Neste Oyj

Thank you, and good afternoon, ladies and gentlemen, and welcome to this conference call to discuss Neste's first quarter results published this morning. I'm Juha-Pekka Kekäläinen, Head of Neste IR.

And with me on the call in various locations are President and CEO, Peter Vanacker; CFO, Jyrki Mäki-Kala; and the Business Unit Heads, Matti Lehmus of Renewables Platform; Marko Pekkola of 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 call. With these remarks, I would like to hand over to our CEO, Peter Vanacker to start with the presentation.

Peter, please go ahead.

Thank you, JP, thanks a lot, and everybody for joining us in this call today. Very good afternoon on my behalf.

We have of course all experienced unprecedented circumstances due to the COVID-19 epidemic and I hope of course that you and your families have stayed safe as well as in good health. We're pleased to share with you our solid performance in the first quarter and the outlook going forwards.

If we now skip the slides with the disclaimer and immediately go on Slide 4 on the Q1 highlights, our first quarter comparable EBIT was EUR408 million, which is about 8% higher than in the corresponding period last year. Renewable diesel demand was good in early 2020, but as expected, the feedstock markets remained tight.

And combined with the significant impact of the COVID-19 situation on commodity pricing, the tight feedstock market created some pressure on the sales margin. As a result our comparable sales margins, including BTC averaged at US$685 per ton during Q1.

The EBIT contribution of the BTC was EUR52 million in the first quarter and the Renewable Products result was boosted by high sales volumes, 731,000 tons, which was about 6% higher than in the previous year. This was enabled -- and I'm very proud of that on the work that our people have been accomplishing again.

It was enabled by a new quarterly production record of 795,000 tons as the production facilities were operating at a high utilization rate of 101%. This production record would indicate a potential nameplate capacity of close to 3.2 million tons.

So crossing the bridge between the 3 million that we had announced last year and then the 4.5 million capacity, nameplate capacity in the middle of 2022. Oil Products had a decent result in a very challenging market environment and especially during the second half of the quarter and its first quarter comparable operating profit was at Q1 2019 level.

The reference margin reflecting the general market conditions was very volatile and averaged lower than in the year before. Our good operational and supply performance supported the additional margin, which reached US$6.7 per barrel.

The warm weather and the COVID-19 epidemic substantially limited air and road traffic and this has an increasingly negative impact on product demand towards the end of the quarter. The Marketing & Services segment had a challenging first quarter in a very competitive market and its results was impacted by lower sales volumes caused by substantially lower demand due, as said, to the weather and the COVID-19 pandemic.

In addition, of course the divestment of our Russian business, which was successfully completed in October last year, reduced the comparable EBIT by EUR3 million. Health and safety remains one of our top priorities and of course even more so now with the COVID-19 epidemic and also of course a focus area.

Our occupational safety performance measured by the total recordable incident frequency was about the average 2019 level and improvement actions have been defined. Process safety performance continues on a good basis and we of course also implemented far reaching business continuity plans to ensure safe and reliable operations during the COVID-19 epidemic.

We continue to make good progress in our strategy implementation and I will come back to that at the end of the presentation. The Neste AGM is now -- that was originally scheduled for the 7th of April, had to be postponed due to the COVID-19 restrictions in Finland.

And the Board of Directors has today given notice of a new AGM date to take place on the 18th of May. The Board of Directors is now proposing a dividend of EUR0.46 per share as a first installment to be paid in May.

And the Board is also proposing to be authorized to decide separately on a second dividend installment of maximum EUR0.56 per share and that consists out of the ordinary dividend of EUR0.46 per share and the extraordinary dividend of EUR0.10 per share to be paid later in the year. That would be done tentatively in October and here the Board of Directors wants to be prudent in a time of significant market uncertainty.

If we move to Slide 5 on the financial targets, the solid performance is also visible in our financial targets. We reached a record high after-tax ROACE of 26.7% on the rolling 12 months basis and again clearly exceeding the 15% target.

Our leverage ratio remains negative at minus 1.1% at the end of March. Our strong financial position will support us in navigating through the increasing market volatility.

On the next page, let's turn now to the big topic of our lives today. The COVID-19 crisis caused significant and unprecedented uncertainty related to economic development and the demand and prices of oil products.

And a lot will depend on the pace, timing and geographical distribution of a possible market recovery. Market consultants currently estimate that oil demand will decline somewhere between 4 million and 9 million barrels per day in 2020 year-on-year and the IEA expects 29 million barrels per day of year-on-year of demand decline in April and 26 million barrels per day of year-on-year oil demand decline in May alone, and this is expected to have a negative impact on the market demand, the sales and profitability of our Oil Products and Marketing & Services businesses.

The biofuel regulations and mandates are expected to continue supporting renewable diesel demand and possible decline in the overall fuel demand could however also negatively impact the sales and profitability of Renewable Products businesses. Neste has a strong balance sheet and the liquidity position and that is good to navigate through these uncertain and difficult times.

Business continuity and contingency plans are in place and corrective actions have already been started. The Porvoo major turnaround has to be split as you know between the years 2020 and 2021, and the Singapore capacity expansion continues to be on track as planned.

Lockdown measures by the local government could, however, pose some risks to progress. But I have very full faith in our management and the employees to navigate successfully through these challenging times.

Now, with these opening remarks, I we'd like to hand over to Jyrki to discuss the financials in more detail. Jyrki?

Yes. I hope you can hear me.

Yes, we can hear you.

Yes, okay. Thank you.

So thank you, Peter, and let’s move to the next page. So let’s talk about the Group financials.

I have only few slides here confirming the quarter one figures. So if you turn to next page with the figures.

Yes. Thank you.

So talking about the quarter one and making some comparison now for the corresponding quarter last year, our revenues really had this drop that was very visible in the quarter one coming from the Brent oil -- Brent price drop in the first quarter and that had roughly EUR400 million impact on the revenue side and that of course also caused the fact that we had to do a write-down in the inventories that was EUR300 million but that is not part of the comparable figures, I’ll talk that a little bit later. But the EUR500 million lower net sales like I mentioned it had an impact coming from the crude oil price roughly EUR400 million.

And then EUR100 million lower sales in both OP and also in the Marketing & Services businesses, including really the Russian divestment, what we did later in the quarter, quarter three 2019. So actually it was Renewable Products that increased their net sales coming from higher volume, roughly EUR300 million impact in quarter one compared to 2019, ‘19 first quarter figures.

If you look at EBITDA we got EUR326 million, it's lower than 2019 by EUR160 million. And since this is a IFRS figure, this figure includes, for example, the write-down of the Oil Products EUR300 million inventory write-down, that certainly has not been part of comparable operating profit, but it is part of the normal EBITDA what you can see in this column, EUR326 million.

