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Introduction & Market Context
Neste Oyj (HEL:NESTE) presented its first quarter 2025 results on April 29, revealing significant margin pressure in its renewable products business while highlighting progress in sustainable aviation fuel (SAF) sales and cost-cutting initiatives. The Finnish refiner continues to navigate challenging market conditions characterized by pressured end-product prices and elevated feedstock costs, a continuation of trends observed throughout 2024.
The company’s share price closed at €7.95 on April 28, 2025, near its 52-week low of €6.79, reflecting ongoing investor concerns about profitability in the renewable fuels sector. Neste’s presentation emphasized operational improvements and strategic initiatives aimed at weathering the current market downturn.
Quarterly Performance Highlights
Neste reported a substantial year-over-year decline in financial performance for Q1 2025. Group comparable EBITDA fell to €210 million, down 62% from €551 million in Q1 2024. This decline was primarily driven by compressed margins in the renewable products segment.
As shown in the following performance highlights:
Comparable sales margin for renewable products dropped to $310 per ton, a 45% decrease from $562 per ton in the same period last year. Similarly, the total refining margin for oil products declined to $9.9 per barrel from $20.4 per barrel in Q1 2024. These margin contractions occurred despite solid operational performance at Neste’s refineries, with utilization rates of 79% for renewable products and 88% for oil products.
One bright spot was the significant growth in SAF sales, which reached 130 kilotons in Q1 2025, more than tripling from 41 kilotons in Q1 2024. This growth was supported by the implementation of the ReFuelEU legislation, which mandates a 2% SAF blend in 2025. Overall renewable product sales volumes increased modestly to 892 kilotons from 849 kilotons in the prior-year period.
The company also noted that mild winter conditions affected sales volumes of winter-grade products in both the Oil Products and Marketing & Services segments.
Strategic Initiatives
Neste highlighted several key strategic initiatives progressing during the quarter. The company has started SAF production at its Rotterdam facility, increasing its total SAF capacity to 1.5 million tons per annum. Additionally, the Rotterdam capacity expansion project is proceeding according to a revised schedule and budget.
The following slide details these initiatives:
A significant focus of the presentation was Neste’s performance improvement program, which aims to deliver a €350 million EBITDA run rate improvement by the end of 2026. As of Q1 2025, the company has achieved €52 million in annualized run rate improvements against the 2024 baseline.
The program focuses on four priority areas: commercial acceleration and supply chain optimization, refinery performance and safety, external cost reduction, and operating model simplification. This comprehensive approach demonstrates Neste’s commitment to enhancing profitability amid challenging market conditions.
The detailed progress of the performance improvement program is illustrated below:
In February 2025, Neste announced a significant collaboration with DHL Group to reduce logistics emissions. The partnership aims to develop a commercial model that will lead to DHL’s offtake of approximately 300,000 tons of neat (unblended) SAF per year from Neste by 2030. This agreement underscores Neste’s strategic pivot toward sustainable aviation fuel as a growth driver.
Market Conditions
The presentation provided insight into the challenging market conditions affecting Neste’s renewable diesel business. A graph showing the renewable diesel reference gross margin revealed a significant decline from an average of $512 per ton in Q4 2024 to just $254 per ton in Q1 2025.
The following chart illustrates this downward trend:
This margin compression reflects broader challenges in the renewable fuels market that have persisted since 2024. During last year’s Q2 earnings call, Neste had already reported weakening conditions in both U.S. and European renewable products markets, with sales margins dropping to $382 per ton from $800 per ton the previous year.
Forward-Looking Statements
Looking ahead, Neste emphasized its focus on three key areas: increasing SAF sales volumes, supported by regulatory mandates; improving operational efficiency through its performance improvement program; and maintaining solid production at its refineries.
The company’s collaboration with DHL represents a significant long-term commitment to the SAF market, potentially providing more stable demand amid volatile market conditions. This aligns with the company’s previous statements about the growing importance of SAF in its product portfolio.
While Neste did not provide specific financial guidance for the remainder of 2025, the emphasis on cost reduction and operational improvements suggests management is preparing for continued market challenges in the near term. The company remains committed to achieving its €350 million EBITDA improvement target by the end of 2026 while maintaining an investment-grade credit rating.
The ongoing transition in renewable fuels markets, particularly with the growth of SAF demand driven by regulatory mandates, presents both challenges and opportunities for Neste as it navigates through a period of margin pressure while positioning itself for future growth in sustainable aviation fuels.
Full presentation:
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