Neste has revealed that, for the first time ever, the profit contribution from its renewable products has surpassed that of its oil products.
Finland-headed renewable fuels and oil refiner Neste has posted record-high financial results 2016. According to its 2016 end of year financial statements the company had a comparable operating profit of EUR 983 million compared to EUR 925 million in 2015.
– Neste had another successful year in 2016. For the first time Renewable Products had the largest full-year profit contribution, which reflects the continuing strategic transformation of the company, said Matti Lievonen, President and CEO of Neste.
Despite a slight drop in year-on-year sales volume, renewable products recorded a full-year comparable operating profit of EUR 469 million. This is up EUR 67 million on 2015, an effect of higher reference margin and additional margin averages than in 2015. It is also higher than the EUR 453 million full year profit that oil products contributed.
– Our sales volumes reached 2.22 million tonnes, only 2 percent below the previous year, despite of the scheduled major turnaround implemented at the Rotterdam refinery in the second quarter. A slightly higher share of the sales volume was allocated to the North American market compared to 2015. In the US market the Environmental Protection Agency (EPA) finalised increased volume mandates for biomass-based diesel for 2017 and 2018 in November 2016, said Lievonen.
Feedstock optimisation
Another noteworthy detail is that the share of waste and residue feedstock used to produce the renewable product increased by 10 percent 2016 compared to 2015, reaching 78 percent of total renewable inputs.
Expressed as volume of renewable product sales, 1.73 million tonnes of a total 2.22 million sales volume 2016 was derived from waste and residue feedstock. This represents an increase of 190 000 tonnes compared to 2015.
The recent acquisition of the Sluiskil pre-treatment facility is anticipated to further enhance Neste’s capability to process lower quality wastes and residues.
– The vegetable oil market is expected to remain volatile, and we aim to expand the use of lower quality waste and residue feedstock further. The completed acquisition of the new feedstock pre-treatment and storage facility in the Netherlands will support this goal, said Lievonen.
Renewable capacity expansion
With the addition of the Sluiskil pre-treatment facility Neste’s nameplate production capacity has, as of 1 January 2017, increased to 2.6 million tonnes. Lievonen also confirmed that the company is pushing ahead with its capacity growth programme suggesting confidence in an increase in global demand for renewable fuels and products.
Neste expects sales volumes of renewable diesel supplied to end-users with no fossil diesel blended i.e. as 100 percent renewable fuel to continue growing, from 15 percent in 2016 to 25 percent of the total renewable sales volumes in 2017. The reference margin is expected to be at approximately the average level of the year 2016.
– Neste continues to optimise sales allocation based on the total margin, and we have new attractive markets in Europe. For example, Norway has set a biofuel target in traffic growing from 7.5 percent in 2017 to 20 percent in 2020. California continues to be an important market for Neste, he said.
The capacity growth programme includes continued “debottlenecking” of its existing production facilities, located in Finland, the Netherlands and Singapore, to reach 3 million tonnes nameplate capacity by 2020 – as well as the building of new capacity.
– We are currently evaluating the feasibility of options to invest in new production capacity. The options under review include locations in the US and Singapore, ended Matti Lievonen.
Final “oil” removed from the brand
In a separate statement Neste announced that it has renamed it third business reporting business area “Oil Retail” to “Marketing & Services”. The reason given for the renaming is the “increased importance of solutions and services” in the business area although no changes are noted in the business operations. It made a comparable operating profit of EUR 90 million in 2016.
In March 2016 “oil” was dropped from its “Neste Oil” refuelling station chain in Finland, the Baltic countries and Russia.
– Reaching the name change for our station chain reflects the important position of the station network in the company’s customer experience. By operating under a single name, we are all parts of a single company, building a single brand, said Antti Tiitola, Executive Vice President of Oil Retail Business Area at Neste back in March.
The official name of Neste Oil was changed to Neste Corporation in June 2015. The word “oil” no longer illustrated the company, in which products based on renewable raw materials have become an increasingly important part of the business.
