Earnings call transcript: Neste Q2 2025 sees record renewable volumes

Neste Oyj reported its second-quarter earnings for 2025, showcasing a strong performance in renewable products and a notable stock price increase. The company achieved a group comparable EBITDA of €341 million, with renewable diesel volumes reaching the highest levels in its history. Despite a challenging market environment, Neste’s shares surged 9.71% following the earnings release, reflecting investor optimism. According to InvestingPro data, the stock’s RSI indicates overbought territory after delivering strong returns over the past three months. The company’s market capitalization now stands at €12.9 billion, with the stock trading near its Fair Value based on comprehensive analysis.

Key Takeaways

• Neste’s renewable diesel volumes increased by 80% in Q2.
• The company reported a group comparable EBITDA of €341 million.
• Stock price rose by 9.71% after the earnings announcement.
• Neste maintained its full-year guidance, with slight adjustments to CapEx.

Company Performance

Neste demonstrated resilience in Q2 2025, driven by its renewable products segment, which reported an EBITDA of €174 million. The company capitalized on growing demand for sustainable aviation fuel (SAF), with sales more than doubling during the quarter. Neste’s strategic focus on renewable energy and innovation has positioned it as a leader in the renewable fuels sector.

Financial Highlights

• Revenue: Not disclosed in the transcript.
• Group Comparable EBITDA: €341 million.
• Renewable Products EBITDA: €174 million.
• Oil Products EBITDA: €135 million.
• Free Cash Flow: €226 million.

Outlook & Guidance

Neste’s full-year guidance remains unchanged, with a slight reduction in CapEx guidance to €1,000-1,020 million. The company anticipates potential market improvements in 2026-2027, driven by regulatory support in Europe and the US. Neste continues to focus on completing its Rotterdam renewable refinery expansion, expected to significantly boost capacity. InvestingPro data shows that four analysts have recently revised their earnings upward for the upcoming period, with expectations of profitability this year despite current challenges. The company has maintained dividend payments for 20 consecutive years, demonstrating commitment to shareholder returns.

Executive Commentary

CEO Heikki emphasized Neste’s transformation into a global industrial enterprise, highlighting the company’s commitment to renewable products. CFO Eva reiterated the company’s focus on delivering strong performance in the second half of the year.

Risks and Challenges

• Market Oversupply: The renewable fuels market is expected to remain oversupplied in 2025, posing a challenge to pricing.
• Regulatory Changes: Emerging regulations in Germany and the US could impact demand dynamics.
• Feedstock Availability: Securing sustainable feedstock remains a critical challenge for maintaining production levels.
• Economic Volatility: Global economic conditions and geopolitical tensions could affect market stability.
• Competition: Increasing competition in the renewable fuels space may pressure margins.

Q&A

During the earnings call, analysts inquired about potential German regulations that could create 2 million tons of additional demand. Discussions also focused on SAF market dynamics, feedstock price challenges, and leverage management strategies.

Neste’s strong performance in Q2 2025, coupled with its strategic initiatives and market positioning, has bolstered investor confidence, as reflected in the significant stock price increase. The company’s ongoing focus on renewable energy and operational efficiency positions it well for future growth. For comprehensive analysis of Neste and 1,400+ other companies, including detailed Fair Value assessments and expert insights, visit InvestingPro. The platform’s exclusive Pro Research Reports provide actionable intelligence through intuitive visuals and expert analysis.

Full transcript - Neste Oyj (NESTE) Q2 2025:

Heikki, CEO, Neste: Next, we start our presentations with safety. Safety really is the core of everything we do here. This slide has two pieces of information. First of all, on the left hand side, you see the data on total recordable injury frequency, which is the so called the people element of safety. It’s calculated based on incidents per millions of hours.

And you can see from the direction of travel that this year, we have been able to start to reduce the number of incidents and we are heading more in the right direction. However, I want to say to you that the figure we have there, 1,600,000,000 is not where we want to go. We want to go clearly lower. In this type of an industry, we can and we should be lower. So we have our work cut out for us, but I am happy to see that this quarter went the way it did.

On the right hand side then, we see data on process safety. And we’ve had actually two remarkably good quarters now behind us, Q1 and Q2, where we had basically no PSE one, PSE two incidents. Those are the more of the high risk events. Why is process safety so important? In this type of an industry, we’re dealing with fuels, high pressure, high temperature, a very flammable easily flammable material, which, of course, when it gets in connection with oxygen, can create flames, can create even explosions.

So we really have to monitor process safety very carefully. Even small pinholes can create problems. So it’s very much a matter of preventive maintenance, asset integrity analysis, trying to understand where you might have corrosion risks and so forth. So I said, a good performance from the team, and I’m happy to share this information with you. Then if we look at sort of the main the key things at Neste that we’re focusing on and what actually we’ve done and how they are progressing.

So let me start from the left hand side, reliable operations at the refineries. Well, we remember how last year ended and how we’ve now been in recovery mode this half year. Our availability and reliability at our plants has been much better. Sure, from time to time, there are incidences, but it’s also a matter of how you recover from them and how well you can anticipate potential risks. So I was really happy to see that our utilization levels were high, availability was high and overall performance was good.

And then, of course, the Rotterdam modification, which started in April, we now have soft capacity there as well. The reason why operations are important, of course, from the reliability standpoint is the logic of a positive spiral. So good reliability, good operations also means better safety. It also means the ability then to more effectively to reduce cost. It also means less extras, for example, demurrage costs when you have delays, less shipping costs and hopefully also happier customers.

So we really want to continue and get ourselves on this positive spinning wheel and continue to gain momentum as a business. On the right then, achievements on the commercial front. When I started, I mentioned that we at Deste want to become much more intimate with our customers. We need to put more emphasis on our commercial approach. We need to find new good customers for us who will sort of match up well with our offering.

And in the second quarter, we were again able to expand the roster of companies, DHL, Amazon, FedEx, brands which are very well known. Today, Neste is the world’s largest producer of renewable airline fuels. And if we looked at the results of the second quarter in terms of volume, soft sales went up 80%. And overall, renewable volumes in the second quarter were the highest in Neste’s history. So again, kudos to Team Neste for good work there.

