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Edited Transcript of NESTE.HE earnings conference call or presentation 6-Feb-19 1:00pm GMT

Q4 2018 Neste Oyj Earnings Call

Espoo Feb 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Neste Oyj earnings conference call or presentation Wednesday, February 6, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Juha-Pekka Kekäläinen

Neste Oyj - VP of IR

* Jyrki Mäki-Kala

Neste Oyj - CFO & Member of the Executive Board

* Kaisa Hietala

Neste Oyj - Executive VP of Renewable Products & Member of Executive Board

* Matti Lehmus

Neste Oyj - Executive VP of Oil Products & Member of the Executive Board

* Panu Kopra

Neste Oyj - Executive VP of Marketing & Services and Member of Executive Board

* Peter Z. E. Vanacker

Neste Oyj - President & CEO

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Conference Call Participants

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* Alexander Jones

BofA Merrill Lynch, Research Division - Analyst

* Artem Beletski

SEB, Research Division - Analyst

* Henri Jerome Dieudonne Marie Patricot

UBS Investment Bank, Research Division - Associate Director and Equity Research Analyst

* Iiris Theman

Carnegie Investment Bank AB, Research Division - Financial Analyst

* Joshua Eliot Dweck Stone

Barclays Bank PLC, Research Division - Analyst

* Matthew Peter Charles Lofting

JP Morgan Chase & Co, Research Division - VP

* Mehdi Ennebati

Societe Generale Cross Asset Research - Equity Analyst

* Michael J Alsford

Citigroup Inc, Research Division - Director

* Nikolaos Konstantakis

Exane BNP Paribas, Research Division - Analyst of Oil and Gas

* Pasi Väisänen

Nordea Markets, Research Division - Senior Analyst of Utilities and Energy

* Peter Testa

One Investments S.A.G.L. - Analyst

* Sasikanth Chilukuru

Morgan Stanley, Research Division - Research Associate

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's Q4 2018 Neste Corporation Earnings Conference Call. (Operator Instructions) I must advise you that this conference is being recorded today on Wednesday, the 6th of February, 2019.

I would now like to hand the conference over to your first speaker for today, Mr. Juha-Pekka Kekäläinen. Please go ahead, sir.

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Juha-Pekka Kekäläinen, Neste Oyj - VP of IR [2]

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Thank you, and good afternoon, ladies and gentlemen. It's a perfect winter day here in Espoo. Welcome to this conference call to discuss Neste's fourth quarter and full year '18 results announced earlier today. I'm Juha-Pekka Kekäläinen, Head of Neste's IR, and with me here President and CEO, Peter Vanacker; CFO, Jyrki Mäki-Kala; and the Business Area Head, Kaisa Hietala of Renewable Products; Matti Lehmus of Oil Products; and Panu Kopra of Marketing & Services. We will be referring to the presentation that can be found on our website. Please pay attention as always to the disclaimer since we will be making forward-looking statements in this call.

With these remarks, I would like to hand over to our CEO, Peter Vanacker, to start with the presentation. Peter, please go ahead.

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Peter Z. E. Vanacker, Neste Oyj - President & CEO [3]

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Thank a lot, JP, and good afternoon to you also on my behalf. And I must say on start that I'm really, really proud on our employees. I'm really proud on the excellent job that they have done in 2018 and also in the fourth quarter of 2018. So of course, you have seen the numbers, and we are very, very pleased to share with you our excellent performance in 2018 and happy to discuss the way forward with you.

Now if we look at Slide #4, we had, as alluded to before, a very strong year in 2018, and we made an all-time high comparable EBIT of over EUR 1.4 billion. As I said, our employees, they have delivered an excellent performance, and we, as a company, have made another big step forward in developing our Renewable Products business. Renewable Products had an outstanding performance as a result of favorable markets and successful sales margin optimization. And this was particularly a good achievement considering the scheduled maintenance turnarounds that we have implemented in Rotterdam in the second quarter, and in Singapore in the fourth quarter. And except for the plant maintenance, all our manufacturing units ran at a very high capacity outputs. The Oil Products' results was impacted by a less supportive refining margin environment and a weaker U.S. dollar. These 2 elements alone had a negative impact of some EUR 100 million on the comparable operating profit compared to the year 2017. Additionally, we had more scheduled refinery unit maintenances that -- than in the previous year. And on a positive note, and I hope you also saw this, our additional margin was thrown and we averaged at USD 6.2 per barrel in the year 2018 as a result of our successful investments and an improved reliability in our manufacturing units. Also Marketing & Services improved its financial performance versus the previous year. We were able to maintain our sales volumes and even increased our unit margins in a very competitive market. The final investment decision to expand the Singapore renewable production capacity was made in December and this strategic decision has been prepared very diligently and was the most important event of the year. And now we are moving to project execution in full speed and we are fully on track. I will come back to this later in the presentation. Our occupational safety figures improved and the occupational safety TRIF result was 1.7, and that was one of the best ever at Neste. And, of course, also here, I would also like to take the opportunity to thank our personnel for their safe and productive work that made the outstanding financial results possible.

The Board of Directors also proposed -- proposes to the AGM that the dividend would be increased by 34% to EUR 2.28 per share, and this reflects also the confidence by the board on the company's ability to create profitable growth and generate a solid cash flow. The strong financial performance is also visible in our financial targets and we reached a record-high ROACE of 21.1% by far exceeding the 15% target for the fourth year in a row. And our leverage ratio was very low at the end of 2018. And more importantly, the strong financial position enables us in the implementation of our growth strategy going forward while maintaining a healthy dividend distribution.

So with these starting remarks, I would like to hand over to Jyrki to discuss the financials in more detail.

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Jyrki Mäki-Kala, Neste Oyj - CFO & Member of the Executive Board [4]

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Okay. So good early afternoon also on my behalf. So it's really my pleasure to go into the details concerning the 2018 financials. Like stated earlier, 2018 was a very strong year for Neste, and like we promised already early August of last year that we are heading towards a very strong year. We actually had 4 strong quarters in 2018, and like stated already earlier, we ROACE improved, basically, quarter-by-quarter to the record level to 21.1% unit. And our balance sheet was stronger quarter-on-quarter as we saw the leverage dropped for the first time below 0. If we then look the financials in figures, 2018. If we first look at the quarter 4, our quarter 4 financials were strong like it was also in quarter 3. So Peter's first CEO quarter was very successful. Basically, with similar net sales in quarter 4 2017, we posted 12% better EBIT. And this is really coming from our operations, what we basically are managing globally in our operation and also concerning our sales activities.

