Neste Oyj

Juha-Pekka Kekäläinen - Head, IR Matti Lievonen - President and CEO Jyrki Maki-Kala - CFO Kaisa Hietala - EVP, Renewable Products Matti Lehmus - EVP, Oil Products Panu Kopra - EVP, Marketing & Services

Mehdi Ennebati - Societe Generale Artem Beletski - SEB Analytics Peter Low - Redburn Antti Koskivuori - Danske Bank Henri Patricot - UBS Sasikanth Chilukuru - Morgan Stanley Matt Lofting - JPMorgan Pasi Väisänen - Nordea Bank Joshua Stone - Barclays

Thank you. And good afternoon, ladies and gentlemen.

Hope you all have a nice start for the year. And welcome to this Conference Call to discuss Neste’s Fourth Quarter and Full Year 2017 Results published earlier today.

I'm Juha-Pekka Kekäläinen, Head of Neste’s IR. And with me here today our President and CEO, Matti Lievonen, CFO, Jyrki Maki-Kala, and the Business Area head, Kaisa Hietala, Renewable Products, Matti Lehmus, Oil Products and Panu Kopra, of Marketing & Services.

We will be referring to the presentation that can be found on our website. Please pay attention to the disclaimer since we will be making forward-looking statements in this conference call.

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

Thank you, Juha-Pekka, and welcome to my behalf, and hopefully everybody has had a good start as we had for this year as Neste. So last year, Neste has a very successful year.

And I think that is a very well defined that its result of determined strategy implementation. So in all sectors, good operational performance and improved safety.

Those works are very important for us. And we posted an all-time high comparable operating profit of €1.101 billion.

This is the third year in row that we could improve our comparable operating profits. And especially, if we look to business areas of Renewable products posted excellent full year comparable operating profit €561 million, and that's you need to remember, it's without Blender's Tax Credit.

So we are very, very satisfied with the strategy implementation. Let’s comes to the sales volumes 16% up from the last year.

So there is also good things. And then, as we have always said that we optimized our sales to the most profitable market, as well as feedstock supplies.

So we could also increase this 100% renewable diesel and uses up to 25% during the 2016 and the fourth quarter we were up to 30%. Feedstock was well developed.

So we used waste and residues 76%, so excellent results. At the same time, we in the phase – the technical design of the new production unit what will be initiated into Singapore.

And oil products also stated excellent result, €495 million, which was the strongest in the decade, excellent, and we know that we had a project there very much. So we concluded our strategic investment in the Solvent Deasphalting unit and then OneRefinery concept in Naantali.

We completed Altos [ph] and we are very confident that this additional margin at least 5.5 going forward will be in the place. Also when you have good results, you like to also doing that in dividend.

And the Board is proposing dividend to increase 31% up to €1.70 [ph] per share. That was good things.

And then, the things where we need to develop more is marketing and service. We were able to keep the volumes in the previous year's level.

But there has been a very competitive environment, especially in Finland, partially in Russia and the unit margin were clearly lower than in 2016 and that's - the extra pressure for us. But as mentioned, so we really working on that and we’ll improve also that business area.

But this strong performance reflected in our financial targets clearly, and return of capital employed after tax was 17.5% and our target 16%. The leverage went down to 8.7.

So in the financial side, we have very, very strong position going forward. And having this morning the meeting with our employees here, they’ve forecasted [ph] to all over the places.

I gave my gratitude to our people because we are pushing the things very, very strong speed in different areas. And that has been seen now in the results, but also the atmosphere.

I think that we have a great, great atmosphere in this company and looking forward to grow from more in this year and then having a strong year. But before going into outlook, I hand over to Jyrki Maki-Kala, who will go through the Group financials.

Yes, good afternoon also from my behalf. May be go through 2017 brief before moving into the business areas.

From my point of view, there was three items leading to this excellent results what Matti Lievonen just briefly discussed. The excellent refinery runs that was there with both Renewable Products and also Oil Products.

Refineries, you are seeing the utilization rates very high in both business areas, that's number one. And then, number two, certainly, the safety and the process interruptions were very low during the year really leading to this high utilization rate.

So this is like a two-way that when you have this working well, then you have the excellent refinery runs. And then, certainly, RP results that was now the biggest contributor for our annual profit, the margins and volume developed and was very strong during the year.

If you look at the figures here just looking the revenue side, for example '17 and '16, you are seeing the 13% increase in revenues, more than €13 billion as an annual sales that cooperating [ph] profit, Renewable Products 20% up and really without the BTC that was there in 2016. Oil Products getting very close to €500 million level, 9% increase.

So the business performance was really strong and can be seen in our records. And if you look that also from a quarter point of view, if you look the performance by Renewable Products in quarter 4, you see that there comparable operating profit increase close to 60% and remember without the Blender's Tax Credit again.

Oil Products was slightly lower in quarter 4 compared to previous year, but mainly hit by the weakening U.S. dollar.

