Neste Oyj

Juha-Pekka Kekalainen - Head of IR Matti Lievonen - President, Chairman and CEO Jyrki Maki-Kala - CFO Matti Lehmus - EVP of Oil Products Kaisa Hietala - EVP of Renewable Products Antti Tiitola - EVP, Oil Retail

Mehdi Ennebati - Societe Generale Matt Lofting - Nomura Karri Rinta - Handelsbanken Mukhtar Garadaghi - Citi Nitin Sharma - JPMorgan Joshua Stone - Barclays Capital Henri Patricot - UBS

Thank you and good afternoon, ladies and gentlemen. Welcome to this conference call to discuss Neste Oil’s fourth quarter and full year 2014 results published earlier today.

I am Juha-Pekka Kekalainen. I am the Head of Neste Oil’s IR.

With me here today are President and CEO, Matti Lievonen; CFO, Jyrki Maki-Kala; Matti Lehmus, who is the Executive Vice President of Oil Products business area; Kaisa Hietala, EVP for Renewable Products; and Antti Tiitola, who is the Executive Vice President, heading our Oil Retail business. We will be referring to the presentation that can be found on our website.

Please pay attention to the disclaimer since we will be making forward-looking statements in this conference call. And with these remarks I hand over to CEO, Matti Lievonen to start with the presentation.

Matti go ahead.

Thank you, Juha-Pekka. Good afternoon from my behalf also.

2014 we are very proud to result what we could do in 2014, because the operating environment was very volatile last year. If we look at the Brent first.

So we had a huge decline in the Brent in the last -- starting third quarter but being very heavy in the fourth quarter. Also the Neste Oil reference margin very roller coaster.

We revised our guidance few times last year and the basic reason was that the volatility was so huge. But luckily towards end of the year the reference margin in Urals-Brent [ph] side was pretty strong, which helped us very much.

Also the euro-US dollar exchange rate was developing favorable for us and also very sharp decline. Then euro-ruble exchange rate also had volatility very much towards end of the year and of course that’s affecting our retail business, not show much as the group.

And then if you look at some drivers in renewable side so FAME versus palm oil prices volatility there also and then also seeking very less what was in 2013, with the profitability same in soya materials, around soybean oil, lot of volatility. And when you are working in this sort of environment what you need to have, you need to have a very strong operations in your own company and you could be able to improve our internal performance and I am very happy to say that, that was the really the backbone for us that we could make a really good result in 2014.

Despite the volatile markets we were able to make a comparable EBIT almost at 2013, we got level. And also very proud that this internal improvement action materialized.

We announced in April that by internal improvement that we will achieve more than €50 million and we have achieved close to €60 million. And then also from sales side, marketing side we did an extremely good job.

So I am happy the result what we have been able to do last year and I will touch on the outlooks later on, but first I will hand over to our CFO, Jyrki Maki-Kala, to tell a few words about quarter four financials.

Yeah, good afternoon. So I have a few slides here and then my colleague from the business areas will comment their figures concerning the quarter four.

But if we look at quarter four financials compared to the last or the previous year, corresponding quarter, we see a drop in revenues, that is very much around this crude oil drop that was there in Q4, this year for up to 35%, where the oil landed during the period. Our comparable operating profit it was a record high in Q4, mainly coming also from the Blenders tax credit that was announced mainly in the last days of December, but €255 million €254 million this is quite a big change compared to the 2013 corresponding €163 million.

There are differences between the businesses but the oil product had a very strong quarter also coming from the reference margin. Matti Lehmus will discuss more about that, renewable products very clearly coming out of the Blenders tax credit and the background oil retail basically for the first time this year it has a lower result than the corresponding period 2013 mainly coming out of the ruble and lower margins and then the others improved, that is this mainly coming from the [indiscernible] operation in Sweden and also our internal costs.

But then you will see a big figure there, a big change in the IFRS operating profit level where we have this minus 27, and that basically includes €322 million of this inventory value loss. That basically around this change in the crude oil price.

Otherwise it would have been much, much better compared to the 2013 figure. Net cash or the cash flow I’ll comment more on the annual figure a little bit later with the presentation and that space is where the change is coming from.

And the comparable earnings that €0.80 improved from last year figures and thus all this what I mentioned in a quick analysis where the major thing is coming you will see very clearly the positive thing in quarter four was around renewables and confirmation of the Blenders tax credit, basically €89 million out of this €90 million improvement. And also it is important that we had the others improved €16 million there in the background mainly coming out of the operation like I mentioned newness, fixed cost and also some operation on other business areas.

FX changes compared to 2013, year-over-year was totally in a different level compared to previous year. We had a positive side and also in the volume side we have slightly lower sales volume in Q4 compared to 2013 mainly split quite even between oil products and renewables.

So then I will hand over to Matti Lehmus to discuss about oil products.

Yes, good afternoon. So if you look at the key figures for the oil products then the first observation is that oil products did benefit from strong market.

