Neste Oyj

Thank you and good afternoon, ladies and gentlemen, and welcome to this conference call to discuss Neste's Third Quarter Results published this morning. I'm Juha-Pekka Kekalainen, Head of Neste IR, and here with me on the call 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 and Services.

We will be referring to the presentation that can be found on our website. Please pay attention to the disclaimer, since, as always, 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.

Thanks a lot, JP and a very good afternoon also on my behalf. Distinctive feature of the third quarter summer period was the gradual recovery from the first wave of the COVID-19 pandemic.

And this naturally varies country-by-country. And we now seem to be moving to the worst again.

In these circumstances, we are very pleased to be able to share with you our very good overall performance in the past quarter. I must say that the Neste employees have done a superb job again during this quarter.

It's a lot of fun and a lot of joy to work with such passionate people. If we move to Slide number 4, despite the market turbulence caused by the COVID-19 pandemic, our performance was solid in the third quarter.

The Group's comparable EBIT was EUR373 million. Renewable products had another strong quarter, as the business continue to be very resilient.

And from a financial point of view, this was one of the best quarters in renewables ever. The renewable diesel demand remained good and our sales volume was stable at 730,000 tons.

Sales volumes were slightly down from the record levels in Q2, but higher than in the corresponding period last year. Our production facilities operated at the high 95% utilization rates, even including the scheduled catalyst change at the Singapore refinery that was completed in early July.

And we had also one at the Porvoo units in September. As expected, the feedstock markets remained tight and particularly, the palm oil price continued its way up.

As a result of successful sales performance and a positive contribution from the feedstock market movements combined with our hedging, we were able to increase our sales margin to an exceptional $744 per ton, again an exceptional achievements. The oil products was impacted by continued very weak refining markets caused by the global COVID-19 related demand reduction and the resulting oversupply situation.

The reference margin reflecting the general market conditions averaged at minus $0.8 per barrel in the third quarter. It was the lowest quarterly level in at least the past 20 years and had a negative impact of EUR170 million on the comparable operating profit year-on-year.

The comparable EBIT remained slightly negative and on a positive notes, our additional margin was strong at $6.7 per barrel supported by good operational performance, currency hedging and some contango inventory profits. Several cost reduction measures have been successfully taken in oil products.

Our Marketing and Services segments performed very well in the challenging market also considering the divestment of the Russian operation that we completed last year. Sales volumes were still impacted by the COVID-19 pandemic, but we were able to improve our unit margins.

And also Marketing and Services has done an great job in reducing their cost basis. We continue to take the risks related to the COVID-19 pandemic seriously.

Our primary objective is to ensure the health and safety of our employees, our customers and other partners, as well as to ensure the continuity of our operations and secure supply of products. Our occupational safety performance was very good in the third quarter and the total recordable incident frequency was 0.4 incidents per million hours, which is really a record in the entire industry.

This is the lowest quarterly result also for Neste ever. The process safety event rate also improved to 1.5, but we still have to work to reach the targeted level.

Despite the market turbulence, we continue to focus on our strategy execution and I will come back to that at the end of the presentation as usual. As you have surely noticed, we have initiated co-operation negotiations on a plan to restructure our refinery operations in Finland.

It is done in order to ensure the long-term competitiveness of the Oil Products business. We are exploring the shutdown of the refinery operations in Naantali and focusing the site on a terminal and harbor operations, as well as transforming the Porvoo refinery operations to co-processing of renewable and circular raw materials.

And if implemented, the plans would mean up to 470 redundancies, including possible outsourcing. The decisions on the measures and impacts will be made after the negotiations have been concluded.

The planned changes are expected to result in annual fixed cost savings of approximately EUR50 million. Although the time is not optimal and this is definitely news that is unfortunate for many of us, the planned actions to develop our refinery operations are urgently needed to maintain operations and strategic capabilities in refining in Finland and to secure the oil products competitiveness.

As authorized by the AGM on 18th of May this year, the Board of Directors has decided on the distribution of the second dividend installment and they have confirmed the proposal to distribute an ordinary dividend of EUR0.46 and an extra dividend of EUR0.10 per share. On Slide number 5.

Yes. Our strong financial position continues to be visible in our financial targets.

We reached a high after tax ROACE of 23.1% on a rolling 12 month basis. Again, clearly, exceeding the 15% target.

And our leverage ratio was 4.5% at the end of September. As stated before, the strong financial position enables the implementation of our growth strategy going forward.

And this is even more important in these turbulent times. Now, with this -- these remarks, I would like to hand over to Jyrki, our CFO to discuss the financials in more detail.

Yes. Thank you, Peter.

If we take the summer rebates there, it's basically, good early afternoon, like already stated, just a few minutes ago, we delivered good quarter three result despite another quarter affected by the ongoing COVID-19 pandemic on our global operation. We managed to deliver good operating profit, strong cash flow and even strengthened our already strong balance sheet.

If we look the figures, I'll more comment here the quarter-to-quarter items. If we take the top line, quarter three revenues were some EUR3 million higher than in quarter two.

But clearly lower than 2019 quarter three and that was roughly EUR1.1 billion and comparing to 2019 EUR700 million, out of that is coming from the crude oil price effect and slightly lower sales volumes in Marketing and Services of roughly EUR300 million. And if you really look also the year-to-date September position, the revenue difference is roughly EUR3 billion.

So, it's roughly EUR1 billion per quarter, how it will be seen in our top line revenues. If we then move to the comparable EBIT, EUR370 million, it was some EUR60 million below quarter three, 2019 when we take into account the fact that we had also retrospective BTC from 2019.

And if you look at the figures, it's really a matter of oil product that had a hit of EUR114 million on the Group level EBIT. But if you look to renewable products as a whole, you are seeing that we made 94% of the quarterly comp EBIT out of renewable products.

They bolstered [ph] EUR47 million higher comp EBIT than previous quarter 2019. But really, when taken into account this retrospective 2019 BTC, the comp EBIT was pretty much at the same level as in 2019.

The weakening US dollar made some 22 million hit on our 2020 quarter three financials versus previous year, but that was really compensated by higher sales volumes and higher sales margin that were both up by some 2% or 3% compared to previous year. Matti Lehmus will open the development a bit more in his presentation.

If we move then to the oil products part, I think the important thing is that they managed to push their comp EBIT up to the low levels quarter two EUR60 million negative to up slightly negative, very close to zero level in quarter three. The reference margin was basically $8 per barrel lower than previous year and this had an effect of EUR170 million, which was then partially compensated by the action that that segment was able to do like 41% higher additional margin and EUR22 million lower fixed cost.

For example, if you look the details in the material, even the refinery production cost were one of the lowest during the last six quarters. And it's very notable that in quarter two, 2020, the reference margin was minus 0.3 and now it was minus 0.8.

Quarter two, out of the fixed cost and also from the CapEx point of view, we had the first part of the Porvoo turnaround and now 2021, we will have the second part of the turnaround and Marko Pekkola will open the results more in his presentation. If you go then to Marketing and Services, like stated earlier, they actually delivered their strongest comp EBIT with the current [ph] set-up of the Russian business was sold 2019 that had roughly EUR4 million comp EBIT contribution for the quarter three, 2019.

So, EUR26 million comp EBIT in a quarter is an excellent achievement in the COVID affected environment. Sales were slightly lower by volumes, but the margin were higher and also the management was able to lower the fixed cost significantly during the quarter.

