Neste Corporation, Stock Exchange Release / Inside information, 13 February 2025
at 8.55 am (EET)
As a result of the company's significantly changed market environment and
weakened financial performance as well as a comprehensive full potential
analysis started in October 2024, Neste has decided to start a performance
improvement program. The goal is to secure our strong market position and cost
competitiveness in renewable fuels and to enhance Neste's financial performance.
The program targets a total of EUR 350 million EBITDA run rate improvement by
the end of 2026, of which EUR 250 million from operational costs.
The Rotterdam growth investment project continues, but schedule and costs have
been re-evaluated. Due to the challenging contractor market, the scheduled start
of commercial operations has been delayed from 2026 to 2027. Furthermore, the
estimation for investment cost has been increased from EUR 1.9 billion to EUR
2.5 billion. Several actions have been taken to ensure that the project proceeds
on the updated schedule and budget.
Renewed focus and strict capital discipline
In 2025-2026, Neste plans to refocus from growth and development to efficiency
and profitability, including capital discipline. The company's performance
improvement program focuses on commercial acceleration and supply chain
optimization, improved refinery performance and safety, external cost reduction,
and operating model simplification.
Neste continues to strengthen its competitive advantage by developing its
current raw material base, novel vegetable oils sourcing and lignocellulosic raw
materials research.
The company plans to scale down investments in the development of algae and
Power-to-X. In Renewable Products, Neste is planning to streamline its renewable
and circular polymers and chemicals activities, focusing on renewable fuels. The
company also considers simplifying its commercial models and streamlining its
sales channels for renewables to accelerate sales growth. The focus of the
Porvoo refinery transformation is planned to be on energy efficiency and
renewable hydrogen while other components of the plan are considered to be
delayed.
Neste maintains strict capital discipline throughout the company and in the
coming few years, our capital expenditure beyond the Rotterdam investment is
expected to be on an annual level of approximately EUR 0.5 billion with focus on
safety and reliability investments.
Change negotiations to be started
To improve profitability and cost-competitiveness, Neste plans to further
simplify its operating model and increase internal efficiency. As a result, the
company starts change negotiations that cover globally Oil Products and
Renewable Products business areas and all functions, targeting total annual cost
savings of approximately EUR 65 million. The planned organizational changes are
expected to lead to a permanent reduction of approximately 600 positions, of
which approximately 450 in Finland.
“Our current financial performance is weak and not sustainable. Therefore, we
must take urgent action to reset various parts of our company. Adjustments to
our cost structure and development portfolio are necessary to meet the current
and foreseeable market realities. Before preparing any plans and launching the
performance improvement program, we have conducted a systematic and
comprehensive analysis of the markets and our own operations. While
understandably hard for Neste people, the planned efficiency measures are
necessary to ensure Neste's long-term competitiveness and success. We will do
our best to support our employees in this situation. Going forward, we plan to
focus on our core operations and remain fully committed to serving our customers
and maintaining our position as a global market leader in renewable diesel and
sustainable aviation fuel,” says Neste's President and CEO Heikki Malinen.
Financial targets, dividend for the year 2024 and capital allocation
Neste continues to seek growth in renewable fuels targeting market leadership,
cost competitiveness and technology advantage. During the coming few years, the
company will extract full commercial potential from its existing operations and
the Rotterdam expansion as well as improve refinery performance through better
safety, reliability and project execution. In 2025-2026, the company will focus
on defined priorities and reset its cost structure, while in 2027-2028 it will
prepare next steps of growth, focusing on selected development initiatives.
Maintaining a strong balance sheet will be crucial in both of these phases.
In line with changes in the company's operating environment and financial
performance, Neste updates its financial targets for 2025-2026. Firstly, we are
targeting EUR 350 million EBITDA run rate improvement by the end of 2026 from
our performance improvement program, of which EUR 250 million from operational
costs. Secondly, we are committed to maintaining our investment grade credit
rating and our leverage below 40%.
The company targets a total capital expenditure of maximum EUR 2.4 billion in
2025-2026. In light of the current financial position of the company, the Board
has decided to cancel the dividend policy announced on 19 June 2023, and
proposes a dividend payout of 0.20 euros per share for the year 2024 to the
Annual General Meeting. Going forward, the company seeks to maximize operating
cash flow in order to strengthen the balance sheet with the potential to review
the dividend in the future.
Neste Corporation
Hanna Maula
Senior Vice President, Communications, Sustainability and Public Affairs
Further information: Please contact Neste's media service, tel. +358 800 94025 /
media@neste.com (weekdays from 8.30 a.m. to 4.00 p.m. EET). Please subscribe to
Neste's releases at https://www.neste.com/media/subscribe.
Neste in brief
Neste (NESTE, Nasdaq Helsinki) uses science and innovative technology to
transform waste and other resources into renewable fuels and circular raw
materials. The company creates solutions for mitigating climate change and
accelerating a shift to a circular economy. Being the world's leading producer
of sustainable aviation fuel (SAF) and renewable diesel and a forerunner in
developing renewable and circular feedstock solutions for polymers and
chemicals, the company aims to help its customers to reduce their greenhouse gas
emissions by at least 20 million tons annually by 2030.
The company's ambition is to make the Porvoo oil refinery in Finland the most
sustainable refinery in Europe. Neste is committed to reaching carbon-neutral
production by 2035, and will reduce the carbon emission intensity of sold
products by 50% by 2040. Neste has also set high standards for biodiversity,
human rights and the supply chain. The company has consistently been included in
the CDP and the DJSI lists of the world's most sustainable companies. In 2023,
Neste's revenue stood at EUR 22.9 billion. Read more:
neste.com (http://www.neste.com)