Neste Oil Stock

Good afternoon, everybody, and welcome to discuss Neste's Q2 results that were released this morning. My name is Jukka Miettinen, Vice President of Investor Relations for Neste.

Here with me, we have our President and CEO, Heikki Malinen, as well as our CFO, Eeva Sipila. We are referring today to the presentation that was released in our website early this morning.

The key highlights of our presentation include, for example, the performance in the ongoing market volatility, our Q2 financial performance.

We will be also discussing the changes in the RP demand outlook as well as opportunities and uncertainties. We will have discussions with all of you, and please pay attention to the disclaimer as we will be making forward-looking statements in this call.

But with these remarks, I would like to hand over to our President and CEO, Heikki Malinen. Heikki, please?

Thank you, Jukka, and good morning to the folks in the U.S. and good afternoon here in Europe. I hope everybody is enjoying the nice summer we're having. So let's go into the presentation here.

And first of all, this Q2 was the best quarter financially ever for Neste. I'm really pleased with the results. I'd say I'm also proud with the work that the folks at Neste have done.

Things have changed quite a lot since the last 2 years. So of course, we at Neste are very happy with the improved financial performance. The market environment has been favorable for us, and we've been able to take advantage of the opportunities ahead.

Also strategically, I'm very pleased that the Renewable Energy Directive III decisions have finally started to be implemented in Europe and also the RVO decisions in the U.S. were a positive signal also for us for the future.

I think many of the stars around Neste are aligning nicely.

Our financial position has strengthened, and Eeva will go into the balance sheet and cash flows in more detail later on today.

And then as I said, the work on Rotterdam continues. But as always, at Neste, we start with safety because that is our license to operate. On the left-hand side, you can see our total recordable injury frequency rate.

And for the second quarter, we had clearly better performance than we've had in the past. We had some cases, injuries, but I would call them minor, less risky.

Our focus though in terms of people safety is to make sure there are no fatalities and no serious injuries. Work continues. We are striving for [ zero ]. But overall, direction of travel in the second quarter was good.

On the right-hand side, you see the data for process safety. We had very good performance for process safety in Q2, and we basically recorded no category 1 or 2 incidences.

So very pleased with that performance. So look at the figures briefly. So on the upper left-hand side, you can see our renewable product sales. We sold over 1 million tonnes.

And in terms of our financial result in terms of EBITDA, $1.2 billion, and that is record EBITDA for Neste. I'm very pleased with the RP margin. I know a lot of us talk about the sales margin and follow that closely. $1,200 per tonne is a record number.

I think the way I sort of see it is that it is a positive signal that we have been able to monetize the market opportunity that has been here in the second quarter.

In terms of refining margin for OP, $25 per barrel. Market conditions have helped that is, of course, clear. But overall, if I look at the first half of this year, Porvoo as a refinery has performed quite well.

And so overall, I'm personally pleased with the performance of the team in Porvoo. Eeva will go into the financial numbers in more detail in a moment. So Eeva, I hand it over to you for a more detailed discussion, please.

All right. Thank you, Heikki, and good afternoon to everybody on my behalf as well. I'll start with the reference margins.

So this graph illustrates the renewable diesel gross margins in the quarter. And you can see it was a volatile quarter. Margins charged up quite dramatically in the early part of the quarter.

And then as the feedstock cost also kind of started to catch up, the margins did come down. But overall, the average was still well above $1,000 per tonne. For Neste, our comparable EBITDA for the quarter was indeed the all-time high of EUR 1.2 billion and almost 3/4 of that came from Renewable Products.

Oil Products enjoyed the exceptionally wide diesel cracks, whereas then Marketing & Services had a more challenging market with slightly lower volumes and tighter unit margins.

We continued our strong progress in the performance improvement program. And as annualized run rate impact, we reached EUR 594 million at the end of June whereas then the realized in-quarter impact was EUR 145 million.

And if one looks at the impact split, so then 60% from cost reductions and roughly 40% from revenue and margin optimization.

As you may remember, we are pushing this program until the end of this year. So obviously, now coming to the sort of late part of the program. Moving then to the segments, and I'll start with the Renewable Products. So on the left-hand side in the graph, you can see that volumes were up from Q1, so sequentially up, but year-over-year slightly down.

Now importantly, the blue line shows really the continued uptick in the margins. On the right-hand side, then we can compare sequentially the main items that affected the result. And you can really see that it was a story of margin and volume.

Everything else was marginal. Starting from the volumes. So the RD market continued to be the more attractive market. So you see our SAF volumes were relatively modest.

Then looking at the main components in the margins. So we all know diesel prices were high in the quarter. But I would also draw your attention to the RIN prices. So we've seen a market strengthening in the U.S. market started already in Q1 and continued in Q2, and that's obviously supporting our U.S. business significantly.

Then on the other hand, our utilization rate of 75% was unsatisfactory. And hence, the work on operational reliability continues. And we are actually preparing now to implement broader upgrade work in connection with our upcoming turnarounds in the second half.

You may remember that we have discussed the fact that some of the improvement actions are unfortunately very difficult to implement while the refineries are running. So they do sort of make more sense to combine with the turnarounds and when we have a general shutdown.

Then moving to Oil Products. So again, on the left-hand side, the blue line shows our utilization rate. It was up to 90% in the quarter. I think coming so close to the end of the catalyst, a very solid performance from the team to be able to drive at these levels.

Again, on the right-hand side, if we analyze the main items explaining the results sequentially. So indeed, you see slightly lower sales volumes. And this is purely due to the fact that we are preparing for the turnaround, and we actually sold very little spot volumes. We wanted to keep those in our inventory so that then we can fulfill our term sale promises to our customers in the third quarter.

Then on the total refining margin in the quarter, it ended up at $25.8 per barrel. And actually, despite the outlook looking tougher at the beginning of the quarter due to very high crude premiums when we met last time, those premiums actually came significantly down into the May, June period, which then supported the refining margin to actually improve on the already strong Q1 level.

And then finally, on the Marketing & Services. So indeed, a slightly more challenging market. Then again, as you may remember, you can well see from the graph on the left-hand side that the Q1 was quite exceptional.

We had quite a bit of inventory profits hiking in the result. And in that sense, we're satisfied with the EUR 23 million achieved. The high pulp prices are having an impact on demand when it comes to Finland and Baltics.

And then the fixed costs are here slightly up, and it's really the ongoing investments into the network to improve that customer experience that we have been working on for a few quarters now already.

Then moving back to the group figures. So on the left-hand side, the cash out investments, very stable quarter compared to Q1.

Now as we have the plans ready for the turnarounds, we have been able to narrow our guidance on the full year CapEx.

And we have today guided you on approximately EUR 1.2 billion, so the upper range of the previous range. And as I said, really to -- we're trying to maximize the opportunity that those shutdowns give us to improve reliability.

Then moving to the right-hand side, so cash flow before financing activities. Net working capital was a big mover in the quarter. The higher market prices obviously have an impact on all values they do tie cash and especially then combined with the fact that we are, as mentioned, preparing for the turnaround in Oil Products, where we have been running up inventories.

So a combination of higher volume and high prices had a significant impact on cash flow. Considering all this, we have to be satisfied with SEK 164 million that we generated in the quarter, really, thanks to the strong profitability.

Looking forward, we all know the recent reescalation in the Middle East makes obviously predicting market prices very difficult. I would think that we all agree that they're unlikely to come down in the short term. However, from a cash flow point of view, as we get into Q4, I certainly expect our inventory volumes to come down, and that will then ease the pressure on the cash flow late in the year.

And then to conclude, our financial position, strengthened market leading during the quarter. We took our first concrete step in deleveraging by tendering EUR 500 million of notes successfully in the quarter.

Now this took our gross debt down and with a stable cash position, our net debt to capital went below 30%. I'm also pleased that Moody's noted our progress in strengthening our financial position with the recent decision from this week to confirm our A3 rating with a stable outlook.

All in all, we are comfortably hitting our financial targets set for '25, '26. And with that, handing back to Heikki.

Thank you, Eeva, for reviewing the financial details. Now let's move on and talk about some other topical themes and the outlook.

So first, an update on the regulatory environment. As we all know, it is very critical that we make progress in this area as well. The important message to the market is that in terms of the European Union, the RED III implementation progresses.

And you may recall that last autumn, after the summer, there was news that Germany was going to increase its mandates for renewable diesel. It's taken quite a long time. But now in May, the German government and parliament have made its decisions, and we have a very positive outcome.

Netherlands following. And most recently, Spain has also made a decision to implement RED III. So gradually, member state-by-member state, the directive gets implemented. And overall, the decisions are very positive, very favorable for renewable diesel demand here for the coming years, and I will then go through that in a moment with some other data.

In the U.S., the decision on RVO, as said, very favorable, significant anticipated demand growth expected. And it also takes away a lot of the uncertainty and ambiguity we've had regarding where will the policy go. But as said, decisions are very positive for this sector.

And then with respect to Asia Pacific area, it is, of course, a very large market, a huge amount of population. Australia is gradually moving forward. There are now discussions about a mandate for low-carbon liquid fuels. So let's see how that moves and whether the Middle East situation will further accelerate the trend.

And then in SAF, Singapore, one of the leading countries in Asia in this area is now moving forward then to implement take the first step in the SAF mandate. So overall, compared to where we were a year ago, I think a lot of clarity. I don't really see anything sort of negative on the contrary, very favorable outlook.

And in that respect, for Neste, as we are investing in this sector, this is very important and favorable. Here in this chart, you can then see those legislative decisions being converted into absolute volumes.

These are our estimates. On the left-hand side, you can see the global demand for renewable diesel, we are estimating it to be somewhere around 20 million tonnes. And with these decisions, we project demand to grow about 10% per year, heading then beyond 30 million tonnes per annum.

On the right-hand side, we have the situation on SAF. No major decisions announced this year. We are on the current trajectory still with 35% increase, still, of course, a small market, very nascent market. But of course, recognizing that the fossil jet fuel market is huge and continues to grow.

There is also significant upside potential in this area as we go forward. And of course, we are doing our own work to advocate the benefits of SAF and look forward to seeing the 6% then being implemented in 2030 in Europe.

Here is just an updated photo on Rotterdam. I don't really have anything new of substance to report at the moment. As you can see from the photo, again, work continues. We have a lot of people on the site, a lot of activity. The work continues.

My own view, though, is that if you compare now Rotterdam vis-a-vis the decisions that have been taken, so if you go back, remember a couple of years ago, there was a discussion of whether it makes sense to invest in this sector. Quite a number of companies have canceled or postponed their investments.

We made a decision to move forward, even recognizing some of the uncertainty. It's my clear view that this was the right call to make at Neste and the timing of this investment then in '27 with a start-up, I think will be well timed now when the European demand outlook also looks quite favorable so -- or looks really favorable.

So overall, very pleased with this work and decision. Then a few words about opportunities. So the topic of the time is, of course, energy security, the situation in the Middle East raises, of course, a lot of questions about how much energy reserves and supplies countries should have.

I personally, together with Eeva, we are of the view that this will increase the discussion about having more inventory, more production, buying more locally. And this itself will also support the demand for renewables.

The volume increases coming from RVO in the U.S. are substantial. That is going to help us also in our Martinez refinery in California.

And we also see that the situation today is most likely going to continue for a while where the middle distillates market is tight, supply is reduced.

And for Porvoo, in particular, Porvoo is very much focused and concentrated optimized around middle distillates. So Porvoo is also benefiting from this opportunity. On the uncertainties, well, geopolitical tensions are high, and they are creating volatility in the oil market.

So it is, of course, many things are possible. But so far for Neste, the direction of travel has been very supportive. The availability of production components is something we monitor carefully. We saw during COVID, there were disruptions in the supply chains.

So far, we have not seen anything in our area, but we monitor very carefully that we have all important spare parts and chemicals and other things that we need to produce that we in stock in the right amounts.

Feedstock prices, well, the last year, if we look at Europe, we've seen feedstock prices maybe rise about 10 percentage, maybe a bit less than that. In the U.S., clearly more. It would not be unsurprising if gradually also the pressure on price rises comes also gradually more to Europe.