Otherwise, the business has a very sound operating performance in the background. Our cash flow remains strong, more than €200 million - €600 million.

If you think about what we are now proposing as a dividend, that's roughly €435 million. So you'll see that the free cash flow versus dividend payment goes nicely hand-in-hand in that sense.

So overall, the performance with the big figures very positive outcome when thinking about where we landed. If you think about what happened in the sales side, just as an example.

I think it’s good to sometimes go back to the revenue as well. We went up €1.5 million in revenues, and the prices certainly was the biggest impact, but it's not such the prices of oil that makes the changes.

It's also what is in the background, the agreement and the business. That's a business approach with our important customers as well.

Volumes very positive, mainly coming out of Renewable Products. And then, like mentioned already, the euro-U.S.

dollar balance change that the U.S. dollar is clearly weaker 2017 compared to the previous year, especially during the last quarter.

We have two businesses [ph] here, I will very briefly go through these because the business areas will go also commenting these elements. But if you think about the quarter-to-quarter happening roughly €50 million improvement in our comparable EBIT, there are two clearly very positive items affecting our performance.

The volumes, that is really Renewable Products they had the high used ever quarterly sales volume, reaching more than 700 KP quarter and impact was roughly the figure that is here on a positive side. And then the additional margin, I think this is the important part because Oil Products, they got very close to this 5.5 annual level on a quarterly basis here.

And Renewable, they were able to improve the additional margin by €71 million quarter-on-quarter. And there was no BTC 2017.

So you'll see that the impact has been very, very positive what has been able to create from the market place. The FX changes is something that I just comment here.

But if you look the annual figure in the FX changes initial level, it was minus 31 million. And the quarterly, it was minus 38.

So you'll see that the change has started taking place later 2017 with the weakening U.S. dollar hit us in the quarter 4.

But our FCs, et cetera in the first three quarters has been very positive compared to the market performance with the weakening U.S. dollar.

So I think we succeeded pretty nicely also in that sense. The all the other changes are very small ones on the quarterly basis.

If we then move finally to the full year figures 2017 and this over €1.1 billion completed. There you'll see little bit of same story of what I mentioned on a quarterly basis, very strong performance with the volumes, mainly coming out of Renewables as a total.

Reference margin improvement €170 million, closing pretty much 50-50 from Renewables and Oil Products. And that is for margin, its negative 67 million.

But remember, this takes into account the fact that we didn't have the 2017 Blender's Tax Credit in place, in 2016, it was there. And the Oil Products impact is only, let's say, less than 20 million negative there.

So it was really from Renewables and the impact coming out of the non-BTC year of 2017. The FX changes, like I mentioned.

Fixed cost, we are really focusing on the growth project. These were projects what we need to do for the future.

So more headcount and more fixed cost and that is basically leading to the 37 million increase in fixed cost. And then the others is more about depreciation and internal invoicing taken into account what we are selling from - at the group level.

So overall, let's say, the road map from previous year EBIT to this year's 2017 EBIT is very clear by thinking about where it came from and what are the biggest effect into Neste's profitability. Okay.

If I then move to the segment reviews and we start with the biggest contributor. Kaisa, Renewable Products.

Thank you, Jyrki. Good afternoon, and welcome to the call also on my behalf.

It was a excellent quartile for Renewable Products. Our revenue reached €924 million.

And with that revenue, we created €209 million comparable EBIT. Our additional margin remained on the Q3 level being slightly higher $254 per ton.

And our sales volume, as already stated, was a record high. Refineries were running very well in Q4, but also there was some delays of deliveries from Q3, as well as some advanced deliveries from Q1.

And so therefore, the slightly higher sales volume then what we have typically seen. I would like to highlight here that our share of sales to North America was 27%.

So we did not speculate with the potential BTC decision with this higher sales volume. Our share of waste and residue feedstock was 75% and investment €24 million in Q4.

And these are related to our strategic growth projects mainly. And this brings to the comparable RONA and now for the first time above 30% being 30.2%.

If we then look at the breach from 2016 Q4 to 2017 Q4, it gives you a very clear picture how or where the improvements came from. We sold roughly 50 kilotons more renewable diesel, adding 20 million EBIT.

And then, we almost doubled our additional margin compared to Q4 2016, which had a great impact of €71 million. The exchange rates reduced the result by 17 million and then the fixed cost related to the strategic growth project reduced the result by 10 million.

All in all ending to 2,009 million, which I think that a record quartile for Renewable Products when we exclude the impact of BTC. If we then look at the whole year results for Renewable Products.

You can see that the sales volume had a largest impact and improvement. Some of you remember that in 2016, we had a major Rotterdam turnaround and then we also had some production challenges.

But the year 2017 was very good from the utilization point of view. And as our production volumes was very close to 2.6 million tons, it also shows that our capacity program creep is progressing very well.

So basically, we sold 345 kilotons more in 2017 compared to 2016, and that contributed €104 million higher result. Reference margin was also higher in 2017, mainly higher in Europe during the first half of the year, but then higher in North America during the second half of the year.