And then I’ll talk about flexibility and competitiveness later, but I think when we look at the situation, especially vis a vis Singapore, so our ability to move our volumes into different jurisdictions is also a key part of our core strength. But I’ll come back to competitiveness later in the back half of the presentation. Then the performance improvement program, we’ll talk about it extensively today. What I can report to you is that we are on track. We are moving forward as we have planned, as we intended, and that’s a good thing.

The objective here is still to reach the €350,000,000 EBITDA run rate improvement by the end of twenty twenty six. That is what we told you in our capital markets update in February in London. And then finally, Rotterdam capacity expansion, it is progressing. You remember from our earlier meetings that it is delayed. It will cost more money than we had anticipated.

It is a big project. It’s going to be the largest soft renewable refinery on this on the European continent, probably maybe even worldwide. And it is really a core part of Neste’s long term strategy. So a lot of time spent on that. I’ve been to Rotterdam multiple times, keeping an eye also from my standpoint on how things are progressing.

But that said, a lot of work still remains to be done in Rotterdam, and that’s a high area of focus. Then if we look at the Q2 numbers, Eva will dive into the details in a moment. I just want to highlight out of these six numbers, I want to highlight a couple of things. I already talked about the amount of volume we sold. That was a positive.

It gives us also confidence that our product is a good demand for our products. People like what Neste produces. On the lower side, in the middle, we had the cash flow number. Recognizing the amount of debt we have and also the fact that we have significant investments ongoing, I was very pleased that our free cash flow was as high as €226,000,000 We, of course, continue to put a lot of emphasis on working capital management and, of course, trying to generate more profits than to get good free cash flow. Maybe a comment still on the upper right hand corner on Oil Products.

The refining margin, dollars 10 a barrel, was less than we had hoped it would be. One issue we are carefully sort of thinking about is the crude oil slate. The cost of crude oil, it has risen. We need to think carefully about continue working on how we can expand our crude oil slate to reduce those costs. But we will see how that progresses.

Then here’s my slide on the performance improvement program. I’m very pleased that we can report here that €107,000,000 EBITDA run rate improvements have been booked. The process is very rigorous. We’re conservative with Eva and my colleagues. It’s important that every single saving we identify and we take to the process that we are confident that we will that will really create value.

So just to give you a bit of a sense here that out of the probably 400 initiatives we have, once they get to the level of the so called the G3, G4 phase, myself and my closest colleagues, we scrutinize all the initiatives. So we want to make sure that they are bona fide real initiatives and that they will then deliver. So I said, I’m happy with the way this has started, and it’s a two year program. So we have now two quarters. We still have one point five years to go, but I’m happy and confident about the trajectory of travel.

One final thing I want to say here about this whole how I think about this program. When I started at Neste, I mentioned that the way I sort of see Neste transforming it is that we’ve come we’ve been very much a development oriented company with a lot of expansion, but we need to transform ourselves into a global industrial enterprise. And part of being successful long term relates to the fact that we need to be very good at continuous improvement. And so for me, this program is also a sort of segue into making also Neste much better in the area of continuous improvement. And we’ve done a lot of things here alongside of this program to continue strengthening our bench strength in that area.

And hopefully, that will then carry Neste forward well into the future once this exercise is done and completed. Those were my introductory remarks. Let me now hand it over to Eva, and she will dive into the figures, and I’ll then come back with some more commentary about regulatory topics and so forth. So Eva, please.

Eva, CFO, Neste: Thank you, Heikki, and good afternoon to everyone on my behalf as well. I’ll start with a few words on the market before going into the Neste financials. So many of you will recognize this renewable diesel reference margin that we’ve been sharing with you too as a good proxy on the market. And for the benefit of those who are newer in the audience, a reminder that this is indeed a gross margin, so we deduct the feedstock costs from the revenue. However, you should note that the difference between the gross margin and then the sales margin, we will talk later in the presentation about, is then the production and logistics costs.

So they are two different things. But what you can see from the graph is that the market was volatile, but on a sort of positive trajectory during Q2. And that gave us some tailwind for our business. Moving then to the Neste financials. Q2, our group comparable EBITDA reached EUR $341,000,000.

Of this, Renewable Products was EUR 174,000,000, really thanks to reliability driving volumes because in the market, the feedstock prices continued high. In Oil Products, 135,000,000 for the quarter. As Heikki mentioned, the refining margin was a disappointment for us. Volumes as such were good. So again, here, the reliability did support our profitability.

And then on marketing and services, 32,000,000. Considering that the market is actually down year over year, the team did very good work on commercial operations to compensate. Performance improvement program is obviously a key part of what we’re doing at Neste. And happy to report that whilst the run rate annual run rate at the June was €107,000,000 In the quarter, we had a realized impact of €26,000,000 And in order to give you a bit of an idea on the broad array of things we are working with, there is some detail on the slide. I would say that the majority we’re working on is really around procurement costs.

The headcount reductions were done a few months back. Now we’re really into less spending, but also then spending more wisely, renegotiating quite a lot of procurement contracts. On the logistics side, a business with a global network like ours, there’s a lot of opportunity for efficiency. So we’re looking at the routes, we’re looking at how much ship with how much we sort of optimize on in various parts of the sort of transportation chain and a lot of work going in all aspects of that. Part of our profitability improvement is also from reducing the amount of leased assets.

Terminals we discussed, I believe, also in the first quarter, that’s been a sort of first area with good potential for rationalization, and then we see the benefit also on the asset side. In some areas, we’re still in the sort of, one could say, low hanging fruits, quicker wins, but ramping up sort of now very well for the second half. Moving then into the segments. I will start with Renewables Products and then maybe a few highlights from this. On the left hand graph, you see very well in the column the volume increase and supporting.

And when you combine that with the sales margin, that was continued on upward trajectory, obviously, that supports the profitability improvement. Moving then to the right hand side. I know some of you like to compare sequentially, so there’s a few things I’d want to point out. On the sales volume side, obviously, the SAF volume, thanks to a very good ramp up of the new line in Rotterdam, we’ve been able really to sort of double more than double our SAF sales in the quarter. Also, it’s worth noting that we’ve continued to successfully focus on our home market, Europe, with our sales with European sales amounting for 73% of our sales.

So the North American share continued to decrease from the Q1 levels. Then on the margin side, I’d like to highlight that we did now, for the first time, book the CFPC credits for the Q2 share, not yet Q1. The clean air production credits are still waiting for some regulatory confirmation and final details, and we want to wait for that. We do expect that to come during the second half, and then we’ll be able to proceed. But we now booked €33,000,000 for the Q2 share, and that obviously supported our margins.