But so far, in the first half, we have benefited from the fact that feedstock price increases have been fairly moderate. And of course, at Neste, we are buying from all sources globally. So that allows us to try to take advantage and optimize feedstock sourcing depending on where we see market opportunities to buy cheaper.

And then, of course, we have the question about inflation and impact on macro if this formal situation continues longer. Then my final slide on the outlook is that renewable product sales volume in 2026 are expected to be approximately at the same level as in 2025.

Oil product sales volumes in 2026 are expected to be lower than in 2025 due to the planned maintenance turnaround in Porvoo. The group's full year 2026 cash out capital expenditure, excluding M&A, is estimated to be approximately EUR 1.2 billion.

There are 3 scheduled maintenance turnarounds in the second half of 2026 with the following approximate durations. In Porvoo, we have an 8-week turnaround starting now end of August 2026. In Rotterdam, we will have an 8-week turnaround during the fourth quarter of this year.

And in Singapore, we're going to have an 11-week turnaround starting in December 2026 for one of the production lines.

So in this stronger market, we have updated our plans on turnarounds. And we believe that there are attractive business cases to invest in Singapore and Rotterdam more, particularly because, first of all, of course, on safety, we always need to make sure we have good safety levels, but we also need to improve our utilization, and we believe these turnarounds will help that.

And secondly, we need to continue expanding our ability to process a variety of feedstocks, also more challenging feedstocks with higher buyer premiums. And we believe that the Eagle mandates are also driving towards that direction. So those are some of the reasons for the longer turnarounds in Rotterdam and Singapore. And with those comments, I guess we move on then to the Q&A.

[Operator Instructions] The next question comes from Alejandro Vigil from Santander.

Congratulations for these record results this quarter. My first question is about the outlook for Renewable Products margins in the second half of the year.

I know it's difficult and you try to be cautious, but if you can elaborate about how July started and your view about margins for the rest of the year. And the second question is, thank you very much for these views about the long-term demand for renewable diesel and SAF.

And also interested in your thoughts about supply because as you said before, there are many cancellations of projects, delays. So it looks like the demand supply could be quite tight in the coming years. Your thoughts would be very welcome.

Thank you. The first question is a tough one. We've seen from the past that it is quite difficult to forecast the movements in sales margins. They can move fairly quickly.

And of course, considering the fact that underlying, you also have the price of gas oil that can be very volatile. Anything you would like to add because I'm really more erring on the cautious side, but...

Yes. Maybe, Alejandro, just to know that our base case assumption would be that during the second half, we see feedstocks costs going up somewhat, then the diesel prices is really now depending so much on the situation in Middle East that I think we all just need to kind of follow that very closely and then sort of discuss during the end of quarter and as the second half goes that where how that looks.

On your question regarding long-term demand, I mean the outlook is really, I think, even more favorable than we would have thought a year ago at this time. On supply, of course, that's a good question and an important question because, of course, the commercial side is very much dependent on supply and demand.

Well, I think as far as we can see as far as large-scale projects like Neste Rotterdam 2, I don't think we can identify a single major one that's underway.

And recognizing that it actually takes quite a long time to get these projects started, it is not that easy to start or even restart the project. So I think that does give us some sort of highway here to move. Co-processing is, of course, one clear potential source and some refineries are doing that and we will do that.

And then, of course, when you look at the European market, you have the question of imports from Asia, particularly and then there some imports from North America. But I think overall, if we look at the situation as it speaks, I would just say that I think Rotterdam 2 is coming online at a good time and the demand looks to be out there. So the timing is really good.

The next question comes from Kate O’Sullivan from Citi.

So at Q1, you highlighted priorities before considering the next phase of growth, bringing Rotterdam online, demonstrating returns on that investment and continuing to deleverage.

And since then, we've seen margins have remained exceptionally strong. So assuming Rotterdam ramps successfully and the balance sheet reaches a level you consider appropriate, what becomes the company's next strategic priority given the structural growth outlook for renewable fuels and Neste's position as the market leader, should investors expect Neste to pursue another meaningful phase of capacity expansion? Or do you increasingly see the focus shifting towards maximizing returns from the existing asset base?

Very important strategic question. I think this is something we will have to come back to as we get into 2027 and 2028.

At Neste, our current focus is very much now on getting returns. So we've invested quite a lot. Don't forget, we also have the Singapore Line 2 investment both of these investments, we have to get into a phase where we get our returns up.

So that is really the priority number one. Then if we look at then beyond the 2030s, we have mentioned that we are looking at lignocellulosic as a new technology that's out there in the public.

So for me personally, for the next few years, it will be about deleveraging, getting our operational performance even higher, getting utilization higher. That's where our mind is set. And thoughts beyond that, we will then have to come back to that at the appropriate time.

The next question comes from Adnan Dhanani from RBC.

Two from me, please. Just the first one, if you're able to provide some color on the turnarounds this year, particularly interested in what the utilization rates could look like post the enhancements that you're working at, at Rotterdam.

And on the flip side, I appreciate you said there's a good business case for those turnarounds, but is there any scope to make those events shorter? Because obviously, you'll be going offline at a time where there are pretty strong margins in the market.

And then just second one on OP. So if I look through your numbers this quarter, the middle distillate sales volumes fell quite a bit quarter-over-quarter in your overall sales split.

Obviously, this is a time where distillate margins have been very attractive. A number of your finer peers have been maximizing their slate towards those products. So I just want to understand what would the switch there?

I'll just comment first on the TA utilization, the timing of RD and Rotterdam and Singapore, and then Eeva can talk about the middle distillates and where we are. Well, we obviously recognize the market situation and are not going to spend any extra days on these turnarounds.

In terms of Singapore line # 2, we had the start-up 3 years ago. This is the first major turnaround that we have. So that is explaining the turnaround duration. There's more work to do.

And then in terms of the utilization level, there are certain upgrades we have to do in the lines to get utilization to a higher level. I don't want to comment on what the utilization could be, but we do financially believe this is an attractive business case. Then in terms of Porvoo...

Yes, I mentioned a few points already. Obviously, in this market, I think everybody who has a diesel slate has been pushing to the max.

But as I mentioned, we're coming so close to the turnaround, our catalyst is quite worn out. So I think the team really did its utmost to sort of push for the sort of 90% utilization.

And then as I said, whilst our sales volumes were down, we did produce. So they are now in inventory so that we can then sort of deliver to our customers during the turnaround. So with those 2 topics, I think we're happy with the outcome.

But indeed, recognizing that now our focus is on getting most out of the turnaround and then really sort of ramping quickly up for Q4 in case the market continues to be this tight in the middle distillates.

The next question comes from Sasikanth Chilukuru from Jefferies.

I would again come back on the turnaround activity. I just wanted to understand if you could -- or if you could provide more details on the issues that are actually affecting this lower utilization.

What is actually going wrong and why is utilization low? Is it more to do with some units not functioning well? And thereby actually, for the turnaround work, how much of the work is affecting reliability and how much of that is actually improving the slate of feedstocks that you could use? If you can provide some color on that.

The second one was related to the 2016 CapEx. Now it's at the higher end of the previous guidance range. Wondering what was it that kind of got it to this higher end? Slightly related to that, if you could comment on where we are with the revised budget of EUR 2.5 billion for the Rotterdam expansion plant. Are we still within that budget?

If I start first, the renewable energy directives are steering the markets very much into more and more complex feedstocks. And at Neste, of course, one source of competitive advantage for Neste has been that we're able to use a variety of feedstocks.

We source them from all over the world. We've been really trying to push to get into the more complex part of the market because also the bio premiums are higher, the margins are higher.

So legislation is directing the market towards that, but also we at Neste want to be the front runner. And consequently, that technical -- the challenge to process these is higher, and that requires certain material upgrades in the lines.

That is what's driving that. And we believe there's a financial return for pushing in that direction with higher margins, but we need more volume, and that's why we need to get the upgrades into the lines.

And then to your questions on the CapEx. So we started the year with a range of SEK 1 billion to SEK 1.2 billion. And then now as the plans have become more concrete, we have sort of narrowed and wanted to be more specific on the guidance, partly also because our first half spend is perhaps slightly lower so that you don't then assume that to sort of that this is a linear development rather that the second half is more heavy.

And as Heikki said, it really is just a reflection of now also all these sort of additional aspects. These are not just sort of traditional catalyst changes that we're talking about, and that kind of explains the EUR 1.2 billion. Then on Rotterdam, so no news to report. So the EUR 2.5 billion, we're still working with that.

The next question comes from Henri Patricot from UBS.

Two questions from me, following up on the topic of the [indiscernible] products margin for the second half of the year.

So just firstly, when it comes to what we've seen in July, obviously higher diesel prices, you mentioned that you expect feedstock prices to likely be higher in the second half of the year. So is that something that has offset the high diesel prices already in July? Or are you just expecting that prices for feedstocks are likely to be higher for the rest of the year? And then secondly, I was wondering if you can give us a sense of whether there's a difference in terms of the split between spot sales and term sales in the second half of the year versus the first half?

Do you want to take the first one?

Yes, I can take the first one. So I would say now there's sort of a reescalation in Middle East. So the feedstock markets haven't reacted that fast. It's more the general trend that as we see the strength both in the U.S. and European market, we're clearly seeing more buying of feedstock and that's kind of more sort of continued.

Of course, it's good to appreciate that we are hedged partly on the gas oil. So these sort of spikes we suddenly get don't necessarily materialize in our margins. So that's maybe the cautionary comment on what's happened now in the past sort of week, 1.5 weeks.

Yes. And in terms of term sales, so we mentioned, I think it was end of last year that we have termed about roughly 60%. I would use that number throughout the whole year. There are some months when we have a bit more months a bit less, but that is sort of the rough number through the year.

The next question comes from Derrick Whitfield from Texas Capital.

First, building on the last question, how are you guys thinking about term pricing exposure for 2027 given the strength of the market at present? And then second, could you speak to how you're thinking about the allocation of RP cells across your end markets? The regulatory markets, as you guys highlighted, are exceptionally strong here in the U.S. and are moving higher to bid for imports?

Could you repeat the second half, please, one more time. The line was a bit unclear. So please, the second -- the allocation question.

Sure. So second, could you speak to how you're thinking about the allocation of RP sales across your end markets? The regulatory markets here in the U.S. are quite strong as you guys highlighted and are moving higher to bid for imports.

Yes. No, thank you. So yes, I think what is very, very quiet now summertime is the summer season is upon us and most of our customers on vacations in August. So I think we will then come back to this term question later in autumn.

But as you said, it is, of course, clear that the price level at the moment is on the higher side. We will have to have the negotiations as always, with our customers and see then what are they looking for 2027 and then customer by customer negotiate based on what type of needs they have.

So I can't really comment on that, but recognize your question. In terms of allocation of volume, you may recall that a few years ago, we allocated or we had to reallocate the Singapore volumes over to Europe.

European demand has been very good and continues to be very good. So a lot of the European market continues to be very important for us. Martinez is now the primary source for our volumes in the U.S. and Martinez is running well.

And that's basically the situation for Neste at the moment. So nothing really to tell about that at the moment.

The next question comes from Paul Redman from BNP Paribas.

Two questions, please. The first is just to come back to margins and try to reframe the question. Can you give us any indication of what you've had in July? So has July on average been better than what you got in 2Q as an average? That's both for the Oil Products business and the Renewable Products business.

And then I wanted to touch on the performance improvement program. I wanted to ask where we can go from here. You're clearly making big savings and big revenue benefits from this program you put in place over a year ago. So yes, where can we go from here? And then secondly, how much of that is baked into the margins? How much of the cost and revenue over the savings over the past year are now coming through as $1 per tonne on the margin?

So maybe I'll ask Eeva to comment on the numerical side, and I will then talk about the performance improvement program, how we move forward.

Yes. I think what comes to July and the couple of weeks. So obviously, I would say that generally, when you have a sudden reescalation like we've seen in the Middle East, it usually people -- the first reaction for customers is to wait and see kind of what's coming out of this.

So we haven't, in that sense, seen huge volumes, but I would say that no change in RP, whereas then in OP, obviously, the cracks have reacted and that comes kind of quicker through.

