Neste Oyj

Matti Lehmus - EVP, Oil Products Jyrki Maki-Kala - CFO Panu Kopra - EVP, Oil Retail Kaisa Hietala - EVP, Renewable Products Matti Lievonen - President & CEO Juha-Pekka Kekalainen - VP, IR

Mehdi Ennebati - Societe Generale Josh Stone - Barclays Mukhtar Garadaghi - Citi Henri Patricot - UBS Thomas Adolff - Credit Suisse Giacomo Romeo - Macquarie

Thank you and good afternoon, ladies and gentlemen. Welcome to this conference call to discuss Neste's third quarter results published earlier today.

I'm Juha-Pekka Kekalainen, Head of Neste's IR. And with me here today are President and CEO, Matti Lievonen; Jyrki Maki-Kala, CFO and the business area heads Matti Lehmus, Oil Products; Kaisa Hietala, Renewable Products and Panu Kopra, Oil Retail.

We'll be refering to the presentation that can be found on our website, as always please pay attention to the disclaimer, since we will be making forward-looking statements in this conference call. And with these remarks I'm pleased to hand over to Matti Lievonen to start with the presentation.

Matti, please go ahead.

Thank you, Juha-Pekka. Welcome everybody come to this Neste's third quarter results.

Maybe few words that if you look at the macro or so demand is still doing well in those products its about 1.2 million barrels per day increase, also the renewable side especially to our renewable products there is a very good demand, then if you look at the oil products and the reference margin. So here we have had a big compared to last year or so.

In the nine first months so we're some minus $4.5 per barrel behind of reference margin. But despite all of those we have been able to do really good financial performance in all, all year alone and especially welcome when we see that how the refining industries doing and we've been able to really pushed our additional margin in our traditional refining and also very well also in the renewable side.

If you look at the third quarter results, our comparable EBIT was €264 million and I must say that its a really good result. Even we most and little bit behind of [indiscernible] but if you look at the overall results contribution so its excellent from [indiscernible].

We had a solid cash flow in the third quarter and if you look at the whole nine month this year so i should say that, also the cash flow has been very, very cute, it's close to €600 million. For these two remarkable [indiscernible] renewable products in third quarter they posted almost same result in oil products and what is remarkable is also that the old products could be posted such a result with very weak gross margin environment, so we have to with the both businesses, a good operational performance.

Oil products did a great job up to September, then we had a pickup in production, but very good operational performance, also at the renewable products, we did a good [indiscernible] we make production record, both in Singapore and Rotterdam side, in August and also the lower refining margin aside, I discussed with you worst, of course impacting the oil products, but anyhow with our internal measures, we have been able to post a good result also in oil products. And I think to say about our retail detail, very solid good results in the third quarter.

Then I think the board is very important for us and then of course for U.S., how is our financial targets and we have well achieved the target, so return of capital employed after the tax that was a fourth consecutive quarter that we was over 15%, now lately 18.6%. Also the leverage has been long period to be in the low level of our range.

So overall, very confident that we have done a good job this year as previous years and we see that it will continue, so no doubt of that. Now I hand over to Jyrki Maki-Kala, our CFO, who will go through the finances.

Yes, thank you Matti. I think [indiscernible] already mentioned that the results were very strong during the quarter, quarter-three basic looking whatever financial figures.

We had a very strong comparable EBIT, very strong IFRS EBIT, nice free cash flow and our comparable earnings per share, it was very solid, but if you look the difference between 2015 third quarter and 2016 third quarter, you'll see that market environment was totally different. If you look, these figures that is posted here, you'll see that the turnover, basically is more or less the same as 2015, but if you then go down to, let's say details behind the €264 million comparable EBIT what we basically delivered, oil products has nearly 60% lower reference margins this year, compared to last year, but they have able deliver nice results because their additional margin were 35% higher.

So this is really the story about different kind of market environment in the background but very solid performance, if that is our margin what the oil products was doing. And basically similar story was with renewable products, their reference margin was slightly higher, but additional margin was 68% higher than Q3, 2016.