I think then we move to the most important figure what we’re always reporting, it’s a comparable operating profit. It improved by EUR30 million compared to 2019.

And that is something that is only coming basically from businesses, I will talk a bit later about those because Renewable Products, Oil Products and also Marketing & Services, they basically have more or less the same comparable EBIT, 2019 first quarter and 2020 first quarter. And the big improvement like you see is in the Others, where we had the big negative net profit of our -- of minority-owned company Nynas in Sweden, roughly EUR30 million.

So that is no longer affecting our comparable operating profit across 2019 figures and there you see the big improvement of this in our figures. Operating profit going down IFRS, but again it’s lower than last year.

Same story here. It is about the inventory write-down of the Oil Products.

And then our cash flow, that was negative by EUR120 million compared to slightly positive 2019. We had much higher investing -- investment activities this quarter 2020 roughly EUR220 million more.

And that is very clearly seen in the cash flow figures. And then final, the comparable earnings per share is much higher than 2019 first quarter as the bottom-line net profit is much higher than 2019 when we are excluding the inventory write-downs, the EUR 300 million.

So it's a very good, solid start of the year also from the comparable earnings point of view. If you move to the next slide that basically tells how the comparable EBIT then moved between ‘19 to ‘20 by business areas.

Can you change the slide please? Okay, thank you.

So here is basically a story of what I mentioned. Basically the business is pretty flat from the operating profit point of view and then the Others improving mainly through Nynas at the end of the day.

So that's basically how we landed to EUR408 million. And then I think the most interesting slide is this one, when we are having a breakdown of elements with our comparable EBIT 2020 first quarter.

And now it is a little bit different -- different way to show it because the reason is now very clear. Now that we have the BTC in place for 2020 and also up to 2022, it is an essential part of the performance, the EUR40 million that is the last part of the material, the EUR40 million improvement.

And really to make things comparable now during 2020 we have allocated basically here for 2019 first quarter BTC that was EUR40 million and then we have the true comparison of apples-to-apples between 2019 first quarter and now certainly the first quarter of 2020. So actually we are looking then for across 2019 first quarter, it was EUR418 million when the BTC is included and this year it's EUR408 million.

So actually a small drop in the comparable EBIT. But if you look to first at sales volumes, there's a small increase for the operating profit coming from the sales volumes.

That is mainly coming from Renewable Products. They had a very good solid first with the volume point of view.

And then both Oil Products and Marketing & Services had a negative impact coming out of the sales volumes, with the known reason, especially with the COVID-19, and certainly like mentioned earlier, Marketing & Services, they divested the Russian business in quarter three '19. So it's no longer in the books of Marketing & Services.

So that's basically how we landed to this EUR5 million improvement coming from the sales volumes. And then I think the more important is the sales margin, but it is minus EUR22 million.

And basically the biggest part of that is coming from Renewable Products. They had $71 per ton lower sales margins, that is roughly EUR45 million impact, negative in this column.

And then Oil Products, it has a positive impact, EUR4 million and it has basically two different kind of elements. It had a lower reference margin in 2020 compared to 2019, roughly 4% lower.

But they had an excellent performance in the operation. So their additional margin was 35% higher this year than 2019.

And that gave a boost of EUR28 million positive to this margin level. So combined Oil Products with the reference margin, additional margin, EUR24 million better this year than 2019.

So excellent achievement in that sense. And then finally, Marketing & Services, it was pretty much flat.

There was no impact coming from the marketing side. It was more about the volumes like I mentioned earlier.

FX changes, this is mainly U.S. dollar and mainly impacting Renewable Products, roughly 80% of that is in the renewable side and the rest is mostly in the OP side.

And then, the fixed cost side, we had an increase of our fixed cost like we had said also earlier, high focus on the growth activities in Renewable Products. So they had EUR31 million higher fixed costs in this first quarter compared to last year.

Oil Product was more or less at the same level, EUR3 million, so really focusing on the internal efficiencies in a high level. And then Marketing & Services, they had a EUR7 million lower fixed cost this year than last year.

Of course part of that is the Russian business was sold. So, that is basically how the things go.

And then the final piece of the puzzle, the fixed cost is then EUR8 million lower. Fixed costs in the Others, mainly group level item.

So that's basically how we landed to this EUR19 million higher fixed costs. So mostly coming out of renewables with a very, very good reason like everybody.

Everybody knows. And then the last part, the positives in the other items.

It is a combination of Nynas’ profit no longer affecting Neste’s comparable EBIT and then higher depreciation due to high CapEx activities what we had basically also in 2019. And that's how we basically land to this EUR408 million comparable EBIT at the end of the quarter one 2020.

So basically these three slides were something that I was planning to present. So, now I’ll hand over to Matti Lehmus to describe what happened in Renewable Products.

So, Matti, please.

Thank you, Jyrki, and good afternoon on my behalf. So I'm happy to state that the solid performance of the Renewable Products continued in the first quarter, and like you did hear, we were able to achieve comparable results of EUR329 million.

If I immediately comment on the sales margin, like our CFO was explaining, we were coming in at a sales margin of $685 per ton which $71 lower than first quarter 2019 if we take into account the retroactive BTC for 2019. And I would comment that this is in spite of the, well, let’s say, results of the tight feedstock market in particular and the fact that we are able to have good sales margin reflects the successful efforts to mitigate these raw material price increases.

On the sales volume side, I'm very pleased with the level of 731 kilotons. We were able to increase the share of our European sales to 75% versus 60% in the previous quarter.

And in general, it's good to say that the demand for renewable diesel was solid in the first quarter. Like you have heard, the production run very well and we achieved a record production volume of 795 kilotons.

And I have to say this is a great achievement by the entire supply chain because in practice we were avoiding any disruptions coming from the lockdowns following the COVID-19 pandemic. If you then turn to the waterfall, I think it draws a very clear picture.

And again, you can see that BTC 2019 has been reallocated to 2019 first quarter. So it starts from EUR377 million.

And the big items is that we were able to increase our volumes of sales following also very good production. And that increase of 39 kilotons had a EUR24 million positive impact.

The fact that the sales margin decreased by $71, had a EUR45 million negative impact and then the third big item is the fixed cost increase of EUR31 million versus a year ago. And this indeed reflects in particular the investments we have made in strategic growth projects on one hand, and the ongoing studies.

And at the same time, it also reflects the strengthening of our resources throughout 2019 in order to prepare for the Singapore expansion start up. Then turning to the feedstock markets and obviously like the title says there was very high volatility.