Now then the question is what happens on the crude premiums going forward on this. But that hopefully sort of helps you forward. And then take you...

Yes, I think on, well, we kicked the performance improvement program at a time when the markets were very weak, our results were really poor, and we're trying to accelerate and extract value quickly.

And if you remember, we had the headcount reduction exercise. We took out a lot of costs from sourcing, and we're able to capture some really quick wins. We've also been able to save quite a lot and optimize logistics and improve our commercial approach on the market.

So I think these are in some ways, some of them on the sourcing and on the headcount, they're done and that value has sort of been captured. I think going forward, though, our focus very much is in the refineries. It is a longer-term journey.

You are hearing that we say that we have these turnarounds. We need a bit more time to do them. We need some money for that. But I think they are attractive investments. They will yield better utilization, and it's clearly worth doing, but that is sort of a bit beyond the current program of performance improvement.

I would say, though, that in terms of the -- from a leadership standpoint, implementing this program has really shown that by being very, very systematic in driving performance inside Neste, we can yield a lot of benefits.

I think the Neste team has learned a lot from these 2 years of running the performance improvement program. We have hundreds of ideas. We have hundreds of people contributing to that. We've been able to find a lot of things turning every rock.

And there are still many ideas out there that we will sort of implement in the coming years. But I think as far as the program is concerned, the sort of the big push has now been accomplished. And we're gradually -- as you can see from the Eeva slide, the cash is coming in, and we're booking them into the profit and loss statement.

The next question comes from Matthew Blair from TPH.

In RP, if we look at the comparable sales margin versus your index, capture rose to 118% in Q2 from 102% in Q1. What were the tailwinds here? And do you think the 118%, is that a reasonable assumption or at least a reasonable baseline for the third quarter? And then my second question, you mentioned the strength of the U.S. RVO.

Do you think the U.S. is going to be short RINs at the end of 2026? Or would you think that the RIN price will move to a level where the U.S. will be attracting significant RD imports? And has Neste received any sort of interest from like U.S. refiners in terms of raising RD flows from Europe to the U.S.

Do you want to start?

Yes. On the RP margin, so with all this volatility and now in the external market, so I would be cautious on drawing conclusions on a single quarter. This is hardly a normalized year.

I think the difference partly between Q1 and Q2 is that we had more levers in Q2. You may remember that Q1, it was a very heavy turnaround quarter. So just kind of less levers to address.

And I think in that sense, obviously very pleased that we're able in a very turbulent environment kind of really drive value. I think it kind of shows and speaks for the sort of improvements we've been able to push through for instance, in our commercial and feedstock operations.

But as I said now, sort of especially Q4 for RP will be sort of very much affected by the turnarounds and by default, our levers will again be slower. So that's maybe good to take into account, Matthew.

Maybe your question about sort of allocation, I would just say that the Martinez volume is roughly about 1/4 of our sales. So the last few years have been very tough in the U.S. market. And now gradually, that business is starting to generate more value.

It also, of course, is then shown in our average sales margin. So people easily forget that we actually have quite a large U.S. presence through Martinez. So happy to see that move upward. For the coming half year with the turnarounds in Singapore and Rotterdam, we're pretty busy taking care of our European customers and Singapore will be contributing in this market.

How does the world then look like in '27 later on, that remains to be seen. Singapore always has the option to ship its products, both East and West, but at the moment, our focus is pretty much more on the European continent, where the demand is also very robust.

And then Martinez, of course, now needs to start proving itself also with a better profitability.

The next question comes from Teodor Sveen-Nilsen from SB1 Markets.

First, a question on dividends and buybacks. Given your very strong year-to-date performance in earnings, how should we think around the dividends and potential buybacks going into next year? Second question, that is just a follow-up on the CapEx guidance.

Is it any cost increases involved in the fact that you lift the low end of the previous guidance? Or is it just more work to be done that has driven that you have removed the low end of the guidance?

Well, I can maybe start with the latter. So now obviously, we gave the guidance in February. So I would say that we had a pretty good view on the sort of cost levels of various components.

Naturally, the Middle East situation has stretched supply chains. So we see inflation in certain areas. But as I said, I think we've been just moving in the range we already guided on.

So it's more a proxy of adding more work in the turnarounds. But yes, but that hopefully answers your question then.

Yes. Regarding your question, regarding dividends and buybacks. So if I recall, we paid for 2025, we paid EUR 154 million, right? And so of course, looking to continue with the dividend payments this year.

The absolute amount, though, we need to see how the year concludes. And then, of course, the Board will make its own recommendation regarding dividend payout.

I think Eeva and I have been very clear that at least management view is that we need to continue deleveraging the company. And we are not there yet.

So that also needs to be factored in as we look at dividends. But as I said, we will come back to that later in the year when we have a chance to get a better view on how the year ends and then see our monetary requirements then for 2027.

Understood. Will you consider any buybacks at all?

I can't comment on that question, sorry.

The next question comes from Nash Cui from Barclays.

Two, please. The first one is on RP term sales. You locked in 60% of your volume in a lower margin environment back in Q4, yet you beat the spot reference on Slide 9, I remember, with record high margin this quarter.

How should we understand the term sale impact on your margin going forward? Or in another way, what have you done right this quarter to achieve such a big margin? And was there any favorable one-off items? And my second question is on RP sales volume for the second half.

I understand there's heavy maintenance in Q4, but how should investors think about sales volume split in 3Q versus 4Q? How much flexibility do you have to front-load the sales into Q3?

Well, if I try to answer both questions. So you may remember that even in term sales, typically, the diesel component is open.

So obviously, we have benefited from that partly hedged. So we haven't got the full impact. But still, I would say that, obviously, in these markets, that has contributed to the term sales as well. We kind of haven't missed that component.

Then like Heikki mentioned in the previous answers, the U.S. impact where clearly in a much better place with our U.S. margins, thanks to a stronger market. So really, those 2, not really any sort of one-offs that, as I said in my commentary, really volume margin, sorry, everything else was pretty marginal in the quarter.

And then when it comes to the sales volumes, so obviously, we will prepare for the fourth quarter turnarounds in the same way as we're doing now in OP, so that we will produce in Q3 to then be able to deliver to our customers in Q4.

So the sales volumes difference maybe is not that significant, but now our focus is clearly in Q3 really to optimize on the production and drive utilization even if we are coming to the sort of end of catalyst in Rotterdam clearly now in the coming weeks.

But that's really -- and then the better we are able to execute the turnarounds, then maybe we have some spot business in Q4 still as an availability opportunity, if you may, if the market continues to be this strong, that would certainly be something we would aim for, but maybe a bit early to comment on that yet.

The next question comes from Yulia Bocharnikova from Goldman Sachs.

May I please follow up on Martinez and the U.S. market. We've seen very strong RIN prices, but also quite significant tally in feedstock prices. Is Martinez exposed to U.S. domestic feedstock price really or maybe there is any opportunity to optimize to maybe import cheaper feedstock from abroad given where RIN prices are? Yes, is it still basically margin dilutive to the overall margin or not anymore?

Well, for Neste, of course, if you recall, we also have our Mahoney business where we're actually heavily involved in the [ UCO ] collection ourselves locally. So that gives us in some ways, it's sort of a physical hedge because as the prices go up, of course, we benefit from the Mahoney side.

So that does adjust -- I think overall, the decisions on the feedstock choices are made by the joint venture, and they make their decisions independently. And it's their decision then to decide how they optimize that.

The next question comes from Henry Tarr from Berenberg.

Two from me, please. The first one is just was there an impact of hedging on the results as you look for Q2? And the second one, I think you mentioned earlier that you were looking at lignocellulosic potentially. So could you give a little more color on that as a technology and how interesting you find it?

So, maybe you touch on the hedging, and I'll comment on ligno.

Sure. So it had less impact in the quarter. I mean the movements were big, but we had perhaps more netting than we even estimated ourselves in the sense that, obviously, from the gas oil hedges, we continue to take a hit.

We have hedged at very different levels before the Middle East crisis, obviously, and that continues to come through. But then again, on the feedstock side, we had a positive hedging result as some of the feedstocks took quite a big jump, especially in the U.S. market. So the net impact was rather modest. And hence, I didn't flag it earlier either.

In terms of your question regarding ligno, Neste is the world's largest buyer of these waste and residues. If we look into the 2030s, we still see ample supply available on these feedstocks, cooking oil, animal fats, novel vegetable oils.

But of course, as we develop our business over decades, we need to also consider what would be the next source of feedstocks beyond and the ligno pool is substantially larger than what we have in waste and residue. Technology is complex. We've been developing it for some years. We believe we're on to something, but there will be phases where we will need to pilot this more on industrial scale or before pre-industrial scale before we really know.

So I would just say that we have wanted to mention ligno to provide the markets with an understanding that we believe there is a chance to develop a source for material molecules beyond waste and residue. And this is what we're driving for, but this is definitely a 2030s story. So before 2030, no, we will not be in industrial production.

The next question comes from Christopher Kuplent from BofA.

Just 2 more from me, if I may. Firstly, I appreciate, Eeva, you couldn't give us an update on the Rotterdam budget, but maybe you can talk us through the time line. We've approached 2027 by another 3 quarters.

So I wonder whether you can be more specific around when you expect first production and probably more importantly, about the expected ramp-up period because as far as I recall, the Singapore new line that is now going back into maintenance did have, let's say, a rough start.

So I wonder whether you've taken any lessons from that in order to prepare for a smoother ramp-up, shorter ramp-up period in Rotterdam and then secondly, looking at your H1 run rate for CapEx, would it be fair to say that EUR 200 million ex turnarounds is a useful calculation to then say, okay, in the second half, you're obviously busier on turnarounds. So they will cost you an extra EUR 400 million. Is that a fair calculation?

Well, if I Heikki take the first one and then come back -- take the one on the RDCG. So Christopher, Q1 also had its turnaround. So we had a turnaround in Martinez. We had a turnaround on the other Singapore line.

So I think drawing the conclusion that it will be sort of outside of turnarounds maybe is too bold statement. The big differentiating factor perhaps is just that the OP Porvoo turnaround is -- we're talking about EUR 400 million alone in that. And that really all comes in mostly in Q3, probably some tails cash out still in Q4. Obviously, all the invoices will not come in Q3. So that really is the moving. And then the slightly additional spend on the 2 RP turnarounds.

Yes. The Singapore start was not the easiest. I think we've historically had a reasonable good track record, but Singapore was not an easy start. Granted though we were also post-COVID, maybe that time period added to some of the challenges.

But we've done a lot of internal analysis and reckoning on what went well and what didn't well. We've moved a number of the people who were actually working on the Singapore start-up. They're now working in Rotterdam. So we've tried to make sure that, that knowledge is and has been transferred.

So I think that is an important step in terms of how we how we staff the team. At this stage, 2027 start is what we're able to communicate. We're not able to give you a more accurate timing at this time. But when we have a better understanding, we will, of course, be communicating it to the markets, but still need to be patient.

The next question comes from Artem Beletski from SEB.

Still to go from my end. So the first one is relating to renewable products. And could you maybe comment on fixed cost outlook for second half of this year? And has there been something exceptional in Q2? And then coming to oil products, and could you maybe talk about the opportunities to lock in product margins within the segment to any meaningful extent when it comes to volumes, given the fact that spot margins are extremely high, so also forward cracks have moved up quite substantially.

If I start with the fixed cost in RP. So obviously, there's some seasonality between the quarters and then maybe a sort of positive issue per se, but obviously, with the high result from RP, we've increased the bonuses, and that's actually to an extent that is visible if you compare Q2 and Q1 fixed cost.

Everything else, I think, more falls in the line of the seasonality. And then, of course, it does -- a lower utilization usually brings a certain sort of hassle cost and these, and we've had some of that certainly in the first half.

So aiming for a better situation in the second half. But that, of course, remains to be sort of proven.

Then on OP, well, in terms of our customer base, so most of our sales are in the Nordic markets, and we have a certain amount of larger B2B fuel distributors with whom we do business.

These are usually annual negotiations for the following year. So I think your question was asked already earlier that these are sort of on the higher level side. We just need to see how the conversations then go with the customers in the autumn period and what they need and what they would like to have. And then we will make proposals and negotiate accordingly. And let's see where we end up for 2027. So...