So you will see that these are the reasons why on the other hand, we're having a very good performance with all products even in a week market environment 2016. And renewable products keep pushing the comparable EBIT at a high level.

Basically oil rate their lackness in earlier, very steady performance in the background posting nice results in that P&L, our IFRS EBITDA was 100% better than last year of Q3. Of course, posted by in inventory gains in the background.

And this year 2016, we were able to deliver each quarter positive free cash flow Q1, Q3, Q2 and even we're now already at the level of close to €600 million. And we still have a contango inventories in our back book and then comparable earnings per share [indiscernible] to €0.80 per share on quarterly basis.

Basic the story, what I told you earlier is very visible in this picture calculation, you will see a huge difference between reference margin coming from oil products and then the positive additional margin basically coming from both businesses, both oil products and also renewables. We're having the other points basically here with our comparable EBIT calculation with minor impact, fixed cost relatively higher coming mainly from maintenance and the others is mainly coming from depreciation and slightly lower profits with our others [indiscernible] our Nynas joint venture in Sweden.

But overall this year, you will see that the fix, the currencies don't play any major roles and it's basically zero compared to 2016. So the business results they are pretty visible in that sense.

If we move then to nine months of the year before what I mentioned about Q3 results and looking at the financial figures what we have been basically can be applied here best ever comparable EBIT nine months record basically what we delivered comparable EBIT €720 million IFRS EBIT more than €850 million like I mentioned free cash flow getting close to €600 million with a nine-month basis and comparable earnings, basically €2.21 per share, so if you use that with our new dividend policy for the province, so it's already $0.88 per share after nine months. So I think all these figures are very strong background, while we're saying that we had a very high performance financials when we're seeing the first 9-months results.

The figures alone here are very clear how they came through €720 million, very strong profitability, it's basically with the renewable products nearly doubled their profitability, compared to 2015 first-nine months and oil products basically maintaining the profitability, even though the market environment is totally different, compared to 2015. All the other points I basically mentioned, so it's a very good performance, what we have seen in the background.

If we then move to the next page, that is basically the big levers between these two consecutive years 2015 and 2016. In the first-nine months, you'll see the market, in fact coming out of reference margin €218 million that is mainly coming out of oil products and that has been basically compensated by additional margin that is inside this €377 million and also renewables additional margin, so we have been doing, we have invested €377 million, that is basically what is our impact on the positive development of our comparable EBIT during 2016 and the same story applied and on the, let's say more negative side, with our fixed costs they are a bit high, mainly coming from maintenance and some process what we're running in Neste SAP, some name change project to Neste Finance and Marketing campaigns, etcetera, so there are reasons behind, but certainly this kind of deal will open need to have a firm due to going forward, but otherwise the figures of 50 going black and white, in the absence of solid performance, nice delivery after the first-nine months and that's basically where we're heading when we're shifting to the quarter for 2016 as we speak.

So, then I hand over to Matti Lehmus to talk about oil products.

Thank you, Jyrki. This is Matti Lehmus.

So, like discussed by our CO and our CFO, I will start with the comment that I'm quite pleased with the financial performance of oil products in the third quarter, in spite of the fact that but the reference margin dropped from exceptionally high level of $9 per barrel last year to below $4, we were able to come out with an EBIT €120 million. That's commenting on some of the items behind the sales volume was strong at 3.9 million tons and this really reflects the high utilization rates that we were able to have both in the second and the third quarter.

So that is been reflected also in a higher sales volume that we could sell out at the same time, another highlight would be that we continue to work on the crude oil flexibility and the euro share in our fleet went up to 74% and if you compare this with the figure a year ago you can see that there has been a clear improvement of 10% of course in a market where the euro difference has been wide, this is very valuable. And finally, the investments went back to a normal level, after last year's exceptionally high level of course last year, this was the following the turnaround.

So that explains the high level in 2015. And then turning to the waterfall, it is actually very clear story has as is visible in this picture the reference margin drop of $5 per barrel explains a very big decrease from that angle that minus €128 million, but this could then be at least partially compensated by clear growth of the additional margin from $4.1 to $5.6 per barrel and that then compensated for €47 million.