At the same time, there were also negatives. Diesel price was clearly lower compared to Q1. RINs were up, but at the same time then so were U. S. Feedstock costs.

So all in all, a net positive of EUR 11,000,000 for the quarter. And still, maybe just to point out the fixed costs. So the profitability improvement program is obviously visible also on this graph. Moving then to Oil Products. So you see the refining margin on the left hand side, and really, it was basically flat from Q1.

And that considering that Q1 was hit by the warm winter in our home markets, then the Q2 margin was indeed a disappointment. Really coming from two factors, the crude slate we use was more impacted by the volatility in the oil markets. We all know all the various events during the Q2, and clearly, production costs were then relatively tougher. And at the same time, the gasoline export markets were also very tough and contributed very little to the overall. So then despite the sort of volume support, the margin improvement was very small.

Moving then to Marketing and Services. So here, you do see on the left hand side the sales volume reflecting really the market demand kind of on a downward trajectory. Obviously, in Q2, we do have the seasonal support from the B2C market recovering, so that helped on the right hand side comparison. But I think the sort of team really excelled on the commercial front and worked hard to reach the €32,000,000 that we delivered. Then on to the group level again.

So we’ve talked about capital discipline and the focus on cash flow being very high on our agenda. And pleased to report that in the Q2, we were able to demonstrate that tight discipline and had cash out investments of $221,000,000. You may have noted that in the full report, we did also guide for the full year number to be slightly lower. So we’re now in a range between EUR 1,000,000,000 and EUR 1,020,000,000.00, which would mean that we’re slightly higher cash out in the second half. Now this is due to the maintenance breaks in Rotterdam and Singapore that are upcoming.

Normal business events as such and but good to note. On the cash flow on the right hand side, this is thanks to good profitability, importantly, also very focused work on the working capital. So we were able to clearly reduce cash from working capital to the extent that actually we were successful in pulling some of our initiatives into Q3 that we had originally assumed that would only impact Q3. So altogether, this is the first half when we can report that we were able with operative cash flow to fund our CapEx growth in Rotterdam. That’s a really big achievement from the team and something we’re very proud about.

I think looking forward, it’s good to note that in the Q3, the cash flow will be more dependent on the operative profitability. We will have to add inventory because we are preparing then for the rotor and maintenance break. And obviously, we need to be ready to serve our customers throughout that six week time period normally than in Q4. So you’ll see an impact on that in Q3. But altogether, really, the positive cash flow helped us secure our leverage at sort of below our financial target.

We are we’re obviously still very close to the bar, and it requires a lot of attention in the coming quarters as well. But nevertheless, I think a sort of good indication of the capacity we have when we really put all our full team focused on what is important. And with that, I would hand it back to you, Heiko.

Heikki, CEO, Neste: Thank you, Eva. So let’s switch gears for a moment and talk about a fairly complex topic, and that is regulatory affairs. Obviously, the world around us is there’s a lot of stuff happening. And during the second quarter, many, many new initiatives and laws were prepared. I’m going to go through first what’s happening in the European Union and then say a few words about The U.

S. Situation. So first of all, with respect to the EU, we know that as far as the refuel EU is concerned and aviation, particularly, we have now the 2% mandate until 02/1930. And if we look at what that means in volume terms for mandated volume, that is about 1,200,000 tonnes. So the question for us from Neste is that as we are now also constructing the new refinery in Rotterdam, which starts in 2027, how do we actually bridge then ourselves in the industry from 2% now to the 6% in 02/1930?

And our position is that the European Union should help to develop some type of a bridging mechanism on how to get voluntary demand, so to speak, pulled forward from the post-two thousand and thirty time period. So last week, there was an industry dialogue on the Sustainable Transportation Investment Plan or STIP in Brussels that I attended. And the discussion really was among various topics. One of them was this bridging question. Neste has proposed that one idea could be to use the ETS tool to provide a mechanism to narrow the gap between the kerosene price and the soft price as one idea.

There was also a discussion about the book and claim approach, whether that could be helped to further support the market. So I guess our view is that we hope that the work of DG Move will continue, and they have indicated that during the course of autumn, hopefully, we will then hear something more. On the Renewable Energy Directive, RED III implementation, now as it goes into the member states, there was some very exciting news coming out of Germany. So in Germany, they are considering actually a number of things, which when you turn that into volume, we can calculate that it should create as much as additionally 2,000,000 tons of volume if it were to be implemented as presented. But let’s see.

The German process will take its own time and then we will then see what happens. But net net still, I think the direction of travel is that there will be implementation plans, which help create more RD volume. So that was a second positive thing. Then on The U. S.

Front, three subjects: the Renewable Volume Obligation, the RVO the LCFS, the Low Carbon Fuel Standard and then the CFPC. So a couple of observations. So the RVO decision here, actually, it’s a very strong market signal. And the administration actually is to be commended for really taking our historic decision over this type. So it’s a very positive for the whole sector and the industry.

So we’re very pleased to see that. From the standpoint of Neste, don’t forget we have half of Marti Neste in California. And then we also own a quite interesting feedstock business, which we internally call Mahoney, where we collect used cooking oil from nearly 100,000 kitchens. So while as the programs in The U. S.

Focus very much on the domestic industry, Neste can participate in this either through the both from the standpoint of the collection of feedstocks through Mahoney and then, of course, through Martiness and the joint venture with Marathon. So those are good things. On the low carbon fuel standard, it went into effect on July 1. And then on the CFPC, the 45Z tax credit, so well, they will expand the credit pool. And we will then see, in practical terms, we will come back to more detail how Neste will then hopefully react and respond and benefit from that.

Then let’s talk about Rotterdam again because this is an exciting confirmation that our investment program is moving forward. We have now had a start in April. It is 5,000,000 tons of capacity. And then when Rotterdam II starts in 2027, that will be additional 700,000. So totally, by the end of twenty twenty seven, we will have 1,200,000 tons of SAF capacity.

And as I said before, if we look at the current volume of mandated SAF, it’s 1.2. So basically, Neste in itself out of Rotterdam could supply the whole European demand. And that is why we believe that we need a bridging mechanism to take us into 2,030 mandates earlier through a voluntary scheme. I mentioned at my opening about flexibility and Neste’s competitive advantage. I wanted to open this up a little bit with a few more details.

