Neste Oil Corporation
Stock Exchange Release
5 February 2013 at 9.00 a.m. (EET)
Neste Oil's Financial Statements for 2012
Full-year comparable operating profit almost doubled to EUR 352 million (2011: 178 million)
Fourth-quarter comparable operating profit was EUR 82 million (Q4/2011: 20 million)
Solid cash flow reduced leverage during the second half of the year
2012 in brief:
Comparable operating profit was EUR 352 million (2011: EUR 178 million)
IFRS operating profit was EUR 321 million (2011: EUR 273 million)
Total refining margin was USD 10.17/bbl (2011: USD 8.76/bbl)
Net cash from operations was EUR 468 million (2011: EUR 197 million)
Investments totaled EUR 292 million (2011: EUR 364 million)
Leverage ratio was 42.9% (2011: 45.7%)
The Board of Directors will propose a dividend of EUR 0.38 per share (2011: 0.35)
Fourth quarter in brief:
Comparable operating profit was EUR 82 million (Q4/2011: EUR 20 million)
IFRS operating profit was EUR 57 million (Q4/2011: EUR -22 million)
Total refining margin was USD 10.99/bbl (Q4/2011: USD 7.24/bbl)
Net cash from operations was EUR 327 million (Q4/2011: EUR 394 million)
Investments totaled EUR 81 million (Q4/2011: EUR 86 million)
President & CEO Matti Lievonen:
"Neste Oil had a solid year 2012. We were able to almost double the Group's comparable operating profit. We also strengthened our balance sheet and reduced our leverage through strong cash flow generation.
Average refining margins in 2012 were higher than in 2011. While the growth in demand for oil products was not particularly strong, several supply limitations, such as refinery closures and maintenance and other outages, strengthened margins. After being very high in the third quarter, refining margins returned to more normal levels towards the end of the year. Overall refinery productivity at both our Porvoo and Naantali refineries improved, despite maintenance work at both sites. In 2012, the Oil Products segment recorded a comparable operating profit of EUR 396 million, which was significantly higher than in 2011.
We made good progress in the Renewable Fuels business during 2012, increasing our sales volumes by more than a million tons and expanding our markets and customer base. In line with our feedstock strategy, we also increased our use of waste- and residue-based feedstock by over 400,000 tons to 742,000 tons. Although Renewable Fuels remained loss-making in 2012, the business' full-year comparable operating profit improved by EUR 107 million compared to 2011 and reached close to breakeven in the fourth quarter.
Uncertainties in the global economy have been reflected in the oil and renewable fuel markets, and we anticipate that this volatility will continue. However, we expect the Group's full-year comparable operating profit in 2013 to improve compared to 2012. Renewable Fuels' full-year result is expected to improve and be positive."
The Group's fourth-quarter 2012 results
Neste Oil's revenue increased to EUR 4,597 million in the fourth quarter from EUR 4,169 million during the same period in 2011. This increase resulted mainly from higher product prices and the growth of the Renewable Fuels business. The Group's comparable operating profit came in at EUR 82 million. Comparable operating profit for the corresponding period in 2011 was EUR 20 million. Oil Products' result was positively impacted by refining margins, which were higher than in the corresponding period in 2011, although closer to normal compared to the very high levels seen during the third quarter 2012. Renewable Fuels improved year-on-year and, as expected, recorded a comparable operating profit close to breakeven in the fourth quarter. Oil Retail's performance was lower than that in the corresponding period in 2011, and was negatively impacted by tighter margins in Finland and North-West Russia. The Others segment posted a loss and a significantly lower result than in the fourth quarter of 2011.
Oil Products' fourth-quarter comparable operating profit was EUR 116 million (27 million), Renewable Fuels' EUR -2 million (-15 million), and Oil Retail's EUR 5 million (9 million). The comparable operating profit of the Others segment totaled EUR -37 million (2 million); associated companies and joint ventures accounted for EUR -8 million (-3 million) of this figure, which mainly reflects unsatisfactory performance at Nynas. The Others segment's result was also burdened by a EUR 14 million write-off related to an IT system project and changes in internal corporate charges, including pension liabilities.
The Group's IFRS operating profit was EUR 57 million (-22 million), which was impacted by inventory losses totaling EUR 48 million (62 million) and changes in the fair value of open oil derivatives totaling EUR 23 million (9 million). Pre-tax profit was EUR 41 million (-49 million), profit for the period EUR 21 million (-22 million), and earnings per share EUR 0.08 (-0.09).