In the others, there are also elements which we report mainly in the additional margin, this is for example, the contribution of our shipping business. And then turning to the market a couple of comments on the third quarter dynamics and like you can see in the left hand picture, if you look at the gasoline market it can be stated that the gasoline market was on seasonally low at roughly $11 per barrel margin and if you look at what happened within the quarter we can see that some recovery happened during the quarter.

So, towards the end of the quarter with active shut down periods with declining inventories, there were some improvements in the gasoline margins. In the diesel, quite a normal level in 2016 stable at roughly $10 per barrel, also here one can see that within the quarter, the shutdown periods combined with continued inventory drawers and quite strong demand from the agricultural second sector providing some support to the diesel towards the end of the quarter.

And finally, important for Neste in particular on the rate differential again quite a wide differential the third quarter at $2.4 per barrel. This was actually in line with what we have seen in the earlier quarters this year.

So this year's average is now at $2.6 per barrel and this just reflects the continued good supply of REB combined, also with other Middle East and supply of media and heavy grades in the market. Finally some comments on our margins.

So even in a very weak market we were able to come out with a total refining margin close to $10 per barrel and this of course was really driven by our additional margin which was a $5.6 per barrel which actually is the same number as what we have on average reached this year for the additional margin. And if you look at some of the drivers behind the additional margin, it is really the high utilization rate, all the way until mid-September, we were able to run forward in particular its very high utilization rate then of course we have to take production line fall down to an earlier than planned maintenance.

The impact of this will be reflected in the fourth quarter. The other one that I would like to highlight in the additional margin is that we continue to have good sales into our home markets Finland, Sweden, for example and also Contango income supports the additional margin we now see that Contango income, it's quite evenly spread between the quarters this year.

Final comment, perhaps on the refinery production cost. We're now seeing a level of $3.7 per barrel in line with the previous quarters.

This is higher than what we saw a year ago and the main factor here is that utility costs driven in particular by natural gas has been on an increasing trend and that this been reflected in our production cost. With these comments, I will hand over to Kaisa Hietala to discuss renewable products for third quarter.

Thank you Matti. Very pleased to be here today to present a strong result for renewable products.

Our comparable EBIT in Q3 was €124 million and our sales volume was 544 kilotons which was 5% less than a year ago and this might spur some questions to you. So let me spend a little bit time here.

And as communicated during the year, this has been the big turnaround year for Neste renewable products. We had a nine week turnaround in Rotterdam, during Q2 and we have these sorts of these managing and balancing the volumes throughout the Q1, Q2 and Q3.

So still in Q3, we were a normalizing our inventory level and also in Q3. We had some shipments delayed from Q3 to Q4 and that cost slightly lowered sales volumes, compared to last year.

However, we were able to increase the sales volumes, compared to Q2 and naturally, this is now reflecting the normalization of our product. My expectations for the Q4, is that we will see a strong sales volumes already.

Our sales went mainly to Europe -- 65% to Europe and then 35% to North America. Our share of waste and residues feedstock is nicely getting closer to our guidance that we gave during the Capital Markets Day that we're targeting to reach 80% in 2016.

If we then look at the waterfall and discuss about the -- especially the additional margin element which was clearly the largest element and in our comparable EBIT increased from last year to this year. Additional margin has several also market driven elements in renewable product.

It's good to remember that for example, the California carbon credits are part of it and the additional margin difference between Q2 and Q3 in 2016 is something that I would like to also point out here, because I'm expecting that people have questions around it and there I would definitely like all of us to look at the carbon credit price environment which was above $100 in Q2, while then it was tipping and starting to recover in Q3, but clearly there was a clear difference in that respect. However, here you can see the volume difference reference margin remaining almost at the same level, the cleared chump in additional margin and then some increase in fixed costs, but otherwise the comparable EBIT buildup from last year, it's all about our own activities and doing the across the value chain which has been and still remains to be one of our policy priority.