So first of all, if we look at the left hand of the slide, we often talk about feedstocks. And I really want to the more I sort of work here at Neste, I’ve really come to understand the tremendous strength of Neste when it comes to global access of feedstock. So we are constantly sourcing more and more. We’re broadening our geographic footprint, and we have a very strong sourcing team that is able to take advantage of different opportunities globally as they materialize. As I already said, we are backward integrated into collection in The U.

S, but also in Europe, we are partially backward integrated. And we are developing our trading capabilities as our feedstock business grows over time. On the middle front middle side here, production on three continents. It gives us an opportunity to optimize. That is an advantage for the company.

We also have leading pretreatment technology. And don’t forget, this is also not a question only of getting access to feedstocks, but it also access to feedstocks, which are cheaper and oftentimes more complex to process. So our pretreatment capabilities in our new refineries are unique and things where we can try to squeeze more value out of the system. And then an important point here is the ability to move between SAF and RD. So if we see that it is commercially more viable and more interesting to produce RD, we can allocate SAF volumes that direction.

Or vice versa, we can move then RD back to SAF, both in Singapore and then in Rotterdam. So this flexibility, both geographically but also between products on a case by case, month by month, quarter by quarter basis, is a strength of our industrial system. And then finally, global commercial presence. I’m very happy to see these great brands, FedEx, DHL and Amazon, be interested to buy from Neste. And I think that’s really the essence of some of the sources of strength for the Neste system.

Then I want to close off, before I mention the outlook, just about a couple of opportunities and uncertainties. Obviously, this industry is facing global challenges like so many other industries. I want to highlight, as I mentioned, the German bill. That is a net net positive. Let’s see how it gets implemented.

And also, the fact that if we can get EU now to do something on soft demand, that will also be a big positive. Eva mentioned the need to diversify our crude oil slate. We’re doing a lot of work around that. And if successful, that would help us also take some of the pressure off in terms of the OP production costs. And then finally, on the uncertainties, I guess, the global macro economy remains a bit unpredictable, but I think Neste has so far managed pretty well to get through these more challenging times.

Then on the final point here, if we go to the market outlook. So the outlook for Neste for 2025, if I just briefly go through it. So the uncertainty in global trade and geopolitics and their impact on the global economic outlook are causing market volatility. Markets for both renewable fuels and oil products are sensitive to oil price development. The market in renewable fuels is expected to remain oversupplied in 2025.

And then we have the guidance. It is unchanged. And I think we mentioned here earlier on the additional information at the bottom about the change in CapEx that you can read at the bottom. So a lot of information for today. And I think, Eva, are we ready to take the questions?

Eva, CFO, Neste: I think we are.

Heikki, CEO, Neste: Okay. Excellent. Please.

Conference Operator: The next question comes from Alejandro Vigil Garcia from Santander. Please go ahead.

Alejandro Vigil Garcia, Analyst, Santander: Yes. Hello. Thank you for taking my questions. The first one is about your sales strategy. You’re selling more into the European market significantly more than in the previous quarters.

Of course, it depends on the opportunity in terms of both markets. How you see this opportunity in the coming quarters? You see The U. S. Potentially more attractive or you will keep focusing on the European market?

And the second question is this very interesting comment about the SAF regulation. I’m also interested in your thoughts about the synthetic fuels, the 2,030 mandate in the European Union. Is this something that could also be adjusted by market reality or market conditions? Thank you.

Heikki, CEO, Neste: So Alejandro, thank you. Eva, if I take these questions to start off. So on the sales strategy, so very happy that we have this flexibility. The RD market in Europe has been short, and we have been able to sell volume from Singapore to keep the refinery running quite well. So I’m very happy with that.

Of course, we need to look at this quarter by quarter. But now that we have the system flowing and especially if, for example, the German decision goes forward, we believe there will be good demand for RD. And so of course, The U. S. Market is an option.

And but it, of course, will be very situational, I think, at the moment for the time for the probably for the near term. Then on your question about, I guess, synthetic, you’re referring to ESOP, if I understand correctly. You know, of course, Neste, our position is we’re focusing on these renewable products. We are not producing ESOP. We have no plans to get into the ESOP business at this point in time.

We other interests. Of course, for Europe to completely decarbonize itself in aviation, ESOP will be needed. But I think it’s enough to the European Union and the respective producers then to find a mechanism how those investments go forward. I think there are quite a lot of investments, but very few FIDs so far in that area. But as I said, Neste is not involved in that.

Derek Whitfield, Analyst, Texas Capital: The

Conference Operator: next question comes from Derek Whitfield from Texas Capital. Please go ahead.

Artem Beletsky, Analyst, SEB: Good afternoon all and thanks for taking my questions. I have two. With the first one, with respect to your EBITDA margin bridge on Page 13, could you perhaps speak to where you’re seeing the greatest contributions in your fixed cost improvement? And then separately, as a second question, regarding the global feedstock markets, could you speak to the trends you’re seeing across the waste focus feedstock markets? And more specifically, are you finding that U.

S. 45Z policy is creating opportunities to buy lower cost feedstock outside of The U. S. As a result of less demand for those feedstocks given that 45Z policy favors domestic feedstocks?

Heikki, CEO, Neste: So thank you very much for your question, Derek. If we do so, let Eeva take the first one and I’ll take the second.

Eva, CFO, Neste: Sure. Yes. So Derek, on the contribution from the fixed assets, it really relates to the performance improvement program. So the topics I touched in on the previous slide would are the good ones to go back to. It’s I would say the biggest lever is really around various procurement initiatives.

And logistics is important. As CEO mentioned, it’s also supported by more reliable operations where we’re able to plan better and planning ahead is always a cheaper option. And then obviously, the headcount changes we have done. So those would be maybe but really the full list, it’s a wide variety of actions.

Heikki, CEO, Neste: Okay. So regarding your feedstock question, if I try to sort of focus in on two things, one is used cooking oil, YUKO and then animal fat. So of course, if there will be less demand where it will be unattractive then to well, let’s say, if The U. S. Suppliers will be less financially interested to buy Asian feedstocks and Australian animal fat, then of course, there’s a question where does that volume go.

And I think on YUKO, we have seen some moderation in Asian prices, but not a lot. And it is a question where the will go. I think one area we don’t know very well is how much Chinese demand for these products and how much Chinese domestic consumption YUKO will actually grow in the years and whether that will then keep the Yuko price in China from maybe declining as one might expect if The U. S. Sales are not continuing.