Revenue obviously declined year-on-year. This is the direct results from the declining crude oil price but more importantly the comparable EBIT did increase to level of €109 million from €67 million a year earlier.

And this is in turn mainly the main driver here is the higher reference margin which was 5.6 in the fourth quarter which is a good level and clearly stronger than a year ago. Here it’s worthwhile to note that that while we did have the hydrogen unit damage ongoing during the fourth quarter, a significant part of that profit impact was compensated by the insurance compensation.

If we turn to the next page you can see the waterfall analysis, basically giving the same message. The main difference year-on-year was that clearly higher reference margin and at the same time additional margin declined by €31 million.

Here I would say that the oil products apart from the hydrogen unit damage did have a very good operational performance in the fourth quarter and the fact that the impact is minus €30 million shows that in the insurance compensation compensated last two quarter the impact. On the fixed cost side, slight increase.

This is mainly related to higher maintenance cost, again related to the hydrogen unit. If we look at the market on the next slide a couple of comments what made the reference margins strong.

So I would raise three things. Firstly, the gasoline market was seasonally strong year-on-year.

We can see that we had margin level of roughly $10 per barrel almost double than a year ago. And at the same time the euro spread price differential remained reasonably wide at $1.5 per barrel and these two factors both clearly supported the reference margin.

Third factor I would add is that weakness of the physical crude oil market meant that there was a clear discount of physical crude versus the future and that added roughly $1 per barrel to the reference margin as well. Finally combining all these factors we can see that the total refining margin remained strong at $11.4 per barrel.

So this was a good quarter, slightly stronger even than the third quarter and I would in particular raise apart from the reference margin the fact that the additional margin came in at $5.8 per barrel in spite of that Porvoo production outage. So we can clearly see that operational performance allows us to have strong additional margin when things go well.

At this point I hand over to Kaisa Hietala to discuss the renewable products results.

So, good afternoon also on my behalf. Q4 last year was a very strong quarter for renewable products.

This was of course due to the re-introduction of the Blender's Tax Credit. But then on the other hand we also were very successful in our operations and here are couple of points that I would like to highlight.

First of all the Singapore turnaround was successfully completed at the beginning of Q4 and even though the refinery was closed until end of October we were still able to achieve clearly more than 500,000 tonnes of sales volume in Q4. Our capacity utilization rate was also very high at 98% and clearly reflecting the fact that both world scale refineries, the Rotterdam refinery and Singapore refinery were running at higher capacity than the nameplate capacity.

The reference margin environment was significantly lower in Q4, 2014, if we compare to Q4 2013. If we look at the sales allocation, 19% of sales went to North America and the remaining to Europe and Asia.

The reason why the North America sales was lower than the annual average is that the Singapore maintenance in October was reducing those volumes. And then the final thing I would like to highlight is the very nicely achieved waste and residues use at our refineries which was 61% in Q4.

And with all of that renewable products achieved €141 million EBIT compared to €94 million in Q4. The share of BTC €89 million.

Here is a picture, a waterfall picture describing basically the same elements which I discussed already, clearly showing that the reference margin was challenging for us in Q4 but additional marching, which included the BTC at hold and also lot of own activities, improvement activities we were able to increase from last 2013 in €94 million to €141 million. If we then look at the market parameters in last quartile here you can see the European margins, the biodiesel margin on the left hand side and then the vegetable oil complex on the right hand side.

The trend has been downward, clearly the margins are under pressure and the biodiesel margin which is the same seasonal price versus palm oil was clearly on the lower level about 2013 average and then if we look at the vegetable oil complex, the vegetable oils we’re trading closer to each other than the average was in 2013. And if we then move to the North America, the soya Methyl Ester which is the local biodiesel margin were also on a lower level than in 2013 but clearly on roughly on an average level for 2014.

But then the RIN values were relatively stable throughout the period and then we saw an increase towards the end of the period. And then finally an additional margin analysis and here I would like to point out that the impact of the Blender’s Tax Credit is the light green color which all was [indiscernible] but if we look at the reference margin and the normal sales margin which is the dark green color here we can clearly state that renewable products have been able to increase the additional margin by improving the feedstock flexibility, the operational efficiency and also the sales allocation.

This is now on a roughly $200 plus per tonne level which we consider being healthy. And I would like to now hand over to Mr.

Antti Tiitola to discuss the retail results.

Thank you. Good afternoon, Antti Tiitola here.

In oil retail our revenues declined from €1.12 billion to €1.04 billion in the last quarter and the EBIT declined from €15 million to €8 million. The main reason for this development was first of all we had a good volume growth in the sales network, actually in all five countries and also in the back water business in Northwest Russia.

But in the direct sales [ph] there volumes declined compared to the last quarter in 2013. We had especially some challenges in the Finnish industry and traffic segments and the unit margins are under pressure in Finland and in Northwest Russia.

So our margins have the negative EBIT impact of roughly €8 million which you will see also on the next page in the waterfall analysis. So the main reasons were the unit margins in those markets, Finland and Northwest Russia.

And now I hand over to Jyrki Maki-Kala.