And maybe just adding, Artem, to that, that obviously, the turnaround kind of limits a bit our ability to use all the levers in a way, we have to be a bit cautious on how much product we have at hand because the turnaround success is obviously highly important to that. And let's hope we have an opportunity to optimize then in Q4 when we're back up.

The next question comes from Alice Winograd from Morgan Stanley.

I have a couple of questions, please. First, I would say, more structurally, there's been a huge amount of volatility in prices.

Last year, there was the rally into year-end. And then this year, there's the Middle East, there's the ramp in the U.S. mandate. So I'm interested in -- do you see a change in consumer behavior? Are people interested in locking in potentially longer-term supply contracts or to change pricing structure, so they're less exposed to the volatility? And second, on the cost side, have there been any other costs other than feedstock that could affect capture rates in this disruption? So for instance, shipping, natural gas, hydrogen, interested in your views.

Well, if I start with the volatility, yes, I mean, of course, the problem is you're always when you have volatility, what type of a scenario are you reacting towards or trying to mitigate or minimize.

And this has been a bit of a guessing game here because we've -- all of these -- I guess, I would call them shocks in some ways have been coming from unexpected directions.

But I have to say that our customer needs vary really significantly. There are some customers who much more want security and guarantee and others who are big buyers and then maybe the part they buy from Neste is more variable.

So it's really -- I cannot generalize because as I said, the customers' needs are so different across the spectrum of customers we have but I would agree with you the volatility has been significant.

And it doesn't make the negotiations easier because you always are not sure exactly are we -- is this the right solution then for the next year? But I guess that's just a sign of times we're living now at the moment.

And then Alice, to your second question, so you raised a good point that shipping costs have obviously also been impacted by the disruptions in geopolitics, and we've seen them sort of hike up significantly.

Now fortunately, we've had since last year quite a lot of the performance improvement actions really on logistics because clearly, that was an area where we had to do much better and the timing has been right is we really needed to sort of up our game to face this year's market.

It continues, obviously, as now the re-escalation continues to be something that we need to sort of be very closely monitoring and trying to optimize that how we sort of route and how we plan for logistics.

And then as Heikki mentioned also in his opportunities and risk slide that just availability of certain components and is in this type of environment, just very important. So we have a lot of extra work going around now just to sort of be very -- know exactly what we have, what we're going to need, plan ahead with the suppliers, working much, much more closely with them to ensure that we don't get any production issues, which obviously in this market would be extremely costly.

So we're trying at all costs to avoid any disruption. But it's certainly -- that's why we also highlighted in the risks.

The next question comes from Matt Lofting from JPM.

I wanted to ask you about operational performance, the journey that you're on and how that interacts with future maintenance requirements on the renewable refinery assets, 8 and 11 weeks into the sort of the second half of the year, respectively, obviously, relatively long duration schedules.

When you look beyond the second half of this year and the investment and maintenance cycles for 2027 plus, should we expect sort of similar duration in the future is required in order to get the assets to where they need to be on a midterm basis? And where also do you think sort of CapEx 2027, 2028 as Rotterdam phases off settles relative to the EUR 1.2 billion for 2026?

If I just start with operational performance and then Eeva, you can talk about the CapEx numbers. But I would go back to my earlier comment that the utilization levels need to be higher than what we see in RP.

And clearly, we have been on a journey -- of course, there's starting up these facilities. I think we talked about the Singapore challenges. I think overall, Singapore has moved in a much better direction.

The longer duration, as I said before, for line #2, that's partially linked to the fact that we have the first major turnaround after the start-up. But overall, we do see that the operational performance and utilization level is going to require making certain modifications to the lines and augmenting the materials.

And that also relates to the fact that we're trying to push into more and more into the tougher segments of feedstocks and tougher segments of the business where the premiums are higher.

And there's attractive business case for doing that and the combination of monetary margin potential there, but then also just getting the utilization levels up, that's the driver behind the TAs.

I can guarantee you, we have looked at the time needed for these TAs with a really fine tooth comb. Every single extra day, if we can shorten it, we will do it but that is just getting a number of things into these refineries.

It just takes -- it's labor, it takes people. And you have to do -- the installations have to be done really professionally and well.

So the quality of the maintenance work is high quality. So I'd rather take a few more days to make sure the work is really well done than maybe do a shortcut and then we have issues. Ultimately, we have to run these refineries in a very safe way, and we're not going to take any risks on that.

And then to your question on the CapEx. So obviously, the Rotterdam growth project has been -- had a heavy impact on our CapEx needs for now a couple of years and tails then in '27, but then from '28 onwards, that will move out.

I think it's a bit early to guide on '27, '28 otherwise. But I'd just say that I think our job with Heikki is obviously to drive return for our shareholders.

And if it then requires CapEx where we have attractive paybacks, then we will look at them. You can expect us to sort of want to push forward with them and whereas then if we don't see the proper returns, then we will be much tighter on CapEx.

So there's good and bad CapEx in my books and a lot of gray in between. So it's really how rather than focusing on the numbers, especially, I think we will be in a very different place from a financial position point of view at the end of this year. And I take that as purely a positive because then it gives us opportunity and options to look at options that we didn't perhaps have 1.5 years back.

So I think the turnaround we've done has been tremendously important, successful so far and really sort of will enable us to make then the right decisions for future returns.

The next question comes from Tony Jones from Rothschild.

I just have one left on working capital. Inventory in the quarter was up nearly EUR 1 billion year-on-year. Could you give us a bit of an indication how much of that is finished product versus inflation and the mechanics of how that might unwind and the timing in the second half?

Well, I would maybe sort of shy away from giving you exact numbers. It is specifically the volume in OP.

But of course, it is combined with the fact that we've added volume. You get a good proxy if you look at the sort of what we didn't sell versus produce, you get an idea on the inventories and then obviously, the sort of market prices whilst they were slightly lower at the end of the quarter, now they're back up again. So that's maybe good to take into account. So both aspects were important.

The one we can work with is the inventory volumes, and that's why I said that we're obviously focused on delivering better cash flow than for the full year, but that will very much sort of be a Q4 question. And in Q3, then there's less we can do and then we're more sort of need to sort of to see what happens on the market prices.

The next question comes from Matti Kaurola from OP Corporate Bank.

I think we've been addressing a lot of the short-term [indiscernible] in COVID.

But in the longer term, your market intelligence team has very, very well slide about demand growth, it's quite first what we saw in '23 when they were hinting about the kind of oversupply in the near term.

So my question is like in the longer term, how do you see the soft market going? Like there is European demand growth, but is that taking place in 2030 when there is going to be a big jump in kind of mandate? Or is there more kind of a linear part what you are assuming? And then the second one, I'd like to address about the volumes next year.

I think Eeva, you told us during the Q3 call that for this year, 80% utilization rate would have been justified. But if we think next year, is that something after the capacity creeps or the bottlenecking that we could take as a baseline?

Well, I can maybe start with my previous comment that that's why we call 75% unsatisfactory that we're not at 80%.

But then Heikki to the SAF question and how we see that.

Well, we hope it would be more linear. At the moment, things are moving forward. I think SAF this year, and I think that the mandates, we believe, will go up, even though there's certain industry participants are pushing back on that.

I do believe we're going to see higher mandates. And I would be personally very surprised if that 2030 6% were to be withdrawn. But I think it's going to be more and more heading towards the 2030s.

As said earlier, for Neste, of course, the great thing is we can optimize between SAF and renewable diesel. We have this optionality is a real asset for us in the company.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

So thank you very much for the call today in the middle of the summer. As I said, it's been an exciting quarter for Neste, all-time high results, something, of course, we're super happy about. We're pleased about the fact that the financial position is stronger, and Eeva mentioned also the Moody's rating matter.

On the regulatory development, I just want to underscore the fact that, I mean, these are major decisions now that the member states have made. We believe this is a strong tailwind for the sector. And the situation with Hormuz, of course, will raise this whole question of energy security to a much more bigger topic.

So that's why I believe this tailwind we're getting from regulatory side will be strong and more durable than maybe in the past. And overall, we're well positioned to capture market opportunities.

We will invest in these lines to get these utilization levels on RP higher. And I think that positions Neste really well then for the future. And when we add Rotterdam 2 line coming, I think that puts Neste in a good position for the coming years.

So with those words, I hope you all enjoy your summer vacation, and we will then see you again later in the fall when we report back on Q3 results. Take care. Bye-bye.

Good afternoon, everybody, and welcome to discuss Neste's Q1 results that were published this morning. My name is Jukka Metten, Vice President of Investor Relations at Neste. Here with me, we have our CEO and President, Heikki Malinen; and our CFO, Eeva Sipila.

We are referring to the presentation that was launched on our website early this morning. The key highlights of our presentation include today, our position in the ongoing market volatility, our Q1 financial performance. We will also cover the status of our performance improvement program and the progress towards our financial targets.

We are also discussing our near-term focus areas as well as the current opportunities and uncertainties. We will have time for discussions with all of you, and please pay attention to the disclaimer as we will be making forward-looking statements in this call.

With these remarks, I would like to hand over to our President and CEO, Heikki Malinen. Heikki, please, the floor is yours.

Thank you, Jukka. Good morning, good afternoon, everybody. Welcome also on my behalf to the Neste Q1 call. Really great to be here today again with Eeva. Let's start with the summary for the first quarter. Five main highlights, obviously, as we all know, we had tremendous market volatility originating from the Iran crisis, especially during the month of March.

And I can say Neste, we feel was able to manage through that volatility period pretty well.

Our financial performance for the first quarter was really good. Looking at the levels we achieved, I'm very satisfied with the absolute profit. Our utilization at in the RP business was low. We'll come back to that. We could have done somewhat better. There's still work to be done. I'll talk about that. The execution of our performance improvement program continues really well.

Eeva will give you some more update on that. But I would just say that overall, I'm very pleased with how the team at Neste is executing the program.

And then finally, the work on the Rotterdam line #2 investment continues. The closer we get to 2027, I think the more clear it is that the timing of the investment is good, and we really look forward to getting our production up and running then in 2027. But as always, at Neste, we start with safety. Safety is our, so to speak, our license to operate, and we are striving to improve our safety, both in terms of employee safety, which we measure as TRIF, it's recordable incident frequency and then process safety.

We have a very systematic 5-year road map that we're executing. However, if we look at the results for the first quarter, I'm not very pleased. We have not been able in TRIF to move the needle downward trending sideways. And in particular, here in the Nordic region and in the United States, the cold harsh winter did impact our safety. We should have been able to perform even better as winter comes every year. But that is a work that we need to then learn on.

On the process safety side, also, we had a few -- very few but still events, and they raised then the score in the wrong direction. So as I said, safety is #1 topic, and it is absolutely the highest priority for myself and my colleagues within the Neste organization. Then if we look at the figures, again, maybe the six main numbers, and Eeva will talk about them. Obviously, on the left-hand side, renewable product sales volume, 874,000 tons. You can see that we had the turnarounds, both in Martinez and in Singapore, line #1. And then we will talk about the other topic from Singapore production. But as I said, we are at the [ 874 ] and would have, of course, liked to have a tad more.

The margin -- sales margin for renewables was very strong, $856 per ton compared to where we were just a bit over a year ago, and in 2024, in the last quarter, we've come a long way. Our margins are now clearly much better, which, of course, considering also how much capital we have invested in the business, these margins are necessary in order for us then to get good returns on the investment.

On the right-hand side, you can see Oil Products refining margin, $23 per barrel. It is an improvement from the previous quarter, just as a recognition where we were a year ago, we were less than $10. So again, significant improvement in refining margins in the Oil Products business. EUR 861 million of comparable EBITDA, and our free cash flow was very, very positive. And we, of course, are pleased with that because it impacts our leverage.

As, we all know, the markets were very volatile. For those of you who don't follow this that closely, I think the message we want to say to you here is threefold. We've seen significant volatility in crude oil prices. I think Neste was able to manage the volatility pretty well. Subsequently, we saw significant spikes in diesel pricing and jet fuel pricing. When we look at our renewable diesel and SAF business, so there is an interlinkage between those prices and also the fossil version of fuel.

