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2016-02-04

Neste Oyj: Record-high full-year comparable operating profit and strong cash flow - dividend proposal EUR 1.00 per share

Neste Corporation

Financial Statements Release
4 February 2016 at 9 am. (EET)

Record-high full-year comparable operating profit and strong cash flow -
dividend proposal EUR 1.00 per share

2015 in brief:

· Comparable operating profit totaled EUR 925 million (2014: EUR 583 million)
· IFRS operating profit totaled EUR 699 million (2014: 150 million)
· Oil Products' total refining margin was USD 11.79/bbl (2014: USD 9.83/bbl)
· Major turnaround at the Porvoo refinery completed during the second quarter.
· Renewable Products' comparable sales margin was USD 299/ton (2014: USD
278/ton)
· Cash flow before financing activities was EUR 480 million (2014: EUR -59
million)
· Return on average capital employed (ROACE) was 16.3% (2014: 10.1%)
· Leverage ratio was 29.4% at the end of December (31.12.2014: 37.9%)
· Comparable earnings per share were EUR 2.84 (2014: EUR 1.60)
· The Board of Directors will propose a dividend of EUR 1.00 per share (2014:
0.65), totaling EUR 256 million (2014: EUR 166 million).

Fourth quarter in brief:

· Comparable operating profit totaled EUR 352 million (Q4/2014: EUR 256
million)
· Oil Products' comparable operating profit was EUR 91 million (Q4/2014: EUR
110 million)
· Renewable Products' comparable operating profit was EUR 231 million
(Q4/2014: EUR 142 million)
· Oil Retail's comparable operating profit was EUR 17 million (Q4/2014: EUR 8
million)
· Cash flow before financing activities was EUR 300 million (Q4/2014: EUR 237
million)

President&CEO Matti Lievonen:

"Neste generated an excellent result in 2015 despite the largest major
turnaround in the history of the Porvoo refinery. We posted a full-year
comparable operating profit of EUR 925 million (583 million), almost 60% over
the previous year's level. I am very pleased to note that all business areas
were able to improve their result. Crude oil prices continued to decline in
2015, which reduced our revenue, but the margin environment remained
favorable. We generated a strong cash flow. One of the major achievements in
2015 was that our return on average capital employed after tax exceeded the
long term target level of 15%.

Oil Products posted a comparable operating profit of EUR 439 million, compared
to EUR 285 million in 2014. During the year refining margins were supported
by a particularly strong gasoline market, which was mainly driven by demand
growth in the low oil price environment. Neste's reference margin averaged
USD 7.7/bbl in 2015, more than 60% higher than in 2014. The scheduled major
turnaround at the Porvoo refinery, which was successfully completed in June,
had a EUR 130 million negative impact on the operating profit. A favorable
USD/EUR exchange rate affected the result positively.

Renewable Products recorded a full-year comparable operating profit of EUR 402
million, compared to EUR 239 million in 2014. Renewable Products' average
reference margin was lower than in 2014, but we were able to grow our
additional margin. Stronger US dollar had a positive impact on the segment's
result. Our sales volumes reached a new record of 2.267 million tons, an 8%
increase from the previous year. A slightly higher share, 31% of the volume,
was allocated to the North American market in 2015. In the US market the
Environmental Protection Agency (EPA) has finalized growing volume mandates
for biomass-based diesel for 2016 and 2017, and the Blender's Tax Credit
(BTC) was reinstated retroactively for 2015 and in advance for 2016. The
positive contribution of the BTC on operating profit was higher in 2015 than
in 2014. The use of waste- and residue feedstock was successfully expanded to
average 68% of total renewable inputs in 2015.

In Oil Retail we were able to increase profits by growing sales volumes and
improving unit margins. The segment generated a full-year comparable
operating profit of EUR 84 million, which was the highest ever and a clear
improvement from 2014.

Crude oil and renewable feedstock price changes, as well as supply and demand
balances, will be reflected in the oil and renewable fuel markets. Low crude
oil prices are expected to continue supporting product demand. Neste expects
Oil Products' reference refining margin to continue to be supported by
relatively good gasoline margins. Our Porvoo refinery is expected to run at
high utilization rate with no major maintenance outages scheduled. Renewable
Products' reference margin is expected to remain at approximately the year
2015 average level. Utilization rates of our renewable diesel production
facilities are expected to be high, excluding the scheduled turnaround at the
Rotterdam refinery in April-May. In Oil Retail the sales volumes and unit
margins are expected to follow the previous years' seasonality pattern."