Yes let’s then move on to the full year financials and some other topics. So we’ll start with the figures, the corresponding annual figures ’14 and ’13.

You’ll see the dropping in the net sales, very obvious coming mainly out of the oil price that basically took place during the last five months of 2014. Our profitability level measured by the comparable figures is pretty much at the same level as in 2013.

Improvement in oil products, basically the full year additional margin was 5.1 which was basically something what we announced in our Capital Markets Day, that 5 is a good target going forward. So they achieved that during 2014 already.

Renewable product, thanks to the good quarter, quarter four with the Blender’s Tax Credit so they went up close to €240 million level in the comparable EBIT. Retail quarter four again they had issues with the margin and also with the weak ruble, so basically they were behind the €8 million or €9 million in the annual EBIT level, if we look 2013.

So basically there were changes in quarter four that basically made an impact on the full year figures. And then the big thing of course in IFRS figures with the operating profit level is that we reached €150 million and if you add there the €492 million that was coming out of the inventory value as a loss, so we are pretty much at the same level again comparing to 2013.

But the big change that has been also asked today from various, let’s say listeners is about the net cash from the operation that we basically landed close €600 million lower level in net cash from operation. And that is basically the cash before capital expenditures, meaning the taxes and interest are also included and there is no simple answer why that was €600 million lower.

It’s a combination of many things. 2013 was the near history best cash flow that we have made in annual level and as an example 2013 renewable business has for the first time the full operation in place, meaning really utilizing all the supply chain, feedstock et cetera activities.

And also we in the Group level, managed to let’s secure a lot of the activities very positively at the end of 2013, meaning the cargo timings et cetera, et cetera. So we really maximize the cash flow back in 2013.

And then if we move to 2014 figures we had lot of special issues in quarter four and also timing wise special issues; thinking about the oil price dropping, thinking about the incident in Porvoo refinery and thinking about the also the currency changes that took place in a very short and quick period. So overall the year-end 2014 working capital has a lot of extra ideas or extra points inside meaning the Blender’s Tax Credit €90 million, we have the insurance compensation roughly €20 million there at the end of the year, cargo timing in and out meaning, crude and also the product shipping made a difference roughly €100 million if you compare ‘13 and ’14.

And then certainly the weekly lowering crude oil price in quarter four it made an effect on our working capital negatively by roughly €120 million and all these items what we consider like working capital items are something, it’s only the timing issue. So we will get these most of these back in 2015 because that was there in place the last second of [indiscernible] for 2014 but then like this BTC we are getting this in the first half of 2015.

So most of this change is around timing and that is something that when the oil price is moving one day into different direction so we are getting back most of the cash flow effect during that year. So that is basically behind the net cash changes with our cash flow statement.

And then the comparable EBIT, the 1.6 that is basically the basis where we calculate the dividend. So 1.6 is how we basically, according to policy define the minimum for the 33% dividend.

After summarizing the reviews by segment what I just mentioned oil products reference margin basically at the same level at 2013, 4.8, very strong additional margin what I mentioned despite we had this incidence in Porvoo during the year and then finally the base oil improved their contribution nicely throughout the year. Renewables, what Kaisa already mentioned sales volumes we were now at a level what is basically the original capacity of our plant.

So it was a very good improvement by increasing 11%, the volumes but the markets were weaker year-on-year and that’s very, very clear and then the Blender’s Tax Credit at year-end was a very positive impact for the full year figures. Retail, like Mr.

Tiitola mentioned volumes increased but the margin were under pressure in Finland and Northwest Russia due to competition and then the weakening ruble at the end of the year made an impact on the full year figures. But these are basically the main things that happened behind the figures and all this what I said in waterfall, big changes, big figures relating to reference margin, both in oil products and renewables production, but mostly renewable and the green ones are the one that we succeeded with our own doings.

Volumes benefitting our operations, meaning the additional margin, lower fixed cost like we announced in April we will have improvement program in place. And then of course the FX changes year-on-year was negative and still we basically landed more or less at the same level as in 2013.

It was an excellent achievement, successful on actions basically. And then the key financials, these two targets what we are announcing, return on average capital employed, we are in the double digit figure, 10.1 and with our leverage we are inside our range 25% to 50% with a level of 38%.

So solid balance sheet in the background. And then one special base that we have added into the material is about the oil price change because it has been discussed a lot and also ask questions about it, but the main principle when crude oil prices is changing $10 per barrel, what it means in our P&L balance sheet and cash flow.

But we have said that it has an impact on our IFRS EBIT through the inventory valuation losses and $10 means U.S. $100 million.

But on the other hand when the price is going down we are also benefiting of lower utility costs and freights, but there is a certain time lag that is not as immediate as it is with the inventory valuation loss. That is basically U.S.

$30 million. So in IFRS EBIT level the change is minus 70 and comparable EBIT it’s plus 30 that’s something to remember.

Working capital decrease is evident because oil price is going down. The overall balance between inventories, payables and receivables is that $10 per barrel it means $50 million lower working capital.