If you look Renewable Products for fourth quarter, it was basically 80% of the group comparable EBIT. And that figure has been going up year-on-year if you look back at the history. From the free cash flow point of view, the last quarter posted close to EUR 400 million free cash flow. If we then move to the full year figures, you see the big change in our comparable EBIT year-on-year, 29% improvement compared to 2017, and the main reasons that I will explain a little bit later is really coming out of the activities around managing the sales margin. Renewable Products improved a massive 75% compared to previous year and even taking out the Blender's Tax Credit what we posted early part of 2018, the improvement was still very impressive. It was 50%. Oil Products has roughly EUR 100 million of lower EBIT, but if you look the background where it's coming from, it's basically coming from lower reference meaning the market and also the impact coming out of U.S. currency rate. So the market has -- market changes played a big role in the profitability of all products.

And then last but not least, Marketing & Services, they improved nicely 13% of their comparable EBIT compared to last year. And that improvement mainly came during quarter 4. So very good achievement. Strong cash flow, nearly 40% improvement compared to last year. And like stated earlier, the comparable EPS that is a basis for the dividend proposal, it basically improved by 35%. If we briefly look where the last quarter's improvement gained, just a few words here. I think the businesses will explain it a little bit more going forward. We have roughly 12% improvement compared to 2017 last quarter. And basically, just one reason for business that you are seeing here, Renewable Products sales margin went up 54% quarter-on-quarter. Marketing & Services, they had an improvement of 53% compared to quarter 4 '17. And Oil Products, little bit lower EBIT really coming out of the reference margin and the big turnaround in quarter 4 relating our Porvoo operations. So that was kind of big changes in quarter 4 when looking businesses.

But if we then move into these details that are more explaining our quarterly report, the full year changes here if you look overall, the improvement was EUR 321 million. If you want to have a very simple answer to this, you just look the third column there. Additional margin improved EUR 326 million. That is basically the same as the improvement between 2 years, but this is not the full truth. But all the other items relating to market changes and our cost management, et cetera, they basically balance each other. But if we just open this a little bit more, if you look at year 2018 with Neste, we have really big unit turnarounds in Neste, both in Renewables, Singapore and Rotterdam, and also in Oil Products, higher turnaround year basically than 2017. And we got this negative change with the lower sales volume impacting our comparable EBIT, these EUR 171 million.

And if you then basically combine the reference margin, roughly EUR 206 million. Renewable Products was very, very positive with the market coming out of reference margin, EUR 267 million positive, while Oil Products has negative of EUR 61 million compared to 2017. But overall, also very positive when looking overall combining these 2 elements. And then the few cost items there at the end of the presentation. The FX market rate mainly coming out of USD 60 million roughly, fixed costs again reflecting the high turnaround activities what we had in the refineries. And basically, the others is mostly depreciation coming out of higher CapEx operation, basically the previous years. So that's basically how we landed with record-high EUR 1.422 billion comparable operating profit.

So with these words then, I turn into our business areas. So Kaisa of Renewable Products.

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [5]

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Thank you, Jyrki. Good afternoon, everybody. Great to be here today and report these fantastic results from Renewable Products, both for the fourth quarter 2018, but also for the full year 2018. If we first look into the fourth quarter, comparable EBIT EUR 281 million in a quarter when we also had a 2 months' long turnaround in Singapore, it's really outstanding. This created comparable sales margin for our sales for the first time being above $700 per ton. This sales margin was impacted by several factors. First of all, the markets were favorable. I will be showing you the feedstock market trends as well as the -- for example, the USA market parameters, so we were operating in a favorable market. And also our sales allocation was optimal, and on top of that also our operations when it comes to the refineries, that was very good. And the Singapore turnaround was delivered on schedule and in time. So in a way, operationally, this was a very successful quarter and we also got lots of support from the market. Our sales volume was 575 kilotons, clearly impacted by the Singapore turnaround. Our sales allocation was exactly the same as in 2017 Q4, 73% sales to Europe, the remaining to North America. The share of 100% renewable diesel was a bit below 30% because of the Singapore turnaround. But then if we look at full year 2018, we did reach 30% as a outcome, and this is taking us in right direction considering the longer-term target we have.

The share of waste and residue feedstock was 77%, again impacted by the Singapore turnaround, but then if we look at the full year, we are above 80%, and this is also very well aligned with our strategy to increase the use of waste and residues as a feedstock. Investments, EUR 50 million. There you can see the impact of Singapore turnaround but also the investments we are allocating for the Singapore expansion work that was done during last year Q4. And this brings us to the comparable RONA above 50%, very, very high numbers. Just quickly commenting on the full year results. So EUR 983 million with -- comparable EBIT, with revenue of EUR 3.2 billion. If we then look at the bridge between Q4 '17 and Q4 '18, here you can see that the sales volume was 12% lower in 2018 than in Q4 2017. The impact was EUR 86 million while the sales margin really created a big boost recording more than EUR 150 million higher comparable EBIT elements. The rest was more or less according to Q4 '17.

But let's look at the markets. And I'll start from the European market parameters. And it was interesting Q4. I mean, if we first look at the European biodiesel margin, very strong peak was visible in Q4, and this is related to sales and demand imbalance. There was a very low water levels across the European rivers and most of the biodiesel or the biodiesel feedstocks are transported by river branches to the Central European facilities. And while that activity was not possible due to the low water levels, this is what we saw. I have never seen anything like this during my times. And this adamantly has now corrected and, of course, clearly, this creates sort of challenges how to interpret the reference margin. And the second thing, which is important to note here, is the vegetable and animal fat prices. We saw very low palm oil prices in Q4.