But so far, we haven’t seen any big material decline in Yuko price in China. So let’s see. Some of the UCO probably has come to Europe for the time being. Then on the animal fat for Australia, that, of course, that will need to find a new home. Of course, if there are attractive opportunities to buy that, of course, we will also consider that.

So I think we have to wait a couple of months, maybe a few quarters to see how this then starts to play out in more detail. But it’s clearly it’s a very important topic directly raised.

Conference Operator: The next question comes from Artem Beletsky from SEB.

Peter Low, Analyst, Rothschild: I actually have three relating to renewables. So firstly, starting with volumes. You made record for comes to sales and production in Q2. What is the outlook for third quarter volume wise? The second is relating to fixed cost in Renewables.

So there has been quite meaningful decline quarter on quarter, I think something like 14%. Has there been anything exceptional? And how we should think about the trend during the rest of the year given the fact that you are still in early phase of performance improvement program? And the last one is, I wanted to pick your thoughts on European market and we have seen that spot RDE margins have been improving quite significantly during Q2, also in the beginning of Q3. How do you see the situation?

What is actually driving this type such healthy development given the fact that we are still seeing global overcapacity on the market? Thank you.

Heikki, CEO, Neste: Thank you. So volume outlook, fixed cost and then European market. Maybe if I just comment on the volume. Of course, we don’t specifically guide at the level of granularity that you may be looking. But I think overall, this year, we have made good traction on our business.

We reported earlier that we have made term contracts that take us until the end of the year, and we have also been doing spot sales. I hope that we will be able to maintain the current level, but I think we don’t really guide in much detail. The market at the moment, I think, is fairly stable as we see it to be. On the fixed costs, big change

Eva, CFO, Neste: Yes. Maybe it’s already, Artyn, partly answered, I hope, to Derek in the previous question around that. There’s no nothing exceptional, no. I would say that it’s a wide area of things. Now obviously, we had a few always, when you start these type of initiatives, some low hanging fruits, so the trend has been very rapid on parts.

But then again, there’s areas where we’ve we’re more in the sort of just starting. So and we’re very comfortable with the overall EUR $350,000,000 target we have for the performance improvement. So in that sense, I think we are very focused on delivering also in second half on because also when you look at what was discussed on the feedstock cost, we’re not seeing much help from that side and the market is oversupplied. So it’s really a lot focused on our own actions and driving cost from out anywhere where we can.

Heikki, CEO, Neste: But I would like to still say that we have really tried to front load the fixed cost savings, so really try to address that as quickly as we can. And that’s why we made these structural changes immediately in the beginning of the first quarter and the negotiations were down in record time. So trying to front load the things we can control ourselves as quickly as we can. Then if I heard you correctly, you were asking about the premiums in Europe. Our read is that partially the German news has been extremely positive, and I think the market is sort of preempting a bit what might be coming out of there.

I think that was sort of our read on what has happened here. Then yes, so should we go to the next question?

Conference Operator: The next question comes from Peter Low from Rothschild.

Nash Qui, Analyst, Barclays: You’ve talked a bit about the increase in SAF volumes in the quarter. Are you able to say whether that was accretive to the overall margin, I. E, are those SAF sales at a higher margin to RD? And just as a context to that question, on one of the quarters now, a larger European oil major was quite bearish on SAF margins due to rising imports into Europe? And then secondly, can you just comment on what proportion of your sales are sold on term contracts as opposed to a spot basis?

Heikki, CEO, Neste: Okay. So maybe if I start, so I think we have said before also that when you if you look at the publicly available information on spot pricing, so of course, on soft pricing spot soft pricing, I guess, is the right way. So of course, they are points in time and they have a value of information, but it is only what it is, right? So our order book is more robust and more versatile. So of course, for us, the soft business, it’s a more refined product than renewable diesel.

So we have to get a return on our investment, if I put it this way, to answer your question, when we think about pricing. But I don’t want to go into more detail. And I think I made a comment earlier about the flexibility between RD and SaaS. Of course, if we have to make choices about where we allocate volume based on commercial and financial reasons, then we will use that flexibility. Do you want to continue with the other points?

Eva, CFO, Neste: Yes. Yes, I can. So I think the concern on the imports is on the SAF side is real. I think there’s obviously sort of capacity in Asia that one would expect the Chinese to tap these markets. It remains then to be seen how much really will happen in the second half, but I think we would share that view.

Then on the portion of terms, so this obviously is a business decision that we will sort of change in time depending market dynamics. And like our CEO said, we are, in that sense, happy to deliver SAF or then if the price is not accretive, then we’re happy to sell more RD. And that is how we look at is at this point of time, I would say that a significant really, majority of our volumes are turned for this year because there’s only six months to go and we have the maintenance breaks coming. So we’ve obviously wanted to plan ahead so that we can supply our customers. On the RD side, we have some flexibility still out there.

Conference Operator: The next question comes from Nash Qui from Barclays.

Adnan Dani, Analyst, RBC: For the strong results. Two questions from me, please. The first one is on soft volume growth. So soft growth 80% Q on Q. I just wonder if you can comment on the trend for the second half please?

And then my second question is really on RP and OP margin. I understand it’s hard to guide into 2H, but any color will be helpful especially given diesel crack has been very strong? Or if you can’t say anything, just wonder, can you provide some color on the spot margin you are getting right now, both on RP and OP? Thank you. In July, please.

Thank you.

Heikki, CEO, Neste: So if I comment on the first one, you remember I remember we discussed in the previous quarter how will the volume be allocated through the year. Is it front end loaded, back end loaded? This is very much, I would say, a bit of a test year because we just don’t know ultimately how things will pan out. The €1,200,000 should be purchased. And so far, I think it would be our understanding that the summer is reasonably busy.

But we just I mean, it should be 1,200,000 tons demanded volume by the year end, not more, not less. Will there be voluntary demand? I think, as I mentioned earlier in the call, we are seeing, especially cargo companies, parcel delivery companies, I think they are able to price or pass on some of the costs to their customers. They have a product and a value offering that works. But I think on the more traditional airline side, that is more difficult.

So that’s why I think the 1.2 is probably a realistic number plus then something on top of that for voluntary.