And all these means at the end of the day that we are having a lower free cash flow throughout our operation and that is $20 million. But if you basically compare that to what happened in 2014 we are talking about $100 million to $150 million lower cash flow coming out of the crude oil price going down.

And this principle basically follows a logic also, when the price is going up but the main thing is also to remember that all these things, what happen on in a daily operation is the timing. The timing effect what finally is then the cash flow impact, but looking back to 2014 the cash flow was hit by roughly €100 million to €150 million coming out of the oil price going down.

And then I will hand over to Matti Lievonen about the other topics.

Thank you. First let’s start the outlook for 2015.

If we look at the operating environment we could say that we continue to be very volatile, crude oil price changes will be there, also the [indiscernible] balance is looking the place and there is a lot of uncertainties also in political decision on bio-fuel mandates. So there is still lot of volatility, but we are very confident in our capability to make a good result and we are expecting that our comparable EBIT will remain very robust and that’s something that we really believe, but probably will be lower than 2014.

We are not including any Blender's Tax Credit because it is not announced. So it’s purely the market situation where we are today.

And if you look at the markets today for example oil products, the reference margin they are pretty strong now and forwards looking also good in the first half of the year, and you never know what’s going to happen in the second half that we saw last year when after first quarter the Urals [ph] was a level was under 4 and extended anyhow 4.7, 4.8. In that respect also the renewable as mentioned by Kaisa Hietala.

So we are really focusing the optimized renewable profitability, it means the feedstock optimization, end market optimization or business [ph] optimization and we are really happy that we are able to do those optimization because our term contract is around 50% and we are happy to have it at that level we have said that several years because then it gives us really the possibility to maneuver regarding the feedstock price and the markets development in different countries. And then in oil retail the Russia probably is the question mark but it’s not so huge that we could not manage and then as mentioned so the volumes are building in Russia but this excess rate of the euro-rubles that’s caused some negative impact for us.

But we are very-very robust and we feel that we will be able to make a very good comparable EBIT also in 2015 and as we told also the cash flow that was very hard shock in fourth quarter that how the oil price and all the things went, Blender’s Tax Credit at end of the year we just believe that our cash flow will be at good level also. Then one big major thing is the Porvoo refinery turnaround has been scheduled, that it will start in April and last about 18 months.

There is of course the negative impact in our EBIT and it’s estimated about the 70 million and of course when we have this turnaround so we start, we have started and we will still continue to make the strategic inventories for this turnaround that we are not needing to buying from outside stocks and that of course we are using the good container situation for building these stocks and it’s improving also our result. Then the investment 2015 we expect to total some €450 million.

It’s including €100 million Porvoo turnaround cost and also we have this strategic project like STA [ph] unit to Porvoo and then finalized the [indiscernible] station. So pretty much very good in the CapEx cycles.

Then the next point is division proposal, so the Board of Directors will propose dividend at €0.65 per share. It will yield a 2% to 3.2% at the year-end 2014 share price.

It gives 41% of convertible net profit and our minimum target is 33%. We feel that €0.65 is good dividend in this year when we have a lot of investments going on.

But as I mentioned and we have mentioned that our policy is to be a stable dividend payer and this minimum 33% is once again beat it by 41%. Then one other big news that Board of Director will proposed to the AGM that we will change our name to Neste Corporation from Neste Oil.

And really the meaning is not that we start to save, the briefing goes to another question we are dropping the oil out there. But it really reflects our strategy what we have presented to CMD capital Day but also we have demonstrated in practice how we are doing.

So we are emphasized we will diverse growth like new products. We have renewables fuels now and we have a new application what we have told that will be the bio-based chemicals and the services.

For example we have our engineering company, Mr. Jacobs is giving very much services, it’s northern European biggest petrochemical engineering company.

Also other services that we will increase in all business area. So that’s our strategic view and also I am pleased that over 40% of profits came from renewable products in 2014.

So we are really the original traditional oil refining company but we are doing things differently. We want to be forerunner and forward what the change is and that’s why we are dropping the oil out and then see all the possibilities to expand our businesses in those areas which are the core business for Neste.

However, we are not going to change the station network, Neste Oil brand for time being. We are sensible with the cost and the timing.

And by timing we are changing then the station network branding. And then we focus on the same thing as earlier so safety.

We did a good safety development in 2014. Our [indiscernible] incident frequency was 2.7.

Also our process safety went to level 3. We are inching towards zero, that is our target.

Cash flow as mentioned we are emphasizing the cash flow, what’s coming to the inventories then CapEx and also optimizing our seasoning. Refinery productivity there we have a big project going on and the program that’s the one refinery concept as we launched that fourth quarter last year.

So we will combine two refineries into one single refinery concept for department in Porvoo and the one department in Naantali, meaning that Naantali will be supplier of the feedstock very much to the Porvoo. We are lowering the Naantali costs and also increasing the yield in Porvoo more middle distillates and the less dependent of purchases from Russia.

So all those will give us a good return and what we have said that payback time is less than five years. Markets and customers we still focus more and more to the customer-centric organization.