Again if I look back, I think it was around years 2005, 2006, when we have been seeing levels of $500 or even below $500 per ton palm oil price. So there has been high inventories and also some import restrictions in place that we have already now started to see that the palm oil prices are recovered. Then if we move to the North America and look at the market parameters over there, let's first look at the U.S. Soy methyl ester margin that was clearly lower than in 2017. If we look at the Q4, it was hardly pushed down by the crude oil price, but also the fact that the soybean oil prices were low. Then if we look at the California and the Low Carbon Fuel Standard credit prices, remaining on a very strong level, above $190 almost throughout the whole quarter. So that was very supportive for us. Also we saw that the biodiesel RINs were recovering during the Q4, not to the same level as in Q4 2017, but still the long-lasting decline of the value of RINs now seems to be turned and we saw that turn happening during Q4.

Then finally, let's look at the comparable sales margin elements. This was, historically, the highest sales margin recorded, $715 per ton. And this was -- clearly supported the market, whether it was the feedstock market or than the LCFS and RIN prices, but also it was a result of a very good production. I mean utilization rate at 80%, even though we had the 2 months turnaround in Singapore. Rotterdam was performing well as well as the units in Porvoo. So all in all, these elements, combined with the good sales allocation, Renewable Products was able to reach these historically high comparable sales margin levels.

Let me now hand over to Matti Lehmus to discuss Oil Products.

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Matti Lehmus, Neste Oyj - Executive VP of Oil Products & Member of the Executive Board [6]

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Thank you, Kaisa. So I'm now turning to Oil Products. So what I would start with is that after a very strong third quarter, the fourth quarter in Oil Products business was impacted by both scheduled maintenance but also a weaker market. And that means that the comparable EBIT of EUR 60 million then also came in lower than a year ago when it was EUR 89 million. And if we compare and start with the reference margin that had a value of $4.3 per barrel in the fourth quarter and this is, of course, clearly weaker than the $6 that we saw in the third quarter, also weaker than a year ago at $4.9. On the scheduled maintenance, it is indeed something that was -- had a big impact on the Porvoo operations. Every second year, we have clearly bigger scope of turnaround in PL4 and that is exactly what happened in 2018. At the same time, it's fair to say that the scope turned out to be even a bit wider than we had anticipated and hence, the impact also was EUR 10 million more than what we had anticipated. This scheduled turnaround is also reflected, of course, in the euro share and in the average utilization rate as you can see.

If I then turned to the waterfall and compare the fourth quarter to last year, I think there's a couple of very clear messages. First of all, reference margin impact was EUR 15 million because of the weaker margin level. And also the wider and broader maintenance is clearly reflected in the fixed costs, which were EUR 27 million higher than a year ago. A third thing, which is a bit not as visible in the numbers is the effective FX rate was essentially weaker for the dollar. So also that had a EUR 15 million impact negative in total. The positive thing is that the additional margin continued to be very strong. We came in at $6.2 per barrel. And this is actually a reflection that in spite of the scheduled maintenance, we were first of all able to run, outside the maintenance, the refinery really well. So immediately, as of December, the configuration was really fully up and running again. And also there was some good success in sales of exports of diesel and gasoline. And then a few comments on the market. If you look at the fourth quarter, there is a couple of things to highlight. So first of all, it's clear that the gasoline market, which started the quarter quite okay, clearly weakened and went into a weak level in November, December in particular. This was driven by very high utilization, particularly in the U.S., increasing inventory levels combined then with a normal seasonal shift to winter holidays and being outside of the driving season.

At the same time, diesel actually performed really well. We continued to see strong demand for diesel. And like you can see the diesel crack actually averaged almost $18 per barrel in the fourth quarter. So this reflects continued strong market for distillates. On the Urals, the quarter averaged minus $0.9, and -- which is a relatively strong Urals market. And here, of course, the combined impact of OPEC cuts, the sanctions on Iran, now also recently less heavy crude output from Venezuela has supported the Urals market. And we are now, of course, waiting for some impact from the maintenance season going forward to widen the differential somewhat. And finally, looking at the total refining margin. We were able, in spite of the weaker market, to maintain a good total margin level of more than $10 per barrel. And I think it's particularly important here that the additional margin now for the fourth time in a row came over $6 per barrel. And this is really, let's say, 2 things which are driving the additional margin. It's the fact that the One Refinery configuration has been running extremely well and that we have been able to maintain a very good utilization and reliability throughout the year. So I'm very happy about that one. And then, of course, finally, the production costs, of course, reflect higher maintenance and we are now very clearly focusing on coming back to normal levels when it comes to production costs.

With these words, I hand over to Panu Kopra, who will comment on the Marketing & Services quarter.

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Panu Kopra, Neste Oyj - Executive VP of Marketing & Services and Member of Executive Board [7]

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Thank you, Matti. This is Panu Kopra speaking. If we start from the Q4 EBIT results and the results really improved from EUR 11 million to EUR 19 million. And taking into account extremely difficult market situations in Russia, we can be more than just satisfied with these results. Also full year EBIT from EUR 68 million to EUR 77 million, we can say that satisfactory result, at least. And how we did it? So in Q4, we squeezed fixed costs really down. We sold all-time high volumes in truck network, all B2B sales went well. We can mention bunker, aviation and lubricants sales performed extremely well. And at the same time net unit margins improved due to -- mainly due to our internal measures. So very active indents in pricing, market optimization and successful new customer acquisitions.

All these elements together then enabled the good results. And some examples of new innovative customer work that we opened here in December, in Finland, new type of station with absolutely new customer experience. There's real robot who is filling up the cars so that customers don't have to anymore step out to the cold weather. And payment is done by mobile or invoiced automatically. Unless the customer is willing to have a coffee or snack, while the robot is filling up, the customer can go to our unmanned shop. There is really no staff at all, and also the payment is done automatically. This is something new still in the piloted phase, but we got a lot of good media attention due to this one. And also customers are very interested about this project. Customer satisfaction stayed in a good level. Our B2B NPS was still at level of 56, and we continue to work even for the better customer experience. Almost entire Neste K station is now rebranded. So almost 80 new upgraded stations with updated offering are ready to serve customers. So this is shortly of Marketing & Services.

Handing over back to CEO, Peter.