Let us then look into the markets and the margin environment and first we have here the European market. Seasonality is kicking in the European biodiesel margin environment as we're moving into a winter qualities which means that the low quality biodiesel do not qualify as a blending component and therefore this seems to now becoming sort of a seasonal element maybe coming a bit later this year compared to last year, but still at clear chance in that respect.

If we then look at the vegetable oils and animal fats price development. Palm price has been increasing compared to last year, quite a considerable.

But then if we look at the overall sort of feedstock complex, virtual complex it seems to be now balancing a bit more, palm oil being still very volatile we're following the virtual complex very carefully since there seems to be some tightness in the market going next year. So this is something, definitely that we keep monitoring.

If we then look at the U.S. market environment especially the biodiesel margin, clear improvement from the early year lows.

This is reflecting the continues commitment of the U.S. authorities on the RR test program and the indication of the 2017 and 2018 blending mandates and then if we look at the RIN values for biomass based diesel and also for the conventional renewable fuels which is the ethanol mainly there I think the main sort of element in the market, causing the increase is that blending overall issue with ethanol blend hitting the 10% and therefore biodiesel blending.

There is a very good demand in the market and the market trends being positive for Neste oil. And then finally there is a last slide, still discussing our additional margins.

Many of the topics have been covered already. I would like to highlight here that our utilization rates in renewable products was 100% and of course this then reflected in our production costs very pleased to note the low production costs in Q3.

So with this works I would like to hand Panu Kopra to discuss our oil retail results.

Hello for everyone. This is Panu Kopra speaking.

We have a good quarter in retail. In Baltic volumes were growing very well especially in Lithuania and Latvia volumes where climb high in network sales in network sales.

In [indiscernible], growing both in network sales, as well as indirect sales. In Russia we lost slightly volumes, but non-fuel business generated healthy growth, especially fast food was growing better than expected.

The overall, we can be satisfied to our performance in Russia, during this quarter. We were able to open 10 new stations in Finland and continued rebranding of odd stations to new Nesteky format [ph].

There are now six new Nesteky stations opened already in Finland. Return on net assets stayed at higher level, reaching almost 47%.

As we can see from this slide, no big surprises, like I said earlier, we gained market share and good growth in volumes, but we have to accept big-lower unit margin due to tough competition. Fixed costs were €2 million higher than last year, due to some size soil cleaning costs and higher maintenance costs.

All in all, solid and stable third quarter for Asia. Thank you and handing over back to Matti Lehmus.

Thank you. As you heard, so we have done a great job in the first-nine months and that we see that this trend will continue and we're very confident that the year 2016 will be another successful one for Neste and it's really when I look at the trends, for example, oil products, so we're expecting that the fourth quarter reference margin is bit higher than the third quarter, very secured element, there has been maintenance season, in the refining also, the demand has been good in the third quarter, continue to beat also the fourth quarter and also the inventories has been lowering a bit.

So we're expecting a good -- what's coming to change for the last time, is that now we have this overall production line for maintenance, we took it forward from spring 2017 and we expect that some EBIT is negative some €30 million but in the other hand, so we do not have then the -- this quarter, one plant maintenance for [indiscernible]. Then the renewable products, as we heard, there is a healthy demand for our products and that is the case, so we expect that the reference margin is about the level of 2015, but on additional margin side, we're expecting to remain very strong.

And utilization rates, expected to be high towards 100% availability in third quarter and that we don't see at the moment, any sign of not doing that. All retail has normally grows a seasonably pattern, but otherwise it's not like a diesel engine, but it's a good engine that's bring good result, quarter by quarter.

We're very dull company, so focusing to things -- we have focused that many years and I think that we have seen also the result of that. Safety side, I must say that we have a big-fallback -- small fallback in the third quarter was coming to safe and we're making the actions that we could improve it.

Cash flow, as mentioned earlier, almost €600 million, compared to €180 million last year, we find it productivity, so in their provisional oil product side, we still have our improvements to do. And then in Singapore and Rotterdam tape out posted production record in during the third quarter.

Then the markets and customers and I'm very happy that there is a lot to happen and we announced already this IKR Corporation was coming to bioplastics, but then also we have this new bunker quality coming on stream next year, so we have now two big customers here in in Scandinavia, we have a [indiscernible]. We have been approaching in a good way with these new products.