Additional margin was lower, clearly impacted by the lack of BTC. But then the corrective actions, which we took for Q3 and now also implemented in Q4 clearly was - they were able to mitigate the impact of the missing BTC decision.

So all in all, 2017 for Renewable Products was a very good year, €561 million comparable EBIT. If we then look at the markets, and first the European biodiesel market.

The margins remained on a good level. We have to remember that the winter specification for biodiesel during Q4.

So the lower quality FAME products cannot be used in a market. It has to be products with 12 point minus 10.

So this was boosting up the market. And this is the seasonal trend that we typically have been seeing.

But as you can see, the market is very volatile in Europe. And there is a lot of discussion around the anti-tariff decisions - favorable decisions for Argentinian imports, but let's see how that develops.

If we then look at the vegetable oil and animal fat prices. A positive trend for Neste.

Both animal fats and the palm oil prices were lower in Q4 compared to the year previously. And the volatility, which remains in the market has already in now started to develop as we are progressing towards the Q1.

If we then move to the U.S. markets.

The U.S. biodiesel margins developed aggressively in Q4, very, very positive trend.

Our view on this or the reason for this development is the fact that at the beginning of the year, in 2017, the legal uncertainties were really slowing down the fulfillment of the obligations -- biofuel obligations, and therefore, many players were in a hurry towards the year-end to fulfill their obligation and there was a very healthy demand in the market. But then on the other hand, if we look at the RIN prices, there were lots of speculations towards the year-end that the BTC would be retroactively decided and that pushed the RIN prices down quite dramatically.

If we then look into the additional margin. Our comparable sales margin was slightly higher, $365 per ton.

Our reference margin was roughly on a same level, but then, here, you can see that additional margin improvements. The utilization rates was very high, 97%, and all in all, I think this showed the capability that renewable refineries are in a good shape and we are looking forward to next year.

With this, I would like to now hand over to Matti Lievonen to discuss the Q4 and annual results of Oil Products

Thank you, Kaisa. Good afternoon, also on my behalf, and I'll start with the comment that I'm very satisfied with the fourth quarter for Oil Products.

It was a quarter in which we started up safely the new OneRefinery configuration. It was a quarter when we did conduct a scheduled maintenance for PL 4.

And I have to say everything went exactly as planned and we were able to run the refineries very smoothly throughout the quarter without any unplanned downtime. And this is very important.

And this is also reflected for example, the fact that the utilization rates were clearly higher than a year ago where we also had the same type of scheduled maintenance. Another comment to be made on the fourth quarter is that market it weakened during the fourth quarter.

We ended up with the reference margin of 4.9 on average. And with this, we were able then to reach an EBIT of €89 million combined with a good operational performance.

Looking at the full year, we did reach €495 million and this indeed is the best EBIT comparable that we have had during this decade. Final comment.

Investments were at €121 million in the fourth quarter and this relatively high level of growth reflects the fact that we completed our OneRefinery program. If I move to the waterfall, just some comments so - for the fourth quarter.

So the first observation is that reference margin was slightly lower than a year-ago, 4.9 versus 5.2. And at the same time, the bigger factor, which had a negative impact, was actually the FX development, which moved from 1.08 a year ago to 1.18 in the fourth quarter.

This, on the other hand, was then compensated by slightly higher additional margin. And I think it's important here to comment that when we compare the years, we did not have any contango income or any significant contango income in this year.

We also had clearly tighter REB differential. So this additional margin actually reflects better utilization and also the fact that the STA unit was running.

And final comment on the waterfall would be that the fixed cost were €8 million lower than a year ago. And this is actually clearly linked also to the utilization and with availability performance.

So it's mainly in the maintenance cost where we see the difference. Then moving on to the full year.

Some highlights for the full year 2017 through the waterfall. So first observation, of course, is that we did have a healthy refining and reference margin environment.

And increase to 5.7 on an annual level versus $4.09 per barrel a year ago had a big positive contribution, €82 million. At the same time, we were able to keep that the additional margin almost flat, 5.4 versus 5.5 a year ago.

And I think again it's important to highlight here that this is in spite of the fact that there was clearly lower opportunities on the contango side and also increasing utilities prices. So this really reflects a good year when it comes to making clearly better year in terms of reliability and also then starting off the SBA unit in the fourth quarter.

And on an annual basis, we can already see here that the FX did have a negative impact year-on-year minus €20 million. But as commented earlier, this is clearly perhaps more clearly visible in the fourth quarter in particular.

Some comments then on the market. So first commenting on the products and the fourth quarter, in particular.

I think it's quite clear that gasoline, which had been strong performer over the whole summer, the early autumn also, weakened actually then towards the year-end, very typical seasonal phenomenon. And this actually means that diesel was the strongest performer when it comes to product margins.