If I first comment on the vegetable oil prices, they started the year very strong, but you can see that, for example, from the palm oil curve that they decreased significantly during the first quarter following the outbreak of the COVID crisis. And this has been also here on the vegetables like palm oil, quite a significant move because the starting level at the beginning of the year was $900 per ton, and the quarter ended below $600 per ton.

At the same time it’s good to note that quarter-on-quarter the Q1 average versus the fourth quarter last year was still reflecting a higher price for palm oil for example by $27 per ton. So the average was still higher.

Turning to the waste and residue prices, it's good to state that they have also reacted to the business environment change, but to a much lesser extent during quarter one because the market remained very tight. And this is, for example, reflected, if you to look at the animal fat curve, by the fact that the quarterly average for animal fat increased by more than $50 per ton from the fourth quarter, the first quarter, and also used cooking oil prices increased from the previous quarter.

And so I reiterate waste and residues have reacted to the COVID market change, but effect has been much slower, much less pronounced than for Oil Products. And if I comment a bit on the supply, I would say that the animal fat supply volume has been quite stable.

But for example, for used cooking oil, the availability has decreased following restaurant lockdowns in a number of regions. So this completes the feedstock part.

If I then look at the U.S. market briefly, I would state that LCFS credit, which is important for the California market, averaged $206 per ton in the quarter one which is, as in the previous quarter, a very strong level, close to the cap that has been set.

And like you can see from the price curve after reaching actually that $210 per ton level in early 2020, the LCFS, there was some volatility after the outbreak of the COVID situation, prices momentarily dropping under $180 per ton, but they have recovered to over $190 which reflects a solid demand for credits. On the RIN side, prices have actually on the D4 RINs been relatively stable in quarter one, the average being $0.47 per gallon.

And if again comparing to the previous fourth quarter last year, this is slightly lower, which is obviously also a reflection that the RINs came down after the BTC was announced in December. And it will be interesting to follow the RIN development going forward as biodiesel margins at the moment are very weak in the U.S.

market. Finally, a few comments on sales margins.

So the sales margin were at the solid level of $685 per ton in the first quarter. And compared to the first quarter 2019, also the fourth quarter of 2019, this is somewhat lower when we take into account the retroactive BTC for the 2019 numbers.

So for example, compared to the first quarter, the comparable number would be $756 per ton. The sales margin development was driven by two main factors.

Firstly, the market movement had a decreasing impact on the margin stemming from the combination of tight waste and residue feedstock markets resulting in increasing feedstock costs; and at the same time, decreasing Oil Product prices, and in particular also diesel on the other hand. Our hedging strategy of course softened this impact slightly, but only partial mitigation was possible.

And at the same time, the other factor is that the sales performance was very good and this was reflected in increasing price premium, very good optimization of the sales mix. And like mentioned earlier as part of this optimization, for example, European sales share increased to 75% from the previous quarter’s 60%.

Finally, I would like to state that the sales margin in the first quarter was also supported by really good operational performance. We reached 101% utilization and that means a record production volume of 795 kilotons.

And this is of course clearly higher than the production volume that we for example reached a year ago. With these words, I would be happy to hand over to Marko Pekkola to discuss the Oil Product segment.

Yes. Thank you, Matti, and good afternoon, everyone.

Just making sure that you’re able to hear me.

Yes, we are.

Good, okay. And I'll comment -- we change the slide to Oil Products.

I’ll comment the Oil Products’ first quarter starting with the comparable EBIT, where we came in with a decent EUR74 million, at the same time when our sales volumes were almost 10% lower versus the first quarter of 2019 and the main reasons were the COVID-19 pandemic and also the warm beginning of the year. Our refinery utilizations rates were on a planned level on and good operational and supply performance reported our additional margin being on good level of USD6.7 per barrel.

Investments were higher compared to the 2019 in preparation of a major turnaround in Porvoo, which will be then -- which will be as already said executed in phases during 2020 and then '21. If we then move on to the next slide, I'll can comment on the EBIT bridge between first quarter ‘20 and ‘19.

And then like said, main positive impact in Q1 ‘20 EUR28 million came from good additional margin. And like said, also already good operational performance and supply performance, so behind that.

And in other items, EUR17 million negative change versus last year, mainly reflecting the lower profitability of our trading, especially with the products businesses and also higher depreciation in 2019. If we then move on to the next slide and let's take a look on the markets, where we certainly did see this unprecedented situation of the COVID-19 pandemic.

And crude oil price drop impact resulting big volatility in both product margins and then also Urals-Brent differential. Urals-Brent differential averaged at minus USD2.3 per barrel during the first quarter and widened towards -- through the end of quarter.

And crude oil prices were trending down during the first quarter and Brent price fell from level of USD66 per barrel to the level of USD23 per barrel. And we all know what the physical oil demands were, first in China and then followed by the rest of the world.

If we then move with our margin performance, if we move to the next slide. And there you can look on -- at our margin performance.

Our total margin -- refining margin was at a good level of USD11 per barrel, supported by strong additional margin, when at the same time, the reference margin which reflects the general market conditions averaged on the level of USD4.3 per barrel. Refinery costs were below last year's level due to strict control -- cost control and general crude oil related due to these costs are coming down.

With good operational and supply performance supporting the additional margins, we were able to deliver comparable decent results on the same level as in Q1 2019. Matti, with this short recap, then I would like to hand over to Panu to talk about Marketing & Services.

Thank you, Marko. This is Panu Kopra speaking.

Yes, indeed much worse start for the year than expected. I'll go through quickly the reasons behind this.

First of all, January and February were roughly 8 Celsius degree warmer than they average, are and even much more warmer compared to the last year. Obviously this hit hard to the diesel and light fuel oil demand.

Secondly, diesel demand was hit by the February strikes here in Finland. Third, hammer for the demand was COVID-19 which almost stopped our aviation and marine.

In the light of traffic especially compared to the network and then this traffic drop was roughly 25% to 35% depending on the market where we operate in and that obviously has a big impact also to our volumes in the network service. In order to have something positive to say, I would mention that the heavy traffic is still going quite well, as well as the agricultural volume.

Like Peter already said, the sales of Russia had impact also to our comparable EBIT this year compared to last year. In fixed cost we were able to save something compared to last year.

In spite of this very turbulence in the markets, we are able to continue the expansion of Neste MY availability in all markets we operate. And COVID-19 has boosted also the usage of mobile applications and now customers have been very satisfied to use touchless payments.

And then it is of course good for us also in the future. Now, handing over to Pet.

Thank you very much Panu. And let's now move on to the current topics.