Eva, CFO, Neste: And then maybe, Anas, a few comments on the margin. Obviously, in this volatile market, I think it’s we’re all following the events and the diesel crack is something that clearly sort of will be impacted by what happens in the oil markets. And with all the geopolitical dynamics, it’s very hard to sort of make any sort of statements on that. What I can say that on the OP side, as said, the second quarter refining margin was a disappointment. We do see the two reasons that kind of pulled it down, the supply cost as well as the gasoline export being more healthy going into Q3.

So we’re definitely sort of aiming for an improvement in OP on that. And then in RP, we will be really driving the flexibility to the utmost depending then on the market dynamics. But obviously, diesel crack is something that we are we take what is given. It’s not something we can really influence.

Adnan Dani, Analyst, RBC: The

Conference Operator: next question comes from Adnan Dani from RBC. Go ahead.

Iris Thaman, Analyst, DNB Carnegie: Thanks for taking my questions. Two for me please. First one just on feedstock. In your presentation you’ve highlighted decrease in feedstock prices opportunity. Could you please just elaborate on what that option looks like and just your outlook for the feedstock market, given we’re still seeing a favorable price pressure in a number of markets?

And then second on the longer term SAF demand, assuming you don’t get a bridging mechanism in Europe for SAF till 02/1930, what are the opportunities in other markets that could help utilize that capacity that comes online in 2027?

Heikki, CEO, Neste: Do you want to do the first feedstock Yes. And I’ll do the

Eva, CFO, Neste: So the feedstock opportunity is really around the flexibility that Neste has, that we are able to take various types of feedstock. And now with The U. S. Legislation changing and then like was discussed earlier in the Q and A part, it remains a bit to be seen. But obviously, one does expect that the markets within U.

S, the prices will go up. But then from some areas where U. S. Producers have earlier taken product that they with the incentive structure, they are less incentivized to do so. So they could ease a bit the pressure on prices.

But so far, this has all been in the news for many weeks, and we haven’t really seen improvement. So it’s really around the opportunity, trying to play as a very agile operation and use any opportunities we have. But the strength is really the Neste’s ability to use many different type of feedstocks.

Heikki, CEO, Neste: So your question about soft demand, I guess, it’s more like 27%, 2829%. So of course, we are going to continue an active dialogue with the commission and also the other stakeholders, airlines, etcetera, to try to find a win win solution, how we could accelerate the demand curve for soft, so it is more linear. So that’s a discussions, lot a lot of work with the commission airlines. But let’s see. I’m hopeful, but of course, cannot promise anything because that’s, of course, the decisions are in the hands of the commission.

And then, of course, if we’re not able to sell SAF, then we have the option of selling renewable diesel. And as I said before, the European market has been short. There is more demand coming from the implementation of RED three. And then somewhere out of that, we will find our own balance. But the details of that, of course, are still up in the air, and we’ll have to then see in 2027 and 2028 when Rotterdam starts what the final game plan is.

So stay tuned then but still a few years ahead from now.

Iris Thaman, Analyst, DNB Carnegie: The

Conference Operator: next question comes from Iris Thaman from DNB Carnegie.

Eva, CFO, Neste0: Hi, this is Iris from DMP Carnegie. Thanks for your presentation. And I have two questions. So firstly, Germany’s latest proposal or this regulation proposal. So you mentioned some 2,000,000 tons potential demand impact.

Is that more in the long term, I mean 02/1930? Or do you think that it could materialize already in the short term, let’s say, 06/27? And secondly, is it still fair to expect staff sales to increase towards the year end, as you mentioned in the Q1 report? Thank

Heikki, CEO, Neste: Thank you. So if I kind of comment on this. So let’s say, the German decision was positive. The €2,000,000 is probably sort of on the high end. And as usual, traditionally, these things may sort of be watered down as the process goes through the system.

So don’t know yet what the final number is. But anyway, it’s a net clearly, net positive outcome. In terms of our understanding on how this could go forward, we believe it could show up already in 2026, 2027. So that would really then help stabilize also the balance of the market much, much sooner than originally planned. And then on SAF, the second half volumes, we, of course, want to be actively participating in the SAF market, but I referred to my earlier comment that we really don’t yet know how the lifting of SAF in the second quarter second half of the year will materialize and how much of that will then, of course, come to Neste vis a vis other suppliers.

So I can’t really comment until we really see what happens.

Eva, CFO, Neste0: Okay. Thank you.

Conference Operator: The next question comes from Henry Tarr from Berenberg.

Eva, CFO, Neste1: Thanks very much for taking my questions. I had a couple. Firstly, just on the CFPC, you’ve taken the credit for Q2, but not for Q1 yet. Has something changed to give you confidence to take the Q2 figure? And would it be sensible to think that the Q1 figure, if you gain comfort that you can book it, would be something similar to the Q2 figure?

That’s the first question.

Heikki, CEO, Neste: Yes,

Eva, CFO, Neste: if I take that. So thanks, Henri. The Q2 is it was really, in a sense, we’re kind of working also, of course, together with our joint venture partner and that we have a sort of common way of doing and also following the industry practice. And we felt then that as the legislation kind of came, the announcements came during Q2, that we now have enough comfort to book for the Q2. But we would really want to wanted to wait for the final sort of information and clarifications to be out before sort of now taking any view on the first quarter because we basically have the whole second half to then take it equally.

It’s going to be sort of coming late anyway. When it comes to the Q1 figure, so indeed, we did say in connection with our Q1 report that we estimate the amount to be in the range of 30,000,000 to €40,000,000 which is a very similar ballpark that we now booked for Q2. So we haven’t changed our view on the number per se.

Eva, CFO, Neste1: Okay. Thanks for that. And then my next question is on balance sheet. Clearly, you had a good quarter helped by working capital, etcetera. You’re still perhaps towards the higher end of the gearing range.

Are you still thinking about or would you think about asset sales and divestments? Do you think that’s sort of necessary or would be helpful at this point?

Heikki, CEO, Neste: Sorry, if I can answer that. So when we kicked off the performance improvement program, so the objective and the target really has been to I’ve said internally that we need to raise the flight altitude of Neste, a bit of an airline analogy here, and really to lift ourselves enough that topics like the one you mentioned will not be of relevance. So of course, let’s see how the business develops, but I feel very confident that this performance improvement program is going to be successful. I know we have we’re really doing it in a very systematic way. And unless something surprising happens, we should stay within that 40%.