Then the market share, we have increased in the oil retail side and the renewable side, we have 10, once again two new cities in the USA, who started to use 100% renewable diesel, so all in all, I see that we have a very good space to go forward, also the fourth quarter, but also for the next year. So that the message and I end now forward for the questions.

Operator, we're now ready for questions.

I will ask two questions please. So the first one on your outlook regarding renewable products reference margins for this year that provided in the 3Q report.

So you expect it to remain more or less in line with full year 2015 level which implicitly means material collapse in 4Q reference margin. However when I look at your website and you again by your differed reference margins that you provide I can see that it is currently close toward three year high.

So it looks like your outlook is quite conservative. So can you justify it please?

Second question is regarding your renewable fuel sales volumes. As 3Q [indiscernible] volumes, have been decline in year-on-year and you gave us the result.

Regarding Q4, can you just please precise if you expect a strong sales volume increase on year-on-year basis and quarter-on quarter basis. And regarding to 2017 as you did a schedule and maintenance and given that your production capacity now 2.6 billion per year.

Is it fair to assume a liquidity growth figure compare 2016 sales volume. Thank you.

Three questions, first one was regarding our reference margin outlook for this year. And indeed, we're conservative here.

Let's see how it develops. It has been promising in Q3 that we have taken a bit of a conservative view on that.

The second question was about.

Is there any reason that to explain these [indiscernible] because you want to be conservative?

It is a volatile market and our as if you look at the volatility from past years we just want to be conservative here. Then there was a question around sales volume to renewal products sales volumes and especially the outlook for Q4.

We have a strong outlook for Q4 when it comes to sales volumes and I'm not expecting any surprises there and then there was a third question which was about the 2017. Potential scheduled maintenance in renewable products.

There is none. So we're not planning to have any major turnarounds so shutdowns as the renewable products and refineries.

And therefore, then the sales volume, the production and the sales volume should be then reflected in that.

Okay, so is it fair to assume a [indiscernible] volume growth 2017 up to 2016.

Yes it is.

I'll take three questions please. [indiscernible] questions on renewable product sales.

If you compare production with sales, there is a production outperforms sales, that was building inventory and you explained the part that it was timing of sales. Can you just clarify; do you think for the fourth quarter that sales might actually outperform production and that we might draw down some of that inventory -- implied inventory?

And secondly, if I look at the European [indiscernible] prices, you've seen this big increase in same price related to the need to integrate, you saw the same thing last year. How closely correlated to NExBTL price to the same price in that is it easy to capture all of that increase in margin?

Maybe you can provide some comment there. And then thirdly, just on the EPA, I see that they've -- they're about to [indiscernible] in 2017 mandates.

Do you have any expectation around that or any comments from what they might or any impact from ring prices as a result? Thank you.

So three questions, the first one was regarding Q4 outlook. Do we expect the sales to outperform our production volumes?

Of course, I mean that we're optimizing the markets as we go depending how the margins are moving during Q4, especially towards the year-end, but let's see how it goes, the sales volume outlook is strong for Q4, but optimization still take takes place. The second question was about the European winter biodiesel qualities and the stronger pricing, so one.

NExBTL as product, is not really sort of competing that much of a same product, as such, maybe that's the case of peak during the winter season, but mainly, we have been looking for the special applications, the right pockets, really the right customer segments where this product is adding clearly much more value than same biodiesel and therefore the comparison, I mean price premiums and so on, it's difficult to sort of give a exact number there. And then the last question was around EPA mandate for 2017.

EPA has made a proposal to increase the demand biomass based diesel by 5% from 2016 to 2017 and currently our expectation is that they will finalize the process and communicated still before end of November.

So first for Kaisa, Kaisa how do you think about the EPA's announcement from a sense that there is some expectation in the market that given all the sort of an outcry against the D6 levels from refinery et cetera, that will adjusted down to accommodate that. Now do you expect D4 to be correlated to D6 in this scenario.