And Panu Kopra will also describe more in details a bit later. The segment others that basically going forward, it's only about our engineering unit and our corporate cost we sold the Nynas AB shares in September.

So we had EUR6 million better comp EBIT coming out of the other segment. If we then look to cash flow before the financing activities i.e.

free cash flow, it improved now clearly to the level of EUR350 million versus last year EUR71 million. And this was really done through very tight working capital management.

That impact was EUR422 million. Our year-to-date free cash flow is still slightly negative by EUR51 million, but one item here is to remember that the effect of the US Blender's Tax Credit from the years 2018 and 2019, we received the checks 9th of October, roughly US$355 million.

So that will further improve our working capital position and increase our free cash flow during quarter four. And finally the KPI comparable earnings per share.

It is year-to-date, roughly 4% higher than in 2019. So then very briefly about the bridges.

The next one is really about segment-by-segment, but basically, oil product is down due to the negative reference margin and renewable products compensated EUR47 million through volumes and margins. And then finally -- MS [ph] actually improved slightly if we think about the sold Russian business 2019, but everything is around oil products reference margin and then renewable products performance.

If you look the quarter bridge that is there in the next page, little bit more in details by unit. And let's take first by comparison purpose is really this 2019 BTC EUR56 million to make the figures really comparable, then all the reference margin, this $8 per barrel, it had a huge impact in one quarter EUR170 million and then the own actions like mentioned additional margin improvement, et cetera.

The improvement was EUR39 million in OP. And then renewable products, higher sales margin $744 had improvement of EUR12 million.

And all in all these things meant this EUR119 million change compared to 2019. And remember that the FX changes in one quarter, especially in this case, it had a EUR34 million negative impact on our comparable EBIT but compensated nicely by the fixed cost savings.

And the year-to-date bridge then the final slide in my presentation, you will see very clearly that there are two big items and then for nearly not visible in the material. Just for the comparison purposes, 160 million -- 65 -- sorry 64 million -- no 66 million, sorry, BTC 2019 added and then we have the comparable figures.

And then you will see that we had improvement with some sales volumes, fixed cost and also in the other BU [ph], but the big-ticket item again is the nine month oil products lower. Reference margin $4.8 per barrel.

That had an massive impact of EUR339 million. And if you remember that during quarter one, it was practically zero compared to 2019.

So this is all concerning quarter two and quarter three. But the positive thing, certainly is that the OP additional margin more than EUR80 million improvement and then renewable product with slightly higher at the lower sales margin negative EUR65 million.

So overall, this meant this impact by comparable purposes what is then finally the outcome there. You may say that the fixed cost savings are not visible in this material, but remember that we really sold two businesses in 2019, engineering service, some units and also our Northwest Russian business in Marketing and Services.

And those impact is EUR40 million in this case. So actually our savings in fixed costs are much higher than seen in this material.

So, I end of my presentation here and leave the stage to Matti Lehmus. Please?

Thank you, Jyrki and good afternoon, everybody. I'll be happy to give some comments on the Renewables segment.

So, obviously what I'll start with is that very happy with a very good EBIT level of EUR352 million in the third quarter. This was a 15% improvement versus last year third quarter, and also 12% improvement versus the previous quarter.

And I have to say, I'm very pleased with the operational performance across the chain, whether it's production, whether it's sales, whether it's feedstock supply. One of the highlights in the quarter is of course the very good sales margin level at $744 per ton.

This was stronger than last year, even including the retroactive BTC, are clearly stronger than in the second quarter of 2020. Several positive factors supported the third quarter margin, in spite of a continued tight feedstock market including hedging, including sales performance and I will discuss this later, a bit in more detail.

Another highlight of the quarter is that the sales volume continue to be at a good level of 730 kilotons. This is approximately 5% lower than the record level that we had in the previous quarter, but also very good level in the third quarter.

And it reflects the fact that the overall renewable diesel demand continues to be solid in spite of the COVID impacts on diesel demand in a number of markets. If I look at production, we had a very good quarter with 762 kiloton production, higher than year ago, also higher than the previous quarter.

And this contains the fact that we completed successfully our Porvoo catalyst change and also the ramp up of Singapore in the beginning of the quarter, after our catalyst change there. So, in -- outside of the shutdowns, we were able to maximize our utilization very successfully.

So overall, very good quarter. Some quick comments on the waterfall on the next page.

So obviously, a high level picture is very clear. If you compare the EBIT to the third quarter 2019 and I take into account the BTC readjustment, the EBIT level was actually quite similar with a difference of only minus EUR9 million.

And this is of course good achievement in a business environment where feedstock prices have been increasing clearly year-on-year. The drivers are also quite clear, volumes were slightly higher, sales margin was slightly higher and these factors were compensated by the impact of a weaker dollar, which had a EUR22 million impact year-on-year and also the fixed cost have been slightly higher than last year reflecting the strengthening of our resourcing to prepare for Singapore expansion start up.

Let me then move to some comment on the feedstock markets. My first comment would be that waste and residue market dynamics were quite similar as in the previous quarter.

We had a tight market and also the increasing price trend continued. Demand for waste and residues continues to be solid but also availability continued gradually recovering.

So for example if I take used cooking oil as an example, in China, we saw that the supply recovered pretty much to the same level as before COVID. The key market driver in the third quarter was a rapidly strengthening vegetable oil markets.

And both palm oil, soybean oil prices increased significantly during the quarter. For example, crude palm oil, average price increased by 25% versus the second quarter.

In case of palm oil, there were uncertainties on the production outlook driven for example by the weather, La Nina phenomenon and also at the same time quite solid demand for example into China. If I then turn to the waste and residues such as animal fat and used cooking oil, they did follow partially the vegetable oils, but price movements were clearly less pronounced than for vegetable oils and in practice, this means like you can see nicely in the chart that the price differential between waste and residue and vegetable oils narrowed during the third quarter.

And again, if I take the example of used cooking oil price movement actually stabilized during the quarter as availability was also improving. Some comments on the US markets on the next slides.

That's noting that the LCFS credit prices continued on a high level in third quarter average $196. This is actually very similar level as a year ago and also as in the previous quarter.

On the RIN values on the same time if you look at the D4 RIN charts, you can see that there was a clear strengthening to $0.67 a gallon. This actually reflects that the market responded to a widening differential between soybean oil and petroleum products like heating oil and also continued solid demand for RINs.

Well, then finally, turning to sales margin slides on the next page. The sales margin like commented earlier was at a very good level of $744 per ton, slightly stronger even than in the second quarter.

And this was a big -- in the third quarter last year, I mean. And it was a big margin improvement versus the level of $625 per ton in the previous quarter.

The high sales margin was the result of two particular drivers. The first one being that the feedstock market development, combined with our hedging supported the margins.

Like commented earlier that waste and residue prices did increase during third quarter. But the price differential to palm oil narrowed as vegetable oil prices increased more significantly.

And in this situation, our hedging had a positive result and supported the sales margin. Another factor is that the sales performance in the third quarter was also very good.

It supported the margin development, and we had a positive development on price premium and also a very successful market optimization. And finally, of course, commenting on the third quarter also the operational performance in production was very good, high utilization rate and this -- a smooth operational performance, of course, always also has a positive impact on the margin performance.

With these comments, I will hand over to Marko Pekkola, who will discuss the oil products.

Thank you, Matti. And I'll comment the oil products third quarter.