We did say in the previous quarter, if you recall, that there may be moments when we temporarily go above 40%, and that is not the end of the world, okay? But still, plan is to stick with the portfolio we have and try to make more money.

Eva, CFO, Neste1: Okay. Thank you very much.

Conference Operator: The next question comes from Henri Patrico from UBS.

Eva, CFO, Neste2: Yes. Thank you for the update. Two questions, please. The first one on the discussions for term contracts for 2026. I was wondering if you already have a sense on if that’s likely to be taking place a bit later this year as you expect an improvement in market conditions towards year end and whether we should expect a change compared to the split one third, two third that we’ve seen for 2025?

And secondly, going back to Smeraldi comments, Heikki, around the competitive advantage and the level of backward integration. Can you share with us what sort of level of backward integration you have at the moment and where you’re increasing this integration? Thank you.

Heikki, CEO, Neste: So thank you for your questions. So regarding term contracts for 2026, usually, the negotiations start in autumn. I can’t really say yet how the customers are going to want to do this. Of course, Neste’s standpoint, we’re ready to have our discussions. But my understanding, based on what my colleagues are telling me, is that sometime in Q4, that’s when the thing really gets busy.

So nothing more. I can’t really comment on the split regarding 2026. It’s really all a function of the state of the market, what we then agree with the customers. So we’ll have to come back to that topic then in the spring, probably around the spring of next year when we the negotiations are finalized. Then on your question of competitive advantage, I don’t really have a number on the percentage off the top of my head, a percentage of backward integration.

Maybe we can look into whether we could, for the future reference, come up with a numerical figure.

Eva, CFO, Neste: It hasn’t changed, though.

Heikki, CEO, Neste: I mean, it hasn’t changed. I mean, we have in Europe, we’re well positioned especially on animal fats. In The U. S, we’re well positioned in EUCO. We have long term partnerships with various suppliers that provide us with the feedstocks.

I guess, if I look at our past strategy, it was very much we were thinking about making acquisitions, backward integrated acquisitions to buy more assets, more collection capacity. I think at the moment, given where we are and the state of the balance sheet, our capital is going to be allocated to Rotterdam, and then we have the turnaround in 2026. So really, we spend the money there. And the sourcing of feedstock will be more through trading, through active engagement with suppliers and then, of course, longer term supply deals, but not M and A backward integrated M and A.

Eva, CFO, Neste2: Understood. Thank you.

Conference Operator: The next question comes from Paul Redman from BNP Paribas.

Eva, CFO, Neste3: Hi, guys, and thank you very much for your time. I have two questions. One was well, the first was just on seasonality. So you’ve got, I think, 80%, I’ll tell me if I’m wrong, 80% of your volume your renewable diesel volume turned up. But the renewable diesel market in Europe is tight.

If we started to see diesel prices come off, would that mean that your term sale prices would be lower despite a tighter renewable diesel price in Europe. So only 20% of your volumes would benefit from the tightness in renewable diesel. I just kind want a bit of an indication because I’m thinking about seasonality. And normally, get a tightness in diesel in the summer and a weakness in the winter months. And I just want to see whether Neste would be impacted by that or whether renewable diesel and diesel prices are fundamentally delinked nowadays.

And then the second one was just on SAP. You say it’s very difficult to know what the SAP sales will be for the second half of the year. But is there a concern that you’ve got a big maintenance program going on in 4Q twenty twenty five, at which point the SAP market could get tighter if people need to buy to meet mandated levels and you don’t have the volume online to provide that, so you kind of miss out on that market? And just in the meantime, how is the extension of the 40b going to drive SaaS sales in 3Q before it runs out

Peter Low, Analyst, Rothschild: at the September? Thank you.

Heikki, CEO, Neste: So there were three questions. Maybe I’ll take a crack at the second and third, if you want to think about the first one. So let me try to answer this in such a way that, first of all, on the 45Z, our understanding is that it basically equalizes more the domestic SAF production and the import, the sort of equalization effect. But we have sold some stuff from Singapore to North America, also Canada. And of course, we will look to continue that where demand exists.

In terms of Rotterdam turnaround, which is then in October, November time frame, we will, of course, develop an educated point of view on what the demand could be. And then we will, of course, we can drive into inventory. So that is Eva’s comment about working capital. But that’s sort of a business decision we’ll have to make here after the summer vacation period is over on what is our read on the market. So it is possible that we will have to push more into working capital for that period of time.

Backstop, of course, is besides Rotterdam and Singapore, that can also produce SAF online, too. So that’s a very detailed operative question and a tactical question, and I can’t really go into that more. Anything you want to say about the seasonality?

Eva, CFO, Neste: Yes. Maybe on the term sales. So indeed, an element of the term sales is that then it is binding on both sides. Obviously, there are some parts of the pricing can be linked to various market drivers, but that’s the kind of we, as a producer, get the visibility into volumes and then customer gets visibility into pricing. So that’s why we I think we’ve tried to sort of warn you from focusing purely on a few sort of spot deals on the markets.

Any volume we are able to push out extra and like we were now successful with the utilization rate obviously helps, but certainly then part of the upside could also be not available. So it’s a that’s why we need to think very closely for ’26 in a way how much do we term, how much don’t we and with what type of contracts. It’s like our CEO said, it’s sort of highly sort of important commercial question.

Heikki, CEO, Neste: Indeed.

Eva, CFO, Neste4: The The first one is just on kind of global industry rationalization and I think we saw a decent amount of it last year. Given it seems margins are stabilizing a bit, do you think that’s kind of run its course? Or do you think there’s still more that needs to be done here given your view that the market, I think, is still a bit oversupplied? So

Heikki, CEO, Neste: Jason, thanks for your question. I’m not sure if I would call it industry rationalization. I would more call it postponement of projects. I think what we have seen globally, primarily, especially in Europe, is that plans to add capacity have been withdrawn or postponed. It does actually put Neste in an interesting position because in 2017, when Rotterdam starts, if the others do postpone their projects as has happened, we are coming with a new facility, world class, very competitive asset.

So I think the development has been net positive. I can’t really say anything more. Other companies will make their own decisions regarding capacity addition for renewables, which is a growth market, by the way, so it isn’t really that much of a rationalization question.

Eva, CFO, Neste4: Got it. Well, hopefully, you could say more about the next question, which is on antidumping duties from the EU on U. S. SAF. And just wondering if you have an update on expectations if and when the European Union can pass those and provide some support for Neste’s business.