And is it or do you think the fact that we're having a tight demand in D4 should continue to support those trends, despite let's say a slight relaxation on the D6 side. And then I'll then ask Matti.

So EPA proposal for the biomass based diesel volumes I think it's been welcomed by the market and there has been a discussion around conventional renewable fuel mandates and as you said, what is the statue around ethanol blending and so on. I think we have been to this discussion also earlier this was seen also in 2013 and the decision in 2013 and then going forward was pretty firm that the EPA sticks to their original proposal.

So I'm not seeing different here, but of course we have to wait until the final proposal get confirmed to see the final numbers, but that this was also the case in 2013 and EPA has been continuing round the RR test program also after the discussion in 2013.

Sorry Kaisa but hasn't there been reaction in 2013 and we saw RINs go from would have $1.20 to $1.30, $1.40 back then have to differ sort of this bring sanity. So is it a scenario that happens again and more important do you think the D4s followed the same trajectory again.

Well what we saw in 2013 was a collapse already in Q4 and then discussion about how much we rain has been rolled between the years and what is the overall sort of green availability in the market and so on. So, I think it's a wider topic than just one EPA decision factor.

I think the outlook for biomass-based diesel, the gross of the obligation from 2015 to 2016 and against 2017 has been very consistent.

And two quick questions for Matti, Matti, could you help us quantify the volume boost you might in 4Q from inventory drawdowns on the Contango effect pushing about, I think 400,000 sales above production, is that the order of magnitude for next quarter? And secondly, could you help us think about margins in 2017, I mean demand is expected to be a lower, oil price higher, but then we're also seeing less additions.

Could you help us think year-on-year about 2017?

So, I'll first address the question on the volume outlook in all products in fourth quarter. Like I commented in the 3rd quarter, the main reason for high sales volume was really in the high utilization at the refineries, both in the second quarter and also in the third quarter, until the very end of September.

I think when I look at the fourth quarter, you are right that we will be again unwinding some Contangos, however this is mainly incurred. So I think the sales volume levels will more be reflecting the utilization rates at the refineries and given that we're in the middle of appeal for shutdown, it's probably more in normal level.

In the 2017 margin outlook, I would just refer to the discussion we had during the Capital Markets Day. We're starting into next year from relatively high inventories both for gasoline and diesel, at the same time the supply-demand outlook is relatively balanced.

So I think it looks like a relatively normal here at this point in time and you can look at the historical, so if you exclude the 2016 exception year to get some historical data, what the years have looked like.

Two questions on renewable products for me. The first one, just on the sales volume to North America in the fourth quarter, they were down slightly, in absolute terms and I was wondering if that's because the shipments which were delayed were mainly supposed to go to the U.S.

territories brought some increased competition on these markets. And then second question on the feedstock prices, you mentioned in the release that you've seen the cost on an increasing trend.

Are you mainly referring to you said that the tightness in there the market for vegetable oils or that come as the alternative feedstock at U.S. Thank you.

The first question was about the sales volumes to North America, whether that was a timing issue of the shipments and that's exactly the case. And the second question was around the feedstock price and sort of the tightness in the vegetable oil complex that we're starting to see and this is reflecting vegetable price is and basically describing the trend between the years how we have seen especially the palm oil price increasing and also slight increase with the other vegetable oils as well.

And now we're monitoring very carefully how this complex is moving going forward.

And how is or the alternative feedstock moving in terms of price compared to by [indiscernible] demand.

In the graph you can see the cattle price in Europe and that price as you can be very volatile and not necessarily following the veg oil complex, but it has been roughly on the same level as a year-ago and of course, I mean we're optimizing the way the [indiscernible] of feedstock and there the feedstock flexibility which we have built plays a major role.

Half of them you can answer with yes and no. Just to go back on the contango gain booked in 3Q.

Did I understand you correctly you said it's going to be evenly split between the quarters in other words, the gain booked in 3Q should be similar to the gain booked in the fourth quarter. Second question you can answer with yes or no, is the CapEx increase for this year to €250 million and I guess you used to say €400 million is that's driven by the maintenance being brought forward again, yes or no.

