Investing.com -- Neste’s fourth-quarter earnings fell significantly short of expectations, primarily due to a sharp decline in the performance of its Renewable Products segment, sending shares down by over 10%.
The consumer goods company’s EBITDA for the quarter came in at €168 million, 45% below the market consensus of €308 million.
“There’s a lot to be discussed at the CMD, but to us, the underperformance raises questions as to whether Neste has the right structure and set-up,” said analysts at Barclays (LON:BARC) in a note.
The Renewable Products segment was the biggest drag, posting an EBITDA of just €13 million—far below the €137 million expected by analysts.
The segment’s sales margin was particularly weak at $242 per ton, missing consensus estimates by 38%.
Despite the earnings miss, Neste’s free cash flow received a boost from a working capital inflow of €709 million.
However, when excluding these working capital benefits, cash flow from operations stood at €202 million.
With net capital expenditures reaching €316 million, the company recorded a negative free cash flow (excluding working capital changes) of €114 million.
Neste’s net debt rose slightly in the quarter, reaching €4.19 billion, up from €4.10 billion in the previous quarter. As a result, the company’s net debt-to-capital ratio increased to 36.1% from 35.2% in Q3.
The company also reported setbacks in its Rotterdam expansion project, citing difficulties in the contractor market.
The start of commercial operations has been postponed from 2026 to 2027, and the estimated investment cost has risen from €1.9 billion to €2.5 billion.
Neste stated that measures have been taken to keep the project on track under the revised timeline and budget.
Meanwhile, Neste announced changes to its Porvoo refinery transformation plan, shifting its focus to energy efficiency and renewable hydrogen.
Other planned investments in algae development, Power-to-X technology, and renewable polymers and chemicals will be scaled down. The company emphasized a stronger focus on renewable fuels.
In an effort to improve its financial performance, Neste introduced a cost-cutting program targeting €350 million in EBITDA improvement by the end of 2026.
Of this, €250 million is expected to come from operational cost reductions, including an annual cost saving of €65 million through a reduction of approximately 600 jobs.
Neste reaffirmed its commitment to maintaining an investment-grade credit rating and keeping leverage below 40%. The company set a maximum capital expenditure target of €2.4 billion for 2025-2026.
Additionally, Neste’s board scrapped its previous dividend policy and proposed a sharply reduced dividend of €0.20 per share for fiscal year 2024, down from €1.20 per share in 2023.
The company stated that its priority is to maximize operating cash flow to strengthen its balance sheet, with the possibility of revisiting dividend payments in the future.