Comparable EBIT total out 1 million [ph] negative driven by still depressed global demand, oversupplied market and a positive Urals strength differentials. During the quarter, the reference margin averaged, as already highlighted on -- at that minus USD0.8 per barrel.

Our sales volumes were only 3% higher compared with the Q3 2019 with -- when we had planned maintenance in year four [ph] in Porvoo reflecting the lower demand. Refinery utilization rates was adjusted down to 87%.

Urals' share was 65% on lower level than normal, due to mitigation actions for Urals' differential, being very volatile and averaging higher than Brent during the third quarter. If we then move on to the EBIT bridge between Q3 '20 and 2019, where the impact of exceptionally weak product market can be seen.

This resulted in refining margin trading mostly at negative value during the quarter, which had a negative impact of both EUR170 million on the comparable operating profit year-on-year. Main positive impacts in Q3 '20, EUR39 million gain from additional margin which was supported by good operational performance, currency hedging and contango inventory profits.

Positive impact of EUR22 million came from successfully implemented short-term cost reduction measures. If we then move on -- and let's have a look at the markets, where we could also see the continued impact of COVID-19 pandemic on physical product demand and low margins in both diesel and gasoline.

Urals-Brent differential was very narrow during the quarter, mainly due to the lower export volumes of Russian Export Blend. The Urals differential averaged at positive 1.0 -- $0.1 per barrel for the quarter.

Brent crude oil price was trading in a fairly narrow range between USD39 per barrel to USD46 per barrel during the quarter. When -- then, let's move on and take a look on our own margin performance.

Our total refining margin was very low at level of $5.9 per barrel, but supported by strong additional margin of $6.7 per barrel in Q3 2020. Refinery production costs were below last year's level, mainly due to the successful implementation of short-term cost reduction measures.

And as already mentioned by Peter in order to ensure the long-term competitiveness of Oil Products business, we have initiated the co-operation negotiations on a plant restructure refinery operations in Naantali and Porvoo. The co-operation negotiations are ongoing and the plan changes are expected to result in annual fixed cost savings of approximately EUR50 million.

And this is a very important part of oil products future success to continue solid gas generation. With these comments, I would like to hand over to Panu to talk about Marketing and Services.

Thank you, Marko. Hello to everybody and this is Panu Kopra speaking.

Taking into account all different kind of circumstances in the market, I can say that we performed very well. When we eliminate the impact of the Russian divestment, we actually improved our operating profit compared to last year.

During Q3, we suffered still low bunker and Jet-A1 volumes. However, traffic under gross [ph] was not so low any more than it used to be in Q2.

Lower volumes were compensated by healthy margins mainly due to excellent network pricing. We also did a lot of work for cutting of fixed costs and outcome of that is also clearly visible in operating profit.

Return on net assets again above 26 projects, which is in retail business healthy figure. The availability of Neste MY is expanding not only in Finland, but also in the Baltic countries.

Now Neste MY is available roughly in 120 stations. Sales results clearly shows that those companies and consumers who has a high priority for sustainability are moving as a first to use Neste MY.

We see transformation ongoing from fossil diesel to renewable. And it is not only about the sales of Neste MY as a product, it is even more.

We have started to sell additionally, CO2 reporting services to our customers in order to make their life easier and build sustainability indicator transparent and reliable. This is what we call selling of sustainable solutions.

And it comes on top of product sales and margins. Number of Neste mobile app users is increasing very rapidly.

Customers prefer to pay fuel by their own mobile device, instead entering pin to normal payment terminals. Same time, we collect a lot of direct marketing commissions and develop efficient communication channel to our customers.

All in all, solid Q3 in marketing and services. Handing over back to Peter.

Yes, I agree, Panu, very, very good results in marketing and services and very happy with that. Let's now move on to the current topics.

And first of all, on strategy implementation. The very good progress on our strategy implementation has continued.

The Singapore renewables capacity expansion is proceeding well and the updated completion schedule targeting start up in Q1 of 2023 remains valid. We naturally need to take all precautions and follow the development of the COVID-19 situation in Singapore, very carefully.

The feasibility study phase of the next renewables capacity expansion project in Europe is also progressing well. The next step for decision making will be to select the sites, and we hope to be able to give more news on this during the first half of 2021.

This is of course not a final investment decision, since such a decision is only made shortly before starting the construction. Several new contracts and partnerships have been made in the renewable aviation and renewable polymers and chemicals businesses.

As examples, I would like to mention, getting access to the fuel pipeline delivery system of the San Francisco International Airport and sustainable aviation fuel deliveries to American Airlines, Alaska and JetBlue. A new sales agreements also with Air bp and Shell.

In October, we announced getting Unilever on board in our co-operation with recycling technologies in the United Kingdom [ph] in the area of waste plastic recycling developments. There is a lot going on in the new businesses and their traction is good, but both are still in the early market making phase, of course.

Based upon our business continuity plans, we continue to focus on short-term cost reduction activities. We are on track with our Neste Excellence program with a target to achieve at least EUR225 million EBIT improvement by the end of 2022 compared to the year 2018 that we took as a baseline.

I already mentioned the plans to restructure the Oil Products business. The ongoing co-operation negotiations are expected to be completed in the fourth quarter and decisions will be made after that.

In the area of innovation, we've studied further improvements on the NEXBTL pre-treatment technology, which have enabled us to increase our nameplate capacity already to the 3.2 million tons that we mentioned during the call after Q2 results. The first industrial scale test run of core processing liquefied waste plastic has also been successfully carried out.

And these were just some of the highlights, because the list is very long that I wanted to mention. We have a clear strategy and we are moving consistently ahead.

Let's have a look at the fourth quarter. What do we see?

I think, first of all, sales volumes for renewable diesel are expected to be slightly lower or maybe similar to the previous quarter. The waste and residue markets are anticipated to remain tight and utilization rates of our renewable production facilities are forecasted to remain high in the fourth quarter except for scheduled catalyst change at the Rotterdam refinery.

And that is expected to have a negative impact of EUR50 million on the segment's comparable operating profits, mainly in that fourth quarter. In the fourth quarter, oil products demand is seen to continue recovering slowly, but to be still impacted by the COVID-19 pandemic and the reverence margin is expected to remain very low and very volatile.

Contango inventory profits were expected to impact the Oil Products fourth quarter results positively. In marketing and services, the sales volumes and unit margins are expected to follow the previous year seasonality pattern in the fourth quarter and some negative impact on demand and sales volumes is still anticipated due to the COVID-19 pandemic.

On the next slide. Our strategic projects proceed as planned, but we re-prioritize everything else.

Our Group capital expenditure is estimated to be approximately EUR800 million in 2020 excluding M&A. And previously, as you know, the Group CapEx was estimated to be EUR850 million.

Now, this concludes the presentation and we would now be very happy to take your questions. Greta [ph], if you can open the questions line.

Hi, good afternoon, everybody and congratulations on a very strong renewable product margin. Two questions please from me.

The first one is about the trend for the demand of renewable diesel, would you say that the demand has been strong in the third quarter because there has been some catch up from second quarter level impacted by COVID-19. Meaning that in Q4, the demand might come back to kind of normal level and be lower than Q3.

Or on the contrary, would you say that regarding Q4, so far the demand remains very strong, and you might benefit from it. In fact, the aim is just to try to understand the dynamic of the demand.

And then you know the potential impact from your -- on your oil product pricing in the coming months -- quarter. Second question, we can't read the feasibility study that you just talked about.