And with $13.4 per barrel, diesel was reasonably strong in the fourth quarter and also quite steady throughout the quarter. If I look at this now where we ended the year, it's probably important to state that we actually have lower inventory level than a year ago.

And in particular for distillates, we are starting the year with clearly lower inventories than a year ago. And this combined with the fact that demand grew steadily last year, 1.6, 1.7 million barrels per day and it looks like will continue to grow healthily.

Actually, it was a quite healthy fundamental picture for the refining margin environment. And on the Europe side, in the fourth quarter, we can see that the differential versus Brent clearly did narrow versus a year ago.

We had a level of minus $0.9 per barrel. And we can here clearly see that the fact that the OpEx cuts were in place.

The fact that also Russia is increasing also its exports has let the situation where the Europe's differential in the second half in general has been more narrow than a year ago. Finally, then looking at the total refining margin.

I'm pleased to say that again in spite of the fact that the reference margin was lower, we were able to come with a strong total refining margin of over $10 per barrel. And this is clearly the result of a strong additional margin at $5.8 per barrel.

It's - actually I'm quite pleased with this performance because it's good to remind that we did have the feel for maintenance scheduled in October. So this proves that’s very good operational performance, additional margin can be at a good level even if they have these units turnarounds.

Another factor I would then mention is that the production cost has increased slightly in the fourth quarter. We were at $5.4 per barrel.

And this is mainly a result of utilities costs going up with crude price. Of course, the maintenance that we had in fourth quarter in PL 4 also shows in these numbers.

After these comments, I'll hand over to my colleague, Panu Kopra, to comment on the fourth quarter and full year for Marketing and Services.

Thank you, Matti. It is Panu Kopra speaking.

We had a tough year and overall year was a disappointment from €90 million to €68 million, we cannot be satisfied with the whole year performance. Competition was very hard, especially in Finland and also in Northwest Russia, where we squeezed our unit margins.

But in the Baltics performance was more stable we can be satisfied with the Baltics performance. Overall, in terms of the volumes, we can be quite happy, that we were able to keep the volume levels, and in addition to volumes also, we were able to keep number of customers.

And the customer satisfaction also improved. We made all-time high Net Promoter Score in B2B decrement [ph].

We can have a look at now how this next page where we have this fourth quartile result. There are basically same elements like in the whole year picture as well.

So we can see that the net unit margins were squeezed. If you look now this whole year picture, the fixed cost were bit higher compared to year '16, as well as depreciation.

And in the year 2016, we had a few extra one-offs, and then, they had few million euros positive impact to this results of '16. It's obviously we didn't have year '17 anymore.

And we have started now internal measures in order to improve our performance, we have started - we have a close look of maintenance cost, as well as station [ph] caretaking cost. They have to be reduced.

Marketing is done now with very focused for the operational results. And we are working now and organizing new tenders for some of the key service providers in order to fund those savings, same time working actively and heavily to push sales up.

And in spite of this market situation, I'm confident that we are able to improve our performance. Handing over now to Matti Lievonen.

Thank you, Panu. And then if you look at outlook and that we [indiscernible] that we expect 2018 to be a strong year for Neste.

Why we think about so? If you think about global oil demand, it's been - that's been expected that will grow 1.4 to 1.8 million barrels, also the new capacity is not so huge.

So there should be a very good balance that’s coming Oil product side. Then also if you think about R&D, demand is good.

Also you know, the countries that are very much towards biofuels, like Scandinavian countries, they have increased their mandate to go up. Also in California, the long-term is good.

So very positive signs. Then what's coming to our capability to really extract the good markets that we have shown in the past years that we can do that.

Also the feedstock side, we have a very strong position and then we all the time developing the new markets, new feedstocks and that's why we are very confident that the year will be very strong or strong what we have fully told by the way. So it's me.

So Renewable Products. So obviously, our margin has been with good level and then we expect that it will continue the good level.

Really, if you look additional margin the first two quarter last year was not presenting the real things what's going on and then now we have shown in the last two quarters that we manage those things. Then there is utilization rates in renewable fuels four weeks have done in Rotterdam refinery that's the catalyst change.

And the change is that we are going toward this 3 million targets by 2020. So that is needed to do – to go there, and then we have 9 weeks major turnaround at Singapore refinery in Kuala Lumpur.

So - and operationally, we expect a very good and a high utilization. In the Oil Products, it's very early to say everything about the year 2018.

But if you look now, so we think about and expected that the average reference margin will be below 2017. But who knows, but that's what we expect.

And then this Urals-Brent price difference, that has been under pressure in few months now. But now recently, it's started to come to normal level.

But we expect that might be slightly narrower Urals-Brent price difference. So it will be the high reliability to continue in OneRefinery operation, and we have said to you and unit turnarounds, and we will implement those during the spring and autumn.

Then in marketing and service, very much to normal seasonal bucket and as Mr. Panu Kopra said, so we are doing the measures to improve results.

And then where we continue to focus? So probably you see that we have narrowing that to 4 to 3, but in fact, there is the same thing.