Also there the logistics to new IRP system we will start to launch and then it will be ready in two year time. So lot is going on here in Neste and we are very proud that we are in very good operational condition.

We could really beat the markets with our own activities in how we are doing those things. That was the briefing of the fourth quarter results and the full year and now we are ready for questions.

Thank you.

Hi, good and thanks for presentation. I will ask two questions please.

The first regarding the on renewable fuel division. So you said Kaisa that excluding the Blender's Tax Credit impact your additional margins were $200 per tonne.

Can you tell us what are the main elements justifying the quarter-on-quarter increase. In Q3 you have made $174 per tonne and is this $200 per tonne additional margins is something sustainable.

In fact you know I just wanted to know if using $200 per tonne reference margins we can expect in 2015, a total realized annual EBITDA margins of $400 per tonne which looks very decent for your company next year. The second question we got with Singapore plant, I wanted to know if during the maintenance outage you have made some de-bottlenecking work and if yes could you please tell us what is the new production capacity at your Singapore plant?

Thank you.

Alright, thank you for the questions there. The first question was around the additional margin and the fact that we have been able to increase it continuously throughout 2014.

The main elements for the increase have been around three topics. We have been really focusing on feedstock flexibility.

We are studying and developing and bringing in new dirtier raw materials and this is very well reflected in the annual waste and residual share of feedstock which was 62% in 2014. So this is one of the cornerstones of the additional margin increase.

The second element is the fact that we are streamlining our supply chain all the time and this includes also the logistic cost but as well as the production volumes. In 2014 we were piloting 125% production rate, both in Rotterdam and Singapore and we were very successful and in Q4 both unit were running on that level.

The third element contributing to our increase in additional margin is the sales allocation. Like our CEO already shared with you we are not turning up all our volumes.

We want to have flexibility in the system, also when it comes to the sales allocation. This type of a volatile market is also giving lots of opportunities for players who can globally optimize the sales allocation and this is where we are putting quite a lot of focus into it and in 2014 that also contributed to the additional margin.

What would be then the sort of the level going forward, like mentioned during the Capital Markets Day these three elements, the feedstock flexibility, the operational efficiency and the premium capture those are the key priorities for my business and we will continue to develop those. The sort of the question regarding the 2015 overall sales margin, that is very much depending on the reference margin and at the moment it’s far too early to speculate on that.

Excuse me, Kaisa, just reference margin let’s take the hypothesis that reference margins remain at $200 per tonne and you still have -- you still benefit from the same opportunities that you had in 2014 regarding new districts et cetera. Should we consider on that let’s say additional margins of $200 is achievable?

Well the $200 per tonne was achieved in Q3 and Q4 and we know that the reference margin and the market levels were not that strong as you said. So basically I mean this is the way we want to go, this is our target.

We want to improve the additional margin and we are working on these three areas very hard to be able to deliver the promise. Then there was a second questions regarding the Singapore turnaround and whether we did some de-bottlenecking in order to improve the unit?

It was a maintenance turnaround and of course since we have a target to increase also the waste and residual use, so we did do some improvements regarding that. And then also after the turnaround we were testing the 125% runs and that was successful.

Thank you. Thank you very much.

That’s very useful

Thanks, good afternoon gentlemen. Two question if I could please.

Firstly just coming back to the guidance for 2015, I think you mentioned no sort of BTC allowance and could you just talk about what your embedded reference margin assumptions are on the refining side within that guidance, because I guess that’s another important variables in terms of how it’s sort of coming out directionally year-on-year. And secondly just on renewables could you talk a little bit about how you see the sort of the evolution of the relationship between, if any between absolute fossil fuel-based diesel prices and NExBTL and the extent to which they can increasingly dislocate as you go forward in the event that crude prices stay low?

Thank you.

Thank you, it’s Matti Lievonen. First the guidance, it’s as you said that it’s not including the Blender’s Tax Credit there and also the refining margin this time we didn’t want to start to play with the reference margin.

Last year. We did that and we say that it’s based on that and that we are living with the market SEPs and we are very robust that we’ll be able to compete and if you look at now the forwards, that is today’s forwards it’s pretty much the same level than the last year.

So there’s not anything drastically in the marketplace. And there is always the things which could happen now.

There is in U.S. there is strike going on within the refineries they are not all down but who knows what’s going to happen there.

So it’s better to leave that to market now, and then Kaisa probably will answer to that.

Yes, there was the second question regarding the relationship between fossil diesel price and biodiesel or HVO, NExBTL price. I think what first of all we need to remember that the raw material for biofuels is not crude oil and therefore the raw material, for example for HVO or for biodiesel is very much dictating also the biofuel price levels.

Maybe this was not obvious when the crude oil price and for example the vegetable oil prices were roughly on the same level but now when we have seen a dramatic crude oil price drop it has become obvious that the biofuel prices would not drop in the same way as long as the raw material prices for biofuels remain on the current level. So the relationship or the connection between the fossil diesel price and the biodiesel price has now broken and it’s pretty difficult if you see what kind of premiums that biodiesel has over the fossil diesel.