We are doing [indiscernible] project unit in Europe or in the US. I just wanted to know, do you think that under the current environment, you might be able to save some CapEx regarding the construction naturally given that the price terms [ph] is probably going down on the three?

Thank you.

Yes. Thank you, Mehdi for the questions.

This is Matti Lehmus. And I'll start with the question on the demand of renewable diesel.

So, like we commented, we saw the demand in the third quarter being quite solid and also in a way, we don't see very big changes in that demand pattern. If you look at the big picture, of course, the fact that fossil diesel is in some markets lower by 5% -- by 10% depending on the market has some impact.

But as we had at the same time have had mandates increasing in 2020 in a number of markets. We have seen pretty solid demand throughout the year.

And that's on the diesel -- renewable diesel demand outlook. On the other question, which was on the feasibility study that is ongoing and we are indeed comparing Poorvo and Rotterdam locations as possible locations, it's too early for me to say whether and what type of impact the COVID situation could have on CapEx.

This is the type of information where we will have more information as we go forward in our engineering studies. And like commented earlier, we would anyway be targeting to have maturity to make an investment decision towards end of '21.

Yes, I would also confirm, Mehdi, what Matti is saying I mean on the demand. I have not seen any shift, I mean from one quarter to the other quarter, I mean in terms of demand, demand continues to be solid on the quarterly basis even on a monthly basis.

Of course, you always have certain fluctuations, but here I would like to point out again like I did in the Q2 results, the change in business model that we have successfully implemented in the Renewable Road Transportation. If you look at the external revenues, you will find that 37% in the mix is in other markets, than our home market in the Northern part of Europe or in the United States, like in California.

And this is repeating what we also have done in Q2, where it was about 40% of the total mix. So, you'll see that successful positioning in different geographic markets, as that something we started doing in Q2 2019.

I'm very pleased I mean with that stability and the optionality that we have built in our business model. With regards to means of Q4, I mean once need to, of course, consider that there will be because of the catalyst change, I mean this is about 100 KT of the product that is not available.

So, one needs to take that in consideration as well in the guidance that we have given on, I would say from today's perspective, it will probably be slightly lower in terms of volumes compared to Q3. I know that we have set slightly maybe it's going to be on the level, but if you would ask me, then I would say it's going to be slightly lower because of that.

Thank you very much on that.

Hi. Thanks for taking my questions and congratulations on the strong quarter.

I've got a follow-up on Mehdi's question on the sales level actually into 4Q. And I'd just like you to confirm that it's purely that the lower -- the slightly lower guidance is purely due to maintenance because we are like basically we're three weeks into the fourth quarter.

So I just want to make sure that basically will remain with a healthy outlook through the end of the year. And I guess more longer-term see news [ph] recently about a draft in Germany, including caps on 1.9% of biofuels made from used cooking oil and animal fats.

Should we see -- should we heed this headline and like basically should it be concerning basically call like future mandates, furnace then when it comes to renewable diesel, as well as that. These would be two questions.

So I can take the first one on the sales level basically reiterating what Peter said. The main thing to take into account is that we do have a turnaround in Rotterdam refinery in the fourth quarter.

This is four week turnaround. It has an impact of around 100 kilotons on our production and that is the main reason why we are also commenting on the face outlook that we expect it to be slightly lower, or similar than in the third quarter.

That's the other one Peter, do you want to…

Yes, I can make a couple of comments, I mean on what is happening currently, I mean in Germany and of course, I mean it's on that track that has been introduced, I mean by the Federal Ministry of the Environment regarding the R&D tool implementation in Germany. It's quite disappointing, I mean that they -- in that draft, that's not -- has not been more aspirational I would say by maintaining the existing 6% greenhouse gas reduction targets, I mean through 2025, of course, I mean, this is just the draft and if you have followed what has happened, I mean since that draft has been published, there has been a huge amount of discussion in Germany going on and a huge amount of criticism as well on not being aggressive enough with that draft.

So it's just a draft at this point in time. And as you can hear a bit from my comments there of course that includes that.

Thanks so much. Yes.

General comment, there is also a number of countries. If you look at Europe have already decided on the mandate next year and for example the Nordic countries, Finland, Sweden, Norway, also for example Holland, Spain have already decided on an increasing ambition for next year.

Yes. So again, it comes back to our strategy, I mean that is building up optionality in our business model, not being dependent.

I mean, on one particular country in terms of how eager are they or bullish are they and like Matti said, I mean if you then see on the other hand side, how some other countries really have substantially gone beyond what is in already too like in Sweden for example. Next question.

Thanks. A couple of questions please.

So on hedging and you can quantify how big was the positive hedging EBIT [ph] in Q4 and was it clearly larger quarter-over-quarter and what is the outlook for Q4? And then on pricing were you able to increase prices in renewable products as in Q2 and what is the conclusion from your price negotiations with customers for next year?

And then finally in -- on the EU taxonomy, what is the current situation regarding the taxonomy and do you expect any changes to happen? Thanks.

Yes. Thank you, Iiris.

This is Matti, I'll answer the one on hedging and the pricing. So first on the hedging, just reminding how our hedging philosophy works.

We have in 2020 hedged around 50% of our term sales volume and that means that, how we do the hedging is we are using on one hand, vegetable oil instruments like palm oil. And on the other hand, oil product related instruments like gas oil.

And the hedging, if you look at how the price curves have developed over the year, you can obviously see that it has had a positive impact, because the price differential, for example, palm oil and gas oil, it has clearly widened during the year. We are not quantifying the exact impact, I think if you want to you can make some order of magnitude calculations based on this hedging policy that we have described.

And looking at Q4, it of course depends then on the exact development of the market. The hedging volume is similar -- slightly lower than what we had in the third quarter.

On the pricing, just that's a brief comment, like I commented in my part, yes, that was part of the good performance in the third quarter that we were also able to have a good performance on the sales premium, also in some markets like the US, the fact that the RIN appreciated of course has an impact. What comes to next year, we are just in the process of negotiating next year's contract.

So, too early to comment yet. On the taxonomy, Iiris, I just had huge amount of discussions, I mean with commissioners and DGs during the last couple of weeks.

So the latest on the taxonomy process is actually that we are expecting that the DG FISMA who is responsible for that will publish a Draft Delegated Acts and that acts is a direct asset. So it will be going into a feedback consultation.

We don't know exactly when the Delegated Act drafts will be published. Some members of the Commission told me end of October, maybe beginning of November, then the consultation period is four weeks.

And then of course, it still has to go, I mean to the Council and the European Parliament. So normally, I mean they have a couple of months, I mean to approve or reject.

And if everything would run as currently, remember it has been delayed, I mean already a couple of times if everything will run as scheduled, then the taxonomy would come into force on the 1st of January, 2022. A huge amount of discussion is currently ongoing between the different DGs, because there are quite a lot of different opinions still going on there.

The -- we are of course also involved in that feedback consultation loop and actually one of our specialist is also on that platform that has been established to talk about what does notice, so called Page 211 of the TEG reports -- what's -- what does it mean, this formulation of -- for other types of biofuels that are not advanced biofuels but may offer substantial climate mitigation benefits. The TEG requests that the platform undertake further work to consider establishing criteria for ensuring substantial contribution to climate mitigation.

So stay tuned, is a bit, the message. There's quite some activity ongoing and we are involved, of course, as you can hear.

Thank you very much.

Thanks, good afternoon. I've got three questions, please.

