Release Date: February 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Neste OYJ (NTOIF, Financial) reported an increase in sales volumes for renewable products, indicating strong demand despite operational challenges.
- The company is investing heavily in growth, with EUR1.6 billion spent in 2024, including significant investments in Singapore and Rotterdam.
- Neste OYJ (NTOIF) is expanding its feedstock sourcing capabilities, with new offices in Brazil and activities in India to enhance supply chain resilience.
- The company successfully sold its first significant volumes to Canada, marking an expansion in its market reach.
- Neste OYJ (NTOIF) is focusing on improving operational efficiency and cost competitiveness, with a target of EUR350 million in EBITDA improvement by 2026.
Negative Points
- Neste OYJ (NTOIF) faced operational challenges in 2024, including unplanned outages in Singapore and Rotterdam, impacting production and sales margins.
- The company's financial performance in 2024 was unsatisfactory, with a significant drop in comparable EBITDA to EUR1.25 billion.
- The renewable products market is currently oversupplied, leading to challenging conditions and pressure on margins.
- Neste OYJ (NTOIF) is initiating change negotiations due to the need to reduce its fixed cost base, indicating potential workforce reductions.
- The company reported a negative cash flow before financing items for 2024, highlighting financial pressures.
Q & A Highlights
Q: What were the main factors impacting Neste's sales margin, and have the operational issues been resolved?
A: Anssi Tammilehto, Interim CFO, stated that unplanned outages had an impact of over EUR100 million on the sales margin. SAF sales volumes increased, supporting the margin. CEO Heikki Malinen confirmed that all plants are operational and emphasized the importance of predictive maintenance to prevent future issues.
Q: Can you provide guidance on sales margins and any expected one-off costs from the new cost-cutting measures?
A: CEO Heikki Malinen explained that Neste will focus on guiding aspects they can control, such as sales volumes, due to the unpredictable nature of sales margins. Anssi Tammilehto mentioned that there might be costs associated with the planned redundancies, but no specific figures were provided.
Q: How does Neste plan to achieve the EUR350 million EBITDA improvement, and what is the importance of maintaining the 40% leverage target?
A: CEO Heikki Malinen indicated that more details on the EUR350 million program would be discussed in a later session. Anssi Tammilehto emphasized the importance of maintaining leverage below 40% as a target, acknowledging that it involves various factors.
Q: What is the status of term contracts for 2025, and how do you see sales allocation between Europe and North America?
A: Anssi Tammilehto stated that approximately 60% of term contracts have been agreed upon, lower than the previous year's 80% to allow for flexibility. Sales allocation will depend on market conditions, with a focus on optimizing outcomes.
Q: Can you provide insights into the working capital outlook for 2025 and the contribution of the US joint venture?
A: Anssi Tammilehto highlighted the importance of managing working capital and optimizing cash flow, noting that it remains a key focus. Regarding the US joint venture, he mentioned ongoing optimization efforts to improve financial performance, with a focus on logistics and pre-treatment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
