Half-year results 2017 Matti Lievonen, President & CEO 3 August 2017
Agenda 1. Q2/17 Group financials 2. January-June 2017 review 3. Q2/17 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
Solid performance continued Comparable EBIT 236 MEUR Good quarter in Oil Products Record-high sales volumes in Renewable Products Marketing & Services improved performance from Q1/17 4
Solid performance visible in financial targets ROACE, rolling 12 months, % Leverage, % 25 50 20 15 16.2 40 30 10 20 19.6 5 10 0 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 0 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 5
Q2/17 Group financials
Group financials Q2/17 MEUR Q2/2017 Q2/2016 Revenue 3,280 2,927 Comparable EBITDA 328 374 EBITDA 357 372 Comparable operating profit 236 282 Oil Products 122 149 Renewable Products 101 119 Marketing & Services 19 23 Others (incl. eliminations) -6-9 Operating profit 264 280 Cash flow before financing activities 82 346 Comparable earnings per share, EUR 0.68 0.84 7
Increased sales volumes and supportive markets Group comparable EBIT Q2/16 vs. Q2/17, MEUR 282 +46 +31-103 +12-10 -22 236 Q2/16 Volumes Reference margin Additional margin Fx changes Fixed costs Others Q2/17 8
January-June 2017 review
Result on right track Higher sales volumes compared to H1/2016 Higher reference margin in both Oil Products and Renewable Products Lower additional margins impacted result Strategic refinery investments making progress 10
Group financials H1/17 MEUR H1/2017 H1/2016 Revenue 6,351 5,234 Comparable EBITDA 621 636 EBITDA 717 714 Comparable operating profit 439 457 Oil Products 248 235 Renewable Products 181 199 Marketing & Services 31 45 Others (incl. eliminations) -20-22 Operating profit 536 534 Cash flow before financing activities 58 420 Comparable earnings per share, EUR 1.24 1.41 11
Result close to H1/16 level Group comparable EBIT H1/16 vs. H1/17, MEUR 457 +60 +66-118 +24-20 -30 439 H1/16 Volumes Reference margin Additional margin Fx changes Fixed costs Others H1/17 12
Q2/17 Segment reviews
Good performance in Oil Products Oil Products comparable EBIT, MEUR 200 160 120 80 40 0 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Comparable EBIT 122 MEUR (149 MEUR) Sales volume 3.6 Mton (3.7) Urals share of feed 74% (69%) Investments 61 MEUR (89 MEUR) Comparable RONA* 18.6% (20.4%) MEUR Q2/17 Q2/16 2016 Revenue 2,080 1,916 7,395 Comparable EBIT 122 149 453 Net assets 2,597 2,451 2,424 * Last 12 months 14
Lower additional margin in similar refining market Oil Products comparable EBIT Q2/16 vs. Q2/17, MEUR 149 0 +2-15 +7-15 -6 122 Q2/16 Volumes Reference margin Additional margin Fx changes Fixed costs Others Q2/17 15
Urals-Brent differential narrowed 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 level maintained at good level Total refining margin, USD/bbl 14 12 10 8 6 4 Total refining margin USD 10.67/bbl (11.19) Reference margin USD 5.68/bbl (5.59) Additional margin USD 4.99/bbl (5.60) Porvoo average utilization rate 92% (97%) Refinery production costs USD 4.3/bbl (3.8) 2 0 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Reference margin Additional margin 17
Record-high sales volumes in Renewable Products Comparable EBIT, MEUR 200 150 100 50 0 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 MEUR Q2/17 Q2/16 2016 Revenue 828 596 2,690 Comparable EBIT 101 119 469 Net assets 1,895 1,735 1,811 Comparable EBIT 101 MEUR (119 MEUR) US Blender s Tax Credit expired at end- 2016 Sales volume 674 kton (485 kton); share of North America 32% (41%) Share of waste and residues feedstock 81% (93%) Investments 24 MEUR (37 MEUR) Comparable RONA* 24.8% (28.2%) * Last 12 months 18
Expiry of BTC visible in additional margin Renewable Products comparable EBIT Q2/16 vs. Q2/17, MEUR +46 +29-88 119 +5-10 0 101 Q2/16 Volumes Reference margin Additional margin Fx changes Fixed costs Others Q2/17 19
European margins 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-14Jul-14 Jan-15Jul-15 Jan-16Jul-16 Jan-17Jul-17 * Including $70/ton freight **Quotations in NWE, source: Oil World 400 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Soybean Rapeseed Palm oil Animal fat
US margins improved after biofuel mandates reconfirmed SME vs. Palm oil price* differential, USD/ton Biodiesel RIN, US cent /gal 500 150 400 300 100 200 100 50 21 0 Jan-14Jul-14 Jan-15Jul-15 Jan-16Jul-16 Jan-17Jul-17 * Including $70/ton freight 0 Jan-14Jul-14 Jan-15Jul-15 Jan-16 Jul-16 Jan-17Jul-17 Biomass-based diesel (D4) Conventional renewable fuel (D6)