Great, okay thanks a lot.

Yes, thanks for taking my question, Karri Rinta, Handelsbanken I would like to start by discussing your way of defining your comparable operating profit because in one of your slides you mentioned that when oil price drops you exclude the inventory impact but then you include the positive impact from the lower utility costs and logistics cost. So can you explain why the same underlying driver you exclude one aspect but then you include the other aspect in your comparable operating profit, that’s my first question.

Yes this is Jyrki Maki-Kala. Yeah over the presentation at one of the slides there, about the PLM and there is an inventory valuation, that takes place immediately.

It’s like every day when we’re calculating that, so that’s a timing issue because these, what I call freight and utility costs they will come at with a certain time lag. So they are in that sense not apple-to-apple but on the year let’s say six to 12 months, then you’ll see this as a total effect.

One thing is also that this freight cost and also the elements of the utilities they are also part of our additional margins and so in that sense is our operations what we are managing and improving the margins. So inventory valuation levels is because it’s really every minute, every second, every day calculated.

That’s why we exclude that from our comparable EBIT.

And Matti Lievonen here, also this example there was showing that what is the cash flow effect because that wasn’t very clear in our sensitivity analysis, what is the cash flow effect and the cash flow effect was very much described there. So we haven’t changed our calculation base, what is our convertible operating profit.

It’s the same it has been.

Okay thank you. Then a follow-up on the timing that you mentioned.

If I look at the fourth quarter then the cash flow or the full year, if I look at on a full year basis cash flow excluding working capital was down almost €500 million, which is exactly the same as the investment losses that you booked. So to me that would suggest that these positive benefits from lower oil prices you can see any of those in 2014.

And if I also look at the waterfall analysis for oil product for the EBIT I don’t really benefits there either. So should we now expect that both in terms of cash flow as well as, especially in terms of cash flow we should see benefits from R&D in the first half of 2014 from…

Yeah, that is exactly like you mentioned, that there is time lag and that is basically how it works. That we had something in quarter four last year but it was minimal it more for 2015.

Okay, thank you. Then finally on FX I think you mentioned plus 17 million positive impact from FX on the group level.

It seems like the hedged dollar rate was the same for the fourth quarter of 2014 and 2013. So can you discuss a bit where this positive FX effect came from which currency, which operation?

Thank you.

Basically the things what we are managing is still the U.S. Euro, all of it’s something relating to Swedish Kroner and some other, but I think mainly relating to U.S.

and then Euro because we don’t hedge everything. The hedging is on a rolling basis.

So you will benefit when the crude oil or let’s say the currency is going down compared to previous year.

Okay, thank you.

Good afternoon, gentlemen. A few questions for me.

First of all could you just comment on what you see as the drivers, the FAME margins have been trending down. Could you just talk about what’s happening there and how -- what’s your outlook for 2015 and for the European biodiesel market, what are the sort of key moving parts?

The second one is on the U.S. Prime it seems to be detached by these ethanol [indiscernible] towards the end of the last year.

Again could you just talk about the situation there? And finally, in terms of the opinion in the renewable business longer term you were quite successfully getting it to 200.

What’s the change that could erode that premium? I mean do you see any market participants who can close the gap or I mean any trends on the feedstock base or are you comfortable this can be maintained in the medium to longer-term.

Thank you very much.

All right, this is Kaisa Hietala.. I think that’s three questions.

The first was regarding the Europe biodiesel markets and why do we see the decline in the margins? I would say the overall supply demand is not in balanced at the moment.

There has been quite a lot of players in the market and then some political discussions still regarding the country level demand, or the mandates. So clearly over supply situation is still there and has been pushing down the margins.

If we then go to the second point which was about the North America and especially the RIM levels 2014 was a very special year in U.S.A. We can’t say that the market was based on fundamental supply and demand because there was so much of speculation and sort of opportunistic view regarding the regulations.

If you remember everybody was waiting for 2015 mandate to be published and eventually then in November it was said that it will be published only in 2015 and then there was also the whole story around BTC and potential reintroduction of it. So very difficult to give a full analysis why the RINS behaved the way as they did.

Naturally the RINS is the alternative for blending biofuels and one could say that maybe there was some more supply in the market. So the RIN activity what regulation was confusing the market dynamics and the fundamentals a lot.

So hard to give you a very clear analysis on this. And then the last question was around the premiums and the additional margin and would there be elements to erode that in the future whether it’s the sales premiums or the raw material flexibility I would say the Neste Oil is the only global player in this field when we discuss high quality HVO.

We have a global supply chain, we have a global optimization and we have developed such an agility that I'm pretty confident that we are able to keep our position in the market also in the future.

All right, thanks for that, Kaisa. Just a follow up on the first question, that oversupply you’re describing in Europe that’s pushing down margins.

Now my understanding is that oversupply has been there for many years. I mean is there a reason to link this contraction margin to the lower oil price as in is there a lower governmental support maybe to buy diesel because that’s better detachment from the actual sort of fossil fuel price?