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Peter Z. E. Vanacker, Neste Oyj - President & CEO [8]

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Okay. Thank you, very much, Panu, and it's always great to hear that in all aspects we keep on being very innovative and creative in our company. So let's now move on to the current topics. As an outlook for the first quarter, what do we see? We see the following. That the Renewable Products first quarter sales volumes are expected to be higher than in the fourth quarter of 2018. No major changes in the sales allocation. Our utilization rates of our renewable production facilities are expected also to be high. And the scheduled Singapore refinery turnaround, which was completed during the fourth quarter, is estimated to have a negative EBIT impact of around EUR 15 million, 1-5, in the first quarter 2019. On Oil Products, we are expecting that the reference margin will continue to be low in the first quarter, driven by this weak gasoline markets, but we expect it to strengthen towards the end of the quarter. And utilization rates of our production facilities are anticipated to be high in this first quarter. And with regards to Marketing & Services, the sales volumes and unit margins are expected to follow the previous years' seasonality pattern during the first quarter.

Let's have a look again at the Singapore investment that we had announced in December. And this slide here actually summarizes the key facts about this investment decision. I will not go through it, I mean, in detail, but I would like to state that with this investment, we continue to execute our global growth strategy and lead the transition to Renewable Products. And the investment decision was based on a growing market demand for low carbon solutions in transport, cities, aviation, polymers and chemicals. And it enables us to help more and more customers to make their business more sustainable. And these kind of examples are great landmarks for us as we are building a healthier planet for our children. We are and we will be working hard with our partners to make this investment a success and as I said already at the beginning, we are very well on track and have had a very good start with the work that is being performed in engineering on one hand side and then also opening the site on the other hand side. On the Capital Markets Day, remember, we will organize our Capital Markets Day in London on Wednesday, the 27th of February. And there, we will present our updated strategy with new ambitions and actions forward. And of course, you are warmly welcomed to attend. So please contact our IR team for more information on the registration, and you can also find the contact details on our website.

So this concludes now our presentation and we would be happy to take your questions. Thank you very much.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from the line of Mehdi Ennebati from Societe Generale.

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Mehdi Ennebati, Societe Generale Cross Asset Research - Equity Analyst [2]

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I have 2 questions, please. The first one regarding the Renewable Products sale allocation. So I was just wondering if inside your European market, there has been some material changes regarding the sale allocation since the beginning of the second half of 2018? And did you notice an increasing appetite for your Renewable Products since, let's say, second half of 2018? The second question is about the feedstock price. So can you tell us how is the feedstock price, let's say, your feedstock prices currently evolving compared to Q4 2018? And what is your, let's say, estimate for 2019 based on your knowledge? And do you think that Demeter acquisition is already helping you regarding fixed stock optimization?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [3]

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Thank you for the questions. This is Kaisa speaking. The first question was around our sales allocation during the second half of 2018 and especially, whether we have made material changes in our sales allocation within Europe. We haven't, I mean, we have been targeting the most valuable segments, where the greenhouse gas reduction carries the highest value. And that change was already developed earlier in 2018 when I was discussing the structural changes we have done. So no changes within the -- material changes within the Europe, which we would have implemented in the second half. The second question was around the feedstock price. How is it developing? How do we forecast the 2019? And this was referring to the total pool of Neste feedstock. Unfortunately, we do not share the information of different feedstock price levels or the price developments, but clearly, what I already indicated is that the vegetable oil prices seemed to be bottomed at the end of last year and now are trending upwards. And then there was a question, whether the Demeter acquisition has been supporting us in feedstock sourcing? And the answer is yes. This was one of the strategic initiatives to expand the feedstock availability and also the ability to collect and aggregate the waste of residue feedstock in Europe.

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Mehdi Ennebati, Societe Generale Cross Asset Research - Equity Analyst [4]

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So this is -- this has already impacted principally your margins in Q4 with Demeter acquisition?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [5]

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We -- the joint venture has been operational since 1st of October. And -- but we have been working closely with the Demeter as a supplier earlier. Of course, we have a strategy how to go forward. And that implementation started immediately when the joint venture was formalized on 1st of October.

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Operator [6]

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Your next question comes from the line of Sasikanth Chilukuru from Morgan Stanley.

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Sasikanth Chilukuru, Morgan Stanley, Research Division - Research Associate [7]

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I had 2 questions, please. One on the dividend policy essentially. Given where the -- your net cash position that you have right now, why haven't you increased the current 50% payout policy -- payout? Is there -- are there any indications of whether you would be looking to increase that going forward? The second question I had was on the Renewables. Can you give us an update on the commercial sales of bioplastics? What would the volume contribution be for this year? Are your expectations of the margins on these projects comparable to the ones that you're seeing on MY Renewable Diesel?

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Peter Z. E. Vanacker, Neste Oyj - President & CEO [8]

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Okay. Thank you very much for your questions. And the first question was on the dividend policy. Actually, may I remind you that we have a 51% payout that is going to be proposed, I mean, to the AGM, which means that there is a 34% higher dividend payout if that would be approved, I mean, by the AGM compared to last -- to 2017. I think that's a substantial recognition I would call it, I mean, of the performance that we have delivered in 2018. And as I said also, I mean, it reflects the confidence that we have as leadership of the company as well as our board's on our ability, I mean, to create a profitable growth and generate a solid cash flow. So and -- we have our dividend policy in place that we have said, I mean, we will payout at minimum 50% of the comparable EPS.

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Sasikanth Chilukuru, Morgan Stanley, Research Division - Research Associate [9]

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Sorry, just on that itself, I was just wondering increasing it from 50% to maybe 60% or something of that sort, is that on the table?

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Peter Z. E. Vanacker, Neste Oyj - President & CEO [10]

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We are having great ideas also in investing in the company and one of those great ideas that we have communicated that is actually now into operation is the Singapore Investments. We see great potential, I mean, in the market as we have explained also during December in continuing to grow in road transportation, renewable jet fuel and then, as you alluded also in your second question, renewable polymers and chemicals. So we will, of course, and as we are talking then in the CMD at the end of the month, be a bit more explicit on the growth opportunities that we see there. So as to your second question, bioplastics or biopolymers and biochemicals, we have made very good progress in signing up brand owners and cooperating with them. On one hand side, we gave one announcement on the cooperation, I mean, with IKEA. But on the other hand side, also with partners that we have along the value chain, and we made a communication here on the specialty chemicals company, Clariant, a cooperation that we have with them. And, of course, these are examples to the kind of cooperations that we have, very important ones. And we will on keep -- we will keep on working very hardly in realizing the first sales in 2019. So this is quite a lot of hard work in research, development and market-making possibilities at this point in time.