First of all, progress in our strategy implementation has continued. And the Singapore renewables capacity expansion project is proceeding as planned within budget and on time.

And of course, as discussed earlier, the COVID-19 situation requires a close attention and may impact progress through restrictions set by the local governments. A new sales agreement on sustainable aviation fuel has been signed with Finnair and JetBlue and with others to be communicated later.

And the current COVID epidemic has reduced of course flying significantly and poses serious issues to the entire aviation industry. However, our customers continue to be committed to reducing their carbon footprint going forwards.

A new step in our global feedstock sourcing strategy execution was taken when we announced the acquisition of Mahoney Environmental, which is a major collector and recycler of used cooking oil in the United States. And this transaction supports Neste and our efforts to build a global waste and residue feedstock platform that can keep pace with the world's growing demand for renewable products.

And closing is expected to happen during Q2. In the Renewable Polymers and Chemicals, the strategic co-operation with Borealis for production of renewable polypropylene has started at Borealis sites in Kallo and Beringen.

The biopropane produced at our refinery in Rotterdam is used for this purpose. We also recently announced the combined investments with Mirova and Recycling Technologies, a specialist plastic recycling provider.

And the aim is to accelerate the development of chemical recycling and foster the transition to a circular economy for plastics. We are well on track to exceed the targets set for our Neste Excellence program and new higher targets to improve EBIT by EUR225 million by the end of 2022 and by EUR300 million by 2030 were introduced at our Capital Markets Day.

In the area of innovation, we've made minority stake investments in Sunfire, a leading developer of high temperature electrolysis technology. And the company's patented technology allows production of renewable hydrogen, as well as a direct conversion of water and CO2 into raw materials for the petrochemical products.

And innovation continues to offer us exciting new opportunities to build upon in the medium and long-term. So these were just a couple of highlights that I wanted to mention.

We have a clear strategy and we continue moving ahead consistently. So now let's look at the next slide on the outlook for the second quarter of 2020.

I mean, first of all, the visibility in the global economic development is extremely low due to the COVID-19 pandemic as you know. As a consequence, we expect unprecedented volatility in the Oil Products, in renewable feedstock and renewable fuels markets to remain very high.

Sales volumes or renewable diesel are expected to remain relatively stable in the second quarter despite the market impacts of COVID-19 pandemic and we expect the waste and residue feedstock markets to remain very tight, also driven by lower availability of used cooking oil due to restaurants shut operating. The utilization rates of over renewable production facilities are expected to remain good, except for a scheduled four week catalyst change at the Singapore refinery in the second quarter.

It's currently expected to have a negative impact of EUR50 million on the comparable operating profit. The exact timing of the catalyst change in Singapore will, however, be subject to the lockdown restrictions set by the local authorities.

The Oil Products second quarter market demand is expected to be severely reduced by the COVID-19 pandemic. And the reference margin is also expected to be lower than in the first quarter of 2020 and very high volatility is expected to continue.

As announced on the 23rd of March the scheduled major turnaround at the Porvoo refinery has been postponed to 2021 and only business critical unit maintenance will be performed during the second quarter of 2020. The maintenance of the critical units is currently estimated to have a negative impact of approximately EUR85 million on the segment's comparable operating profit and that’s mainly in the second quarter.

And as Panu also alluded to in Marketing & Services the COVID-19 pandemic is expected to have a significant negative impact on the demand and sales volumes in the second quarter as well. Moving to the next slide, let's then conclude with some other topics of the remainder of the year.

In the current volatile business environment, Neste continues to implement the Singapore capacity expansion project, the modified Porvoo turnaround and other strategic projects according to plan. All other projects are being reprioritized.

And as a result, we expect that the Group's full year 2020 capital expenditure will be reduced from the previously estimated EUR1.2 billion to approximately EUR950 million excluding possible M&A. We scheduled a four week catalysts change at the Rotterdam refinery in the fourth quarter and this catalyst change maintenance is also expected to have a negative impact of EUR50 million on the comparable operating profits.

Additionally, one renewable diesel unit at the Porvoo refinery is scheduled to have a three week maintenance break, and that’s in the third quarter, and the EBIT impact of that is estimated to be approximately EUR10 million. So this concludes now our presentation and we would be happy to take your questions.

Thank you very much.

So two questions please. The first one is regarding the demand for the renewable diesel.

So renewable diesel demand is linked to the fossil fuels consumption which is currently falling. However, you gave us a guidance of stable sales volumes in the second quarter compared to the first quarter.

So why aren't you facing a decrease in the renewable diesel demand? Is it more linked to the kind of contracts that you have, which are kind of let’s say take or pay, or are you lowering your renewable diesel price to keep volatility relatively high sales volumes?

Second question is about your hedging policy. So you’ve told us last time that you hedge your Renewable Products margins a year ahead.

And I wanted to know if you are currently hedging your renewable margins for 2021, knowing that those margins are probably lower than when you were hedging them a year ago? Thank you.

So, thank you, Mehdi, this Matti Lehmus. I will first comment on the demand for renewable diesel.

I mean in generally exactly like you state, of course, the COVID-19 situation has had a significant impact on crude oil and fossil oil product demand like we all have seen. And obviously, this situation also has effects on the global renewable diesel demand, but the effect is much less pronounced.

And I would say a couple of reasons. So first of all, it's good to know that diesel in general has been less impacted than gasoline.

And obviously a very important driver for the renewable diesel demand is the diesel demand, for example, in trucks. And the other comment I would make is that while in some market segments biofuels mandates are direct linked to fossil fuel volumes, there are also some segments where renewable diesel demand is not directly linked.

And just to give you one example, for example, in California, the renewable diesel demand continues to be very solid. So I would state that overall, this means that we expect renewable diesel demand in the short-term to remain quite stable.

And this is also reflected in our comment that we expect overall sales volume to be stable in the second quarter. And on the hedging, I would say that exactly like you stated, we have said that our hedging approach is that we typically stay hedged approximately 50% using vegetable instruments on one hand and oil product instruments on another hand as a proxy hedge.

And indeed we have also stated the typical duration is around 12 months. In this environment, I would say we have slightly shortened the duration of our hedging.

Just coming back on the hedging. Clearly there must been a positive impact on hedging in the first quarter on the margin in renewables.

Are you able to quantify that or give us some order of magnitude as to how significant that was to your margin and earnings in renewables during the first quarter? Any sort of guidance you can provide.

What you think the effects might be over the second quarter, and the remainder of the year? And then secondly, coming back to your comments about overall fuel demand falling and that negatively impacting the renewable diesel sales margin in -- for this year, can you talk about what the mechanism is there for that impact?