And do we truly link that and should we expect that those margins to be lower in a lower oil price world just because there’s less governmental support something like that? I mean is there a structural element to this or is it just easing on up and down because my understanding on supply demand situation it hasn’t changed since the last year.

Is that fair?

I would not link the crude oil price and the biodiesel margins in Europe. I mean as long as the vegetable oils, which are the main raw material for biodiesel for Europe, as long as they keep the current price levels, the biodiesel prices cannot follow exactly the fossil diesel prices.

That’s just a reality because then the biodiesel would not be produced. The regulations in Europe are firmly in place.

There is no revision from the European commission or there has not been a reverse revision in any of the big markets. So I would say that the regulatory support is still there.

What we do see is the seasonal patterns. We see that there is summer grades and then there is the winter grades they have different price levels.

They have different margins as well and now of course the blenders, who need to blend biofuels of course they want to maximize the blending during the cheaper biodiesel seasons which is typically summer season and this seasonality could be something that it’s now swinging also the margin.

But I got I think that Kaisa answered it very well because the biodiesel market that’s defined by the European Union and if we now look at the countries in Europe I think that the most of the biggest countries they are at the level of 6% to 8% in their mandates. And it means that they need to fulfill those and today there’s a frame in Europe this is a biggest product for this segment and as mentioned by Kaisa.

So there is a lot of over capacity. You are right that it has been for several, several years because there was this subsidy quality that those who was building a big production unit they got a lot of subsidies and there was -- 2013 was a good year for the European biodiesel producers and now they run up their plants and last year it wasn’t so good, but they still run.

And there is one thing it’s like ethanol business that you have a couple of things that either you have these rapeseed oil producer and the propane [ph] producer. If you have only the -- if you have rapeseed oil and you take the FAME, they are suffering now very much.

But if you have a combined system that you are producing propane and then you are producing FAME you could be profitable also in this situation and there is a lot of CapEx. I think that is the biggest reason and if you look at as Kaisa mentioned now the price difference between the fossil and then the biodiesel feedstock there is a big difference but clearly we have seen also that there is also a huge dropping in palm oil prices because it’s not sustainable.

They have used in Europe lot of palm oil, for example in energy usage, using the palm oil and now when the crude oil prices has really dropped so they have turned into the fossil fuel but in the traffic fuels they cannot do it because they need to fulfill the mandate. That’s the basic reason so there is also the time lag, that with feedstock if there is not weather who will the whole crop so then it’s of course different, but now the crop seems to be good.

So the time question also when they feedstock in the vegetable side kind of decrease.

Okay, that’s all very clear, thank you very much.

Hi, good afternoon guys, two questions for me. First one on oil price sensitivity.

Now I understand the increase in comparable operating profit that’s around €30 million from $10 decline in oil price, given low utility cost but maybe if you could explain slightly more the implications for cash flow which you suggest had a negative impact especially given that working capital declines. So maybe you could explain in a bit more detail.

And the second question is on the reference margins for renewable business. So you got 61% of your feedstock in Q4 which was based on residue inputs and then in light of growth in this input how relevant is it to use palm oil, soya bean oil, driven restaurant margin.

Maybe some explanation for that please? Thank you.

Yeah, if we start about this oil price sensitivity and the impact on cash flow, this principle of $10 per barrel change that is $20 million in cash flow on a negative side that is basically coming out of the fact that since the inventory valuation loss of 100 million combined with this savings, lower let’s say cost relating to utilities and also to freight, $60 million or $70 million negative in the IFRS EBIT basically and that is then compensated by the lower in working capital. The lower working capital is not exactly the same as $70 million.

It’s lower because when the oil price is going down the balance between payables and receivable changes on a negative side because payables, although the date for payables are longer compared to the days of receivable that is -- can be seen from our figures. So it’s a timing issue.

But overall it really means that coming out of the oil price change at the end of the day you are seeing this $20 million negative change in our free cash flow and it is the principle of quarter -- the timing on monthly basis may effect and will effect but on a principle that’s how it goes and that’s why I mentioned about this what happened in 2014 roughly $65 change of crude oil price roughly means $120 million less free cash flow on an annual basis what we basically witness in 2014.

Thank you.

Then was a question regarding the reference margin and a question whether it is relevant to show the reference margin based on biodiesel margins, while -- when this sale [ph] is using already more than 60% of waste and residue. When we develop the reference margin at the first place we wanted to create a sort of a transparency for the market.

Currently this is the only quoted liquid sort of margin element which is available as a reference for all of us and if we think about still the majority of the market, if we think about the whole biodiesel market is still based on the vegetable oil, the same or SME production then we felt that the reference margin at least gives a guidance how the market is moving and how the correlations are in the biodiesel market. So this is currently the only transparent and liquid quotation we can use as reference.

Is it then fair to conclude that given this growth in waste as an input for your renewable business, your additional margin ought to expand more because even in a declining palm oil, Soya bean oil based reference margin environment, given that these things are not actually the inputs that go into your system your additional margin has to show an increasing trend despite the reference margin, going the other way. Would that not be a conclusion?