So safety and operational excellence. Last year, we posted the best ever safety figures and then also the refinery operational excellence was in good levels.

So both in Porvoo and the Singapore [ph] refineries did a good job. Cash flow is a strong as said by our CEO and then we believe that it would be strong.

And we focus on that and then the customer satisfaction. So this Net Promoter Score card what we're following all business is increasing trend.

We have new customers in different businesses and then what is really lesser is this 100% renewable diesel sales and we plan to grow toward this our target 50% by 2020. So we see the things positive, and we expect to have strong year 2018.

Now we are ready for questions.

Hi. Good morning, all and again congratulations for the [indiscernible] EBIT and earnings.

Two questions, please. First one on the renewable fuel division.

So can you please quantify the impact from the Rotterdam maintenance, which wasn't expected by [indiscernible]? And maybe also the impact from the Singapore maintenance?

And I also tried you know, to quantify the impact from [indiscernible] increase, [indiscernible] price at your EBIT level, so liquidity price went up by nearly $55 compared to 2017. And if we remain at this - at the current level, it is fair to consider that your EBIT should be positively impacted by nearly €80 million?

Thanks to the credit price increase, all the other things being equal. The second question is on the Oil Products division.

So if I exclude the PL4 unit maintenance, which negatively impacted your margins, let's say, by something like €25 million. Your premium margin in Q4 was close to $7 per barrel, which is probably the highest level ever.

So I wanted to know if this is only due to the new configuration of the Porvoo refinery following the investments that recently made or is however you know, anything else someone [indiscernible] high premium excluding the material impact? Thank you.

Thank you for the question. This is Kaisa speaking.

The first question was regarding the Rotterdam shutdown and the Singapore turnaround impact in 2018. In Rotterdam, we are doing our first inspection.

That's the reason why we are having the shutdown. And at the same time, we are also changing the catalyst since the refinery will be down for the inspections anyway.

The Rotterdam shutdown, we will be managing the sales volumes through our inventories. But the Singapore turnaround, which is a major one.

This is 9 weeks turnaround, and our main target is then to creep the Singapore production the same way as we have been now creeping the Rotterdam refinery and this is targeting the 3 million tons by 2020 capacity creep program. So the Singapore impact - because the turnaround is taking place at the end of 2018, the impact will be shared between the late 2018 and early 2019.

Okay. Thank you.

We can’t see anymore.

Yes, hi. This is Artem Beletski.

A couple of questions from my side. Starting with oil products and what comes to 2018, could you maybe highlight what type of turnarounds are you planning for the year?

So yield source be basically made minor actions what you’ll be implementing on that front? And there is a couple of questions for Kaisa when it comes sales location for 2018.

And looking at prospects for North America. So we have seen that California credits have been rocketing quite a lot recently and also biodiesel margins have been improving.

Should we expect higher share of sales to be allocated to that region? And may be just on the fixed cost in renewables, so also has been increasing due to this strategic project, should we expect further increase in 2018 or what kind of development is there to assume?

[Technical Difficulty]

Yes. Thanks very much for taking me back.

Just if you can answer to my questions because I haven't been able you know, to listen and I think the [indiscernible] are nice as well. So regarding the maintenance, please, I think what could be - can you quantify the impact?

Can you also please tell me if I'm far from the reality regarding the LCFS credits price impact that I expect to be something like €80 million or things being equal? And regarding the Oil Products division, regarding the premium margin, it might have been something like $7 per barrel excluding the maintenance.

So is it only due to the new investments or was there any one-off? Thank you.

Thank you for the questions. This is Kaiser speaking.

I hope that the line is now working. We are so sorry about this problems with the connection.

And so I will now first take the questions regarding the turnarounds and the LCFS section then Matti Lievonen will continue. So in Rotterdam, our plan is to – during authority inspection, which is mandatory, also to change the catalyst.

And we are planning 4 weeks shut down, but the idea is that we're covering most of the sales via inventory systems and optimizing the inventories. Then in Singapore, it's a major turnaround, 9 weeks.

It is part of our capacity creep program. Our target is to really creep the Singapore production the same way as we did - after the major turnaround in Rotterdam in 2016.

But the impact of the Singapore turnaround is reflected at the very late of 2018 and also in - early 2019 since turnaround is taking place at the very end of the year. Then there was a question regarding the LCFS.

The current price trend, of course, it’s positive for companies like Neste, since we are selling quite a lot of our products in California and we are generating the credits. We don't have a view on how that market is developing in the future.

It is all about the supply/demand balance. But clearly, the higher the credit, it has the positive impact on both on our reference margin in North America, as well as to our additional margin.

But unfortunately, we do not have a view - forward-looking view on how the LCFS credit price will develop in 2018

Thank you.

And then on Mehdi [ph] on the question OP additional margin. I agree with you, of course, that without the scheduled field for maintenance, Q4 additional margin would have been clearly higher still than the 5.8.