Is it just simply the lower diesel price? Is it maybe lower biofuel credit prices?

Any kind of information you can provide on the mechanism into that effect would be great? Thank you.

Thank you Joshua, it's Matti. So first, on the hedging, we are not quantifying the exact impact of hedging.

Like I explained earlier, it is of course only a proxy hedging approach. We also only hedge part of our sales volume.

So I would state that it helps mitigate a little bit the impacts of feedstock prices going up, while at the same time oil products, diesel went clearly down. But it is only partially mitigating that impact.

And on the margin outlook, I would say that we are not giving any margin guidance. Of course, what I would state that it's clear, it would be very surprising if the COVID-19, very significant market impacts would not have an impact on our margin going forwards.

And the simple logic is like that our prices are to a significant part linked to oil products such as diesel for example. And at the same time, the feedstocks while they are starting to also react and come down they have not reacted as quickly and as much as oil products.

So that is the underlying logic.

I mean, what I can add to that is, Joshua, if you remember that last year in Q2 we talked about the fact that we were moving our business model building up more optionality, that originally I mean we were mainly focused on the Northern part of Europe as well as California. And then we had started with the additional volumes that we were able to produce to prepare other geographic markets.

On one hand side, on the other hand side also selling over 100% of Neste MY in pump stations, not just in Finland but also in the Baltics and California, in the Netherlands and so and so on. So it's now more than 210 stations where you can buy the product.

So having built that optionality in our business model, in addition, also having signed more than usual term contracts for 2020, that gives us of course also more room to maneuver in how we are conducting our sales in renewable diesel. So I think that's also an important factor, I mean to look at.

So this is Antti Koskivuori from Danske. Two questions from me.

First on Oil Products and reference margin guidance that you gave for Q2 saying that it will be likely lower than in Q1. Yet in April according to website calculator from your own website that reference margin has realized more or less double the level that was on average in Q1, so it’s your view on Q2 as a whole based on forward curve or what’s behind this assumption?

And then secondly on the changed dividend proposal now being paid in two parts, I understand this is a Board decision but if you could give some light to the reasons behind this decision as by looking at your balance sheet one doesn't see why this is necessary at this point? Thanks, those would be my questions.

Okay. Let's take your first question, and of course, I mean, let me allude again to Q2.

It’s -- everything is very volatile at this point in time. So Marko, do you want to add something I mean to the OP reference margin?

Yes. Thank you Peter and thank you for the good question.

And of course now for the Q1 and what we can see already based on the calculation, we had a good operational performance and supply performance, that’s also including the timings that we have and then also the wider Urals differential during that time. But now like Peter highlighted, now when we see this very unprecedented situation, a lot of volatility in the area and also uncertainty, so it’s very difficult to forecast and then the forwards are not our forecast in that sense .

Is it fact that the spot margins haven't come down yet, is that the right conclusion?

Well, I would say that that's very hard to forecast. And I would maybe show or highlight that with an example that even during one day the spot margin can change from $1 to even $9 per barrel.

So when the variance is that much, so it’s really hard to forecast.

Yes. And we've seen I mean these changes on a daily basis, spot margins I mean, being at $2 a barrel and then a bit later, I mean going even at the same day, I mean going through $5 or $6 per barrel.

So I think currently they are at $2 per barrel. So I understand your question Antti.

But this market is very volatile. But I mean the important thing here is how also in Q1 our people have been able to maneuver through that situation with I would say in Q1 very good results.

So, that will be the same models with any that we have in Q2. And as you can imagine, I mean this is another way of working than usual, which means that many touch points on a daily basis between our operational teams and how to steer through that volatile periods.

Now, coming to your second question. At the end, I mean, regarding I mean the dividend proposal, I mean, first of all, one can say the dividend proposal has not really changed to the previous proposal that has been made by the Board to the AGM.

The only thing that has changed is that on the second tranche and the extraordinary dividend, the Board is asking the AGM to delegate the responsibility to the Board to decide on its discretion than we guided towards October. Because that is when we have the Q3 results and also available and we communicate them to then take the final decision.

This is I would say just in this very volatile environment, like you have seen for many other companies just being very prudent in how to look at the future.

A few questions from me please as well. Just going to the renewable business, I think last quarter or at the strategy update you talked about term contracts being 70% or more than that.

Can you give us an update where we are on that? Is that still around that level and are you willing to offer some flexibilities if customers asking for less volumes given the current environment?

Secondly, just on the sales margin in the first quarter, perhaps if we can deconstruct it more directionally. Did the March sales margin was weaker than the first quarter average?

And what are you seeing so far in April compared to March? And then finally, just on the additional margin in Oil Products, I wonder if you can be a little bit more specific, you talked about the better operational performance and also about supply management.

Is it truly or largely a function of the more effective feedstock pricing there? And perhaps linked to that also, if you can say what the current utilization rates are in the refineries in April?

So that's -- first of all, take your questions in the renewable area and I would ask Matti to take those questions.

Yes. Thank you, Thomas.

So on the term contract indeed what we have been over the last or so communicating, we typically tend to have something like 60% to 75% range of term contract and exactly like you commented, for 2020 we have been at the higher end of that range and that is still the situation. It has not changed.

So, the share of term contract is somewhat higher this year than it was last year, around the 70%. And in a way you asked also whether we have had needs to reallocate the volumes.

We haven't had a lot of need to touch the volume, so the demand in the Q1 was solid. And then to the flexibility, I mean, so flexibility offered, of course in these term contracts there is a little bit of flexibility also always in, yes.

But then on the other hand side, we have then the optionality in covering more customers, direct business, as well as in geographies.

Okay. There is not much like stability.

I wonder why you're being so cautious about that second installment of the dividend and potentially you have a very strong balance sheet, your gearing is in negative territory and you have the term contracts in place. There's some flexibility.

You have some margin hedges in place. If there's one company that can pay that dividend with ease, that will be you.

So I'm just kind of a little bit puzzled by having that flexibility on the second installment?

Yes, but Thomas, I mean, nobody has said that, at this point that the second tranche and the extraordinary will not be paid. It is just a matter of prudency.

I answered that question already before that the Board has decided to be prudent and take the decision then finally later in the year.

Okay. Yes, and then maybe…

And there was another question on the sales margin for specifically month-by-month. Let's say we are obviously not opening that month-by-month.

But I think in a way if you look at just the description that when we went through the markets earlier in the presentation and you look at the curve, so of course it's clear that in the beginning of the year was different in terms of where crude price was and if you look at what has happened since then. So we have seen decreasing trend clearly on crude prices that has come from the beginning of the year of $60 more towards $20.