Not exactly. Our additional margin has also other elements than just the feedstock flexibility.

Feedstock flexibility is an important key for us but then there are the two very important elements, for example that how well do we run our refineries, how well do we run our supply chain and then how successfully we optimize the sales allocation, so that we can capture the highest premiums in the market. And these elements go hand in hand and this is what we mean when we say that we are optimizing globally.

So I would say that the additional margin has elements of these three areas and not only the feedstock flexibility, where the waste and residue, increase of waste and residue naturally falls.

I am sorry, I will ask just one final question. This is in regards to the guidance on comparable operating profit which you guided to will be lower in 2015 versus ’14.

The key driver here is going to be Blender's Tax Credit which obviously came through in ’14. Any sort of insights and views on that going into ’15 please.

Blender's Tax Credit, what a story it was in 2014 and I am afraid it’s going to be quite a story also in 2015. Currently there is no guidance given by the authorities in U.S.A., how this is going to be handled.

There is no preliminary or final timeline when the decision might come and there is no proposals for the decision on these yet. It is still a very early part of the year and therefore no guidance at the moment unfortunately.

Thank you. Thanks a lot.

Hi, good afternoon. I have two questions please.

First is on the maintenance CapEx. I know there was quite one-offs in this, this year but it did step up and I was wondering if you can remind us what you see as the true cycle maintenance investment, whether that was changed?

And my second question coming back to Blender's Tax Credit, I know at this time you are indicating €80 million in this space. The benefits might be €90 million.

What’s driving that difference and then also just as an aside on the credit, does that €90 million relate just to the credit you received or is it also to some extend extra demand for products in U.S. when the credit [indiscernible] prices going up with the reintroduction of Blender's Tax Credit?

Thank you.

So this is Matti Lehmus, for question on the maintenance CapEx, I would say there are two things which can impact the maintenance CapEx level. It’s of course the basic level and then on top of that there can be either shutdowns or there can be unplanned shutdowns and if you look at 2014, we have some unplanned shutdowns, if you look at 2015 we have one major plant shutdown on the oil product side.

Apart from that the basic level of maintenance CapEx is very stable and we are also looking into the future, don’t see any need to move the basic level strongly upward or downward. And that means then of course that the overall CapEx level over longer period of time excluding shutdown years is quite stable.

And then there was a second question regarding the Blender's Tax Credit, in fact two questions inside it. The first one regarding the guidance that we gave earlier that in case if it’s been reintroduced roughly €80 million impact and then finally the impact was €89 million.

That difference is due to two reasons. First of all when we gave the guidance we still had some volumes to be sold to USA.

And the second reason which probably is the main cause for the change is the currency exchange fluctuation at the year-end, since the Blender's Tax Credit is $1 per gallon and we are showing our result in euros. The second part of the question was that -- was the Blender's Tax Credit based on the volumes we sold in 2014 or was there any sort of additional elements and this is exactly how the BTC works.

It is $1 per gallon for each blended biofuel in USA in 2014. So basically it was calculated for the volumes which we sold in 2014 to USA.

So sort of a very straight forward calculation I hope this answers the question.

Yeah, that makes sense, thank you.

Just two questions from me. The first one to follow-up on the European biodiesel market and on Germany in particular, which has the switch to greenhouse gases reduction as a mandate.

I was wondering if that has impact on demand for NExBTL and then your margins in that country. And then second question on the cost and the sensitivity to the oil price.

So you mentioned a $30 million reduction in cost by $2 reducing in crude cost. I was wondering what is the spread between refining and renewable products in that guidance.

I mean particular for renewable products you were previously mentioning a $170 per tonne as the refinable cost, what you see as the new target for 2015?

So this is Kaisa Hietala speaking and let’s first discuss the Germany and the fact that the Germany has moved into a totally new biofuel regulation at the beginning of this year. And what this means is that instead of setting a percentage how much each player has to blend biofuels in 2015, they are now setting a clean house gas reduction targets.

Of course this gives a lot of opportunities for Neste Oil. Different raw materials will generate different greenhouse gas emission savings for our end products.

So when selling to Germany this is a new optimization tool for us to really capture the maximum value for the greenhouse gas savings. Of course the country has just recently started the new regulation and there is quite a lot of questions in the air but we are very active in the markets and looking into the opportunities how to leverage this semi regulation.

Yeah, then the question about the utilities and our freight, like I mentioned earlier that is about the timing issue. So there is again time lag concerning the -- let’s say position versus the inventory valuation, was like the group level figure concerning both renewable and oil products.

So have an opening in that sense.

Okay, thank you. But then reduction in both divisions?

You are saying that improved level at both the divisions, yeah.

Okay, thank you.

Okay, Juha-Pekka speaking. If there are no further questions we thank you very much for your attention and active participation.

Neste's first quarter 2015 results will be published on the 24th of April. Until then thank you and goodbye.