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Operator [11]

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Your next question comes from the line of Artem Beletski from SEB.

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Artem Beletski, SEB, Research Division - Analyst [12]

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Yes, hi. This is Artem Beletski from SEB. So firstly, what comes to maintenance outlook for 2019. Could you maybe comment, provide some further color on both segments as it appears to be quite clean year for you in terms of those activities? And then one question to Jyrki relating to CapEx outlook for 2019 and also tax rate, and maybe some indications on that front. And the last one is really Blender's Tax Credit situation in the U.S., whether you expect some news from there in recent weeks?

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Jyrki Mäki-Kala, Neste Oyj - CFO & Member of the Executive Board [13]

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So let's cover, first of all, I mean, the maintenance question. And if Kaisa Hietala will comment on Renewable Products and then Matti will comment on Oil Products.

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [14]

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Very good. Regarding Renewable Products, record year. In that respect, we had a large maintenance both in Rotterdam and in Singapore last year. So 2019 should not have such a maintenance spike.

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Matti Lehmus, Neste Oyj - Executive VP of Oil Products & Member of the Executive Board [15]

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And then Matti Lehmus, commenting on Oil Product. We do expect to have a normal scheduled annual maintenance for the PL4, again in autumn, likely more limited in scope than what we had this year. Apart from that, it's mainly some minor unit maintenance. So quite a clean year. As a reminder, of course, that in 2020, we do expect to have the major scheduled turnaround in Porvoo oil in spring, yes. So I mean, of course, there will be some smaller things, I mean, and that are very likely, I mean, in autumn and that could be a catalyst change that we have in Rotterdam. And then the cooking on PL4 in Porvoo, just to give you a complete picture on what were we looking at for 2019. Jyrki, on CapEx?

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Jyrki Mäki-Kala, Neste Oyj - CFO & Member of the Executive Board [16]

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Yes, based on 2 questions. Really, the CapEx estimate now for 2019. We are talking about -- with a range of EUR 650 million to EUR 750 million. And this high figure is naturally coming out of the fact that the Singapore CapEx, that this basically now going on with full speed. And then the other question was about the tax rate going forward. I think that if you look the big picture, our tax rate on an average, we are talking about the level of 15% to 17% unit on the annual basis.

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Artem Beletski, SEB, Research Division - Analyst [17]

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And nothing new on the BTC, Kaisa, nothing new?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [18]

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Nothing new regarding BTC. Situation is unclear, timeline has not been defined or communicated. So unfortunately, we do not have any additional information regarding.

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Operator [19]

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Your next question comes from the line of Josh Stone from Barclays.

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Joshua Eliot Dweck Stone, Barclays Bank PLC, Research Division - Analyst [20]

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I've got a question on the Renewables product pricing, please. It just seems a very sharp step up in the pricing you achieved in the quarter. I was hoping you can talk to some of the moving parts, what drives that and sustainability into next year? Specifically, how important is the underlying diesel price to the renewable diesel price? How much of a benefit did you get from the same price spike in the fourth quarter? And help us to understand how much is seasonal as well?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [21]

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Thank you for the question. This is Kaisa speaking. The Renewables comparable sales margin is a combination of how attractive a feedstock sourcing we are doing, how do we optimize the waste and residue sourcing basically from where and at what price levels. And then the second important element is that how well we are operating the supply chain as well as the production units. And then comes the sales price element. So there is not really a sales price sort of a, element which would be dictating the sales margin. But it is over the whole value chain. And now in Q4, we saw the raw material prices being favorable to us. You saw some of the graphs, which we are showing. Also, our sales allocation was optimal. We were reaching the targeted segments. And then there was a question like okay, the underlying in diesel price, or how much did we benefit from the prior diesel price hike and so on. It depends quite a lot on the, how customers are valuing the CO2 reduction. So it is a value-based sales. And there is, of course, the element of supply and demand. But all in all, it is the combination of the, how successfully we are resourcing raw materials, how well we're operating the supply chain and the production. And then eventually, how well we are placing the markets to the most valuable segments in Europe and in North America.

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Joshua Eliot Dweck Stone, Barclays Bank PLC, Research Division - Analyst [22]

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If I can just quickly follow-up, just on that very sharp spike and same. Is it fair to say Neste saw some benefit from the winter grade pricing there? Or is it a case that wasn't very relevant?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [23]

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Well, renewable diesel price and renewable diesel market is not linked to the biodiesel market that much anymore. Most of the customers in our core segments, it's really value-based sales. So therefore, the link between the biodiesel price movements and the renewable diesel price, it's not there anymore. And that's why we are also now moving from a reference margin and additional margin followed sort of a system into a comparable sales margin.

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Operator [24]

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Your next question comes from the line of Henri Patricot from UBS.

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Henri Jerome Dieudonne Marie Patricot, UBS Investment Bank, Research Division - Associate Director and Equity Research Analyst [25]

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Henri Patricot from UBS. I have a question on Renewable Products and have one on Oil Products. On Renewable Products, I remember a few quarters ago, the first quarter '18, were the first step up in the, in the margin. And at the time you said that there was a change in some of your contract as of the 1st of January 2018. Should we expect something similar for the 1st of January 2019, so that you'd shift some contracts to some more valuable structure for you? And perhaps a second question on Renewable Products and margins -- sorry, on oil products. Matti, you mentioned that you are expecting to get the production cost back to a normal level. What level do you have in mind and what's the timeframe to get there? And on the maintenance in the fourth quarter, which took a bit longer, what is -- actually you had some unexpected issue, or did you actually do a bit more work and expected some more tricks perhaps, ahead of -- eyeing more 2020?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [26]

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Thank you for the questions. The first one was related to whether we are expecting that there is some structural changes in our sort of our contractual sales allocations, moving from 2018 to 2019. And at the moment, I don't see that there is going to be a material change.

