October 26, 2018 / 2:04 PM / 22 days ago

Finnish refiner Neste 'on crest of a wave' with renewables

HELSINKI (Reuters) - Biofuel producer and oil refiner Neste (NESTE.HE) is “on the crest of a wave”, its CEO said after the company set a December deadline for an investment decision on a new Singapore plant and posted quarterly results that sent its shares up by 9 percent.

FILE PHOTO: Fuel pumps are pictured at a Neste Oil gas station in Adazi, Latvia August 5, 2014. REUTERS/Ints Kalnins/File Photo

The Finnish company, which produces diesel and other fuels from renewable materials at plants in Singapore and Rotterdam, reported bigger than expected third-quarter profit thanks to progress at its renewables operation.

“Renewable products exceeded the previous year’s performance as a result of a favourable market and successful margin optimisation,” CEO Matti Lievonen said in a statement.

Third-quarter core operating profit rose to 395 million euros ($449 million) from 350 million euros in the same period last year, surpassing the consensus forecast of 356 million euros in a Reuters poll of analysts. [nL8N1X351S]

Neste said it was on track for a “very strong” full year, though maintenance shutdowns will squeeze profit in the remainder of the year.

“This is a very strong result, especially in renewables ... they clearly succeeded in sales, production and raw material purchases in that business,” said OP Bank analyst Henri Parkkinen, who has a “reduce” rating on the stock.

SINGAPORE DECISION

Neste, which also has two conventional oil refineries in Finland, is looking for future growth in renewable jet fuels and said it would make a final decision in December over its plan to build a new biofuel plant in Singapore.

“We will decide in December,” Lievonen told Reuters “We have been working on the investment constantly and spent tens of millions preparing.”

The company had previously said it would make a final investment decision by the end of 2018. [nL8N1OC3WI]

“Based on what’s happening in the renewables market, that investment has always looked justified,” said OP Bank’s Parkkinen.

Neste CEO Lievonen says the company’s strategy has been further supported by the much-publicised recent report from the United Nations Intergovernmental Panel on Climate Change (IPCC).[nL8N1WO02N]

“We haven’t been affected (by the IPCC report) because we have been on the crest of a wave the whole time. It just showed we have adopted the right strategy,” he said, citing the example of Norway’s decision to oblige the aviation fuel industry to mix 0.5 percent advanced biofuel into jet fuel from 2020 onwards. [nL8N1WK4LY]

Beyond jet fuels, Lievonen said the company is well-placed in the renewables business overall, with a 70 percent market share globally, ahead of Finland’s UPM (UPM.HE), Italy’s ENI (ENI.MI) and France’s Total (TOTF.PA) among others.

“We are the only global player (in renewables)... We have 13 raw materials and global sales,” Lievonen said.

($1 = 0.8797 euros)

Reporting by Jussi Rosendahl and Anne Kauranen; Editing by David Goodman

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