And Neste's one big strength is that our product positioning is very much in the middle distillate. So we are primarily a diesel and jet fuel producer, both for renewable and fossil. And our product positioning, of course, is good given the circumstances we are now facing in the energy markets. And what is very important to note is that if you look at the renewable feedstock prices, maybe you cannot really see that well from this graph, but the message we want to communicate to you is that the feedstock prices, animal fats, cooking oil, et cetera, in the markets where we buy most of our volumes, they were fairly stable.

We did see some movement towards the end of the quarter, originating initially from the U.S. following the big RVO decision. So you saw soybean oil movement. You saw then animal fats in some markets in Asia move. But overall, for Neste, the feedstock cost overall burden stayed fairly stable. And I think that is an outcome of the fact that our sourcing is very diversified globally, and we're able to then always optimize and try to go for a lower cost position.

Now if we talk about where the world is today and geopolitics, of course, very important is to understand where does actually Neste produce its products. And as you can see, we are logistically and location-wise, far away from the crisis areas. In the Nordics, with the Porvoo refinery, we source most of our crude from the North Sea. In Netherlands, West Coast of the U.S., I think overall, our geographic footprint is good and helps us in this situation to stay away from the conflict area. As I said, our crude supply was stable, and we were not from a supply standpoint, impacted by the crisis.

So I think that shows that it puts Neste comparatively in a good position. Those were my initial remarks. I'll now hand it over to Eeva to go through the financials, and then I'll come back and talk a bit more about Neste and where we are. So let's click and Eeva, please.

Thank you, Heikki, and good afternoon, everyone, on my behalf as well. Starting with renewable diesel reference gross margin. As you can see, it pretty much was an upward trend throughout the first quarter, supported by the anticipation of positive regulatory news from both U.S. and Europe. Neste comparable EBITDA reached EUR 861 million for the quarter.

In Renewable Products, the EUR 433 million was reflecting the significantly higher sales -- term sales premiums this year, something we indicated already -- last time we were here that we're going to have a stronger year from the term sales premium point of view. But then obviously, of course, the gas oil surge in March had a positive impact.

In Oil Products, EUR 337 million and supported first by a cold winter. So we had a good January, February from a weather point of view. Cold is always good for us from a -- for the demand of our key products. And then in March, the Middle East conflict.

In Marketing & Services, EUR 48 million for the quarter, similar to Oil Products, driven by first a couple of good cold months, but then also the conflict resulted in a relatively high inventory gain in March, and that's visible in our results.

Our performance improvement program continues very solid and strong progress. We achieved EUR 115 million, 1-1-5, of EBITDA as an impact in the quarter. And in total, we've now so far reached a run rate -- annualized run rate of EUR 476 million of EBITDA. And we have a pretty balanced mix. I'd say we're moving a bit more from purely sort of cost reduction to also revenue and margin optimization. So 64% versus 36% [indiscernible] from -- between the two main areas.

Then if we move into the sort of segments and look a bit more detail into them and starting obviously with Renewable Products. So as you can see from the graph on the left, so indeed, the sales volume was clearly low due to turnarounds, but also an equipment replacement delay in Singapore, which affected our March volumes. Maybe something good worthwhile noting that as of the beginning of this year, we are now including in these sales volumes also our trading volumes.

They are still very small in the total, but it's something that we see the market evolving and something, obviously, that we're building capabilities for. And hence, we feel that this is -- this was the time to start including them in net sales. Now of course, the light blue line on the left-hand side, the sales margin is one that strikes out and clearly sort of rising to $856 million -- $856 per ton is something that was very supportive for our result. And on the right-hand side, we compare the fourth quarter and this now recent quarter and obviously, a very big improvement. Sales volumes were negative, but then again, the sales margin more than outweighed that impact. As you can see from the few smaller numbers, so we were very focused on renewable diesel. We said already entering this year that we expect the market for -- market demand for SAF to be slow in the first part of the year.

And because of the price difference not being attractive enough, we did indeed very much focus on renewable diesel in our sales. And then on the fixed cost, you don't see much of a movement, a slight decrease, but that, of course, includes slightly higher maintenance costs and some sort of fixed costs that come in the early part of the year. So nothing significant in them as such.

Moving then to Oil Products. So here, obviously, the left-hand graph, you see the blue columns and indicating our very strong refining margin for the quarter, $23. And indeed, we had a healthy January, February. So good margins also for those two months, but then really the spike in March due to the Middle East conflict was the one that took us this high.

It's important to understand that the sort of how rapidly the crisis hit in March meant that during the first quarter, we were still in our production using crude that was purchased prior to the conflict. And as we sort of typically have sort of one to two months -- less than two months difference from procurement to actual sort of running in production, this means that we're currently already now running with crude prices that are at a very different level reflected by the conflict. And hence, the margin -- refining margin for Q2 will be lower due to that.

And then whenever the conflict ends, hopefully sooner than later, it's good to note that we will obviously have 1, 2 months negative of the fact that we will be then running with higher cost crude in our production system before then any sort of reduced pricing comes through the system. As Heikki already mentioned, so we are mainly procuring from the North Sea. So availability hasn't been an issue. But really, the sort of prices are obviously reflecting the fact that there's a lot more buyers for North Sea oil as well now that the straight is closed.

Marketing and Services, similar to Oil Products really, so a strong quarter, thanks to the cold winter. And then indeed, the inventory gain is something worth noting that had a big impact in the quarterly margins. Also, what you see here is in the fixed cost, they're slightly up. We have a pretty busy investment program ongoing in our retail network in Finland, and that is reflected in that number.

Moving then to group figures again. So we had a busy investment quarter. The Rotterdam expansion, you'll soon hear and see more about it, is ongoing, progressing very actively. So EUR 206 million cash out investments in the quarter. Now despite this, we delivered healthy cash flow of EUR 286 million before financing activities. And we're obviously very pleased with that. This is very much driven by the strong financial result which enabled us to really have a step change down in our leverage. Very pleased to be at 31.7% at the end of the quarter. And this means, obviously, that we are tracking very well on both of our financial targets already this early in the year.

So with that, I would hand it back to you, Heikki.

Thank you very much. So let's talk about a couple of other subjects. I want to show a slide here that goes through some of our key priorities. It's obvious that for us at Neste, improving our refinery performance on the renewable side is absolute priority in addition, of course, to the safety matter I showed earlier on.

Our utilization level in RP for the first quarter was low. We did have turnarounds in Singapore, line #1 and also in Martinez, these were planned and there is -- the turnarounds went well. But after the Singapore turnaround, we had an installation of critical equipment, which did not proceed according to our own expectations. And that has created a delay in taking that equipment into use. And that is the explanation why then our output or utilization in Q1 for RP was below our own expectations.

We are going to have a major turnaround in Porvoo in the second quarter, after the summer holidays. This turnaround is very critical for us. We planned it very thoroughly. We've taken a lot of time to make sure that everything is ready. And I have strong confidence in the team's ability to deliver on that turnaround. You may ask, well, given the market situation, could we postpone the turnaround?

Unfortunately, the case is that technically and for safety reasons and also for permitting reasons, we will have to execute the turnaround. And we will do it as professionally and as timely as it is possible. So I said, I have good confidence in the Neste team. Turbulence in our markets continue. We continue to navigate and try to take advantage of all the opportunities. Eeva already mentioned briefly about trading. We've started to do that with limited volumes. It's still early days. But also as the market for renewables grows, it will, in the coming years, most likely also provide more opportunities for trading and Neste also wants as a major supplier, wants also to participate in creating more liquidity into the market and taking advantage of the positions we have, whether it's on the feedstock side or on the final product [ for outside. ]

And then finally, on the foundation of Neste, we've talked a lot about our performance improvement program. We have reduced our fixed costs. I think our fixed cost base is now solid. We have improved many of our processes. I think we're better buyers we were in the past. All of this is providing us with greater efficiency and cost competitiveness, which are, of course, fundamental backbones of being a world leader in our industry.

On advocacy, that is a very important part of our business. As you know, advocacy is basically what creates demand in some ways, and we can't really sell before we have the demand creation. It will be interesting to see how this Iran conflict, whether that, in some way, will positively accelerate the, let's say, the adoption of these new fuels like the ones we produce.

Now we've talked a bit about Rotterdam in the past that we've never shown a video. So what I will do is I will click the button here. Let's see if this video comes on screen and you can enjoy a minute looking at what's happening in Rotterdam from the -- from aerial view, so to speak. So here we go.

[Presentation]

So there you have it. That is -- it's an exciting project. I have to say, I go there frequently. And every time I go, I just wonder as you know, the skill and the work results of our engineers and construction partners. But I said, as you can see from the video, the project is moving forward. It is being built step by step. And then in '27, we will start production. It's a complex project. We've taken advantage of the learnings from Singapore.

But as I said, every project of this magnitude is its own [ animal ] in many ways, and there's a lot of work to be done. The safety track record of the project has been really good. We've had very few in the construction side. And I think that this is also a good signal on the quality of the initiative underway. But as I said, building these types of refineries in Europe is something that hasn't happened really for many years. We've had a few industrial projects in Europe. So it is, in some ways, also one-of-a-kind activity here in Heartland of European Union.

Then a few words about short-term opportunities and uncertainties. I think the -- as I said in my previous slide before we -- I saw the Rotterdam video is that I think it's going to be very interesting to see what impact the Iran crisis has on the discussion about energy security. If you look at the debate we're going to have, it's going to be about how much energy supply do you need to have within the domestic markets? Where do you supply the feedstocks from where do the crude oil supply come from and so forth? So I think given our geographic location in Singapore, Netherlands, Finland and the United States, I think in that discussion, I think we should be pretty well positioned.

Regarding regulatory developments, the last months have been very positive. We have in the United States, a historic renewable volume obligation decision by the U.S. government. It is very positive in terms of volume increase -- and as it gets implemented, it will bode well for our Martinez refinery. We're, of course, very pleased with the decision. We also -- remember, we also have the Mahoney business in the U.S., where major collector of cooking oil from over 100,000 kitchens in the U.S. So we also have good supply of feedstocks for our joint venture operations in California.

And then in terms of European regulation, RED III implementation goes forward, Germany is now very close to making its final decision in parliament. And based on our understanding, the Environmental Committee of the Parliament has now reviewed the matter. They made their recommendation that should be coming to a vote in the early month -- early weeks of May. And looking at the proposal that they have, the way the text is written, it's also very positive for Neste, not only in terms of the increase when passed, European demand starting from Germany will increase from 4.5 million, 5 million tons to over 10 million tons by the end of the decade. So that's a big demand increase in renewable diesel.

We look at that policy. It's very attractive from the feedstock selection part. Double counting will most likely be eliminated, that's positive, and there are very strict requirements regarding control and monitoring of supply audits, checks on refineries and that, of course, is something Neste wants that the quality and, let's say, assurance of the feedstocks that are being used is tightly controlled, that is Neste positive.

As I said earlier, we're in a good position because of our presence in the middle distillates market. We know the jet fuel market is fairly tight. We provide jet fuel mainly for our domestic markets here in the Helsinka-Vanta Airport and the environment close by. And as I said, as we improve our capacity utilization in renewables, we will have more volume. On uncertainties, well, geopolitical circumstances are very complicated matters. As we know, they take time to resolve, and I think we will refrain from making any forecast on how the matters will evolve.

I think the only main point for me really is that for Neste's renewable business, the conflict in Iran does not really impact us from the supply standpoint. And I'm also confident that our sourcing of crude oil from North Sea is in good shape. So those are roughly the main points we wanted to show today before we take your questions. We have the outlook. The outlook basically is unchanged. So I won't go into that any further.

And with those, I guess we're ready to take the questions. Thank you.

[Operator Instructions] The next question comes from Alejandro Vigil from Santander.

Congratulations for the strong results. The first question is about the volatility we are seeing in conventional products. How are you taking this opportunity in terms of margins? How much of your volumes for the rest of the year are already sold with fixed conditions? That will be the first question. And the second question is about the Rotterdam project. The start-up during '27, you think it's going to be a low-end process or you are expecting a material contribution from Rotterdam already in '27?

