporation assumes no obligation to update any forward-looking statements. Nothing in this presentation constitutes investment advice and this presentation 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. 3
Excellent quarter strong performance in all business areas Comparable EBIT 350 MEUR Excellent result in Renewable Products Oil Products good result supported by healthy refining market and operational performance Marketing & Services continued to improve its performance 4
Strong performance visible in financial targets ROACE, rolling 12 months, % Leverage, % 25 20 15 17.3 50 40 30 10 20 14.1 5 10 0 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 0 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 5
Q3/17 Group financials
Group financials Q3/17 improvement in all key figures MEUR Q3/2017 Q3/2016 Revenue 3,229 3,034 Comparable EBITDA 442 357 EBITDA 431 411 Comparable operating profit 350 264 Oil Products 158 120 Renewable Products 171 124 Marketing & Services 27 25 Others (incl. eliminations) -5-6 Operating profit 339 319 Cash flow before financing activities 283 147 Comparable earnings per share, EUR 1.08 0.80 7
Reference margins and operations boosting the result Group comparable EBIT Q3/16 vs. Q3/17, MEUR 264 +22 +107-25* -21-11 +14 350 Q3/16 Volumes Reference margin Additional margin Fx changes Fixed costs Others Q3/17 8 *Including -45 MEUR from US Blender s Tax Credit (BTC) in Q3/16
January- September 2017 review
Cumulative comparable EBIT higher than in 2016 Stronger reference margin in both Oil Products and Renewable Products Sales volumes 19% higher in Renewables Lower additional margins impacted results 10
Group financials 1-9/17 comparable operating profit growth 10% from 2016 MEUR 1-9/2017 1-9/2016 Revenue 9,580 8,268 Comparable EBITDA 1,063 993 EBITDA 1,148 1,125 Comparable operating profit 790 721 11 Oil Products 406 355 Renewable Products 352 323 Marketing & Services 57 70 Others (incl. eliminations) -25-27 Operating profit 875 853 Cash flow before financing activities 340 567 Comparable earnings per share, EUR 2.32 2.21
Higher reference margins and sales volumes contributed to strong nine-month result Group comparable EBIT 1-9/16 vs. 1-9/17, MEUR +173-143* 721 +83 +5-31 -16 790 1-9/16 Volumes Reference margin Additional margin Fx changes Fixed costs Others 1-9/17 12 *Including -131 MEUR from BTC in 1-9/16
Q3/17 Segment reviews
Strong results in Oil Products Oil Products comparable EBIT, MEUR 200 160 120 80 40 0 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 MEUR Q3/17 Q3/16 2016 Revenue 2,045 1,961 7,395 Comparable EBIT 158 120 453 Net assets 2,538 2,443 2,424 Comparable EBIT 158 MEUR (120 MEUR) Sales volume 3.6 Mton (3.9 Mton) Porvoo average utilization rate 97% (92%) Urals share of feed 66% (74%) Investments 61 MEUR (49 MEUR) Comparable RONA* 20.0% (18.2%) * Last 12 months 14
Supportive refining market driving strong results Oil Products comparable EBIT Q3/16 vs. Q3/17, MEUR 120-12 +84-30 -12-4 +12 158 Q3/16 Volumes Reference margin Additional margin Fx changes Fixed costs Others Q3/17 15
Higher product margins supported by healthy demand Product margins (price differential vs. Brent), USD/bbl 30 20 10 0-10 -20-30 Jan-14 Jan-15 Jan-16 Jan-17 Urals vs. Brent price differential, USD/bbl 0-1 -2-3 -4 Jan-14 Jan-15 Jan-16 Jan-17 16 Diesel Gasoline Heavy Fuel Oil
Total refining margin boosted by high reference margin Total refining margin, USD/bbl 14 12 10 8 6 4 2 0 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Reference margin Additional margin Total refining margin USD 11.96/bbl (9.40) Reference margin USD 7.21/bbl (3.85) Additional margin USD 4.76/bbl (5.55) Porvoo average utilization rate 97% (92%) Naantali major two-month turnaround during Q3 Refinery production costs USD 4.0/bbl (3.7) 17
Excellent result in Renewable Products Comparable EBIT, MEUR 200 150 100 50 0 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 MEUR Q3/17 Q3/16 2016 Revenue 793 640 2,690 Comparable EBIT 171 124 469 Net assets 1,870 1,803 1,811 Comparable EBIT 171 MEUR (124 MEUR) Additional margin USD 256/ton (245) without US Blender s Tax Credit Sales volume 637 kton (544 kton); share of North America 27% (35%) Share of waste and residues feedstock 77% (79%) Investments 22 MEUR (18 MEUR) Comparable RONA* 27.0% (31.0%) * Last 12 months 18
Higher sales volumes and margins Renewable Products comparable EBIT Q3/16 vs. Q3/17, MEUR +35 +23 +5-9 -6-1 171 124 Q3/16 Volumes Reference margin Additional margin Fx changes Fixed costs Others Q3/17 19
European biodiesel margins averaged higher year-on-year FAME RED Seasonal vs. Palm oil price* differential, USD/ton 500 Vegetable oil and animal fat prices**, USD/ton 1,400 400 1,200 300 1,000 200 100 800 600 20 0 Jan-14 Jan-15 Jan-16 Jan-17 * Including $70/ton freight **Quotations in NWE, source: Oil World 400 Jan-14 Jan-15 Jan-16 Jan-17 Soybean Rapeseed Palm oil Animal fat
