Neste Capital Markets Day 2020: Creating profitable growth through renewable and circular solutions
Neste Corporation, Press Release, 12 March 2020 at 9 a.m. (EET)
Neste is holding a Capital Markets Day 2020 as a webcast today, 12 March 2020. It will feature presentations by President and CEO Peter Vanacker as well as senior management on subjects such as the company's strategy, market outlook and the next steps for creating profitable growth through renewable and circular solutions.
Excellent progress in strategy execution ‒ renewed vision and values
Neste is in a strong position for the second wave of growth and transformation. The company has an excellent safety and profitability track record, and it has made great progress in strategy execution. Neste’s ambition to become a global leader in renewable and circular solutions is unchanged. The vision statement has been renewed as “Leading the way towards a sustainable future together”. Neste’s success is due to its committed and passionate people. To strengthen this, the company has also renewed its values to: “We care, We have courage, We cooperate”. Neste continues to focus on its strategy implementation in the current volatile market environment.
Renewable products market growth is accelerating
In Renewable Road Transportation, Neste has maintained a strong presence in its key markets and successfully opened new markets. The global climate targets set a high ambition for sustainable solutions in transportation, and the global renewable diesel demand is expected to exceed 20 million ton/a by 2030. Neste’s customer centric approach enables efficient margin optimization through the combination of strategic sales channels and flexible outlets.
In Renewable Aviation, passengers are looking for tangible solutions to make flying more sustainable. Neste started the commercial sales of Sustainable Aviation Fuels (SAF) in 2019. Regulatory changes are evolving in Europe and North America creating demand for sustainable aviation fuel. Neste’s SAF current production capacity of 100 000 ton/a is planned to exceed 1 million ton/a in 2022, and new feedstock innovation will provide optionality for growth.
In Renewable Polymers and Chemicals, Neste has started to create a new business through transforming plastics and chemicals value chains. The demand for sustainable polymers and chemicals is growing and it is driven by consumers, brand owners and governments. Neste is supporting polymers and chemicals market leaders with available solutions to make their products more sustainable. Neste’s drop-in solution for renewable polymers has been proven on a commercial scale. The company’s expertise in utilizing lower quality feedstock gives the company competitive advantage in the fast developing chemical recycling market, where it is working together in partnerships with recyclers and technology developers.
Renewables production platform growth progressing
The Singapore capacity expansion investment project is on track. The EUR 1.4 billion investment will increase Neste’s renewable products production capacity by 1.3 million ton/a. The new production line will also include optionality to produce up to 1 million tons of SAF at the facility. The Singapore expansion is scheduled to be up and running in mid-2022, and with some additional capacity creep at the existing sites, Neste targets to increase its renewable products production capacity to 4.5 million ton/a by mid-2022.
Neste is in a feasibility study phase to be able to add 450 kton/a SAF production capability as part of its existing Rotterdam refinery capacity by 2023. Engineering studies on the next worldscale capacity expansion steps are ongoing for several sites globally, including current and selected new locations. The concept of these investments is based upon the current versatile Singapore investment. The aim is to continue to grow the business in renewable road transportation, aviation as well as polymers and chemicals. The company is targeting investment decision capability on the next worldscale production capacity by the end of 2021 and production start-up in 2025.
Neste expects the global waste and residue availability to grow to over 35 million tons by 2030. Its feedstock strategy is focused on waste and residues growth and development of new feedstock sources. Neste is targeting 100% waste and residues share of its total renewables inputs by 2025. The share of new types of feedstock is expected to grow continuously.
Innovation to drive transformation and growth
The role of the Innovation unit at Neste is to ensure the growth of the current businesses and to create new business platforms for further growth in renewable and circular solutions. The unit’s focus is on scalable and sustainable sources of renewable carbon and their required technologies. It will be done in extensive collaboration with research and value chain partners. Neste will seize new opportunities through investing in first-of-a-kind plants and equities in start-ups.
Neste has established three new business platforms:
- lignocellulosic fuels, chemicals and materials,
- scalable feedstocks for aviation fuels, such as algae and municipal solid waste
- renewable hydrogen and Power-to-X.
Cash generation and transformation opportunities in Oil Products
According to its role, Oil Products focuses on cash generation and capturing transformation opportunities. Neste’s optimized refinery configuration creates opportunities to benefit from volatility in a challenging market environment. The Porvoo refinery major turnaround in Q2 2020 is progressing according to plan, and it will ensure the refinery’s continued competitiveness through high safety and reliability. Oil Products has a EUR 50 million comparable EBIT improvement potential through the Neste Excellence program by 2030. The company is currently investigating opportunities in co-processing, HVO expansion and retrofitting of the refinery to improve the profitability and reduce handprint emissions.
Carbon neutral production by 2035
Based upon a detailed potential analysis, Neste is committed to reaching carbon neutral production by 2035. This target will be achieved through several identified measures and actions which are directed at emissions in Scopes 1 and 2 as defined by the Greenhouse Gas Protocol. Some of these measures will already be implemented during the major turnaround in Porvoo in Q2 2020. The new commitment complements Neste’s other strategic climate commitment of reducing customers’ greenhouse gas emissions by at least 20 million tons CO2eq annually by 2030.
Improvement targets of Neste Excellence program upgraded
Excellent progress has been made with the Neste Excellence program. In 2019, EUR 120 million comparable EBIT improvement through capacity creep and catalyst lifetime optimization was realized. The comparable EBIT improvement targets for Neste Excellence program have been upgraded from EUR 100 million to EUR 225 million by the end of 2022, and from EUR 200 million to EUR 300 million by 2030. These improvements are measured compared to the year 2018.
Neste's long-term financial targets are leverage ratio and ROACE after tax, and they remain unchanged. The leverage target is below 40% and the ROACE target is 15%. Neste's dividend policy also remains unchanged. The company will distribute at least 50% of the company's comparable net profit for the year in the form of dividends.
Presentation materials and webcast
Capital Market Day presentation material in English will be available at www.neste.com/investors from around 2 p.m. (EET) onwards. The event can also be followed online at www.neste.com/investors from 2 p.m. (EET) onwards. A replay will be available after the event at www.neste.com/investors.
Vice President, Communications (act.)
Further information: Jyrki Mäki-Kala, Chief Financial Officer, Neste. Please contact Neste’s media service, tel. +358 50 458 5076 / email@example.com (weekdays from 8.30 a.m. to 4.00 p.m. EET).
Neste in brief
Neste (NESTE, Nasdaq Helsinki) creates sustainable solutions for transport, business, and consumer needs. Our wide range of renewable products enable our customers to reduce climate emissions. We are the world's largest producer of renewable diesel refined from waste and residues, introducing renewable solutions also to the aviation and plastics industries. We are also a technologically advanced refiner of high-quality oil products. We want to be a reliable partner with widely valued expertise, research, and sustainable operations. In 2019, Neste's revenue stood at EUR 15.8 billion. In 2020, Neste placed 3rd on the Global 100 list of the most sustainable companies in the world. Read more: neste.com