Then the other two question where you might have to say a bit more can you just go into bit more detail of why you think the reference refining margin should be higher in the fourth quarter versus the third quarter, season I would have said the opposite. Final question just on BTC, I think we discussed this at the breakout session just over a month ago at the Capital Markets Day.

And to one of the proposals in the Senate or whatever you want to call it, I believe your answer was -- since 2012 it's been proposed that Brad and every time it was rejected, because it violates U.S. trade laws deployed around not renewing the BTC for foreign produces.

But we do live in a slightly different world which is a little bit more protection. So I wonder whether the proposals this time around maybe a bit more serious in the past?

Thank you.

I'll start with the first question on the Contangos. And the answer to your question is yes, if you look at EBIT contribution, then the contribution is relatively evenly spread and that means that indeed in the fourth quarter, we're expecting similar EBIT contribution in the third quarter.

Obviously, from cash flow perspective, it's then that when we actually -- it depends on how we roll the inventories, but that will turn the cash flow impact in the fourth quarter.

The question was about the CapEx, moving now to the, let's say €450 million level, it is not above the PL4, it's more about many [indiscernible] into this point, end of October, you'll see the order process basically turn into the final stage for 2016, so we upgraded this CapEx to the more to the level of approximately €450 million, so it is our estimate today basically.

And then again, Matti Lehmus, on the Q4 versus Q3 refining margin comment that we made. Like discussed in the presentation, Q3 was actually a weak quarter from a reference margin perspective and especially the gasoline, I would say was on seasonally weak, given especially July/August.

If you then look at how the fourth quarter has started, we can see that October has actually been quite strong. We have been in the middle of the maintenance season.

We have seen inventories actually starting to decline in September-October and also for example for diesel, the demand has been quite healthy, as we're in the middle of the agricultural high season. So I think it's just a combination of these two things that weak third quarter and then a strong start for the fourth quarter which is the backdrop for our comment.

The last question was regarding BTC and the fact that how we nowadays in, sort of a, in a more protectionistic [ph] world where the approach to introduce the tax credit only for domestic producers, could have more support. This process has been tested many times last year there was very serious discussion around it.

However obligated parties in USA who has to fulfill the RFS mandate, they do support open sort of the trading world and possibility for them to also look into foreign-produced biofuels and this has been a balancing element in discussions and I believe that's also the case for this year discussion.

So do you expect an update for the end of the year or similar to last year where kind of happens quite late into the year. It is of the Presidential election [indiscernible]?

Yes, very difficult to say, it has been almost every time. It has been very late in December until we have heard the final decision and very difficult to say this year is going to be different in that respect but at least we're not expecting sort of that decisions to be done near future.

So at least there is no indication from that.

I think most of my question where had already been asked. Couple of question on refining actually.

One is euros discounts and what your outlook considering potential production cut from the OPEC and if you see potential for some pressure on Urals Brent differential. Second question is also on refining I was wondering that given what you said about your refining reliability program and recent news on forward line for unplanned shutdowns and it's how confident are you in achieving and higher long term utilization targets.

Can you put that recent issues in a bit context with your refining reliability program is?

So first question was on the Ural discount. And if you look at how the market dynamics have changed this year.

We have all year long actually a dynamics, where both the Russian export volume has been on a high level and at the same time, we have had versus 2015 a higher level of medium, heavy crude imports Europe from the Middle East. And that means that actually if you look at the quarter-by quarter differential, it's been relatively stable at leveraging around $2.5 per barrel.

I don't see at the moment anything which would dramatically change these dynamics going into next year. So that's at least the best estimates going forward, as for the dynamics.

Then turning to the other question on the maintenance outlook like we have communicated many times, our target is to increase run length of the production line for targeting to get one year and beyond. And yes, we're having a very systematic reliability program in the background.

We now have to do the maintenance after close to nine months, we didn't yet to reach that target, but we will continue working on the systematic program and our target is still valid, that we get one year and beyond. And at the same time next year, we'll be starting up our feed pre-treatment unit, the SDA unit and that also should support target.

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

Next is fourth quarter and full year results will be published on February 7th. Until then thank you and goodbye.