Firstly, just following up on Germany, I notice ticket prices in that market has fallen quite sharply in the last few weeks. And I was wondering, if that's something that impacts your margin in Germany, and if so, to what extent are you able to move sales out of that market, and to other markets during Q4.

And then the second question on the sales mix, again. So, you're looking at the US versus Europe split, and looking at your US peers, like how often notice that your US margins tend to be higher than European margin for renewable diesel or at least how is the implication from what's reported.

And so is that a fair comment? And what's stopping you from selling more products into the US?

And then my final question on Porvoo, and your plan for co-processing that. I wonder, if you could talk about the potential blend rates you see as possible.

And is it possible to get blend rates as high as 20% or if you can get up to sort of mandate levels in Finland? Thanks.

Yes, thank you, Joshua, this is Matti, I'll take the first two questions. So on Germany, I mean obviously like in any market, you will have some movement on the individual market parameters and what comes to our flexibility, of course, for term sales we have typically already allocated the volumes to certain markets but for the spot sales, it's of course something we continuously analyze and then adjust based on the market situation also the feedstock availabilities, of course.

What comes to US versus Europe, I would just make the general comment that of course the margin level in US, for example, and California as an example, will always depend on what type of feedstock is available, the whole carbon intensity plays a big role, and it is something that also then the market parameters affect. From our perspective, it's something we monitor continuously and we then, of course, if there is an opportunity, we try to make some allocation changes.

But wouldn't make a generic comment that one market is better than the other always.

Okay and I can take then the comment relating to the Porvoo co-processing the share of the feed. I think that when we talk about that, I know it would be renewable or then it would be then circular feeds.

At least our understanding for the moment is that those would be single-digit numbers or and at least in the beginning and/or even very low now in the beginning, as we will get used to it, and that's course situation for the timing.

So very clear, Joshua, I mean technically, I mean 20% is completely out of the possibility. So like Marko said, I mean it's low single digits and you start with very low percentages.

And then you see how far you can go and what needs to be done in terms of the optimization of the assets to then drive it eventually I mean to a middle single digit but 20% in co-processing, I personally don't see that happening.

Yes. Very clear.

Thank you.

Hi guys. Thank you for taking my questions.

I mean, I just like to start, you have previously discussed about 1 million tons of incremental demand for renewable diesel in 2021, obviously Sweden is now over compliant, I guess. Germany is a bit down.

So could you just give us kind of an estimate of how that has changed in your mind. And related to that and back to Iiris's question, I appreciate this quite early on to be talking about the term agreements, but is this kind of relative tiredness as we go into next year reflected in the pricing you're getting?

And then, if I may just go back to the -- something you commented on, Peter about the other European revenue, it's been growing quite a lot over the last four or five quarters. Can you just give us a flavor on which are the important markets there today?

What is the market conditions more broadly, how we should be thinking about the evolution of that part of the portfolio and the mix going forward? Thank you.

Yes, thank you. So I can start with the demand comment and that I'll just take a global view in a way, of course, in 2020, like I commented earlier and also Peter commented, we have seen the market for renewable diesel still growing.

We probably will going to see something like slightly over 1 million ton growth globally, a bit lower than we had perhaps anticipated a year ago because of COVID but still robust growth. If I just take a high level view on 2021, it will of course depend to a certain extent on the COVID recovery, but already analyzing the different regulatory changes, the ambition that is growing, not only in a number of European countries, like mentioned earlier, but also if you take the example of California, where the carbon intensity again grows from 7.5 target reduction to 8.75, same in Oregon also growing.

So we do expect the demand growth to continue also in 2021. And like said some uncertainties, of course, relate to COVID, but I would estimate something between 1.5 million and 2 million to be a realistic number for 2021 growth.

Yes. Hi, Nick.

Of course, I mean excellent questions and you know that I can of course not very explicitly give any guidance, but you fully understand that. But a couple of comments, I would like to make also on demand, I mean, 2021.

And that goes, I mean more towards, I mean the supply side from our point of view. It's very clear, I mean that we at Neste.

We have already done a huge amount of hard work in capturing 0.5 million tons of CREEP nameplate capacity during the last couple of years, but it also means that if we are talking about 2021 that there is no low hanging fruit anymore. So, whilst we continue to work, of course, and scratching here and there and being creative and finding some means, it also means that we will be very tight in terms of the capacity that we actually have available.

In addition to that comes of course also and we will definitely talk about that later when we are then starting the year 2021, we have some tie-ins to do already in Singapore. So, we will have a major shut down in 2021 in Singapore in the existing facility.

Again, don't ask for numbers. When we are ready, I mean to disclose those numbers, we will give them.

But just a little bit as heads up, so, yes, demand growth in 2021 expect to be very healthy in the markets, but the key question is where to get the products from. And then you're asking, I mean for a bit more detail on the internationalization of our business model in Renewable Road Transportation, maybe the only guidance that I can give you there is it is not one particular market.

We have established our access and footprints in the majority of countries in Europe. We don't want to disclose too much on the details because of competitive reasons.

But rest assured, I mean we can relatively quickly shift I mean from one country, I mean to the other country, especially of course when we're talking about the spot business. So, very pleased I mean with that distribution that we currently have around 40% of the total external revenue that is going into these other markets that did not use to be I mean our home markets, we may start saying that they are our home markets as well.

Thank you.

Yes, hi. This is Artem from SEB.

Three questions from my side. So first starting with renewables and thinking about hedging for 2021.

Have you done a lot of activity already at this stage relative to next year. And whether these really attracted to do right now, given the fact that the spread is quite wide between palm oil and gas oil, it's moment.

Then continuing with renewables, could you maybe comment on the fixed costs going forward. So we have seen quite substantial decline sequentially.

Is it a good proxy for the level in upcoming quarters as well. And the last one is on oil products and thinking about contango opportunities in Q4.

So you have been benefiting already in Q3, but is it fair to assume that Q4 will be bigger in terms of related benefits.

Thank you. Matti, starting with a question on hedging for '21.

So, like commented also in previous quarter, we have not actually the hedging ratios for 2021 are very low. We are still in the middle of our term negotiations.

And at the same time like you point out also the levels in the market are not such that there is any reason to start early with that program. So very low hedging for '21 in place.

On the fixed cost that's comment good observation, like in the other parts of the Company we have also in the renewables business made a lot of effort to let's say identify cost saving opportunities. The Q3 fixed costs were clearly lower than in Q2.

If I look forward probably Q3 was exceptionally low. We were able to, if I look also at the timing of the different cost items from different development activities.

So, probably that would be my comment that Q3 was probably particularly low.

And this fixed cost reduction program I mean we started that immediately when we were developing the business continuity plans when we started, what we saw in January that COVID-19 was hitting in China because of our activities in China, of course and then also in Singapore. And one may not look at that as something that is now under the cover of Neste Excellence, so that means sustainable.

A lot of these activities that we have undertaken are short-term activities, just to navigate through that period of time with the COVID-19 pandemic. So we need to continue of course building up our access to waste and residues, the whole network, we need to continue to build up the renewable aviation, renewable polymers and chemicals business.

We have activities, of course, that need to go on with the buildup of people to then run our Singapore facility. You don't hire the people when you have the facility already ready.

Yes, you hire them in advance so that you actually can involve them and buildup of the facility. And then of course, in terms of the internationalization that means in the internationalization, in the future, you need to make sure that you have, I mean the basic functions in place that can support that plus, we delayed a bit in innovation, some hiring in terms of the Business Innovation platforms.