And if I look at the factors, which were there in this quarter, which create that it's - one thing is what you mentioned yes the SDA unit was up and running, it reach utilization end by year-end. So that clearly is a positive factor supporting the additional margin.

There were also some other things, which are particularly for this fourth quarter. One is for example, that we were in a winter quarter.

And that means that certain products have winter quality and also command winter price premium. Another thing is that we did have some FX hedges, which also supported the additional margin, as there were - the hedging result was positive.

But yes, overall, I can confirm your analysis that without the scheduled maintenance, the additional margin would have been even stronger than 5.8.

Thank you very much.

Hi. Thanks for taking my question.

Two for me, both on renewables. Can you give us any color on what your realized feedstock cost in renewables in the quarter?

Were they higher than the third quarter? Were they are in line?

And was there any effect from hedging or any other one-offs in that? The second was just can you give us an update on the renewables, like industry outlook, so if maybe should update us on the status of that too.

And then also specifically in Sweden, I believe there is some changes coming there in the second half of this year? Thanks.

Thank you for the question. This is Kaisa again.

The first one was about realized feedstock cost in Q4. And as you were able to see from our presentation, the trend of the CPO and animal fat, which both are feedstock.

The trend was positive for renewable products in Q4. We saw a lowering price for both of these.

For palm oil, the situation has been improving in Southeast Asia after the weather problems, after [indiscernible]. The inventories are getting higher and the production rates have been good.

So that explains the palm oil. And price - and for waste and residues and tallow of course, we are working to widen the availability of the waste and residues all the time, and we are also moving towards the lower quality.

So the feedstock trend was a positive in Q4 for us. Regulatory outlook.

Let me start from European Union and the rest 2 proposal. At the end of last year, we were in a situation that both the commission and the Environmental Committee, as well as The Industrial Committee gave their views on the proposal.

In January '17 this year, then the Parliament voted on the proposal. And now the negotiation between Commission, the Council and the Parliament have started and will continue for a couple of months to finalize basically the regulation.

What we have seen over the past months is that very opposing views have now started to converge. We are seeing a much more balanced view points when it comes to the wide raw material base, as well as the mandatory target setting for traffic to use biofuel.

And we are also seeing that there is more and more understanding with the fact different member state in European union have - are going to have a different strategies when fulfilling the overall renewable energy targets. So our view is that the development has been positive over the past months.

And now we are looking into the negotiations that we'll continue - that we believe at least till the end of Q2. Then we have following the USA Regulatory Development.

I think the industry was expecting to see the BTC decisions already at the end of last year or latest in January. However, we are in a situation that no decisions have been made regarding BTC.

And at the moment, there is no timeline defined, and we do not have any further information when potentially decisions are made. And in our guidance, we are not including BTC in - for 2017 or 2018 into our guidance.

That's good to remember. Then there was a question regarding Sweden.

Nordic countries being an important market for Neste, also for renewables, as they required high-quality products that can also be used during the winter time. Sweden is moving into a greenhouse gas mandate regulation in June, July this year.

This is the first time Sweden is going to have a mandate, by the way. And this is a big change for the industry, but naturally, very positive for Neste as Sweden is sort of a neighbouring market and part of our Baltic Sea whole market.

So we are looking forward to this. And then, we know that there has been a sound development and discussion for simply no way a regarding the aviation and how to include renewables and fuels as alternative fuels for the aviation.

So we are following that very closely as well.

Thanks.

Hi. It's Antti from Danske.

Two questions may be from my side. First of all, about the currency outlook for 2018.

First the clarifying question about the 38 million that negatively report for Q4. I assume that its excluding hedges, am I correct on that one?

And then could you give us a kind of estimates and how does the situation look for 2018 as a whole net of hedges if we assume that the current spot prices will prevail on the currency market? That would be my first question or maybe there was two.

But other ways, the second one would be about Renewable Products sales volumes in 2018, you have quite a lot of maintenance as has been described. Do you still expect to be able to increase the sales volume in 2018 versus 2017?

Thank you.

Yes. Answering the questions really concerning the currency.

I think you're right, Antti about the impact coming out of FCs and FCs. The figures that was stated without hedges, so it’s basically looking up to how the market rates has basically behaved in that sense.

And we have stated in our material, we expect to see a weak, weakening or weak U.S. dollar 2018.

But according to our hedging policy, we have hedged quite a lot of our transaction for the first half of 2018, especially, but if U.S. dollar stay weak as it is 1.24, 1.25.

So we are going to see overall annual figures that is higher than what we basically ended 2000 and 2017.

Okay.

Let me then take the follow-up questions regarding sales volumes in 2018 with Renewable Products. Since we have a 4-week shutdown in Rotterdam and the 9 weeks turnaround in Singapore, we are not expecting higher volumes in 2018 compared to 2017.

But naturally, I mean, we are maximizing the utilization and before and after the turnarounds. And as you can see, from this year's production figures, the capacity creep actions, which we have taken to Rotterdam, it's really a real.