The Group's fourth-quarter 2015 results

Neste's revenue of EUR 2,759 million in the fourth quarter was lower than that
during the last quarter of 2014 (EUR 3,552 million). The decrease mainly
resulted from lower sales prices caused by the oil price decline, which had a
negative impact of EUR 1.5 billion on the revenue year-on-year. A change in
USD/EUR exchange rate had a positive impact of EUR 0.3 billion, and higher
sales volumes had a positive impact of EUR 0.3 billion year-on-year. The
Group's comparable operating profit came in at EUR 352 million. Comparable
operating profit for the corresponding period in 2014 was EUR 256 million.
Oil Products' result was positively impacted by a favorable USD/EUR exchange
rate, but negatively impacted by a lower additional margin and higher
depreciations than in the last quarter of 2014. Renewable Products improved
significantly due to a higher sales volume, impact of the US Blender's Tax
Credit (BTC), and the favorable USD/EUR exchange rate. Oil Retail's
performance was clearly better than that during the corresponding period in
2014. Oil Retail's result was positively impacted by higher sales volumes and
lower fixed costs. The Others segment improved significantly from the fourth
quarter of 2014, mainly due to improvement of Nynas' result.

Oil Products' fourth-quarter comparable operating profit was EUR 91 million
(110 million), Renewable Products' EUR 231 million (142 million), and Oil
Retail's EUR 17 million (8 million). The comparable operating profit of the
Others segment totaled EUR 15 million (-2 million); joint arrangements
accounted for EUR 22 million (1 million) of this figure.

The Group's IFRS operating profit was EUR 245 million (-25 million), which was
impacted by inventory losses totaling EUR 91 million (322 million), changes
in the fair value of open oil derivatives totaling EUR 7 million (49
million), and non-recurring items totaling EUR -22 million (-8 million). The
non-recurring items include EUR 17 million penalty payment the Finnish
Customs has levied on Neste for not meeting the Finnish biofuel mandate
requirements in 2011. Neste disputes the Customs' interpretation, has
appealed the decision, and considers the penalty payment unjustified. Pre-tax
profit was EUR 219 million (-30 million), profit for the period EUR 209
million (-21 million), and earnings per share EUR 0.81 (-0.08).

The Group's full-year results for 2015

Neste's revenue in 2015 totaled EUR 11,131 million (15,011 million). The
decrease resulted from lower overall sales prices caused by the oil price
decline, which had a negative impact of EUR 5.0 billion, and lower sales
volumes, mainly due to the scheduled Porvoo refinery turnaround, which had a
negative impact of EUR 0.6 billion. The change in USD/EUR exchange rate had a
positive impact of EUR 1.6 billion on the revenue year-on-year. The Group's
comparable operating profit for the year was EUR 925 million, almost 60%
higher than the 583 million reported in 2014. Oil Products' comparable
operating profit was positively impacted by higher reference margins and a
favorable USD/EUR exchange rate, which more than compensated for the negative
impact of the scheduled major turnaround at the Porvoo refinery and lower
additional margin. In Renewable Products we improved our comparable operating
profit mainly as a result of higher sales volume, higher additional margin
and a favorable USD/EUR exchange rate. Oil Retail's result was also clearly
higher than in 2014 due to higher sales volumes and unit margins. The Others
segment improved significantly compared to 2014, mainly due to Nynas
performance. The Group's fixed costs were EUR 668 million (654 million), an
increase that was mainly caused by higher personnel and ERP system
implementation costs.

Oil Products' full-year comparable operating profit was EUR 439 million (285
million), Renewable Products' EUR 402 million (239 million), and Oil Retail's
EUR 84 million (68 million). The comparable operating profit of the Others
segment totaled EUR 2 million (-7 million), of which Nynas accounted for EUR
29 million (11 million).

The Group's full-year IFRS operating profit was EUR 699 million (150 million),
which was impacted by inventory losses totaling EUR 263 million (492
million), changes in the fair value of open oil derivatives totaling EUR -15
million (74 million), and non-recurring items totaling EUR 52 million (-16
million), mainly related to the capital gain from the disposal of the Porvoo
electricity grid. Pre-tax profit was EUR 634 million (78 million), and profit
for the period EUR 560 million (60 million). Comparable earnings per share
were EUR 2.84 (1.60), and earnings per share EUR 2.18 (0.22). The Group's
effective tax rate was 12% (23%). Effective tax rate, which was lower than in
the previous year, is a result of the booked tax-exempt items during the
calendar year, such as the sale proceeds of the shares of Kilpilahden
Sähkönsiirto Oy, and the different distribution of profits over Neste's
countries of operation.

Outlook for 2016

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.

Low crude oil prices are expected to continue supporting product demand. Crude
oil supply is expected to increase as the economic sanctions against Iran are
lifted and more medium heavy crude oil will be brought to the European market
in 2016. Global oil demand growth estimates for 2016 have been increased to a
level of 1.2 - 1.4 million bbl/d, as especially gasoline demand is expected
to continue solid growth. In light of the expected refining capacity growth
the global product supply and demand look reasonably balanced.

Vegetable oil price differentials are expected to vary, depending on crop
outlooks, weather phenomena, and variations in demand for different
feedstocks, but no fundamental changes in the drivers influencing long-term
average feedstock price differentials are expected. Market volatility in
feedstock prices is expected to continue, which will have an impact ...

Författare WKR

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