They are now installed. And of course, next year, we will need to staff, I mean those functions as well, so building up I mean the future.

Now to your contango question; Marko?

Yes, I can take that one. And we are -- like said, some contango supported our result in Q3, and we expect them to do so also in Q4.

But we don't disclose that expected results but I would like to highlight in that we expect that -- we are not expecting them to compensate the low -- very low and weak margin market or the environment that we're wasting [ph] in front of us.

Okay, very clear. Thank you.

Yes. Hello, I want to thank you for the immediate data.

I have just two questions left on Renewable Products. The first one, going back to the pricing question, in the US, it looks like your -- the prices to the US were a little bit lower quarter-on-quarter, despite that you flagged it the higher RIN prices sequentially.

Were there any other developments in the US expanding like flattish to slightly down pricing? And then secondly, just quickly on the used cooking oil market?

Has there been any change in terms of the availability of used cooking oil with the renewed restrictions that we're seeing in Europe in particular and you mentioned there were some recovery in the third quarter, but is that reversing now in the fourth quarter. Thank you.

Yes. Thank you, Henri.

So a brief comment on the first question. I think the pricing in the US, it's quite a transparent market mechanism.

I think the RIN change is probably the main one that at least I'm aware of from that angle. On the used cooking oil, perhaps a couple of more comments.

So I did mention earlier that availability has been gradually recovering. And I mean a positive example here is that, for example, certain Asian countries like China, we have seen recovery back to a level like before the COVID outbreak.

At the same time, it's clear that in other markets, in other countries, both in Europe, in North America also in a number of Asian countries, we are still recovering and behind the availability level when the COVID outbreak happened in spring. At the moment, of course, something we are watching very closely as there is an increasing number of COVID cases and more strict lockdown measures in a number of countries, whether that has an impact going forward.

That's something we will see in the coming months, I'm sure.

Okay. Thank you.

Hi, this is Sasikanth Chilukuru from Morgan Stanley. Thanks for taking my questions.

I had two, please. The first one was related more to a longer-term outlook on the renewable diesel markets.

This year, we've seen a flurry of US refiners looking to convert refineries into renewable diesel plants. And more recently, we've seen European majors, including Total and BP present an ambitious plan to ramp up their renewable diesel capacity.

In this backdrop, I was just wondering -- I was -- just wanted to understand your view on these announcements and whether this has changed your approach on capacity additions and how you plan your future growth projects, whether also any indication of what you think this might have and the impact might be on longer-term margins, that would be useful. The second question was more of a follow-up question related to the capacity additions.

I just wanted to check, you're doing feasibility studies at the Rotterdam and Porvoo Refinery. Is there any possibility in both being selected as projects for FID?

Can you handle two projects construction at one time? Or is it possible to have them staggered, Rotterdam, and then Porvoo?

Thank you.

Talking about DRD [ph] I mean, longer term, if you look at demand creation, I mean, from the other -- from one hand side and if you just look at what the International Energy Agency is projecting in future demands for second-generation biodiesel, so our renewable diesel. Then, I would say this goes even beyond, I mean, what we have currently in our scenarios.

So very strong demand creation longer term. In addition to that, I mean, good to see in the renewable aviation side that there is movements in terms of setting of mandates.

Norway is known with 0.5% that will continue. Sweden is very active in that regards.

France, actually, if I remember well, originally, they had set them in together with the bailout of Air France, a mandate of 2% by 2025. They actually are now saying that they will start, I mean, earlier than that.

If I'm not mistaken, it's 2022, that they will start, I mean, with the implementation of that mandate. So you see a lot of activity.

I mean, the Netherlands is talking about 14% yet by 2030 on renewable aviation. And then in addition to that, on the polymers and chemical side, demand creation, you saw the recent announcements also the alignment of different partners along the value chain.

The last one being, I mean, Borealis and Covestro for the raw material that you use, I mean, to produce polycarbonates. So these are all things in addition in terms of demand creation, in addition to let's say the projection on road transportation.

So, it continues to be that we are working on the implementation of our business model centered around I mean building up optionality, not just I mean from a regional point of view, but also from the different applications that we are building up. So that pretty much is I would say, continue to look more at the demand, let's say, than these announcements on supply.

And then in addition to that, maybe also short comments, not everything that is being announced will then eventually be built or built on time or it's more than just steel and iron, without being arrogant here, but there is a lot, I mean, to running a business model. It's not just, I mean, retrofitting in existing assets.

On the other question on the -- on the feasibility study that is ongoing in Porvoo and Rotterdam, perhaps how I just clearly see that we are at a stage where we are comparing different alternatives and the intent is to be able to make a prioritization and ultimately then hopefully an investment decision for one of the locations. These are of course very complex projects.

Whether you look at the resources needed, whether you look at the CapEx needed and of course also from a feedstock perspective, it's always important that the whole supply chain is in place when a big project like this starts up, so it makes a lot of sense to look at them one at a time. Of course, longer term, one can always look at different alternatives over a longer period of time.

But remember, I mean we are building a world-scale facility with the highest optionality that the industry has ever seen in Singapore, whilst at the same time we are doing feasibility studies and if we will then have the decision on the location in the first half of next year. That means that we will go into quite a lot of resources that will start working on quite a lot of engineering on the selected sites.

So we are running two projects. I mean simultaneously during that period of time.

Yes, it's very clear. Thank you very much.

Hi, thanks for taking my questions. Just a couple of follow-ups.

Just to go back to the hedging briefly to try to understand the high level dynamics. The hedgings contributed positively to the margins throughout 2020, but it's not in place for 2021, does that mean it will drop out, and be a headwind next year as higher feedstock costs come through, or could you work to offset that through your pricing negotiations that are currently underway.

Appreciate, you can't guide specifically, but any color on that dynamics there would be appreciated. And the second was just to clarify your comment on the shutdown at Singapore next year.

Again, I know you can't quantify it, you -- can you just confirm what the reason for that is, did you say, it was to tie it into the new expansion in some way? Thanks.

Matti has already answered to quite a lot of questions around hedging. So let me now answer on one question around the hedging.

Again as we have said also before hedging is in the function of term deals, yes so we don't hedge, let's say, 50% to 60% of the overall volumes. We don't do that either and haven't done that for the year 2020.

But it's taking risk out of the term deals. So, that means that if you have 70% for example, term deals at 30% spot, then that hedging need to be considered always in the context of that 70% of the term deals.

That's one point to remember. The second point is hedging at the current conditions without having clear visibility on the term deal negotiations would in my opinion be unprofessional.

Yes. So, whilst we have started building up a small percentage as Matti also said in terms of hedging, but a very small percentage for 2021, we are mainly focusing now on the term negotiations.

And they have started, they are ongoing and we will not disclose any confidential information on how they are running right now. So stay with us, Peter.

You need to be a little bit patience. And you can imagine these are very, very intensive discussions that we have ongoing.

I've said also in previous calls that quite a lot of people from our sites were involved, I'm personally also involved in that, just like Matti and Carl Nyberg. So two members, I mean in addition to me of the Executive Committee, that's how high it is on our radar.

But nothing more at this point in time in terms of the term deal negotiations. Let us do our homework, yes, run the negotiations, and then we'll see.

And perhaps, I can comment briefly on the second question, which was a follow-up on the Singapore turnaround next year. That's just making the general comment that it's good to understand that there is two types of turnarounds.