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Matti Lehmus, Neste Oyj - Executive VP of Oil Products & Member of the Executive Board [27]

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And then on the other question, Matti here, answering. So first of all I comment on the maintenance in PL4 in autumn, like I commented earlier, first comment is, that every second year, the maintenance by nature is more broader in scope than every second year. There is more work to be done in terms of cleaning the coking, et cetera. But indeed in the last one that we had in October, November, there were also some findings where we did some work beyond the scope that we had planned. So it took a bit longer than we had anticipated. And hence also, the impact was EUR 10 million larger than what we had communicated beforehand. The comment on the production cost, if you looked at our fixed cost, you can clearly see the impact of the scheduled maintenance. The fourth quarter was very high in terms of fixed costs. So mainly, making the comment that we are back into a more normal situation, where we, of course, focus on utilities cost, optimizing cost, cost in general.

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Operator [28]

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Your next question comes from the line of Matt Lofting from JPMorgan.

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Matthew Peter Charles Lofting, JP Morgan Chase & Co, Research Division - VP [29]

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Two if I could, please. I mean, firstly, Renewables. The utilization rate, 80% for the quarter seems very impressive, given the extent of planned maintenance at Singapore. So I wonder if you could just talk about that number, insofar as I've seen that excludes any benefit from use of pre-bill inventory during the quarter. And if so, what that sort of tells us about the, increasingly the flexibility that you have through the asset-based run at least for periods of time above the headline nameplate number. And then secondly on Oil Products. I mean, I noticed during the quarter, you took a reasonably material impairment through the Bahrain base oils unit, related to disadvantaged tax ruling. If you could clarify the context there and assume it was noncash in the quarter. But whether there's any potential future cash payable on that due if the appeal is unsuccessful.

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [30]

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Thank you for the questions. The first question was about Renewable Products utilization in Q4. Last year being at 80%, which is high compared to the fact that Singapore was down for 2 months. Indeed, we have been moving forward with our bottlenecking program. If you probably remember, our target is to reach 3 million tons production capacity by 2020, when we look at the overall production footprint we have in Renewable Products -- I mean, this includes Rotterdam, Singapore and 2 units in Porvoo. And we have been progressing in Rotterdam quite well, but we have been also testing higher nameplate -- higher than nameplate capacity production rates in Porvoo. So all in all, this is a strategic work that we have been doing over the years and it's been successful. And now at the Singapore turnaround, of course, we will continue the de-bottlenecking in Singapore, and we have good expectations that we will be able to then also increase the nameplate capacity when the time is right.

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Peter Z. E. Vanacker, Neste Oyj - President & CEO [31]

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And we'll talk about on that on CMD at the end of the month. I mean, for now, we stick to the 2.7 million tons. And more to come then at the end of the month, please.

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Jyrki Mäki-Kala, Neste Oyj - CFO & Member of the Executive Board [32]

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Yes. And then, Matthew, about your other question, relating to the spot run impairment. It is like we stated in our report that we, as Neste bought RIN, got this order to pay basically the retrospective corporate income tax. And then, in our view, tax claim is not as supported by the law, and not based on actual income figures. And as a part of normal impairment process, basically we have written down the bought RIN assets and this is kind of the normal accounting principle that a publicly-listed company need to do at year-end. So there is nothing extraordinary in that sense. And as the business continues as normal, no changes in that sense.

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Operator [33]

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Your next question comes from the line of Nick Konstantakis from Exane.

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Nikolaos Konstantakis, Exane BNP Paribas, Research Division - Analyst of Oil and Gas [34]

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Most of the questions have been taken, but I'm going to try to attempt, looking at the revenue per ton in the Renewables. I mean, you did have 2 quarters of revenue per ton of higher than $1,700 per ton, given that there's not going to be any contract change in the first quarter in 2019. Is that a level we'll continue to see throughout 2019, or what is a normalized level of revenue per ton in the renewable segment?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [35]

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Thank you for the question. This is Kaisa speaking. Unfortunately, we do not publish our forecast, the revenue per ton numbers. I think it's very important to understand that the concept that our comparable sales margin is impacted by the raw material prices, by how well we are operating the supply chain and the production assets and then how do we contract the sales. I was commenting to one of the earlier questions that we don't see material changes into our sales allocation going forward, nor into our sort of a contract based going forward. However, we have already seen that the raw material prices, especially the palm oil price, have bottomed during -- sorry, at the end of 2018 and we have seen an increasing trend over there. So that's something that we keep following up, but unfortunately, no forecast, given for the comparable sales margin.

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Operator [36]

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Your next question comes from the line of Michael Alsford from Citi.

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Michael J Alsford, Citigroup Inc, Research Division - Director [37]

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I just have a couple if I could. So just firstly on -- when you're feedstock sourcing. Could you maybe just update a little bit more as to how far forward you're buying in your feedstock? I just wanted to get a sense as to how much you're impacted in 1Q from the tick-up in feedstock price that you alluded to earlier? And then just secondly on the renewables business, on the fixed cost size, yes, they've been fluctuating a little bit through the year. I'm just wondering now, obviously, with the Singapore plant expansion launch, I'm just wondering how we should think about fixed costs in that business, so going forward, certainly for 2019.

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [38]

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Thank you for the questions. The first one was around feedstock sourcing and how far-forward we are basically in the market. Our feedstock sourcing is a global activity. We are collecting, aggregating and shipping waste residue raw materials, as well as certified and treatable crude palm oil all over the world, basically. Supply chains are long and depending how do we optimize, which feedstock we want to use at each refinery, unfortunately, there is no sort of a standard timeline when actually we are buying the feedstock. But considering even the shipping times, I mean, from Southeast Asia to Europe, it's from 3 to 4 weeks voyage. So indeed, we are buying forward all the time, but it varies, depending on how do we optimize, what to buy and where to refine those raw materials.

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Jyrki Mäki-Kala, Neste Oyj - CFO & Member of the Executive Board [39]

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Yes, and then Michael there was a question about the fixed cost relating to Renewable Products. Indeed, you are seeing the increase coming out of the fixed cost. Part of that certainly is coming out of the large turnaround that is there in the background, especially for 2018. But certainly, we are implementing SAP system. For example, in Neste, that will be the -- also in the book for Renewables, all the strategy that basically Renewables is going through in the market making with aviation, for polymers, et cetera. So certainly we are going to see an increase in fixed cost. And also, of course, part of the strategy that Neste has been now following the last few years. So nothing extraordinary in that sense.