Thank you, Alejandro. So Eeva, you fill in. But I think regarding volatility regarding the renewable products business, as we said, we have termed half of our business, about 60% for this year. So -- but let's see how our utilization now develops out of Singapore, how we get that solved.

So of course, we're trying to get this matter resolved very quickly and we get more volume, but half of it is termed. Then on -- on the Rotterdam start-up curve, so I really want to refrain from making any comments on that yet. I think it's a very complex project. I recall we have was it in terms of just flanges. I think there are almost like 0.5 million flange connections, which have to be checked and tested -- so this is a huge refinery. And what is most important is that we have a safe start, even if it's a bit slower, but safe and stable start so that when we make commitments about volumes, then we will not have a repeat of what we had when we had the Singapore start. So we really want to avoid that under all circumstances. Anything you want to say about the volatility and how we can take advantage of it?

Yes. I think we're doing obviously our best to take the opportunities the market has, but we are that, I would say, more volume constrained. So that obviously limits the opportunities to a large degree. But obviously, being agile. And I think our Q1 results prove that we did a pretty good job with our teams in all of the segments.

The next question comes from Adnan Dhanani from RBC.

Two for me, please. Just the first one, obviously, there's been a big shock in the energy system from the conflict in Iran. There's likely to be some rethink of energy policy here. You've noted this as an opportunity for renewables in your presentation. If I flip that around, if there are continued energy affordability concerns, do you see any risk on the policy front as it relates to the mandates in Europe and elsewhere, particularly given how reliant you are on these mandates in the RP business?

And just the second one on the Oil Products business. The utilization rates were slightly below where it has been in recent quarters. Are there any issues here that may restrict you from running higher rates in the coming weeks and months and not fully realizing the margins that we're seeing in the market before you go offline for the turnaround?

Thank you very much. Your question about energy policy, of course, it's important. It is something that Neste is, of course, dependent upon. I think that is the fact -- we had here recently in Finland, a debate in the government around what to do with the renewable fuel obligation. And the outcome of that debate was ultimately that the government decided to keep the mandates in place.

And I think the decision was very clear that, that is the intent of the government. So I think that is also sending a strong signal. I've also made the comment very broadly that this is not only a question about fuel supply, but it is also about fuel security. The thing with renewable fuels and also having domestic supply is something that is in a moment when there could be big shortages. And we know that, for example, in some countries, there are serious shortages on jet fuel. So for Neste, it's -- I think we're well positioned.

So at the moment, and especially if this German decision now goes through in May, I think the policy concern is much less of a concern than rather it could be a very good tailwind for us in the coming years. So that's our read on that as we speak. Regarding oil products utilization, so we were 2 percentage points below the previous reference number, so a bit below. But I think overall, I think Provoo is running smoothly. So the only thing that you need to have in your models is the turnaround, and we will do our utmost to get it done in the shortest possible time as long as it is safe. So no visible concerns there.

The next question comes from Derrick Whitfield from Texas Capital.

Congrats on your results. I have two questions. So first, with the benefit of clear regulatory policy in the U.S. and exceptionally strong diesel and jet crack spreads in EU and Asia, how are you thinking about the allocation of RP sales across your end markets? And second, could you elaborate on the trends you're seeing across the global waste-focused feedstock markets referenced in Slide 30, it appears the EU markets are depressed relative to the U.S. markets. Are you also seeing that in other Eastern markets for fats and greases and PFAD?

Okay. Thank you very much for your comments, Derrick. Well, I think the decision in the United States regarding RVO is, of course, very positive. for Martinez. If you recall, looking at the margin levels and the oversupply we have had in the U.S., this should start balancing out. So we can, of course, not say how close to balance the U.S. market is at. That calculation is very difficult to make.

But I think, anyway, we can see that the market is balancing and of course, the margins, if you look at the spot margins, they are moving in the right direction. And now that we have the Martinez turnaround behind us, we should be good to go and get that volume out. In terms of your question about optimizing volume, so following the loss of the BTC, so our Singapore volume has been going to Europe to a large degree, and that is the current status of affairs. So we've been very clear that as we've committed so much capital to this business, we need to now get the returns.

So we will, of course, be optimizing globally, our volume, especially out of Singapore, depending on how the margin levels vary, so U.S. is the large market, but we'll just have to see how this all evolves. But as I said, we're very, very pleased with the decisions taken by the current administration. Then regarding your question about feedstock prices. So it was evident that when the RVO was announced in the U.S. or maybe a bit before that, we saw soybean prices -- soybean oil prices go up.

We then saw animal fat prices in Australia move upward. They were very actually -- I recall mentioning in one of the calls that the ANZ animal fat prices were actually fairly low. So that has now corrected itself quite rapidly. And so they're not anymore at the low levels they were just some months ago. So that clearly is a bit of a signal that there's increasing demand coming out of the United States, which is then impacting animal fat demand in some parts of the -- Western part of the Pacific.

Regarding UCO, fairly stable European market has been overall quite, I think you know subdued, I don't know if subdued is the word, but fairly stable. And as you know, we also have now sourcing from Brazil for animal fat. So we have now multiple options on how we can play. Maybe one important thing is still coming back to European policy is that in some European countries, animal fat has not been accepted. And some of the regulation seems to be going in that direction that maybe even animal fat could be, to some degree, approved or accepted. So if that happens, that will be a net positive and give us more tools to play as we optimize our own production. So overall, I think we really -- I think we're well positioned, if I may say that way.

The next question comes from Paul Redman from BNP Paribas.

Two questions. The first one is on the renewable fuel margin. I know you put up a chart that kind of implies that margins at the end of 1Q were close to $1,300 a ton. Is there anything you can talk about what you've seen in April? Have the margins been higher, lower, broadly in line? Anything you kind of mentioned there?

And then I guess the next question is a strategic question. The balance sheet is degearing, it dropped from 40%, roughly 40% in 3Q '25 down to 32% today. If these current margins persist, clearly, the balance sheet is going to deleverage even further. Do you have an optimal balance sheet level that you think about or work towards? And if you reach that, what are your priorities at that point? Is it CapEx? Is it capital allocation to shareholders? Is it [indiscernible] inorganic acquisition and growth? Can you just kind of talk about your early thoughts on capital allocation?

So maybe, Eeva, you take a crack at the first one, and I'll start with the second, and then you can fill in the gaps, so to speak.

Yes. So Paul, so we've seen a healthy renewable fuels market also in April. And of course, it's supported by the gas oil prices that are a result of the conflict ongoing, but that's kind of -- has been, in that sense, healthy start for the quarter. And then to the balance sheet.

Yes. So -- of course, we're very pleased with the good cash flow. We, of course, needed a lot of money for Rotterdam, but still the cash flow is good. My own personal point of view, and I think Eva shares it is that we are very much on the deleveraging in the deleveraging category or deleveraging camp.

I personally believe that if a business is this volatile in terms of earnings profile, the balance sheet should be fairly robust. And so if you ask me about priorities, where to use this money, I would very much vote for deleveraging. Going then forward, a longer term, your question about where are we going to use incremental funds if and when they arrive, and hopefully, of course, they will come, but let's see.

We now have Rotterdam as a major investment. We need to get that up and running. We are, of course, looking through our whole system if there are any more debottlenecking opportunities and hopefully, there will be in the coming years. That, of course, will require some capital, but obviously, less than a greenfield. And then what happens after Rotterdam, I think that is a very much open question.

At Neste, that is not a question we're spending -- the team Neste is spending much time on. I think about it and Eeva as well. But I think our focus is now on getting everything we have out of our existing system, getting Rotterdam to up and running. And then we'll just have to see what the world looks like. And then what has been the trajectory of travel as we head into the 30s.

But I think we have good capacity now. Let's work with what we have and make the best out of that first and try to get our returns up to the levels we want them to be. How is that?

Yes, I fully agree. And I think, obviously, it's an exciting time to be in the energy space. And we definitely see growth opportunities, but the time is perhaps not quite yet. And hence, it's really building on our capabilities then to take on those opportunities.

The next question comes from Artem Beletski from SEB.

I have two to be asked. So the first one is relating to renewable sales margin and it indeed jumped to almost USD 400 per ton compared to fourth quarter of this year. Could you maybe talk about the magnitude of impact coming from renewal of term contracts and then the other topic what you highlighted was higher gas oil prices? And maybe what comes to pretty low utilization rate in the quarter. So did it have adverse impact on the margin?

And the second question what I had was relating to regulation, and you did mention RED III implementation in Germany. So we are close to the finish line, so to speak. Maybe you can remind us, so do you still see that volume impact for this year could be 1.5 million tons or something more what comes to Germany and the smaller market where Red III has been approved is Netherlands. So what is the impact from regulatory changes on that front?

Maybe you take the first one, I'll talk on the second one.

Sure. Yes. So Artem, the term contract impact is the one I would highlight. We -- like we indicated in February, I believe we talked about a significant step change in them. You are right to point out that obviously, with the lower production, we had higher production costs in the quarter, and that kind of had a negative impact on the margin as well. I'd say the sort of gas oil impact came, it was pretty much the last weeks of the quarter. So yes, obviously, an impact, but I think a bigger impact than for Q2.

Regarding your question about the volume increase, our own calculations are indicating that in the '26, '27 window, we're talking between 1.5 million to 2 million. We're not able to more accurately at this stage, model exactly what year and what volume. But I think the important point here is the direction of travel.

We basically -- given the volume we have, we can sell that the market is there. I think the only thing maybe I want to just mention here is that if fuel prices remain very high or even if they were to rise, there will be some amount of demand elasticity, especially on the B2C side. And we have seen here in the Nordics in our domestic markets, some pullback in end consumer fuel consumption, maybe less, let's say, 6%, 7%, but it's still very early days. It's such a short amount of data from about four weeks or so.

So you can't really draw bigger conclusions. But of course, if fuel is very high on the B2C side, you will see probably some demand decline. How much would that would then impact RD I cannot say. But overall, I think the key message when you model is the direction of travel on demand looks to be quite favorable for Neste now.

And Artem, on the Netherlands, so I'd say that Germany is really the big one moving the needle for the other countries. whilst, of course, everything is important as it accumulates, but we're talking about 100, 200 kilotons and the Netherlands would be in that camp.

The next question comes from Sasikanth Chilukuru from Jefferies.

First two, please. The first, I wanted to get, again, a little bit more clarity, I suppose, on the current renewable product sales margins. Of course, we started -- we've seen a very strong start to the quarter, European and U.S. renewable diesel prices, if or when prices and fossil diesel prices are all at pretty much 3-year highs. And you have referenced very renewable diesel gross margins of around $1,200 per ton.

All these factors kind of suggest that the current sales margin is also at similar, if not more than these gross margin levels. I was just wondering if you thought this was a fair interpretation. You did mention healthy volumes -- healthy margins, but just wondering if this was a fair interpretation or are there any other factors that we should be considering that could materially impact realized margins?

The second one was for the oil products. There is, of course, this big divergence in product tracks between middle distillates and gasoline fuel oil. Your message on Neste being a middle distillate gate companies pretty clear. I was just wondering how much flexibility do you have to optimize your refining system further towards higher middle distillate yields? What operational or perhaps configurational levers can you use to maximize middle distillate production? And how much more can you add?

Yes. I think you had a sort of a good recap on the items impacting the sales margin as such. So nothing really much to add on that -- then on the OP side, so rest assured, we are very much maximizing everything we can on the middle distillates because of the situation that the world is in. I don't see much more flex in a way. We are approaching the turnaround and that will probably give us a bit more additional than opportunities if we're still in the middle of this conflict, obviously, hopefully not. But of course, the price -- the product market might be tight still for the -- even towards the end of the year. So then having brand-new sort of components in the system. But right now, we're definitely sort of maxing everything out.

Yes. As said, so we're so close to end of run on the catalysts that there isn't really much -- there isn't any wiggle room, so to speak. But when we have new catalysts set up in the reactors, we will then look at the table and options and then produce accordingly, looking to maximize margins.

The next question comes from Kate O'Sullivan from Citi.

So following up on your answer to Paul's question. With the backdrop of renewable fuels margins back at high seen in early 2023, at what renewable products margin could you justify sanctioning new investment? What sort of conditions are you looking for to sanction new growth? And anything you have on hurdle rates and geographies where you would consider adding capacity would be helpful.