And at the same time as our feedstock markets have remained tight. We haven't seen a big movement.

I mean, we have started seeing downward movement recently on animal fats, also on used cooling oil. But it's clear that these movements have been much slower and much less pronounced than in crude oil.

Like mentioned by our CEO, we of course continue -- at the same time to continuously optimize and use the optionality. We have to optimize our sales and feedstock mix.

And then we have the additional margin question on OP. Marko, if you can take that question and also with relation to utilization rates?

Yes, I can take it. And, yes, and I will try to open it, when we say that good operational performance that means that our one refinery setup now and we have in both including Naantali and Porvoo, we were able -- the running rates and utilization rates they were on a good level.

In addition with the rapid changes what we could see on the products with the existing setup what we have we were able to change the operations in the refinery. So that’s a little bit more open -- to open what the good operational performance means.

Then on the supply performance like Peter already said earlier I think we have very good knowledge and skills inside in the house. So we were able to benefit now on the changes in the market, what we produce but then also on the other side it's also -- like as it’s about the pricing, when the deals were done and the purchases.

And the big impact there is of course the wider Urals with especially now during towards the end of Q1 were on the widest. And then on the utilization rates, we are still operating with slightly reduced utilization rates in -- both in Porvoo and Naantali.

I've got a couple please. I guess firstly on the production performance in Renewable Products, it was obviously particularly strong in the quarter.

And I guess when you analyze that you get close to that 3.2 million tons of volumes, which was your target for capacity creep ahead of Singapore startup. So I'm just wondering, when you do the catalyst changes through this year, should we therefore think that actually you could get more capacity creep than you previously indicated from the existing plants and capacity?

That's my first question. And then secondly, more around the balance sheet, and clearly there’s huge dislocations in the market, but you're sitting with a very strong balance sheet.

And so I'm wondering whether there is areas where you could perhaps accelerate your plans and your strategy. I'm thinking capacity expansion, is there value chain integration opportunities, where you can use M&A or other areas to accelerate your growth plans?

Okay, first question, Matti.

Yes. Thank you.

So question on the production volume and indeed I think it's a great indication that with all the work we have done on the operational excellence, on reliability and safety, but also on finding ways to debottleneck the production, the pretreatment. I think the first quarter shows that in a quarter where things run really well, no plant maintenance, also no interruptions, that we can at the moment be very close to that 800 kiloton per quarter in that scenario.

And of course we continue to look for further opportunities but let's say I'm already very pleased that we were able to reach this level in the first quarter and that will be a continuous efforts going forward.

So we have not formally and officially announced now that we are increasing our nameplate capacity from 3 million tons to 3.2 million tons. We're not yet at that point.

We have a very good practice I mean during the first quarter, we are very confident about it. But it's not yet that we say okay, now we have achieved it.

And therefore, the gap between -- remember the original 2.7 million tons, and then the announced 4.5 million tons, with the Singapore facility in 2022 has been completely closed. But it's also like Matti said Neste Excellence is a very important element of our strategy.

So every time you find a creative solution to avoid the bottleneck, you then start focusing on the next bottleneck. So, rest assured I mean that our excellent people will continue to do that.

So on your second question, which is strategic in nature and with regards to balance sheet expansions, M&A, we have talked about that also in the Capital Markets Day, with regards to the HVO expansions. We are currently doing the respective studies.

We are proceeding with that, so we're not putting them on hold because of coronavirus situation. And actually, the locations rather Rotterdam and Porvoo, at two potential locations, this is now starting to move into environmental impacts and analysis studies.

So you may see, especially with regards to Porvoo because this is of course -- and locally it’s public. So you may see that appearing also in the regional news eventually.

So we continue, I mean with full speed ahead on that, whilst we of course continue to focus on building up our sites in Singapore. One point that I -- and you probably read it when I was giving my introductory comments, from today's point of view in Singapore, on the new plants, we continue to be within the timeline that we have communicated, so start at the middle of 2022.

But currently, the construction site has been closed because Singapore, the authorities, they have imposed a new lockdown. They have quite some important cases now, you can say a second wave of COVID-19.

So they have taken rightfully so very rigorous measures to contain that. And that lockdown has just a couple of days ago I mean been extended from the beginning of May now to the first of June.

But as such with -- if that continues to be and we start up again in June, then the current guidance continues to be that we will be on time in the middle of 2022 because we were running a bit ahead in terms of the construction work that we were doing there at the sites. Now M&A we continue of course to look at opportunities in M&A like we said in the Capital Markets Day 2019 as well as in 2020.

So that continues to be of course on our table. We have a focus on closing the acquisition in the United States.

And of course, we continue to look at blocks where it fits, of course to our strategy, and you've seen I mean also in terms of equity investments with start-up companies, what I talked about, that also there, we are active.

The first one on -- is on diesel sensitivity. We touched on this before and you explained the link through the long-term contracts.

Looking at where diesel is today, $300 per ton. That was the level in 2016 when your margins were materially lower but your business model obviously different.

So the question is, are there any -- within your agreements, are there any dampening effects to mitigate this extreme move in diesel like -- or we’re going to see a bigger potential impact quarter-on-quarter on the sales margin? That will be the first.

And secondly looking at your countries split of sales for Renewable Products I mean clearly great increase in the volumes in other European countries. Could you just elaborate on where do these extra volumes go to, which countries?

And if the -- you are already at the pricing level you want to be there? Thank you.

Matti, do you want to take Nick’s questions?

Yes, thank you. So perhaps on the term contract question, without going in detail, I would perhaps highlight the fact that given that we are selling into a number of countries with very different regulatory schemes, very different customer segments, we also have a variety of different type of term contracts.

And like I commented earlier, I mean quite typical is that there is some link to oil product for example, a diesel type product quote, but we have different schemes. The other question on the sales side, I think it's actually -- if you have followed what we have been commenting over last year, I think it's been a very systematic work that while we obviously have had for a number of years important, a number of countries and regions that are important for us, both in North America and Europe, we have also systematically increased the number of customers and customer segments, markets that we operate in, for example, in the European market, which is fragmented.

And I think in this type of situation that is again very valuable that we of course continue to keep all of these customer segments and markets active. And we will also then be optimizing our sales in a way to find the best outlets going forward.

I'm sorry to push and I have a follow up. But could you broadly give us a rule of thumb on the diesel sensitivity?

Or is it 5% of the volumes impacted, 10% or anything you can give incremental it would be very much appreciated.

You mean, Nick, impacted by what?

By the diesel price, sorry, by the diesel.