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Michael J Alsford, Citigroup Inc, Research Division - Director [40]

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Okay. And maybe just a follow-up, it's pretty on the spot. How sustainable do you say the sales margin in Renewables is, over $700 a ton? Is this a new normal?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [41]

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As said, we are unfortunately, we do not give a guidance on the comparable sales margin. Let's keep monitoring the market. And we are definitely pushing for the, for high productivity, higher sales volumes in Q1 compared to Q4 last year as well as the high utilization rates. So this is the guidance we can give at the moment.

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Operator [42]

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Your next question comes from the line of Alexander Jones from Merrill Lynch.

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Alexander Jones, BofA Merrill Lynch, Research Division - Analyst [43]

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Two on Renewables, if I could. The first one is a little bit of around how you think about oil price leverage in the division. As you outlined, the price that customers are willing to pay depends on the value they place on greenhouse gas emissions. Perhaps, your insights on how you think that varies with oil prices? And then the second one is on the Singapore plant. How do you think about the margin you can achieve with that new plant relative to what the company can do now? Do you think that, with the feedstock optionality, your sales allocation allows you to achieve a higher margin?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [44]

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Thank you for the questions. The first question was around oil price leverage and how does the varying oil price is impacting on basically the renewables. Profitability, well, I think we have been aggressively moving away from the commodity bulk biodiesel market. Our value proposal is fully built on greenhouse gas reduction targets. And also our customer segments nowadays, they consist cities, fleets, municipalities, who have made a commitment to reduce their carbon footprint. And therefore, the varying oil price is not seen as a key driver for renewables. The second question was about the upcoming new Singapore expansion and what kind of a margin levels we are expecting when starting up in 2022. I just have to conclude that it's a bit too early to comment on this. This is a very much evolving market, as you have seen over the past 2 to 3 years. And therefore, unfortunately, I'm not able to disclose the numbers for you.

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Peter Z. E. Vanacker, Neste Oyj - President & CEO [45]

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I mean, as we have had -- we said also in December, I mean, every investments that we are undertaking must comply with at least 15% IRR, and that is definitely also the case, I mean, for our Singapore investments.

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Operator [46]

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Your next question comes from the line of Peter Testa from One Investment.

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Peter Testa, One Investments S.A.G.L. - Analyst [47]

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I have a couple, please. Firstly, just going on the point you made earlier about the proportion of your business, which is directly contracted now and less and less in the general biodiesel market. Are you able to help us give any context for what proportion of the business is essentially contracted on a customer basis? And then secondly, when looking at the sourcing, you've been working very hard at vertical integration, you made some acquisitions in this regard as well. Yet when asked about feedstock prices you refer us back to the Palm price, which is a small minority of your sourcing these days. Can you give us any sense as to how your progress on vertical integration and sourcing for other materials is making a difference, which is removing this kind of market-based volatility on feedstock prices? And then one question on the oil division, please. You refer rightly to the very good results of above $6 of additional margin. You continue to just have a major step up, you did a bit of extra investment. Would you regard that as now a sustainable floor on the step on the additional margin supported by this investment?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [48]

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Thank you for the questions. This is Kaisa speaking. The first question was about how much of our sales volumes are being contracted. This varies a bit between the segments. Roughly 50% to 60% termed up would be a right range and rest remaining as a spot sale, which gives us an opportunity also to optimize the sales allocation when we see how the markets are moving. The second question regarding renewables was about the feedstock. And the fact that we have been aggressively expanding our feedstock sourcing over the past years and how has the vertical integration then helped us to balance the market volatility. It is true that the transparency over different waste and residue market prices is very limited. These are very fragmented markets, those could be even regional, supply demand balances, not even global. So therefore, the volatility is something which is not visible, unfortunately, via any quotations or meters, however, it's good to note that some of the waste and residue raw materials, such as tallow oil or sorry, animal fat tallow, is heavily linked also to veg oils. Veg oils are typically the alternative applications if tallow is not available for some of the other industries using tallow. So therefore, we have considered that showing the veg oil price development is at least something that we can show as a reference. But the vertical integration as such, it is more to create a wider availability of waste and residues. And therefore, give us more optimization opportunities globally.

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Matti Lehmus, Neste Oyj - Executive VP of Oil Products & Member of the Executive Board [49]

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And then my trends on the question on the OP, Oil Products, additional margin. So indeed, like you are aware, I'm sure, we have communicated a target of a minimum of $5.5 per barrel after this completion of our configuration change. And I would immediately comment that on a quarterly level, you will probably always see some volatility, because there are always items. It could be plant shutdowns, it could be FX hedges, it could be seasonal impact. So there will continue to be variation, which impacts that additional margin. But if I just now look at 2018, just at the fact, we have had now 4 quarters in a row, where we did meet that, let's say, $6 per barrel. And in the absence of any special impacts we, of course, pushing also in the future to maximize the additional margins.

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Operator [50]

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There are three further questions in the queue. The next question comes from the line of Pasi Väisänen from Nordea.

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Pasi Väisänen, Nordea Markets, Research Division - Senior Analyst of Utilities and Energy [51]

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This is Pasi Väisänen. Sorry my line was broken, I didn't hear it all. But two issues, the first one, actually your return on invested capital is some 50% in Renewables. And so, how come your customers don't see it and squeeze the extra value out from your business. I mean, is there any upper limit on your pricing? Or is the -- have you actually seen a customer who has, complained about the price. And secondly, have you been able to make any studies how this is possible ban for to combustion engines in Sweden or in other countries would actually affect total your business in fossil fuel side then on Renewable business in the long run?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [52]

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Thank you for the questions. Kaisa here, again. I mean, yes, I understand the question around how can you maintain this level of profitability. Let me still emphasize that Neste has been the pioneer and really investing heavily to put together the pieces that makes this happen. So you need, first of all, go to the market and find the raw materials. You need to do the pretreatment and then have the manufacturing size that can convert that pretreating material into renewables. And as we are -- we are the, currently the only player who is really playing a global game here. We have a platform where we can optimize, where we buy the raw materials and we can also optimize to which segments we are selling it. And when we are sort of creating value sales, we are not sort of selling tons of liters, we are selling greenhouse gas reductions. So I would say this is the key that the Neste has been building a platform that enables this type of business to take place. And therefore, I think, it's quite a unique setup and therefore, showing this very high returns. The second question was about the potential or the discussion around banning combustion engines. Matti, would you like to comment on this?