So unfortunately, not increasing from 2017.

I calculated quickly that the impact from the maintenance could be something like 250,000 tons of post-production. Am I in the right ballpark there?

We need to look into the - especially regarding the Singapore turnaround the timing. Because the production time is different compared to when we are selling it.

Delivery times are relatively long from Singapore and so on. So the impact of the Singapore, 9 weeks turnaround, will be both in late 2018, but also early 2019.

Okay. Thank you very much.

Yes. Everyone, thank you for the presentation.

I have few questions for me on Renewable Products. I was wondering with the new pretreatment unit in the Netherlands Sluiskil [ph] positive impact on your results in the fourth quarter and was starting to impact in the first quarter '18?

And then, secondly, the sales of the 100% blend of renewable diesel gets going up every quarter. Can you say in which region you're making progress and you expect to see the same base of improvement in 2018?

Thank you.

Thank you. The first question was regarding Sluiskil, our new pretreatment unit in the Netherlands.

The unit is up and running and we have started to use it as a pretreatment. But the impact in Q4 was still limited due to the timing of the startup and also the fact that we are still developing it further.

And I'm expecting more impact in Q1. However, we do not give sort of numerical guidance on that topic.

Its part of our overall sort of pretreatment platform optimization and the low quality raw material supply. Second question was regarding 100% Neste.

My Renewable Diesel sales are key markets for that is California and that Nordic market. We reached 30% in Q4 as the share of the sales.

And we haven't given a target for 2018, but our overall target still remains the same. So we are targeting half of our sales by 2020 to be 100% Neste My Renewable Diesel.

Okay. Thank you.

Actually, the first one. Now it's been two quarters, wherein when we have seen the additional margin in the renewables to be extremely strong.

Last quarter, you had highlighted that you had done sales allocations, feedstock optimization, those kind of achieving those margins. This quarter, again, you're talking probably feedstock prices have actually helped it.

And then, going forward, you're also saying the pretreatment facility will kind of have a greater impact. I was just wondering what's stopping you from actually going on all out saying these margins will stay probably in the future?

What other than this that you’re seeing to these additional margin in the first place? The second one is also regarding the renewables again.

In the strategy update you had mentioned the commercial production of bio-based plastics to start during the first half of 2018. Just wondering what the progress was there?

Have you started it or are you on track?

All right. Thank you for the questions.

This is Kaisa speaking. First question was regarding renewables additional margin and sort of the drivers.

And then what is stopping us to stating the target levels and so on. Well, it's a pretty complex value chain.

I mean, when we are maximizing additional margin, it involved sales allocation, the feedstock optimization, the whole production platform, operational excellence, as well as the premium capturing sales. Many of these elements have been very volatile and they are not moving hand-in-hand necessary.

So unfortunately, we are not sort of giving a guidance or absolute level as a guidance when it comes to additional margin we basically guide that we are expecting it to stay at the good level also in 2018. Some structural changes have been made very successful ones.

And then, there are that market, the drivers like the feedstock price, as well as the utilization. So some of the elements are in our own time - and some is market related.

So difficult to be able to forecast the market correctly. The second question was related to bio-based plastics.

We are targeting the first commercial production during the first half of the year. And that remains our target.

And we're progressing towards that.

Thank you.

Thanks. Afternoon, everyone and thanks for taking the question.

I’ve just got one left actually going back to cash return, obviously a strong message with the uplift to €1.70 [ph] EPS for 2017. That looks well aligned with the upgraded payout policy you announced in September and obviously supported by lower balance sheet leverage.

Given the strength though in 2017 earnings, just want to understand to what extent you see €1.70 is a minimum baseline in terms of an absolute cash return thinking about the future at dividends doing from Neste versus looking to sort of flex that EPS lower through the payout mechanism to the extent that you see lower margins and no BTC on a 2018 plus fee? Thanks.

Thank you, Matt. Very good question.

So you all remember that we have raised our dividend policy at least 50% of comparable EPS. And this time, we surprised, it was 51%.

So it was decided. But our thing is so that we'd like to have a practically nice dividend policy.

And that's what is our - and as you mentioned, our balance sheet is in excellent condition even to make big investments and also take care of our shareholders. But of course, the main issue is that we keep on doing a good results and that's why we said that 2018 is strong.

And it has taken in account also the Rotterdam catalyst change, the Singapore turnaround, the Samva [ph] turnarounds, smaller turnarounds in the Porvoo. So all is taking account, there is nothing that surprise us in that respect.

So we are very confident of that the year progress somewhat.

Right. Thanks so much.

Thanks. This is Pasi from Nordea.

So is there any forward volume expectations for '18? And secondly, what was the EBIT effect coming from the Singapore maintenance?

And how do you see to animal fat prices to develop later on this year? And lastly, by acting all the earnings component from this year to the full year guidance, would you please explain the stronger result then better result than a very successful result?

Thanks.