The Group's full-year results for 2012
Neste Oil's revenue in 2012 totaled EUR 17,853 million (15,420 million). This increase resulted mainly from the growth of the Renewable Fuels business and higher product prices compared to 2011. The Group's comparable operating profit for the year almost doubled to EUR 352 million, from EUR 178 million reported in 2011. Both the Oil Products and Renewable Fuels segments recorded clear improvement in comparable operating profit year-on-year, and Oil Retail's result was also slightly higher than in 2011. The Others segment posted a significantly lower result than in 2011. The Group's fixed costs came in at EUR 666 million (613 million). This increase was mainly caused by higher staff, IT service, and research & development costs.
Oil Products' full-year comparable operating profit was EUR 396 million (271 million), Renewable Fuels' EUR -56 million (-163 million), and Oil Retail's EUR 58 million (57 million). The comparable operating profit of the Others segment totaled EUR -46 million (9 million), of which Nynas accounted for EUR -6 million (19 million).
The Group's full-year IFRS operating profit was EUR 321 million (273 million), which was impacted by inventory losses totaling EUR 61 million (gains of 79 million) and capital gain totaling EUR 45 million (11 million). Pre-tax profit was EUR 233 million (206 million), profit for the period EUR 159 million (160 million), and earnings per share EUR 0.61 (0.62).
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 2012, the rolling twelve-month ROACE was 4.9% (2011 financial year: 2.6%).
Uncertainties in the global economy have been reflected in the oil, renewable fuel, and renewable feedstock markets and this volatility is expected to continue. Global oil demand is generally forecasted to grow moderately in 2013, but new refining capacity is likely to put pressure on simple refineries. Complex refiners such as Neste Oil, are expected to remain the most competitive. Diesel is projected to be the strongest part of the barrel going forward, and gasoline margins are expected to improve seasonally by summer. The base oil market is likely to be under pressure due to sluggish demand in the automotive industry. The renewable fuels market is based on biofuel regulations, and biofuel demand is expected to continue growing. Vegetable oil price differentials are expected to vary, depending on crop outlooks, weather phenomena, and variations in demand for different feedstock.
Production line 4 at the Porvoo refinery is scheduled to be shut down for maintenance for up to eight weeks starting in the second quarter. The shutdown includes a four-week regulatory pressure vessel inspection. No other major oil refinery maintenance is planned for 2013.
Renewable Fuels' full-year comparable operating profit is expected to improve from that seen in 2012 and be positive. The result will depend on market volatility and successful sales allocations. The average margin hedging ratio used in Renewable Fuels is currently clearly lower than in 2012. A shutdown of three weeks at the Singapore NExBTL refinery due a utility supplier's maintenance work in January will reduce the sales volumes in the first quarter.
The Group's investments are expected to total approx. EUR 300-350 million in 2013.
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 will develop as expected.
Dividend distribution proposal
The parent company's distributable equity as of 31 December 2012 amounted to EUR 1,035 million, and there have been no material changes in the company's financial position since the end of the financial year. The Board of Directors will propose to the Annual General Meeting that Neste Oil Corporation pays a cash dividend of EUR 0.38 per share for 2012, totaling EUR 97 million based on the number of registered shares as of 4 February 2013.
Matti Lievonen, President & CEO, tel. +358 10 458 11
Matti Piri, Acting CFO, tel. +358 10 458 4960
Investor Relations, tel. +358 10 458 5292
News conference and conference call
A press conference in Finnish on 2012 results will be held today, 5 February 2013, at 11:30 a.m. EET at the company's headquarters at 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 5 February 2013 at 3 p.m. Finland / 1 p.m. London / 8 a.m. New York. The call-in numbers are as follows: Finland: +358 (0)9 2310 1543, Europe: +44 (0)20 3427 1901, US: +1 646 254 3363, using access code 3394489. The conference call can be followed at the company's web site. An instant replay of the call will be available until 12 February 2013 at +358 (0)9 2310 1650 for Finland at +44 (0)20 3427 0598 for Europe and +1 347 366 9565 for the US, using access code 3394489.
Neste Oil's interim report is available in its entirety on the company's web site at www.nesteoil.com.