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Matti Lehmus, Neste Oyj - Executive VP of Oil Products & Member of the Executive Board [53]

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Yes, I can comment on this. So that's 2 (inaudible). You are fully right that there is some discussion happening in a number of countries about a long-term potential ban and that's the first comment I would have, is I do anticipate there will be a continued discussion on this, because typically, of course, banning one technology is not necessarily always the best option. I think that the target of reducing CO2 output is very clear, of reducing emissions. And hopefully, there will be approaches where the steering is exactly towards that target, of reducing and minimizing emissions. So I anticipate still quite a lot of debate, whether banning one technology is the right approach, or whether it's more, just putting far tougher and tougher ambition on the regulation is a better approach. Then also allowing other technologies, other alternative fuel solutions to come into play. The other comment I would make is that, of course, it's also good to note that the discussion is very much around passenger cars. It is roughly 30% of the oil demand. So it's also important to note that the growing segments of heavy-duty aviation chemicals bunker date. They continue to be very important for us and we focus of course on those also a lot.

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Peter Z. E. Vanacker, Neste Oyj - President & CEO [54]

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And I would like to add I mean, to that, and maybe if you are following the news, we just posted a press release a couple of minutes ago. And that is that the Finnish Parliament has actually now approved the 2030 biomandate laws. Which means that 30% of liquid biofuels to road traffic need to be implemented by 2029. And that's very well in line, I mean, with the targets that had been set in Sweden and in Norway. So you see -- and let me highlight, I mean, today, I mean, the solution that provides, I mean, gas house -- greenhouse gas emission reductions up to 90% that is available. Is Neste MY over 100% that we are selling in the markets, not just in Finland, but also we have already entered in the Swedish markets and are entering now in the Californian market, with those qualities. So -- and they are fully compatible with the existing infrastructure so they can be used in the existing carpool immediately.

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Operator [55]

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Your next question comes from the line of Iiris Theman from Carnegie.

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Iiris Theman, Carnegie Investment Bank AB, Research Division - Financial Analyst [56]

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This is Iiris Theman from Carnegie. Two questions please. Firstly, how big a negative EBIT impact do you expect from Porvoo turnaround in 2020? And then secondly, I understand that Sweden is going to change the legislation on the classification of feedstock for biofuels. And if I understand it correctly, they could deny PFAD. Is this correct or confirmed and how this is going to affect you, please?

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Matti Lehmus, Neste Oyj - Executive VP of Oil Products & Member of the Executive Board [57]

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So I'll start with the first question. This is Matti Lehmus. So what I would refer to is, in 2015, when we had the turnaround in Porvoo, the impact was EUR 130 million overall. If I look into 2020, we don't have any exact numbers yet, but I would argue it's probably going to be somewhere larger than that just because we expect markets to be also hopefully stronger with the IMO.

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [58]

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And then there was a question regarding the recent decision in Sweden, where they are changing the status and the requirements for a certain waste and residue raw materials, including the PFAD, which you mentioned. There is no banning of raw materials, but they are now requiring that, for example, for PFAD, it has to be certified and traceable. And -- this is the area where Neste has been the leader and currently is the leader. I mean, we all are palm oil raw materials are traced and certified. So we will just implement basically the expertise we have from the crude palm oil sourcing into this one. So no banning or no limitation to use these reclassified raw materials in Sweden, but higher sustainability requirements on that.

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Operator [59]

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Your final question comes from the line of [Stuart Joyner] from Redburn.

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Unidentified Analyst, [60]

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I had 2, if possible please. I'm going to come back to the Renewables margin and the sustainability of that into medium term. There have been a few announcements of extra U.S. capacity in renewables over recent weeks. And just wondered whether you had a comment as to how much of a threat that would be for you going forward? And the second question relates to the deterioration in the gasoline market since your last update. To what extent, obviously, you talked about IMO 2020, in fact, to what extent will gasoline impinge upon that on the strength of margins on the diesel side, given we have so much gasoline around, and the crude slate appears to be getting lighter?

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Kaisa Hietala, Neste Oyj - Executive VP of Renewable Products & Member of Executive Board [61]

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Thank you for the questions. Let me first take the competitors' capacity increase. Sort of bad news recently. If we look at the overall demand for renewable diesel solution and especially if we look at the USA, we have seen that the renewable fuel standard has been now posting the new RBOs. The new applications for 2019, 2020, those are increasing. Also what we saw at the end of last year was that California was confirming a higher ambition for greenhouse gas reductions going beyond 2020. So the demand is increasing. And therefore, it's pretty understandable that the competitors are also increasing the capacity. And this creates support for the industry. It creates support for this solution, for traffic and also in the future, for aviation. So from this point of view, we see that it's quite natural that the growing demand which the regulations are pushing strongly, especially now in USA, but we heard from Peter, just now also given the Nordics, this is a pretty natural development.

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Matti Lehmus, Neste Oyj - Executive VP of Oil Products & Member of the Executive Board [62]

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And then in terms, on the question on gasoline. However we look at it, if you look back a few years ago, we had for a number of years a situation where the market was clearly driven by gasoline and gasoline margins were the strongest part of the barrel. And if I compare it to the situation right now, I think we have clearly seen a change there, that combination of demand being more driven by distillates. At the moment, that's clearly where the stronger growth is. And of course, I am all -- will support that. And at the same time, your comment that also the crude slate has become lighter. So we have clearly shifted into a situation where diesel seems to be the stronger part of the barrel, and I think that's just what the outlook, right now at least, is for the foreseeable future.

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Operator [63]

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Speakers, there are no further questions.

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Juha-Pekka Kekäläinen, Neste Oyj - VP of IR [64]

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This is Juha Kekäläinen speaking. As there are no further questions, we thank you very much for your attention and active participation. Neste's first quarter results will be published on the 26th of April. Until then, thank you, and goodbye.

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Operator [65]

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Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating, you may all now disconnect.