Neste Corporation 2017 performance in oil products and renewables

Neste Corporation had a successful year in 2017, as a result of determined strategy implementation, good operational performance and improved safety. They posted an all-time high comparable operating profit of €1,101 million compared to €983 million in 2016. Renewable Products was able to exceed the previous year's very good performance, and was again the largest comparable operating profit contributor. Also Oil Products improved as a result of a favorable refining margin environment and good operational performance.

Renewable Products posted an excellent full-year comparable operating profit of €561 million (vs €469 million in 2016), which was a great achievement without the US Blender's Tax Credit. Sales volumes were almost 2.6 million tons, a new annual record and up 16% from the previous year. They allocated a higher share of sales volumes to the European markets compared to 2016. As planned, the share of 100% renewable diesel delivered to end-users increased from 15% in 2016 to 25% of total volumes in full-year 2017. Feedstock mix optimization towards lower-quality raw materials continued successfully, and the proportion of waste and residue inputs was 76%. Operational performance was good as the renewable diesel production facilities operated at a 98% utilization rate in 2017. Neste have announced the selection of Singapore as the location for the new renewables production capacity. The technical design of the new production unit has been initiated with the aim of a final investment decision by the end of 2018. If the project proceeds as planned, production at the new unit will begin by 2022.

Oil Products posted a comparable operating profit of €495 million in 2017 (vs €453 million in 2016), which was the strongest in this decade. Global oil demand continued solid, and product supply and demand were quite well balanced. The overall refining market was favorable, and the reference margin averaged $5.70/bbl in 2017, which was $0.80/bbl higher than in the previous year. Oil Products' additional margin was  $5.40/bbl, supported by good operational performance, and contribution of the new strategic investments towards the end of the year. The strategic investments in the Solvent Deasphalting (SDA) unit and the OneRefinery concept were completed during 2017, which will enable reaching their average additional margin target of at least $5.50/bbl going forward.

In Marketing & Services they were able to maintain their sales volumes at the previous year's level. However, the markets continued to be competitive,€ and unit margins were clearly lower than in 2016. The segment generated a full-year comparable operating profit of €68 million (vs €90 million in 2016).

Neste expects the Renewable Products' additional margin to stay at a good level in 2018. Sales volumes of the 100% renewable diesel delivered to end-users are planned to grow, from the levels in 2017, towards their 50% target in 2020. The vegetable oil market is expected to remain volatile, and Neste continues to expand the use of lower-quality waste and residue feedstock. Utilization rates of our renewable diesel facilities are expected to be high, except for the planned maintenance shutdowns.

Oil Products' reference margin is expected to be below the 2017 average in early 2018, but to get support from the start of the driving season in the spring. Oil product supply and demand are expected to be balanced with continued robust demand growth. Distillates margins are seen to be supported by lower inventory levels compared to the previous year. Crude oil supply limitations by producing countries are likely to lead to a slightly narrower Urals-Brent price differential, compared to 2017. They expect high reliability to continue in OneRefinery operations supporting good utilization rate in 2018. Neste will implement several scheduled unit turnarounds during the spring and autumn.

In Marketing & Services the sales volumes and unit margins are expected to follow the previous years' seasonality pattern. Several actions have been initiated to improve financial performance.

As a conclusion, they expect 2018 to be a strong year for Neste.

Source: Neste Corp Financial Statements 2017

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