One that happens quite frequently is so called catalyst turnaround, which is exchanging the catalyst. And that is something that of course also the interval depends on the optimization, but that's a relatively quick one.

I'd say within a month typically can be executed. And then in a more less frequent interval, we have what we would call more major turnarounds, where it's certain maintenance activities.

It can also be tie-ins like in this case for the expansion and they take typically longer, because there is more work to be done. And that's just, I mean an additional comment on next year that in Singapore, we have then this more extensive turnaround coming next year.

Okay. Thank you very much.

Hello. Thanks for taking my questions.

I've got a couple, please. Firstly, I appreciate the volumes are pretty small at the moment.

But you're selling, obviously, sustainable aviation fuel and feedstock for polymers. So are they being sold at the same margin as renewable diesel for road transport?

And I guess, taking a more medium-term view, do you expect that to be the case going forward? That will be my first question.

Just secondly, coming back to Matthew's comments on demand for renewable diesel into 2021. If I remember back to the Capital Markets Day in February, and you look at the supply demand balances that you showed there.

When you look at the demand outlook for renewable diesel '20 to 2021, it looks like it's growing from about 6 million to 7 million tons to around -- or just over 10 million tons, so more than 1.5 million to 2 million tons that Matthew suggested. So I'm just wondering, that can't all be COVID.

So is that just a conservative view that Matthew has just outlined there? Or am I missing something?

Would be my second question. And finally, just to touch on the improvement points on the cost savings.

You mentioned, Peter, that it was EUR225 million was your target by the end of 2022. Could you just give me a run rate of where you are at the moment, i.e., what's in the numbers currently?

Thank you.

Let me start, I mean, with the first question, Michael. On the new business units on the margins there, I mean, you know that we are running a -- the way how we are running our business is based upon, of course, margin optimization.

So we are not allocating volumes to the three different business units, and then they can sell those volumes at whatever margins they feel are appropriate, I mean, for their respective markets. So that will -- that has been established.

I've made comments on this, and that will continue also in the future, that margin optimization. So, having said that, in the renewable aviation, the sustainable aviation fuel in a normal situation, let's say, we have normal kerosene fossil-based kerosene prices.

We're pricing it at 3 times the fossil-based kerosene prices. So nothing has changed there.

Of course, we don't yet have the economics. Because we don't have Singapore up and running.

So here, we are investing in the buildup, and we are shifting some volumes from renewable diesel to build up the market in renewable aviation. And once Singapore is up and running, then, of course, we will have -- I mean, the costs like it needs to be.

And if we then conclude, also on the RJF and then the sustainable aviation fuel project in Rotterdam. That is still ongoing.

If we do that final investment decision then we will also have these costs, I mean in Rotterdam. So today, we don't have that cost position.

So you can conclude that every volume that we are selling in Renewable Aviation, doesn't have the same margin as compared to Renewable Road Transportation because of that market build-up, and it's a bit different, I mean in renewable polymers and chemicals, because here in renewable polymers and Chemicals, there are different products that we are selling. But generally spoken, one can say, margins are comparable, because we don't have, let's say this -- now this additional step we have, the facilities available if we sell bio propane from Rotterdam or we sell renewable diesel, as renewable hydrocarbon from Rotterdam or Porvoo or if we sell some renewable naphtha, then of course I mean that comes out of the existing assets, it's not the same like in aviation.

On the CMD February supply and demand balance, Matti already gave a little bit of a hint to that when we were talking about 6 million to 7 million tons of demand that was of course pre-COVID-19 estimation. So that has gone down.

So demand has been creating, of course, but it's approximately 1 million tons of additional demand globally in 2020 that has been created, so not 2 million tons. And then going to the 10 million tons of demand creation.

It's a bit difficult to say, I mean what will be the number. Today, I mean with still COVID-19 ongoing.

We have lots of discussions around regulation ongoing, I would probably say, it's going to be somewhere between globally 1.5 million and 2 million tons of demand creation compared to the 6 million tons of 2020. On the cost savings, and here we need to differentiate.

We have the COVID-19 related cost savings, and these are just pulling the brakes and navigates as I explained through this pandemic situation, to make sure that we have a good cash flow in 2020, to make sure that we have good EBITs, good profits in 2020. Then there is the Neste Excellence program, which includes creation of through Six Sigma projects, creation of additional margins, EBIT to the bottom line.

And here, included, for example, or the creep capacity that we have been able to create in the renewable products areas. In addition to that, what we also covered there are sustainable cost reductions when we are changing end-to-end processes, and they need to be sustainable at least, and we are auditing them, of course, for three years in a row.

So if you talk about the restructuring in OP, if we would take that final decision, on that about EUR50 million, that is sustainable. So that would go into that bucket of the EUR225 million as a sustainable EBIT improvement.

I want to make sure that you understand, there are two different buckets here because of this COVD-19 that we have opened at the beginning of the year, this additional short-term cost savings bucket. In terms of where are we standing with the EUR225 million, very pleased to say that actually, we are extremely well on track.

And we will probably -- I mean, during the next month's discuss internally what is the number that we will propose during the next Capital Markets Day in 2021. Will we repeat the EUR225 million, or will we increase it?

But it will not be decreased. That's clear.

Okay. Next question?

Hi, there and thanks for taking my question. Two quick questions really.

One is, what's the main driver for the decision as to where to locate the new facilities? And have some of the planned capacity expansions, particularly in the US influence that decision so far?

And then the second question, just the longer-term opportunity within plastics. Is there any technology amongst the polymers or recycling that you think could be material for the Group within five to 10 years?

Thanks.

You want to go to the criteria, Matti?

Yes, I can briefly comment on that. I mean, like we commented after the second quarter, we have focused now for the next big project after the Singapore expansion on the Rotterdam and Porvoo alternatives, so a European site.

That is what we are prioritizing at the moment. The criteria, I would say very typical for this type of decision.

We are of course looking at things like expected CapEx level, expected operating cost level. We are also looking at feedstock availability related logistic cost.

We are looking at market proximity related logistic cost, so it will be then of course an overall comparison with several commercial and technical criteria. Yes.

And of course, I mean we continue to look, I mean and monitor, I mean, supply and demand and that will of course also play an important role when we are then moving towards a decision on the investments. But as I said before, I mean, currently, with the visibility that we have in supply and demand, we see that to be and to continue to be very, very healthy.

In terms of the plastics, we need here also again differentiates, on one hand side, we've talked already on the renewable hydrocarbons, which is a building block. I mean, to produce plastics or chemicals out of it, very good progress here.

And it comes out of the existing or future to builds renewable diesel facilities Porvoo, Rotterdam and Singapore. Of course, we are working also on the full circularity.

So here we talk about waste plastics that we are taking, then through a first step liquefaction, pyrolysis type of technologies. And then second step, which is specialty refining to then have again a renewable hydrocarbon, which is an equal like the renewable hydrocarbon that comes out of our renewable diesel facilities, and can go immediately into the polymers and chemicals processes, technical processes to produce plastics and chemicals out of it.

We have made this announcements on the co-operation that we have with the Recycling Technologies. Recycling Technologies is UK based startup company.

We have an equity position in that company. They are on that liquefaction step that I talked about and we are working together with Unilever because they have high aspirations of course also to make their plastics, I mean, recyclable and at the same time reduce their greenhouse gas emissions.

So we are working on that together with recycling technologies. We do own developments as well in that field.