Yes. Thank you, Kate. A big question, but it's much too early to discuss that. really, I think for me, at Neste at the moment, it is really critical we get Rotterdam to up and running, and we start earning a return for that investment. Don't forget, we had initially planned for EUR 1.9 billion. We're now at EUR 2.5 billion. It's a year delay.

So we have some work to do to get the returns back on that, and then we need to get the deleveraging job done. There's also the question, how do we think when we look at the 30, what type of technology do we really want to employ. We've mentioned that we have the work on Ligno. How will that progress? Is that -- that's one sort of route. Another is to route with the current feedstocks that we use, waste to residues.

We have some key technology choices we will also need to make -- and then what options do we still have with our existing facilities to even further debottleneck. So I would earn on the side of just saying that Rotterdam -- let's get the evidence that the Rotterdam is generating the cash.

Let's look at the -- any debottlenecking opportunities within what we have and then make smart decisions regarding where, when and how we then invest. So -- but far too early to discuss that. We have other priorities for the time being.

And of course, now really in the midst of this Middle East conflict, I think it's -- it will be very interesting to see kind of how energy policy in Europe comes out of this. This is now the second big shock to the system in a matter of a few years.

And obviously, sort of that we will need to base our sort of thoughts also on what happens around us. I mean, clearly, for us as a company, it's important that we are returning attractive rates for our shareholders that we are a competitive investment for the investors globally.

Maybe one more thing, which we need to get more better clarity on SAF mandate for 2030. So the current 6%, I mean, we understand that the European Commission is very much sticking to that, but we need to get a bit more closer to 2030 to actually see how much of the demand as we head into 2030 and into '40 will be sort of skewed into R&D, how much of SAF. It's also going to be interesting to see what happens to Asian demand for these products after the Iran crisis because if you look at Asia, they've been severely hit probably more than anyone from this Iran crisis.

So will we start seeing some pivot into renewables? For example, Australia, a big market, not using renewables at all. So are we going to see these countries rethink their energy policy post Iran conflict? Of course, we're going to be advocating that renewables is the way to go. but we need to get more visibility on that before we could make any decisions. But I said, Rotterdam and debottlenecking priority #1.

Just a follow-up. Your comments about whether the Iran situation could positively affect the adoption of renewable fuels. How do you think about the interaction between renewable fuel adoption and affordability for R&D and SAF given today's pricing mechanics, which are largely referenced to fossil diesel crack plus a green premium. Given your feedstock inputs, animal fats are not directly linked to crude oil prices. Is there any scope to evolve pricing structures so they're less mechanically tied to rising oil prices?

I think this is a complex question regarding price structures, and I really don't want to go into that at this stage. What I want to say, though, is regarding SAF one could make the statement, well, SAF is expensive, the airlines can't afford it. If current high jet fuel prices are painful for airlines, how could they pay for SAF. I think we're going to -- I don't believe that is a strong argument.

I think there are other drivers for decarbonization beyond just looking at costs. And if we -- the reality is that if we look at, for example, the B2B segment in SAF, where we have also cargo customers who want to reduce their Scope 3 emissions. So clearly can see that the market is absorbing the per ton or per parcel cost relatively easy. And if you translate then the cost of SAF into the airline ticket, ultimately, it is not a -- on an airline ticket basis, it's not that huge number.

So I think we're going -- in the airline business, we're going through a transition. stuff will be adopted. It takes its time. The market will grow into the -- stuff will become more common, but it will take its own time. And some companies will be faster to adopt others. But yes, so maybe that's all I have to say. Thank you.

The next question comes from Alice Winograd from Morgan Stanley.

I wanted to ask about biofuel volumes, please. So from the release, it seems like you sold essentially all of the volumes you produced in 1Q, even though from memory, inventory levels were reported to be quite low at the start of the year. So I wanted to ask, to what degree are you comfortable with current inventory levels and whether we should expect some production to be saved for inventory in the next couple of quarters, looking at, of course, the heavy maintenance season at the end of the year. And also still on that, you mentioned a negative surprise with some issue in Singapore, but you have kept guidance essentially unchanged. So I'm wondering if this has any marginal impact on your full year expectations or if this was offset by other assets running harder?

Sure. So Alice, indeed, your memory is correct that we did start the year with lower-than-planned inventories. And I think, obviously, in this type of a very strong market, it's financially sort of not a very easy call to start replenishing inventories when demand is very strong.

So I think we'll sort of -- we would plan to -- and maybe sort of produce a bit more to inventory, but I think the demand now in the second quarter is also something that will remain strong and then that will kind of -- I think we will manage on that. Obviously, we want to avoid any additional issues such as the one in Singapore. But other than that, I think we'll just need to manage our ship with tighter inventories. And it takes a lot more from our sales and operational planning teams and some sort of add, of course, some logistical complexity, but I don't see in this environment, a real opportunity to talk about bigger inventories.

I would say on the volume side, so we are stretching every single production line we have in renewables to looking for any cost -- any way we could increase feed rates. We made some good progress here last year and this year. They're not huge improvements, but still the focus is every single ton we can get out safely, we try to do.

Congratulation on results.

Thank you.

Thank you.

The next question comes from Nash Cui from Barclays.

I have two, please. The first one is on your inventory impact. I wonder if you could isolate and talk about the positive inventory impact on both of your RP and OP margins this quarter, please?

And then the second question is one of your major energy peers is selling their big 800,000 ton biorefineries near Rotterdam. I wonder how Neste thinks about this as an -- and on the flip side, if another company bought it, how will you deal with competition, not only on product sales, but also on supply chain?

If I take the first one, Heikki. So Nash, when it comes to sort of inventory a valuation gains or losses, so in OP and RP, we have the comparable EBITDA, which kind of cleans out that impact. So that would be typically the difference between comparable EBITDA and then the IFRS EBITDA and really in a way to provide you with a clean number.

Now in Marketing and Services, where I mentioned it, it's -- the logic is slightly different because, of course, the sort of inventory cycle is very short. We talk about 1, 2 weeks, and it's part of the sort of how we run the business. So there, the sort of gains are included in the comparable EBITDA. But again, if it was purely a sort of a valuation at the end of the quarter, it's also significant would be comped out. So hopefully, that kind of answers your question.

Regarding your second question, I'm not sure exactly if I heard it verbating correctly, but when you referred to competition, I would just say that from the standpoint of Neste, this is a growing market. Neste, of course, will not be able to supply it and so on. So we need -- it's good that there are other companies investing. I think it then gives confidence to the regulators also to increase the mandates even further. And it's good to have European supply and not sort of -- we've talked about the level playing field. I won't go into that discussion here today, but I think it's good that we have European-based producers also. So yes, that's really all I have to say about that particular case.

Sorry, Eeva, can I just follow up on your first question, please? Because I'm looking at Slide 15 in the presentation, where you were talking about pre-conflict price crude that contributed to the high OP margin. So that's why I'm asking on whether you have any inventory impact within in the margin rather than the EBITDA. I hope that makes sense, but I just want to clarify on that.

Sure, sure. Okay. Yes. So yes, I was thinking of sort of the inventory valuation part. But indeed, from that sense that like I tried to explain on that slide, so just the sort of lead time from procurement to production, there is obviously one and hence, the production runs we were running in March, we were using crude that was -- that came into the system at a lower price. And then in that sense, gave us a high higher margin when the product prices then very, very swiftly jump and that you see in the refining margin. But that obviously now, as I mentioned, has already balanced out because the cycle is relatively short, less than 2 months. So yes.

The next question comes from Iiris Theman from DNB Carnegie.

I have two questions left. So firstly, depreciation was down from the Q4 level in RP. So is this level a good indicator for the rest of the year?

And then secondly, regarding OP's margin, did you mention that you expect lower refining margin in Q2 due to higher crude costs?

All right. Maybe I'll take Heikki both of them. So yes, Iiris, you may remember that in the performance improvement program, we've had one specific area looking at lease costs. And as we are bringing them down, that has a sort of positive impact on depreciation in the sense that kind of lowers them as well. So I think the Q4 is a good proxy. I think you would have seen some movement between the quarters already earlier. But yes, I think we're sort of -- we're still in a few areas, I think we can sort of do some work on the leases, but not anything significant anymore.

And then on the OP, so indeed, I was referring to this total refining margin of 23%, which was boosted by the exceptional circumstances in March. So we would guide you for a lower total refining margin in Q2 than the '23.

Okay. And a follow-up question on OP's margin or crude costs. So do you see somewhat lower crude costs currently versus, for example, in March?

I would say they change on a daily basis. So you can't really have -- there's no real trend. And I think we're all -- we can all read from X what happens this hour and the next hour. So I wouldn't be able to draw any such conclusions other than that they're all over the place in lack of a better expression.

The next question comes from Henry Tarr from Berenberg.

Just a follow-up quickly on the OP previous question. There's obviously a lot of sort of moving parts to that, and it's been very volatile. Is it the case that because of the premiums you're going to be paying for crude now that the sort of realized margin is going to be different to the sort of indicator margin that you might see? Is that what's happening? And then could you give us any indication as to where sort of the realized margin has been running in April for OP?

Well, I think, Henry, the challenge is that there is a pretty big difference between the paper market and the physical market in a conflict like this. As I said, this is a sort of extraordinary shock on the system. So I think the sort of -- obviously, we play in the physical market. So that may sort of make it more complicated from your point of view, if you're purely looking at the -- kind of on the screen.

So I would just say that, obviously, our view is based on what the real cost of physical delivery is. And then on April, we wouldn't sort of provide that exact guidance. I think I've tried to be very clear enough to help you out on the Q2 without even, of course, ourselves knowing what's going to happen in the remainder of the quarter, but just based on the input that we have now in the system, that's our sort of what we kind of wanted to kind of give you a bit more guidance than typically because of appreciating that in these circumstances, it's not an easy job that you have to predict our margins.

Okay. That's great. And then just one quick follow-up. Just on hedging within Renewable Products. Was there any impact on hedging for Q1 in terms of the margin, et cetera? And then do you see anything -- do you have any sort of hedges in place for Q2 as we sit here today?

Sure. So in RP, when we talk about hedging, you could perhaps call it also margin management, but we typically are active when it comes to the term sales because that's obviously where we have an open decision, if you may. We're not able to buy feedstock at the sort of the same length as then our commitments on the term sales, maybe -- of course, then the shorter your term contracts are, then they sort of start to be better in line.

But certainly, in the beginning of the year, we would look into hedging to reduce our exposure then that the sort of feedstock goes in a very different direction. We're not sort of -- I wouldn't say it's -- because of the proxies we need to use, we're not sort of very big in hedging in the sense that, obviously, you have to be very careful when you're using proxies. But in a market like this, I think it's not surprising that the hedges will be more negative because, of course, the sort of March developments were something that one wouldn't expect.

But it wasn't a sort of big impact, but nevertheless, there was a negative impact from hedging in RP, but that is kind of something that we would consider a cost of doing the business. And it's -- as I said, it's more sort of a margin management approach that we're sort of -- we think that has proven served us pretty well.

Speaker 10

The next question comes from Yulia Bocharnikova from Goldman Sachs.

I have a couple, please. First, just to clarify on Q2 volumes in Renewable Products, you mentioned that you would optimize production and probably sell everything without building inventory to the same extent as in previous years. I'm just wondering if we should assume pickup in production and sales volumes in Q2 versus Q1? Or this is probably going to be more flattish and then we will see pickup in second half of the year? And then on refining volumes as well, given there is Porvoo turnaround in Q3, how should we think about refining sales volumes versus production? Is there going to be any inventory build ahead of maintenance or you will just sell everything because there is a very, very strong margin?

Sure. So in Q2, obviously, we have the benefit of we don't have any planned turnarounds. So that we expect to support production volumes and sales volumes. Now unfortunately, as Heikki explained, we have lost one month on one line in Singapore now here in April. So that, of course, eats up some of it.