Heikki, CEO, Neste: Actually, I don’t think we have any information on that, not even aware of what the European Union is planning or thinking.

Eva, CFO, Neste4: Okay. Is that well, let me ask it this way. Is there some expectation given that the EU does have antidumping duties against U. S. Biodiesel and RD?

Is there is it would you assume at some point you would get this antidumping duty?

Heikki, CEO, Neste: I think the primary sort of long term question has more related to China and the direction of Chinese investments. There is antidumping duty for Chinese RD. And the question we have discussed in other calls has been about the SAF, whether SAF would be included in the Chinese antidumping duty. But as said, no new news to report on the Chinese matter.

Eva, CFO, Neste4: Okay. I’ll leave it there. Thanks.

Conference Operator: The next question comes from Posi Verzenin from Nordea.

Eva, CFO, Neste5: Thanks. This is Pasi from Nordea. I have three questions. See that your net assets in renewables is roughly €9,000,000,000 So what are the assumptions behind your valuation model for these assets? And practically in more detail, what is the margin assumption you are using to continue this Rotterdam investment?

And what is your margin giving this €9,000,000,000 asset value for Neste? Or are you using maybe ROI assumptions here? But some figure would be helpful on this matter? And secondly, so regarding the leverage, so are we going to see a temporary decision above 40% leverage already in the third quarter due to this inventory effect you were speaking about? And lastly, do you think that the global supply demand balance could be even better on next year than we have seen in this year?

And these were my three questions. Thanks.

Heikki, CEO, Neste: So thank you, Pasi. So if Eva, you take the net assets and the leverage, and I’ll talk about the global demand.

Eva, CFO, Neste: Yes. Yes. So we don’t publish our sort of internal margin assumptions. You can obviously read something from the annual report notes if you look at the asset impairment information, which we obviously annually do. Our focus is now on improving the profitability and RP, and that has the biggest impact on the equation.

Then on the leverage, I think what I wanted to say is that we don’t expect support from release of working capital in our cash flow in Q3, rather more relying on the operational cash flow, so not as such sort of meaning it to be that grimmer view. I think we’re very focused on being below 40%. But obviously, as you well know, many things can happen in the turbulence we have on currencies and things like this, the last day of the month, and that can have some impact. But I wouldn’t say that the inventory impact in Rotterdam is that we consider it that significant. Just wanted to point out that it will sort of hinder any additional release.

Heikki, CEO, Neste: And then on the anything else? No. And then on your question about the global demand balance for 2026. So I guess if we look at SAF, so probably we will not hopefully, the EU will come up with some new ideas on or implementation of bridging mechanisms for SAF into 02/1930. Doubt that would happen necessarily in 2026.

So that basically would then imply that the oversupply in SAF will continue then if that’s the case because we know demand, it is the 2% and voluntary demand will require more tools. On the RD side, though, as I mentioned, I think Iris was asked Edith was asking about the implementation of the German program. So if that starts to materialize faster and the RD market has been somewhat short, then of course, that would be a positive for renewable diesel in 2026. But as I said, a lot of moving parts, a lot of uncertainty and really cannot make any sound forecasts about 2026 at this time. But that would be my read on what I see at the moment.

Eva, CFO, Neste5: Excellent. I fully understand. Thanks.

Conference Operator: The next question comes from Christopher Kuplent from Bauffet. Please go ahead.

Derek Whitfield, Analyst, Texas Capital: Hi. It’s Chris Coupland from Bank of America. Could I ask on CapEx and your lowered guidance for the year? Maybe go a

Artem Beletsky, Analyst, SEB: little bit into detail, if you

Derek Whitfield, Analyst, Texas Capital: can, where that savings come from? Is the budget for the Rotterdam project unchanged? Or is that one source of it? And if you could give us a bit of, I guess, a second follow-up question, a bit of an insight into FX exposure of this CapEx. How much of that is locked into euros?

And where do you still have exposure to the quite considerable fluctuations we’ve seen so far? Thank you.

Eva, CFO, Neste: Well, if I answer your first question, so the Rotterdam budget is unchanged. So the small decrease that we’ve been able to sort of push is really on collecting on all going through everything else we have we had planned and really sort of scrutinizing, do we need to do it, how can we do it with a lower budget. And hence, that really comes from the sort of the rest of the CapEx. And obviously, we are very focused on really making sure that we only do the work now that we absolutely feel comfortable doing in this current situation. Then on the FX exposures, I would say that we’re pretty much in Rotterdam approaching a situation where it’s work.

So all the components are pretty much already at site. So and the work obviously, the work done there is euro based. So I think the sort of FX risk from that point of view starts to be very marginal. It’s just based on where we are. Now obviously, we will be for our maintenance breaks, there are certain components that are priced in dollars.

Again, I think we’re sort of there is not much open purchases, some may be, but October comes very soon for Rotterdam. So I think we’re but something to follow, but and obviously, with the turbulence being such, but not sort of on I would say, a sort of a big factor, but you’re right to point it out that the currency impact is obviously something that keeps us all on our toes.

Derek Whitfield, Analyst, Texas Capital: Great. Thank you.

Conference Operator: There are no more questions at this time. So I hand the conference back to the speakers.

Heikki, CEO, Neste: So thank you very much for your time and interest today to go through Neste’s Q3 Q2 results. I’m going to maybe summarize our key message today. I’m very pleased with the progress we started to make on the Performance Improvement Program, and we look forward then to report to you in more detail how we make progress. But as said, it’s been a good start. The Rotterdam project is, of course, of highest importance at Neste.

We, top management, are focusing a lot of our attention and time on that to make sure we make the commitments on budget, 2.5, and then the start then in 2027. I’m also very pleased about the success we’ve had on the commercial side. It was a big internal sign of confidence that we were able to reach such a good sales volume in renewable diesel and SAF in the second quarter. And then finally, I think it’s important to note that after some challenging times on the regulatory front, it now seems that we are having a bit of a tailwind when it comes to regulation both here in Europe and in The United States. And that, of course, is something we need.

We focus on our internal actions, but of course, it’s important also that we get a bit of tailwind. And hopefully, that will then start the wind will start blowing in 2026, 2027 and 2028 also for our industry. So with those words, I wish you all a great summer. I look forward to seeing you then after the end of Q3, and take care. Bye bye.

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