By the diesel price. Well, I mean, pretty much still I mean everything, I mean in California where you're talking about LCFS, I mean as a link of course it's price build up as you know.

And we have not disclosed, I mean, any numbers on the European, what is now linked to diesel prices, what is not linked to diesel prices. As you know I mean, everything that we are selling at the pump stations is pretty much, I mean looking at diesel prices and then you have a premium on top of that and then depending of course on how the tax regulation is, if you have high blends, I mean, tax situations, et cetera.

But really, I mean, Nick, we have not disclosed, I mean, how much it is, yes. But it does -- the important thing is, I mean, it does have an influence, that's very clear, yes.

So we are not immune and I said that on Capital Markets Day as well. We are not immune in such a situation where you have such a sudden reduction of oil products prices in the marketplace.

We do everything that is possible I mean to dampen this. And if -- and I make a couple of comments also on the waste and residues.

I mean if you would just calculate, do a back of the envelope calculation on what you assume, what waste from residue prices are today, and if you look then at the sales margins in Q1 that we were still able to make, even if you take BTC out of consideration, I think that shows you also a bit that this is not one-on-one. So, if it would have been 100% waste and residue price increases, plus 100% diesel effect, then of course our renewable diesel sales margins would have been substantially lower.

We’ve follow up questions, just one on Renewable Products and one on Oil Products. On Renewable Products Peter you talked additionally about the situation in the airline industry and you said that discussions will continue.

I was wondering if it’s fair to expect that the increase in volumes of sustainable aviation fuel could be perhaps slower than previously expected given the financial situation of the airline? On the contrary, do you think that some of the financial support at the airlines could be perhaps linked to faster decarbonization and hence perhaps accelerate things around sustainable aviation fuel.

I am interested to hear your views around that? And then secondly on Oil Products.

I wanted to ask about contango and whether you're applying the contango that we are seeing in the market at the moment. I remember there used to be quite substantial contribution in the past, is it likely to be the case again this year?

Any guidance you could give would be very helpful. Thank you.

Okay. Let me take the first question and then Marko will take the second question with regards to contango.

As I said, in the airline industry, of course, I mean, it's a very, very difficult situation. I mean for the entire airline industry.

That's very clear. But nevertheless -- and as we are still in a situation of market making, we continue to see good commitment and good traction by our customers, the ones that we have signed up.

We get new customers that join the party, I would say. There may be a little bit of shifting of volumes.

I mean from the beginning of the year towards the end of the year. But generally spoken, I mean, that's -- look I'm very pleased.

I mean commitment continues to be very high from the airline industry, despite I mean the devastating situation that they are in. Now of course there is quite a lot of discussion ongoing right now, for example, in Brussels around the green deal.

We have also signed a petition that was supported by, if I remember well above 180 Members of Parliament, whereby the main drive and it came from one Member of Parliament that took that initiative was, let's make sure that we make the connection between recovery, COVID-19, and then the green deal. So if we are giving incentives that we also make sure that it brings something in terms of greenhouse gas emission reduction.

So I see that as a very positive development in Brussels. And that will definitely also be followed up I mean during the next months, quarters.

It's good that, that topic is at such I mean in the middle of the table of the policymakers, and of course as usual we stay very close to that and we are supporting it. Marko can you take Operator contango question?

We have -- of course now when there is a lot of that volatility in the market, we are of course following it. We have done some contangos.

And coming back to the question or whether would likely we have a substantial impact coming back on the history figures, I think you have a table to compare it to effective history. And then all-in-all as such, the big changes now with the COVID pandemic, I think the contangos will not solve the issue as such on their own.

Just another question on renewable diesel pricing. Conceptually, why is it correlated to diesel?

As we see at the moment, two markets can have very different supply demand dynamics, given that RD demand appear to remain robust. Should that not give you the degree of pricing power over and above regular diesel prices are doing?

And then secondly, you talked in the release about divergence in animal fat and UCO prices, how much flexibility do you have to switch between the two? And is that something to try and take the advantage of?

Thanks.

Yes, thank you for the question Peter, this is Matti. I'll start with the animal fat, used cooking oil question.

So, I think in a way what we have -- again, systematically worked on over a long period is that technically we have a lot of flexibility and the production units can handle different type of feedstock mixes. At the same time, I would highlight that of course, it is also a question of customer preferences and feedstock availability, logistics, everything.

But let's say technically we have quite good flexibility. On the other question related to let's say pricing power versus fossil diesel, I would highlight that like I commented earlier that we have definitely markets where these two different market segments -- in some markets, there's a direct link in terms of having a mandate volume of renewable.

In others like California I mentioned as an example, it's also a customer choice, what they want to use. But I think ultimately what we have seen is that the demand for renewable diesel has remained stable in this situation.

I have three questions. Firstly, there have been discussions that the U.S.

EPA could halt biofuels or bioethanol blending, given the decreasing oil price. What is your view on this?

Do you expect EPA to do this and could this impact renewable diesel blending? If yes, what this would mean to your U.S.

volumes?

Okay, Matti, you take it.

Yes, a brief comment on this one. So, it is it is accurate, there have been to my understanding a couple of states which have proposed these type of waivers or changes to the system.

There's also a number of states who have clearly proposed it. I think as a general comment, I would say that so far in the past these type of waivers have not been made.

And the system itself that is part of the renewable fuel standard is also such that the system adapts the volumes when changes happen to the underlying demand. So from our perspective, we don't see a need to change the system.

Okay. And then regarding the flat renewable volume outlook, which already has been discussed.

But just wondering that are the customers blending relatively more renewable diesel than previously because you are now guiding flat volumes for Q2 even though the diesel demand is coming down?

Yes. That's a very brief comment.

I think we touched upon it earlier. We have different types of market segments.

In some market segments, the blending mandates are such that they are directly linked to a percentage of the diesel, fossil diesel volume, but we have also different types of market segments where it's either linked to greenhouse gas reductions, or also like the California example where it's actually a choice that the customer has. So I think it will depend market-by-market.

And like commented overall short-term what we have seen is that the demand has been quite stable.

And again expected for Q2 as we guided towards I mean for Q2, yes, sales volumes expected to be relatively stable. We didn't say that market demand is expected to be relatively stable.

We said sales volumes.

Okay, yes, thank you. And then finally, fixed cost in Renewable Products were around [EUR80 million] in Q1, is this kind of a good run rate going forward in the coming quarters?

Well, What I talked about I mean in my opening comments was that we have put in place business continuity plans. So, of course, in such a situation if you put in place business continuity plans and you also look at what were your fixed costs, so that there would not be a runner-up let's say in fixed costs, because of all things like hiring people, et cetera, et cetera.

