April 26, 2019 / 10:12 AM / 7 months ago

Finnish refiner Neste hit by Venezuela oil sanctions

HELSINKI (Reuters) - Finnish biofuel producer and oil refiner Neste reported a bigger than expected fall in quarterly profit on Friday, with U.S. sanctions against Venezuela having curbed crude oil supply to its Nynas joint venture.

FILE PHOTO: General view of Neste's Porvoo oil refinery in southern Finland, November 17, 2015. REUTERS/Jussi Rosendahl/File Photo

First-quarter core operating profit fell 6 percent to 378 million euros ($421 million), at the lower end of analyst expectations that ranged from 376 million to 429 million euros in a Reuters poll.

Neste booked a 31 million euro first-quarter loss from Nynas, in which the Finnish company holds a 49.99 stake. The joint venture with Venezuelan state oil company PDVSA - on which Washington imposed tough restrictions in January - uses Venezuelan crude oil in refineries across Europe.

“The company is trying to do whatever it can to mitigate the situation,” Neste Chief Executive Peter Vanacker told Reuters, adding that this included looking for alternative suppliers.

Venezuelan President Nicolas Maduro has accused U.S. President Donald Trump of waging economic war against Venezuela because oil contributes more than 90 percent of the OPEC member nation’s exports and the bulk of government revenue.

Nynas, which had 2017 sales of 15 billion Swedish crowns ($1.58 billion), owns three refineries in Sweden and Germany as well as a joint venture with Shell in Eastham, UK.

RENEWABLE JEWEL

Neste, which produces diesel and other fuels from renewable materials at plants in Singapore and Rotterdam, said that first quarterly sales at its renewables unit rose 28 percent to 973 million euros and the division’s core operating profit was up 14 percent at 337 million euros, beating forecasts in the Reuters poll.

The unit accounted for 89 percent of Neste’s core operating profit and only 26 percent of the quarter’s revenue.

Neste said that the division’s second-quarter sales volumes would be little changed, with utilization rates remaining high, but raw material prices are expected to increase.

The company said it has scheduled catalyst maintenance - typically a 3-4 week process - at the Rotterdam refinery in the fourth quarter.

The oil products unit, which is more than two and a half times larger in terms of revenue, made a first-quarter profit of only 73 million euros.

“Oil Products’ reference margin in the second quarter is expected to be higher than in the first quarter, driven by a seasonally improving gasoline market,” Neste said.

It also scheduled four-week decoking maintenance at the Porvoo refinery between September and October.

Neste shares, which hit a record high of 33.33 euros this month, were down 2 percent at 31.57 euros in early afternoon trading.

Reporting by Tarmo Virki; Editing by Elaine Hardcastle and David Goodman

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