Neste Oil releases Interim Report for January – March 2015

“The year has started positively in a very favourable refining margin environment,” said President & CEO Matti Lievonen. “We are also pleased with the internal performance in all our business areas. Neste Oil recorded a strong comparable operating profit of €215 million during the first quarter, compared to the €50 million during the corresponding period last year.”

“Oil Products generated a high comparable operating profit of €156 million, compared to €32 million in the first quarter of 2014. Neste Oil's reference margin strengthened during the first quarter, and averaged US$7.5/bbl. Reference margin ended US$4.1/bbl higher than in the corresponding period last year. Gasoline margins were particularly strong, supported by weak crude oil market, good demand, contango storage building, strikes and refinery outages in the US. Our Porvoo refinery operated at a high utilisation rate, and preparations for the major turnaround proceeded according to plan.

“Renewable Products recorded a comparable operating profit of €42 million, compared to €12 million in the first quarter of 2014. Renewable Products' reference margin remained clearly below the levels seen during the corresponding period last year. We were able to maintain our additional margin at a good level by successful margin management and feedstock flexibility. Weaker euro also had a positive effect on our result. Our sales volume increased by 5% from the first quarter of 2014. After successful debottlenecking in 2014, we have increased our renewable diesel nameplate production capacity from 2.0 million to 2.4 million tpy, which has also lead to lower production costs.

“Oil Retail's markets continued competitive, but we were able to increase profits by introducing new products, such as low sulphur marine fuel, and by improving margins particularly in Northwest Russia. The segment generated a comparable operating profit of €17 million, higher than the €14 million booked in the first quarter of 2014.

“As a result of the strong performance during the first quarter and based on the current market outlook for the remainder of the year, Neste Oil revised its guidance on 21 April, and now estimates the Group's full year 2015 comparable operating profit to remain robust and to be higher than that reached in 2014. Previously Neste Oil expected the full year comparable operating profit to remain robust, although probably lower than that reached in 2014.

“On 1 April the Annual General Meeting decided the company name to be Neste Corporation from the beginning of June. Therefore, this will be the last interim report under Neste Oil name. During the recent years our company has changed remarkably, and the new name reflects this change. We are moving forward."

First quarter highlights

Neste Oil's revenue in the first quarter totalled €2,744 million (€3,510 million). The decrease mainly resulted from lower overall sales prices due to the oil price decline. All segments improved their result from the first quarter of 2014, and the Group’s comparable operating profit came in at €215 million (€50 million). Oil Products' result was positively impacted by reference refining margins, which were clearly higher than in the first quarter of 2014. Also Renewable Products improved as a result of successful margin management, feedstock optimisation and favourable USD/EUR exchange rate. Oil Retail's result was positively impacted by higher margins, particularly in Northwest Russia. The Others segment recorded a higher comparable operating profit compared to the first quarter of 2014.

Oil Products’ first quarter comparable operating profit was €156 million (€32 million), Renewable Products’ €42 million (€12 million), and Oil Retail’s €17 million (€14 million). The comparable operating profit of the Others segment totalled €3 million (€-11 million).

The Group’s IFRS operating profit was €233 million (€50 million), which was impacted by inventory losses totalling €76 million (€3 million), changes in the fair value of open oil derivatives totalling €18 million (€5 million), and non-recurring items totalling €77 million (€-2 million), mainly related to the capital gain from the disposal of the Porvoo electricity grid. Pre-tax profit was €205 million (€33 million), profit for the period.

The Group’s effective tax rate was 12% (21%) mainly due to the tax-exempt items, such as the sale proceeds of the shares of Kilpilahden Sähkönsiirto Oy, electricity grid company.

Outlook

Developments in the global economy have been reflected in the oil, renewable fuel, and renewable feedstock markets; and volatility in these markets is expected to continue.

As a result of the strong performance during the first quarter and based on the current market outlook for the remainder of the year, Neste Oil revised its guidance on 21 April and now estimates the Group's full year 2015 comparable operating profit to remain robust and to be higher than that reached in 2014. Previously Neste Oil expected the full year comparable operating profit to remain robust, although probably lower than that reached in 2014.

Adapted from press release by Rosalie Starling

Read the article online at: https://www.hydrocarbonengineering.com/refining/27042015/neste-oil-releases-interim-report-for-january-march-2015-663/