So, we are keeping -- we have a program that we have put in place, that is focused on the fixed costs. So, having said that, that means that you can -- from my comments, understand that fixed cost is something that we are very, very intensively look at -- looking at, whilst not jeopardizing the implementation of our strategy.

Two questions if I could. I mean, firstly, just on feedstock markets.

In addition to the comments you made earlier on used cooking oil, could you talk more generally about feedstock or raw material availability and how it compares in April to the Q1 environment? And then secondly, on the Singapore expansion and the comments that you made earlier, could you just give us a sense of how material the construction commitments or assumptions are for the rest of 2020 in terms of delivering the asset for mid-‘20?

Thank you.

Matti will take the first one, I will take then the second one.

So thank you Matt for the questions. So happy to talk a little bit more about trends we see in the feedstock market in terms of availability.

So I think first I make a couple of comments on each one of the different categories. So I mean used cooking all is probably a special one because here it's an obvious link between availability of used cooking oil and lockdowns having an impact on restaurants.

And what I would say in general is that yes, we have also seen clearly that the COVID situation has had an impact. We’ve seen impacts bigger than 25% in different regions.

What is also interesting is that we on the other hand also see that markets such as Asia for example are starting to recover also. So it is then also depending of course on whether restrictions are being lifted on restaurants.

On animal fats, in general I would say the supply has been relatively stable. I think the key to which is then whether the situation has an impact on slaughtering activity.

So, of course that is something we are watching very closely, whether we could see decreases in slaughtering activity going forward. And on the other hand, on vegetable oil, I'll take the example of palm oil.

I think it's good to state that we haven't actually seen supply disruptions really in this part. And at the same time, what is important to watch there is whether and to what extent this situation has impacts on the other hand on the demand, because for example this situation could lead to lower demand in -- if there are for example local mandates being adopted because of the big price movements.

And with regards to coming to the Singapore expansion, I think the authorities in Singapore have also in the first wave that they had experienced, they have undertaken a very rigid actions and very good actions and they were able to relatively fast contain the situation. So they kept on monitoring that.

And I would make the comparison a bit with South Korea, the same kind of measures that they put in place. They then noticed that in certain dormitories where you have foreign workers living and sleeping, they found out there was a outbreak of COVID-19 and immediately they put in very rigid actions again.

In the first wave we were able to continue with the Singapore expansion. So we have very good support from the authorities on that.

Now in the second wave it's all -- they don't make any exemption. It’s all the construction sites that are shut down because of the concern that they have that eventually this will spread around with regards to the foreign workers.

So if I look at how successful Singapore has been with those kinds of actions and how fast they have been in putting rigorous actions in place, then I have more confidence than, for example, if they would have allowed everybody to continue to work and then everything would have spread around and it would have been uncontrollable. So yes, I mean, they did the first lockdown announcement 13th of April to the 4th of May, and then a couple of days ago, as I said, no extended to the 1st of June.

Is it stays to that and then we start up again during the course of June or even July, then we are confident that the middle of 2022 is still the startup date for over new refinery. Of course, if it would be extended and it would be a shutdown for let's just say six months and it's clear that, that would have an influence of course also on the startup date of the Singapore expansion.

But we're not there yet. And so far I would say rather happy that they have taken in that COVID-19 crisis situation such rigid actions.

And of course we are and our teams are underground. We are completely committed of course on the Singapore expansion, that is without any doubt.

Hi, it’s Artem from SEB. A couple of questions from my side on renewables.

So you covered quite a lot the topic relating collapse in oil price and also fossil diesel. But maybe looking beyond let’s say longer term picture, do you think that there could be some implications on implementation of mandates as fossil diesel is now roughly 5 times more cheaper compared to your product?

Would do you think that let’s say mandates and targets being set by 2030 and so on. So this will be the power mechanism ahead of what comes to demand for renewable diesel.

And the second question is relating to your sales for North America. So the portion was 25% in Q1 and you mentioned that for example low carbon fuel standard is not really linked to blending rates and so on.

Do you expect that North American sales will be clearly more than 30% this year or what the expectations are set forth? Thank you.

Thanks, Artem. And Matti, if you can take the questions.

Yes. So first on the longer term outlook, I think a bit like Peter commented earlier when talking about the renewable aviation outlook longer term.

I think it's very clear. I think that the commitment to climate targets to greenhouse gas reduction hasn't decreased.

If anything, there may be also indeed opportunities to combine post-COVID recovery with accelerating some of the transitions to a sustainable economy. So we do see clearly that the commitment to the longer term targets is there and we have not seen any signs of that being questioned.

In the shorter run we have also seen now waivers. I think the only exception I am aware of is Romania where some waivers have been took place.

Yes. But then on the other hand side, for example, and you know I am originally coming from Belgium, so that plays always a bit of a special role for me that actually Belgium has now since April, further increased their biofuel mandate from 9.6% to 9.9%.

So you'll see these little indications here and there that are pointing into the right direction. Is that a guarantee that there will not be waivers?

Of course, I mean, it's never a guarantee. But at least from today's perspective, we see that rather positively and not as something threatening.

And then just a brief comment on the split, or let's say share of North American sales going forward. Like you have observed, if you look at the past, this has changed or been a bit variable from quarter-to-quarter.

And this is a natural outcome of the fact that we optimize our sales mix based on feedstocks, based on markets and margin outlooks. Also shut down that we have at individual sites may have this kind of quarterly impact.

So, I don't have a number. Actually we don't have a target against which we're steering.

It's really something we are optimizing quarter-after-quarter.

Yes, and maybe a couple of comments to end. Thank you very much.

Very good questions from all of you as usual. Maybe let me point out if you're looking at Q2 -- and Q2 was of course quite extraordinary because on one hand side of course, we had a minus EUR85 million effect, because of that TA2020 that we are implementing starting next week.

We have the Singapore catalysts change with an impact of EUR60 million. We have a very volatile environment with very low visibility.

And of course, as we explained today, a continuously reduced OP and hedge demand and that in combination with very high waste and residue revenue cost for the renewable business. So it will be Q2, very clear for us, a very challenging quarter.

But if I bring it back I mean to the big picture, we continue to work very intensively on the implementation of all the indentified actions in our strategy, continue to make very good progress on that as well. And definitely also continue to be very confident on the long-term outlook of our business.

So that as my final comments.

Thank you, Peter. And this concludes the call.

We thank you very much for your attention and active participation. And next second quarter and half year results will be published on the 23rd of July.

We wish you a very good weekend. Stay safe and in good health.

Thank you and goodbye.