Neste Oyj Unsp/Adr

Welcome to discuss Neste's Q3 results that were published this morning. My name is Anssi Tammelehto. I'm SVP for Strategy, M&A and Investor Relations at Neste. Here with me, we have our President and CEO, Heikki Malinen, and our CFO, Eeva Sipilä. We are referring to the presentation that was launched into our website early this morning. And the key highlights of the presentation include, for example, our Q3 financial performance and the status of our financial targets, including the performance improvement program and leverage. And they are actually progressing well. We are also talking about key regulatory developments and also key opportunities and uncertainties in the market. We are also having time for discussion with you all, and that's of course last but not least. And as always, please pay attention to the disclaimer as we will be making forward-looking statements in this call. With these remarks, I would like to hand over to our president and CEO, Heik. Heik, please.

Thank you very much, and good evening to you folks in Asia, and good morning to you in the U.S. Welcome to Neste's webcast. Nice to see you here again. Q3, in brief, let me just state that it's actually now one year and two weeks, roughly, that I've been working for Neste in this role as CEO. It's been a very busy one year. I wanted to just take a few minutes and just reflect on this past year. Obviously, I've had a chance to travel globally, widely, the company, meet our customers, our suppliers. understand the business, see how our refineries are performing. I think, you know, overall, really, the longer I work here and the more I understand the company, I've come to the conclusion that Neste really is a rough diamond. We have a lot of potential to develop the company further. We have a great group of people here, and as I talk to the Neste folks, I really feel that there's good momentum inside the company and a strong commitment by our staff globally to move this company further. So maybe that's sort of more as a context. We will be discussing Q3 results here today. For me personally, I'm actually pleased with the results. We're obviously not at the level of overall performance we want to be, but the direction of travel into Q3 is good. And if I look at what we have accomplished here, our refineries have been performing well. I'll talk about safety in a moment. Sales have picked up. There's even some positive, actually good momentum in the market. And our performance improvement program is... on schedule, maybe even a bit ahead of schedule. So these are also positive things that we're adding them up all together. And even our fossil traditional Porvo oil products business did well. So it's a good basis to move into them 26. But let's take a look at first safety, because safety really is the fundament of everything that we do. It's a license to operate. Unless we take good care of safety, we have no right to be making these products. On the left-hand side, you can see the data for our people safety, the total recordable incident frequency rate. It is heading gradually down. These numbers, just a reminder, since 2023, they include Mahoney, which is a Yuko collection business in the United States, which is a very different type of activity. But in any case, we need to bring this number down much more. And the team here has very clear plans on how to do that. On the right-hand side, you can see our process safety figures for this year. So far, 2025 has actually gone, if I can say, quite well. Of course, the trend has really fallen. We've had a number of months where we actually had no major incidences in the company on the process side. It's too early to say how much of a trend this is. But anyway, the direction of travel is good. And the discussion, at least in Neste, about process safety is continuous. And we have now in Q3 launched The five-year roadmap journey to further improve our process safety and our ambition is to significantly bring that down even more. But as always, these take time and it doesn't happen overnight. But anyway, we are systematically moving forward. We have some major initiatives underway. You will hear more from Eva about the performance improvement program. I just want to say it's on track. You'll see the curves in a moment. Maybe we're slightly ahead of schedule. But even having said that, you know, What's interesting and important to understand is the direction of travel towards the 350. I think we can confirm that. And then the more we do work around this program, the more evident it becomes that there is, as I said, there are opportunities within the company to perform even better. And that, for me as CEO, is, of course, a very important piece of information. We have been driving down our costs, fixed costs, variable costs. and the refinery performance is rising. In the middle you see then the Rotterdam Capacity Project. It is a significant undertaking. At the moment, having just recently visited the site, and I'm again going in some weeks' time back to Rotterdam, it is very busy. We have approximately 2,300 people from many, many different countries and nationalities working on the site, and the work continues. But it's a big undertaking, and what I want to say separately is that we've also had very good performance on safety. With all the folks on the site, it's very critical that we don't have any accidents, and the team has done a really good job in working towards that goal every single day. And then on the right-hand side, operational achievements. Actually, I think there are many, but we wanted to just highlight maybe two. One was that on soft side, we had record high soft sales volume. We are clearly, you know, the market is picking up. even though the mandates are still somewhat, you know, clearly below our hope in Europe, 2% vis-a-vis 6%. And then, as you can see, the market has become stronger and has been successfully able to leverage the tailwind I want to highlight a couple of numbers from the third quarter, over a million tons of renewable products sales volume, of which SAF was about 244 produced tons. So year to date, we have produced about 741 tons of SAF. So the journey has clearly started. Our comparable sales margin in RP rose clearly to almost $500 per ton. What was also very positive and helped our result was that the total refining margin for all products exceeded 15 bucks per barrel, and that of course then helped the results. EBITDA 531 heading in the right direction. Cash, I'll let Eva talk about cash in a moment, but of course that's something we monitor very carefully as we do when it comes to the 40% leverage. you know, a ceiling, if I want to use that word. My final slide here before I hand it over to Eva, and then I'll come back later, is about the Performance Improvement Program For me, this is more than just a performance program. It is very much a journey that will ultimately then move us into what I've called inside the company a journey of continuous improvement, continuous development. While we're doing this program, we're also building more systematic methods on performance management. We've reviewed all of our KPIs and we continue to do that because, of course, you get what you measure. We have very systematic cadence on performance reviews. This whole approach, we've really pushed that forward harder and we will continue to do that, bring it down deeper and deeper into the organization. So I see this is an important part of moving forward with this program. We also track our various activities in this program very carefully. I personally participate in biweekly reviews of all the initiatives that we approve before they even get included in these calculations. So I think I have a good understanding of where the program is going, and I'm happy to say that I really like what I see. I really like what I'm seeing in the teams. So good work and big thanks to the team nest on this one. So we are heading well towards 350. And so far, 229 annualized run rate improvement by the end of Q3. With those words, I give it over to Eva. So, Eva, please take it from here.