It's Matti Lievonen, probably I’ll answer the last one. I think this is important the company's also making some other works.

And a very successful strong then it's everybody could think about that this is the plus or minus, but recently strong and at least a little strong. So do not have not really – not to add for that.

But then the other question was also good one and Kaisa will give some – provide some thoughts.

Thank you. First question was regarding aviation volumes.

And I'm expecting that this is a renewable aviation fuel volumes. So indeed, the first volumes being used at the Geneva airport in 2018 towards the end of the year when the airport starts a anniversary year celebrations.

So we will be producing and we will bring those volumes to the market. Singapore maintenance impact, that was another question, and the impact in 2017.

It was 2 weeks shutdown due to our hydrogen providers, our authority inspections and the shutdown. And the impact I think we were at least the sales volume we were covering from our inventories, it was sort of planned to be that way.

And not really expecting to see the impact either in Q1 sales volume since this is the seasonality of this business the Q1 tends to be sort of slower moving quartile. So we haven't quantified the impact as such.

Regarding prices?

Exactly. Thank you.

Thank you. So there was question, what is our view on tallow prices, animal fat prices?

Very volatile market, different drivers in different market. And as you were able to see from the graph, which was presented earlier, the price has been going down in Q4, but very difficult to take a view on that.

We are sourcing from different continents and optimizing the price by having a very high availability and access to different tallow streams globally.

All right. So you are kind of able to keep up a decent margins regardless the animals fat to tallow prices would be a bit higher on – later on '18?

We are optimizing all the raw materials. I mean, tallow is one of our raw materials, but we are optimizing the whole feedstock globally, basically we can use in different…

Okay, great. Thanks.

Hi, good afternoon. I’ve got two questions please.

One on the carbon credit press [ph] in California. Can I just confirm that you still capture all of that credits?

And do you see any risk or going to see any signs for any of your customers trying to negotiate a bit of share of that? And then, secondly, the tax rate looks a bit lower in the quarter, can you perhaps explain that from what your guidance is from here?

Thank you.

Thank you. Regarding the LTFS credits.

I mean, we generate the credits since we are the producers. And we are selling those either directly to our customers.

So then - to the market at the credit. So we capture the value of the credits.

And then talking about the global tax rate, it was 16% for the full year 2017. I think we have talked about also earlier, we are looking for figures between 15 to 17 on an annual basis.

So depending on really where we – where the profit is coming from, but that's on a global basis delivered.

That’s great. Thank you.

Sorry. Thank you very much.

Just a follow-up questions. Let's take the hypothesis that the tax Blender tax credit you know, is voted and it is remained the current draft, meaning, high impact, higher effect in 2017 and impacting also 2018?

So the impact you know at your EBIT level will be – put you high. And I wanted to know, if you will, keep your 50% payout policy including the 2 BTC impacts, the one in 2017 and 2018?

Because this will probably boost your dividend - your dividend yield, and I just wanted to know, if you will have to do that to respect dividend policy. And another question may be regarding the CapEx guidance for 2018.

Sorry I was dealing with a lot of visits today. I didn't look at - in your report, can you provide guidance?

Thank you.

It's Matti Lievonen here. Thank you Mehdi for the question.

I think that highly speculative things is not good to speculate, but we have policy that with 50% of comparable EPS if this BTC will come so, that’s relatively will be then the higher dividends.

Thank you…

And then talking about 2018 CapEx level, we assume that to be around €400 million.

Perfect. Thank you.

Yes. This is Artem from SEB.

Two questions left regarding Renewables to Kaisa actually. What comes sales allocation for 2018?

So prospect to what comes to North American market they have improved quite clearly recently if you look at California credits and so on. So should we expect higher portion of sales to be directed to that region being just 26% last year?

And also in terms of fixed cost in renewables. So there has been some increase relating this strategic projects in 2017 quite meaningful impact.

Should we expect further increase in fixed cost due to this initiatives? Thank you.

Thank you for the questions. Sales allocation between Europe and North America mainly between Europe and USA, we have good markets also in Europe.

We are optimizing the sales constantly. So let's see how these overall profitability of USA and California is developing.

I mean, we are looking at doing some [ph] and not only the LCFS. However, I think the sort of 30/70 balance, which we have seen have been tested many times.

And it seems to be that so far it's been the right balance between the markets. But there of course, we remain alert on the market changes.

Fixed cost, we are expecting a small increase for 2018 from compared to 2017. And this is related to the design work that we are doing for the potential Singapore expansion project.

And this is sort of detailed designing already. And the 2017 costs were reflecting also strategic projects as we're looking in feedstock and also sales expansion like, for example, the aviation and so on, but slight increase expected for 2018.

Excellent. Thank you.

Okay. Thank you.

This is Juha-Pekka Kekäläinen again. If there are no further questions, we thank you very much for attention and particularly patience this time, apologies again for the technical difficulties we had during the call.

Neste's first quarter results will be published on the 26th of April. Until then, thank you, and good-bye.