Comparable sales margin maintained at Q1/17 level Renewable Products margin, USD/ton 700 600 500 400 300 200 100 0 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Comparable sales margin USD 270/ton (405) Reference margin USD 278/ton (232) Additional margin USD 101/ton (303) High utilization rate 96% (71%) Reference margin Additional margin Comparable sales margin 22
Marketing & Services improved performance Comparable EBIT, MEUR 30 20 10 0 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 MEUR Q2/17 Q2/16 2016 Revenue 952 886 3,552 Comparable EBIT 19 23 90 Net assets 204 192 196 Comparable EBIT 19 MEUR (23 MEUR) Sales volumes maintained year-on-year Unit margins improved from Q1/17 Heavy traffic continues to recover in Finland Investments 12 MEUR (6 MEUR) Comparable RONA* 37.2% (46.9%) * Last 12 months 23
Result impacted by lower unit margins Marketing & Services comparable EBIT Q2/16 vs. Q2/17, MEUR 23 0-3 +1 0-2 19 Q2/16 Volumes Unit margin Fx changes Fixed costs Others Q2/17 24
Current topics
Outlook for 2017 Strategy implementation proceeding well Focus on customers and growth initiatives continues We are confident that year 2017 will be another successful one for Neste 26
Segment outlook for 2017 Oil Products Margin Reference margin in 2017 expected to be on average similar to 2016. Additional margin targeted at least USD 5.5/bbl after strategic investments completed. Renewable Products Margin Reference margin in 2017 expected to be on average higher than in 2016. Aiming at higher additional margin. Utilization rate Porvoo refinery expected to run at high utilization with normal unit maintenances including Production Line 4 decoking starting in October. Naantali unit scheduled for major two-month turnaround starting in August. Utilization rate Utilization rates expected to stay high. Marketing & Services Unit margins and sales volumes Expected to follow previous years seasonality pattern. 27
Capital Markets Day 2017 Neste will host a Capital Markets Day in London on 19 September 2017 The program will cover an update on Neste s strategy and businesses More information on neste.com/investors 28
We continue to focus on Safety Cash flow Refinery productivity Markets and customers 29
Appendix
Renewable Products comparable EBIT calculation Q2/16 Q3/16 Q4/16 2016 Q1/17 Q2/16 Sales volume, kt 485 544 662 2,222 543 674 Reference margin, $/ton 232 260 338 268 271 278 Additional margin, $/ton 303 245 127 210 125 101 Variable production costs, $/ton 130 130 130 130 110 110 Comparable sales margin, $/ton 405 375 335 348 286 270 Comparable sales margin, MEUR 174 183 206 701 146 165 Fixed costs, MEUR 28 33 34 129 40 37 Depreciations, MEUR 29 26 31 109 26 28 Comparable EBIT, MEUR 119 124 146 469 80 101 31
Refinery production costs, Porvoo & Naantali Q2/16 Q3/16 Q4/16 2016 Q1/17 Q2/17 Refined products Million barrels 28.2 26.8 25.0 105.6 27.2 27.1 Exchange rate EUR/USD 1.13 1.12 1.08 1.11 1.06 1.10 Utilities costs Fixed costs External cost sales Total EUR million 38.3 38.9 44.4 158.6 44.1 44.1 USD/bbl 1.5 1.6 1.9 1.7 1.7 1.8 EUR million 60.1 54.1 82.2 255.1 55.4 64.8 USD/bbl 2.4 2.3 3.6 2.7 2.2 2.6 EUR million -3.7-3.2-4.3-16.9-3.9-3.2 USD/bbl -0.1-0.1-0.2-0.2-0.2-0.1 EUR million 94.7 89.7 122.3 396.8 95.6 105.7 USD/bbl 3.8 3.7 5.3 4.2 3.7 4.3 32
Balance sheet Total assets Non-current assets Current assets Total equity and liabilities Int-bear. liabilities Equity Int-free liabilities 8,000 7,000 7,077 7,094 8,000 7,000 7,077 7,094 6,000 5,000 4,176 4,141 6,000 5,000 3,898 3,300 4,000 4,000 3,000 2,000 1,000 0 2,901 2,953 30 Jun 17 30 Jun 16 3,000 2,000 1,000 0 1,169 1,790 2,010 2,004 30 Jun 17 30 Jun 16 33
Cash flow MEUR Q2/17 Q2/16 Q1/17 H1/17 H1/16 2016 EBITDA (IFRS) 357 372 361 717 714 1,521 Capital gains/losses 0-5 -3-3 -14-28 Other adjustments -81 156-22 -103 141 121 Change in working capital 59-50 -227-168 -187-229 Net finance costs -68 18-52 -120-23 -56 Taxes -50-16 -13-63 -37-137 Net cash generated from operating activities 216 476 44 260 593 1,193 Capital expenditure -108-138 -99-207 -209-407 Other investing activities -26 8 30 4 35 49 Cash flow before financing activities 82 346-25 58 420 834 34
Liquidity & maturity profile MEUR 600 400 200 0 35 2017 2018 2019 2020 2021 2022 2023 2024 2025+ Short-term Long-term Total liquidity at the end of June 2017 was EUR 1,872 million Cash and cash equivalents totalled EUR 222 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 5.0 years at the end of June No financial covenants in Group companies existing loan agreements *Average interest rate for interest-bearing liabilities excluding finance leases was 2.1%