Thank you, Heikki, and good afternoon to everyone on my behalf as well. I'll start with the familiar reference margin of renewable diesel, and just as a reminder, so please do note this is a gross margin, so it deducts only the feedstock cost, and is hence different from the sales margin we'll discuss later on. But indeed, I think this trend line shows very well the strength and recovery we've seen in the European markets in the quarter. Then, just to break down by segment, 531 million euros of comparable EBITDA, so 266 million coming from renewable products, 232 million from oil products, and then 34 million from marketing and services. And I'll maybe comment the segments a bit more in detail very shortly. As Heikki already said, the performance improvement program is obviously an important part of our 531 million result. We're very pleased with the run rate of 229 million achieved at the end of Q3. And then this gives a year-to-date impact in our figures of 84 million euros. Now, a few points on the 229 million. So if we break it into cost reduction versus more margin volume optimization, it's a roughly 80-20 split. And maybe also good to remind you that there is an element of lease costs here, especially on the logistics side, which then are actually not visible in the EBITDA rather in decreased depreciation as we have fewer leases. So roughly a bit more than 10% of the 229 is related to that. Overall, the bigger categories are really around logistics, transportation in all forms of fashion, the optimization there, and the lower discretionary spend across everything we do. Moving then to the business segment commentary. So renewable products. We're very pleased with the reliability of the operations. We almost reached a similar sales volume, as you see from the left-hand side pillars, as we did in Q2. And then the sales margin continued to tick up. If we move to the right hand side and look at the sort of comparison between our Q3 results versus Q2, you see that the big change really comes from the sales margin area. And naturally, the diesel price has supported, has had a positive impact on our margins to actually both of the two segments and also OP, but important here as well. We continue to see some headwind in the feedstock cost. But then we also had a more one-off positive, which comes from the SAF BTC, so the now expired tax credit program in the U.S., which was in place for SAF until September. And we actually booked the full 27 million benefit of those credits in Q3. And that is maybe worthwhile noting. On the CFPC side, the continuing tax credit system, we continued on a similar path as in Q2, so booking 27 million euros in there as well. Then moving into the oil product side. So here diesel crack clearly contributed much better market environment than in Q2, but also we had a better raw material or crude feed cost level in our Q3 and that supported the $15 per barrel margin as well. Overall, as Heikki already mentioned, so we're pleased with the good utilization rate, very stable utilization across the quarters, as you see well from the left-hand side. And then really on the right-hand side, maybe an additional point to note is indeed the the utilization of 91 and also some fixed cost improvement in the figures. Finally, on marketing services, we had a good season, the Q2 driving season, supporting the results, but the team continues. It's very good and diligent work on the fixed cost side and supporting the results. Moving then to cash flow and profitability. The capex continues under very tight control. We have upgraded now our annual guidance to a level that we expect the capex this year to be around 1 billion euros, so slightly down from the earlier range. And this is really thanks to a lot of good discipline across the segments. Now, we knew going into Q3 that we'll have a tougher quarter when it comes to cash flow due to the upcoming maintenance or now already started maintenance, ongoing maintenance, should I say, in Rotterdam and upcoming maintenance in Singapore, which meant that we had to build inventories during Q3 to be able to serve our customers during the Q4. period and that obviously had some headwind on our working capital. But I'm very happy that the total outcome was minus 50 million euros for the quarter because this is also the year-to-date number and this obviously gives us confidence that we can deliver positive cash flow for the full year. as we work to deliver those built-up inventories to our customers in the coming months. So as I said, slight headwind on the cash flow, visible also in the leverage, but we're well below our 40% target and happy with that performance. So with that, I think, Heikki, it's back to you.