US biodiesel margins improved to last year s level SME vs. Palm oil price* differential, USD/ton Biodiesel RIN, US cent /gal 500 150 400 300 100 200 100 50 21 0 Jan-14 Jan-15 Jan-16 Jan-17 * Including $70/ton freight 0 Jan-14 Jan-15 Jan-16 Jan-17 Biomass-based diesel (D4) Conventional renewable fuel (D6)
Increase in comparable sales margin driven by high additional margin Renewable Products margin, USD/ton 700 600 500 400 300 200 100 0 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Comparable sales margin USD 435/ton (375) Reference margin USD 290/ton (260) Additional margin USD 256/ton (245) High utilization rate 99% (100%) Reference margin Additional margin Comparable sales margin 22
Marketing & Services improved performance Comparable EBIT, MEUR 30 20 10 0 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Comparable EBIT 27 MEUR (25 MEUR) Sales volumes maintained year-on-year Unit margins normalized Investments 8 MEUR (8 MEUR) Comparable RONA* 34.0% (46.7%) MEUR Q3/17 Q3/16 2016 Revenue 986 925 3,552 Comparable EBIT 27 25 90 Net assets 304 208 196 * Last 12 months 23
Marketing & Services back on right track Marketing & Services comparable EBIT Q3/16 vs. Q3/17, MEUR 25 0 0 0 +2-1 27 Q3/16 Volumes Unit margins Fx changes Fixed costs Others Q3/17 24
Current topics
Outlook for 2017 The year has continued well and we expect the year 2017 to be very successful for Neste 26
Segment outlook for 2017 Oil Products Margin Reference margin expected to decrease from third quarter peaks, but to continue strong for the season. Average reference margin in 2017 expected to be above previous year s level. Renewable Products Margin Additional margin expected to stay at good level during the fourth quarter. Marketing & Services Unit margins and sales volumes Expected to follow previous years seasonality pattern. Utilization rate Porvoo refinery expected to run at high utilization, except for a scheduled four-week decoking maintenance at Production Line 4 during Q4. Naantali unit turnaround and conversion changes completed mid-october. Utilization rate Utilization rates expected to be high, except for a twoweek shutdown of Singapore refinery due to hydrogen supplier s planned maintenance outage in November. 27
We continue to focus on Safety Cash flow Refinery productivity Markets and customers 28
Appendix
Renewable Products comparable EBIT calculation Q3/16 Q4/16 2016 Q1/17 Q2/17 Q3/17 Sales volume, kt 544 662 2,222 543 674 637 Reference margin, $/ton 260 338 268 271 278 290 Additional margin, $/ton 245 127 210 125 101 256 Variable production costs, $/ton 130 130 130 110 110 110 Comparable sales margin, $/ton 375 335 348 286 270 435 Comparable sales margin, MEUR 183 206 701 146 165 236 Fixed costs, MEUR 33 34 129 40 37 39 Depreciations, MEUR 26 31 109 26 28 27 Comparable EBIT, MEUR 124 146 469 80 101 171 30
Refinery production costs, Porvoo & Naantali Q3/16 Q4/16 2016 Q1/17 Q2/17 Q3/17 Refined products Million barrels 26.8 25.0 105.6 27.2 27.1 27.3 Exchange rate EUR/USD 1.12 1.08 1.11 1.06 1.10 1.17 Utilities costs Fixed costs External cost sales Total EUR million 38.9 44.4 158.6 44.1 44.1 43.0 USD/bbl 1.6 1.9 1.7 1.7 1.8 1.8 EUR million 54.1 82.2 255.1 55.4 64.8 55.0 USD/bbl 2.3 3.6 2.7 2.2 2.6 2.4 EUR million -3.2-4.3-16.9-3.9-3.2-3.7 USD/bbl -0.1-0.2-0.2-0.2-0.1-0.2 EUR million 89.7 122.3 396.8 95.6 105.7 94.4 USD/bbl 3.7 5.3 4.2 3.7 4.3 4.0 31
Cash flow MEUR Q3/17 Q3/16 Q2/17 1-9/17 1-9/16 2016 EBITDA (IFRS) 431 411 357 1,148 1,125 1,521 Capital gains/losses 0-13 0-3 -27-28 Other adjustments 69-18 -81-34 123 121 Change in working capital -80-85 59-249 -271-229 Net finance costs 20-40 -68-99 -64-56 Taxes -51-50 -50-114 -86-137 Net cash generated from operating activities 390 206 216 650 799 1,193 Capital expenditure -131-83 -108-338 -291-407 Other investing activities 24 24-26 28 59 49 Cash flow before financing activities 283 147 82 340 567 834 32
Liquidity & maturity profile MEUR 600 400 200 0 33 2017 2018 2019 2020 2021 2022 2023 2024 2025+ Short-term Long-term Total liquidity at the end of September 2017 was EUR 2,546 million Cash and cash equivalents totalled EUR 496 million Unused committed credit facilities totalled EUR 1,650 million Unused CP programmes (not committed) totalled EUR 400 million Average interest rate for interest-bearing liabilities was 3.1%* and maturity 4.8 years at the end of September No financial covenants in Group companies existing loan agreements *Average interest rate for interest-bearing liabilities excluding finance leases was 2.3%