We have done the first ever successful specialty refinery trial in our site in Naantali, whereby for the first time, on the planet, actually, these kind of renewable hydrocarbons have been produced based upon waste plastic. So we are proceeding very well.

I think what I've said in the Capital Markets Day and what you said also, Henry, five to 10 years from now. Yes, this will be feasible, quite confident on that.

And that will add, I mean, to the portfolio of renewable and circular solutions that we have in the company.

Okay. Thanks.

Hi, good afternoon. A few questions from me as well, please.

Just kind of going back to all the projects that are being discussed, whether it's in the US or whether it's in Europe by the European majors? Would you agree whether or not these projects will move forward all of them would also be a function of whether these companies can actually line up the feedstock and that the feedstock may actually be the key bottleneck in the future.

And with that, and depending on your answer, maybe you can also provide a bit more detail on what progress you're making on expanding the feedstock pool across different geographies, improving the access, et cetera? The second question is on the next big development where you will give the market an update in the first half, potentially it was in FID towards the end of next year.

Just looking at the press release from end of 2018, when you launched the Singapore expansion, and you've targeted a production time line of anywhere between three to 3.5 years, i.e. first production in the first half of 2022.

Obviously, that's delayed due to the COVID issue. For the next expansion, should we also think of a similar time line, three to 3.5 years with more experienced?

Can you kind of narrow that range? Is that range still relevant?

And then maybe just finally, and I do apologize for my final question. When I look at the Group ROACE of 23% today, and for a number of years, you've maintained your target at 15% or used to say at least 15%.

I think when you look at 15% versus 23%, it's fair to say that renewables is doing a lot better, but you haven't changed your target. So are you indirectly implying that you don't think you have today is sustainable?

Thank you.

Okay. Very good questions.

And quite a lot of questions. We are going to try it to answer them all.

On the investment projects feedstock, what I would say is focus the discussion more on what we are doing. I mean, we are currently the largest buyer as you know of waste and residues.

We have embarked since a number of years on expanding that position on a global basis. We very successfully entered Australia -- for Australia, New Zealand, we've very successfully and personally very pleased I mean with that decision that we entered into China.

That's already substantial volumes that we are collecting, aggregating, specifying, certifying, auditing and sending to our Singapore facility. And that went extremely fast despite I mean, the COVID-19 pandemic.

We have to postpone a little bit here going into South America. We are collecting I mean waste and residues I mean in South America.

But we wanted to do one additional step there also in expanding our footprint there. But of course, I mean with a heavy concentration of COVID-19 in these countries, it's clear that we had to actually delay that a little bit, but it's still very high on our agenda.

And then you saw the announcements, you saw the acquisitions, Mahoney Environmental as a platform, more than 30,000 restaurants that they are covering. And I said, on purpose as a platform, because of course we continue to look at how can we expand that organically as well as through M&A.

We are expanding in Europe also through our networks. We made acquisitions here.

We have a joint venture with Timmeter [ph]. We are now established in Poland.

And we go to the Southern part of Europe. So all that is expanding, let's say, our leadership position that we have.

So, imagine what we can do in the next five years prior to those new announced, new builds or retrofits when they come on stream. And that's -- let's say my comment that I want to make, I mean it's up to us, I mean to always be the world leader in the collection of waste and residue and leave a big gap, I mean to somebody else that wants to enter that market.

And the rest, we will then see, I mean how it plays out. So I think I tried to answer your first two questions.

If we now go -- Matti, I mean to.

Timeline.

To timeline on the European project and then compared to the Singapore projects.

Yes, perhaps I can briefly comment on that. Like we said earlier, our target is to mature the study engineering to a point where we would have the possibility to make decisions on investment in '21, if so decided.

If that happened, it is indeed like you can see from the Singapore expansion quite typical what the construction time is and we have said, I think also in the CMD that this could then lead into 2025 target for the start-up. But this is, of course, depending on the decision still to be made.

But this is a very difficult time line.

Yes. And maybe let me again make one comment for clarification here.

And I alluded already to that previously. If you look at, when did we take the final investment decision for the Singapore facility that was in December 2018 and we started the piling in January 2019.

So you take a final investment decision just before you actually start deploying the site and start working on it. And so that's the way, one needs to look at, if we say, we target, if everything goes right middle of 2025 then you calculate back on a normal period of building up and then you come a bit with an indication on when approximately would be the final investment decision.

Okay. Yes, we still have one question.

Yes. ROACE, more than 15%.

Of course, I mean, we always aspire to do more than 15% ROACE and we are very pleased, I mean, that we are doing very successful investments that as you also said, I mean, show that we have substantially higher, it's not because we are doubting. I mean on that 23% or 18% or what it is.

It's also has to do, I mean with the belief that we have, especially, I mean if you are talking about investing in new technologies that a ROACE of above 15% is a very good and value creating targets.

Okay, thank you very much.

Yes, hi, gents. Thanks for the very comprehensive update.

At this stage, I'll keep myself to just one question just on feedstock markets. You commented in the outlook, this morning and again earlier during the call on tightness or potential tightness in waste and residue markets, equally.

When we look at recent months, we've seen the sort of a differential against vegetable oils appear to narrow. And you've also commented earlier on areas like used cooking oil in Asia appearing to trend positively, from where they were earlier in the year.

So I just wanted to understand better, could you talk about that outlook, the extent to which it is precautionary in the context of a COVID influenced uncertain near-term outlook or whether there are specific markets or sub-markets within your feedstock pool, where you see genuine concern around incremental tightness. Thank you.

Thank you for the question. So this is Matti, I would say, it's more making the general comment like we have had the dynamic throughout 2020 that we have a solid demand for waste and residues that is into biofuels.

It is also into olychems [ph]. And at the same time, because of the COVID, we of course had some availability, let's say impact especially in spring, which have now gradually recovered.

For me that doesn't change anything about the fact that market remains tight and it is basically something that will continue with similar dynamics. I'm sure like we have seen in the previous quarters, something that was also mentioned earlier, of course, it's then depending on how the COVID situation develops.

It could have impacts on some specific markets, but that is something we will see in the coming quarters.

Thank you.

Okay, if there are no more questions, then thanks a lot. I mean, a very good call.

We've lots of questions and excellent questions as well. So thank you for your active participation.

I would like, I mean, to conclude by saying that the high uncertainty related to the further development of the COVID-19 pandemic of course and its impact on the global economy continues, let's not fool ourselves. I mean, the pandemic is definitely not over, of course, I mean, we remain very confident in our ability to navigate through these uncertain times and the Renewable Products business has proven to be very resilient in a growing global market.

But please also to manage your expectations on the comments that we have made in this call. We don't have a Singapore that is starting up in 2021.

Yes, so 2021, if I just put a bit of a picture here, has a COVID-19 pandemic, has a challenging market in oil products has no volume, so to say, to grow in the renewable products business and has a starting point that has no hedging. So it's dependent on the outcome and the successes that we have in the term negotiations.

Whilst at the same time, of course, we continue to build up our access to new markets like renewable aviation, renewable polymers and chemicals as well as, of course, the investments that we are undertaking in the new innovation business platforms as well as in certain functions like public affairs. So, I think it's very important also to manage a bit your expectations on the coming years.

And I wanted to take already in a qualitative way, take the opportunity in this call to make those comments. Of course, we will manage -- I mean, through the crisis.

We have great people, as you know, we have great customers, we have great partners, and we are extremely pleased also that we have great investors. So, stay safe and healthy.

And thanks a lot everybody. Goodbye.