Neste Capital Markets Day 2017: Delivering profitable growth - Leverage target and dividend policy revised

Neste Corporation
Stock Exchange Release
19 September 2017 at 7 am. (EET)

Neste Capital Markets Day 2017: Delivering profitable growth - Leverage target and dividend policy revised

Neste is holding a Capital Markets Day 2017 in London today, 19 September, featuring presentations by senior management on subjects such as the company's strategy, market outlook and the next steps for delivering profitable growth.

Clear strategy

Neste's success in strategy execution is based on its unique competitive advantages.  The strategic objectives remain unchanged: be the Baltic Sea champion and create global renewables growth. The strategy sets the direction for the company's ambition to grow and create shareholder value.  Neste is also looking for opportunities to acquire new technologies and competences into its portfolio.

The company is determined to generate strong cash flow to invest in profitable growth and productivity, to optimize debt, and to ensure favorable dividend distribution.

Leverage target and dividend policy revised

Neste's long-term financial targets are leverage ratio and ROACE after tax. The leverage target has been revised to below 40%, when it was previously 25-50%. The ROACE target remains at 15%.

Neste's dividend policy has also been revised. The company will distribute at least 50% of the company's comparable net profit for the year in the form of dividends. The previous policy was to distribute at least 40% of the comparable net profit. The company intends to distribute the annual dividend in two installments, and this will be proposed to the Annual General Meeting 2018.

Baltic Sea champion

Neste seeks value growth in all business areas in its home markets in the Baltic Sea area. This will be reached by offering win-win solutions to customers, further improvements in operational performance and refinery transformation. Neste has a unique customer offering combining both fossil and renewable products. It will continue to develop premium products and tailor-made solutions, and focus on customer experience through customer service design and digitalization.

The medium-term refining business environment is seen to remain supportive, and the reference margin is expected to be supported by the International Maritime Organization's (IMO) bunker sulphur regulation change in 2020. Neste is well prepared for this change with the Solvent Deasphalting (SDA) unit and other strategic refinery investments to be finalized in 2017. Neste continues its efforts to enhance additional margin, and the target for that is at least USD 5.5/bbl on average.
  
Global renewables growth

Neste is the global leader in the renewable diesel market, and is committed to developing significant business from outside road transportation markets by 2020. Neste has developed unique competitive advantages in flexible feedstock supply, global supply chain, and low-carbon renewable drop-in solutions.  Sales volumes of the 100% renewable diesel delivered to end-users are targeted to grow from approx. 25% in 2017 to 50% of the total sales in 2020. The company has built a strong low-quality waste and residue feedstock position and intends to develop that further by commercial and technological solutions.

Neste sees great potential in many new renewable product applications such as renewable jet fuel and bio-based chemicals, where it can provide distinct advantages to its customers by decreasing their carbon footprint. Neste has introduced a Green Hub concept to promote renewable jet fuel use through airport partnerships, and the first partnership was recently announced with the Geneva Airport.  Following a successful production trial, Neste aims to make the first commercial delivery of bio-based plastics during the first half of 2018. Neste targets to have 20% of its renewable business sales volume from the new applications by 2020.

During the last four years Neste has increased its renewable diesel production capacity from 2.0 to 2.6 million tons/a with minor investments.  Neste's target is to increase its renewables capacity further, and it will continue the debottlenecking of the existing capacity to 3 million tons/a by 2020. The company will finalize the feasibility studies for a new, up to 1 million ton/a production capacity by the end of 2017. These feasibility studies include the selection of the site location as well as an updated feedstock and demand outlook. The project scope includes renewable diesel and jet fuel production as well as pretreatment enabling processing of lower-quality raw materials. Neste aims to make the final investment decision on a new production unit by the end of 2018 with a target to have it operational by 2022. 

Short-term outlook

Neste expects Oil Products' reference refining margin to continue strong into the autumn and to average above the previous year's level in 2017. Global demand for oil products has continued healthy and a number of supply disruptions have recently occurred at refineries on both sides of the Atlantic. The Porvoo refinery is expected to run at a high utilization rate, except for a scheduled four-week decoking maintenance at the Production Line 4 during the fourth quarter. At the Naantali unit a major two-month turnaround and finalization of the new conversion set-up are ongoing.

During the second half of 2017 Renewable Products' additional margin is expected to be higher than in the first half of the year. Sales volumes of the 100% renewable diesel delivered to end-users are expected to grow and we target to reach 25% of the total sales volumes in 2017. The vegetable oil market is expected to remain volatile, and Neste aims to expand the use of lower-quality waste and residue feedstock. Utilization rates of our renewable diesel facilities are expected to be high. The biopropane unit at the Rotterdam refinery is getting ready for the first product deliveries.

In Marketing & Services the sales volumes and unit margins are expected follow the previous years' seasonality pattern.

The year has continued well, and we expect the year 2017 to be another successful one for Neste.

CMD presentation material in English will be available at www.neste.com/investors from around 2.30 p.m. (EET) onwards.

The event can also be followed online at www.neste.com/investors from 2.30 p.m. (EET) onwards.

A replay will be available after the event at www.neste.com/investors.

Neste Corporation

Kaisa Lipponen
Director, Corporate Communications

Further information:
Jyrki Mäki-Kala, CFO, tel. +358 10 458 4098

Neste in brief

Neste (NESTE, Nasdaq Helsinki) creates sustainable choices for the needs of transport, businesses and consumers.  Our global range of products and services allows customers to reduce their carbon footprint by combining high-quality renewable products and oil products to tailor-made service solutions. We are the world's largest producer of renewable diesel refined from waste and residues, and we are also bringing renewable solutions to the aviation and plastics industries. We want to be a reliable partner, whose expertise, R&D and sustainable practices are widely respected. In 2016, Neste's net sales stood at EUR 11.7 billion, and we were on the Global 100 list of the 100 most sustainable companies in the world. Read more: neste.com