But still, I think the overall is positive. And then what we sort of decide for Q3, it's a bit early to say now when the conflict is, as I said, moving by the hour. So obviously, we would typically sort of look to build some inventory before we go in RP into the turnaround season and balancing those discussions in the coming months. But my commentary was really more for now for Q2 and where we are now that we obviously want to want to support our customers who have a need for the product.

The next question comes from Matti Kaurola from OP.

First question actually regarding the maintenance taking place in Singapore and Martinez. So if you could get a little bit more open up the increased production costs. So what kind of sales margin impact we are speaking of? And then the second one is actually regarding your term contracts. So if I'm calculating the premiums you've been locking in during the March -- sorry, the November, December time line. So I think you've been giving some of the discount compared to the spot levels. Is that the correct to be assumed?

Well, I don't think we sort of want to go to that level of detail that provide the production cost as such. But as I said, it's, of course, a fair point that when you have production issues and of course, just the sort of fact that we had sort of big turnarounds and ramping up and all that, that, of course, eats up on the margin.

So I think that's the right view to have, but I wouldn't go into more detail. And then to your comment on possible discounts on term sales, I would say that typically, in order for the term sale to be a win-win equation, it would not be the sort of based on a spot price. So -- but of course, it has to be a commercial decision that makes sense for both parties that we do end up turning.

And as you remember, we did end up turning more than we thought. So we thought that we saw the sort of commercial value in turning slightly more without then sort of commenting more specifically on the market prices. We have said earlier as well that, of course, the market prices sometimes can be a bit misleading. It's a very thin markets and not fully transparent. So obviously, we sometimes have the benefit of being a big producer of having a pretty good sense and perhaps a better sense on the real value.

That's good. Then maybe one follow-up question regarding regulatory environment. So Heikki, what are the top three things your PA team is right now working kind of most right now, or what are the key things that you are focusing on?

Right. Well, the agenda is very broad. I think, of course, the most important thing is now to make sure RED III gets implemented across Europe. So as the German decision gets hopefully now finalized, there's still some open areas. Another interesting area for us, I think, longer term is the whole question of Asia. starting all the way from Japan to Australia. I think if you think about how many people live there and how much transportation there is, one, of course, would like to see the mandates start to move also there.

I think these are really the most important things. We have these trade questions that we've discussed in the past, but maybe in today's situation, given the crisis, these trade matters are lesser important, although I'm sure they will come back here once the Iran crisis is over. So those are the three things.

Maybe one more question. I just saw a headline that there is a strike that's put in place. So do you have any kind of estimate at this stage how long it's going to last and any volume impact? -- compared to the Martina sales volumes?

Yes. The turnaround went according to plan in Q1 and production is up and running. There are negotiations between our joint venture partner, who is the operating partner and the U.S. Steel Workers Union, USW. And those conversations are going well in a constructive manner. And my understanding is that at the moment, the refinery is operating pretty close to normal.

Yes. Production is running there as we speak. So...

The next question comes from Christopher Kuplent from BofA.

I've only got one question left and maybe for you, Eeva, to sort of talk to us about U.S. tax credits. You were calling out quite a significant number in Q4, which seems to have dropped. Is that a quarter-on-quarter headwind that I think maybe around EUR 50 million that's hidden in your sales margin when I look at your variation chart, which slide is it on for Renewable Products on Page 14, that EUR 400 million number, is that inclusive of this time around in Q1, receiving less help from these CFPC credits? So just a clarification, please.

Sure. Yes. So I was just checking the release that indeed, we had a lot less credits because of the turnaround in Martinez. So we stated in the release that we booked EUR 13 million, of credits. And yes, that is then, I wouldn't say hidden in that, but it's such a small number that doesn't really move it. But now, of course, you can expect that number to grow in line with a more normalized production.

The next question comes from Matt Lofting from JPM.

I wanted to just ask you about freight costs. They've obviously gone up a lot on a headline basis in recent weeks. Neste, procures feedstock on a pretty extensive basis in the renewables business in particular. So could you just talk about what you're seeing from that perspective and how it affects and feeds into the realized margins, including the capture of that in the margin chart that you showed, I think, on Slide 11.

I think overall, this pertains primarily now given our situation to volume coming out of Asia, both feedstock and final product into Europe. Everything is going through around Africa. So you have the extra delivery time and freight costs have risen somewhat. But I don't think we have yet any material number that we would flag as being a concern.

Yes, I think it's obviously one of those indirect impacts of this conflict that may matter, but I think that's more relevant for those trading in that area for other security reasons. A lot of our cargo has been, as Heikki said, going around Africa already well before this. So in that sense, no significant change. But yes, do we see some price pressure in this area? Yes, I think that's, of course, the reality in one of the indirect areas where this conflict, I think, is causing inflationary pressure for many of us.

I would though say that in terms of our performance improvement program, and I think we've commented on this, I think we've made very good progress across the whole sort of expenditure base, also looking at logistics costs in terms of better consolidation of freight and better negotiating of terms with freight suppliers. So I think we've been able to buffer this through our own internal measures become much better buyers of freight. So just as a mention on that.

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

So thank you very much. As a very quick summary after this long and colorful and good discussion. So as I said, I think both Eeva and I are pleased that we were able to manage our way through a fairly volatile quarter. So -- and of course, manifests with very, very good results.

Our focus and my focus and my colleagues in the line organization, our focus really is now on operational reliability. I think everybody at Neste recognizes that this is a cyclical industry. And when the demand is there, we need to produce. So that message is very well understood by everybody at Neste, and we're working very hard to get production where it needs to be. The performance improvement program is going very well.

We have exceeded the target we set for two years. I'm very happy with that. You saw in the chart -- we have a bigger number. We still see more opportunity across Neste, and we're working on that, and you will then get updated reports as we go through the year. So still more to come. And then I said, the decisions on regulations from the United States to now, hopefully, in the next few weeks in Germany and in general, in Europe, I think it's also providing a longer-term tailwind for our business in renewable diesel. And of course, I mentioned the role of Asia.

Let's see what Iran conflict once we're over, whether energy resilience, energy security will then give even further boost, but we'll have to just wait and see what comes our way. With those words, thank you very much for your attention. Eeva and I will then return back to you after the end of the second quarter. Have a very good day. Thank you.

Good afternoon, everybody. Welcome to discuss Neste's Q4 results that were published this morning. My name is Jukka Miettinen. I'm VP for Investor Relations at Neste. Here with me, we have our President and CEO, Heikki Malinen; and our CFO, Eeva Sipila.

We are referring to the presentation that was launched today on our website early this morning. In the presentation, we will go through the key highlights, for example, our Q4 financial performance and the status of our key focus areas, including the performance improvement program and the progress towards our financial targets. We will be also discussing the key regulatory developments, key opportunities and uncertainties in the market as well as the outlook. We will have time for discussions with all of you. And please pay attention to the disclaimer as we will be making forward-looking statements in this call.

With these remarks, I would like to hand over to our President and CEO, Heikki Malinen. Heikki, please.

Thank you, Jukka. Good morning, good afternoon to everybody. Welcome also to this call on my behalf. Really looking forward to discussing with you about 2025 results, the last quarter and also how this year will work.

Okay. So let's start with a couple of slides here. First, I want to show you -- I want to start with discussing the key figures. But before I do that, let me just make a few comments to provide you with a bigger picture on how I see the situation at Neste after having been in charge of the company now for a bit over 1.25 year. I think overall, if we look at 2025, we had a good year. We have been able to achieve a financial turnaround compared to where we were just a few years ago. I'm very pleased about the fact that in 2025, all of our businesses performed better. Each of them had their own successes.

I want to highlight in the area of RP, specifically that we were able to increase our volumes from 3.7 million to 4.1 million tons of sales. In OP, I'm specifically pleased by the operational performance of the Porvoo refinery. If you look at the utilization of the OP business, which is mainly Porvoo, we achieved 90% at the -- in the fourth quarter, which actually is one of the best years we've had operationally in Porvoo's history. And we were luckily, of course, then able to capture the cracks -- spike in cracks in the fourth quarter.

Marketing and sales, we rarely talk about that, but still, they were able to improve their results by 10%, and they actually launched some very exciting new retail concepts here in the Finnish market, which have been received very well by retail and business consumers.

We also met our financial targets for 2025. I was especially pleased that the performance improvement program, that Eeva will go through in more detail, performed really well. In fact, it performed better than I expected. I've done a number of these during my career, and I was really positively surprised how well the Neste team delivered on multiple areas very systematically, quickly and very efficiently. So a big hats off to the Neste team for what they did.

On the regulatory front, the year was filled with all kinds of rumors and expectations. But in the end, I think the tailwinds are supporting Neste, both in Europe, gradually in the United States as well with the RVO. And then we're starting to see initial green sprouts, so to speak, when it comes to SAF in Asia. And last but not least, I think overall, where we are today, we have a good foundation then to perform better in 2026.

But then looking at Neste in a bit more detail, I always start with safety. This is the #1 subject here in the company. Every meeting starts with safety. On the left-hand side, you can see our total recordable injury frequency rate. This really is people safety calculated on a per 1 million tons -- we were -- 1 million hours worked. We were able to reduce it a bit. We have a long way to go here. I think we have all the means and tools and skills to bring this down. We just need more systematic and discipline. But I'm not happy with the number. We can do much better.

On the right-hand side, we see process safety, which in the past has been pretty tough for Neste in some areas. But overall, if you look at last year, we made good progress. We are not yet at first quartile, we need to go lower, but still, I'm very pleased with how the year ended. 0.9 is a big improvement from the past. And one piece of information, which is not shown in the slide, but which I want to mention specifically is that in the Rotterdam capacity growth project, our expansion, we actually have had a very good safety year as well, good progress. And considering how large and undertaking Rotterdam is, and we have thousands of people on the site, so far, we've done well. Of course, the work continues.

Then a few numbers from last year 2025. Our comparable EBITDA was EUR 1.683 billion, over EUR 400 million improvement vis-a-vis the previous year. I was very pleased with that. On the other hand, you can see the term. The sales margins on renewable products, $411 per ton. We were impacted by the term deals from the fourth quarter of 2024. They did impact that number in the second half. And in the final quarter, we saw prices rise, but we did have that overhang as we often do when we term a part of the business annually.

And then on the right-hand side, maybe I want to highlight the SAF volume. We doubled it to 867,000 tons, pretty much, I would say, at a level which is sort of reasonable given the amount of volume being sold overall. As we know, the renewable -- let's say, the SAF mandates have not risen as rapidly as we had hoped, but still over 800,000 delivered to our customers.

Then on the fourth quarter, our -- shown on the bottom left-hand side, our EBITDA for the fourth quarter was EUR 601 million. We had a very strong finish to the year on multiple fronts. As I said, all of our businesses performed better than the year before. And so of course, we're very pleased with that. Free cash flow in the last quarter was exceptionally strong, EUR 809 million. Eeva will talk about the balance sheet further. I think overall, I can say as far as the balance sheet is concerned that, that 40% leverage that we set at the beginning of the year as an absolute cap, well, I think looking at the number, we can say that we're clearly now in much better shape than we were in the past. Maybe [indiscernible] we're in clear waters, but clearly, the direction of travel is very positive. So good on that front.

The work continues, of course, into this year. We have a number of major things we are working on. The performance improvement program, as discussed already, and Eeva will go through in more detail, delivered EUR 376 million. So we actually achieved, on a run rate basis, more than what we had set out as a target for the 2-year program. So we've really done extremely well. What I want to do here is now that we will report to you -- we're actually going to continue this program for another year, for '26, and then we will, in '27, move more into continuous-improvement type of a mode. We are not setting new public targets for this year, but we will continue reporting to you on a quarterly basis how the work continues. What I can say is that after having observed the work for 1 year, I see there's still good potential to raise that number even more. So you will then get reports on a quarterly basis, and we'll then see where we end up after 2026, what the total final tally is.

Rotterdam is a big undertaking. I go there almost every 6 weeks. During my last visit, I was impressed by the good work people are doing there. It's very, very busy, very intense, a lot of people there. They're making good progress. But as I said, 2027 is then the big year for the startup. And then finally, operationally, we continue to work to increase our own production to make more advancements there and also to be commercially successful. And then, of course, gradually get ready for the Rotterdam launch in '27.

So those are some topics on the agenda of the company. We will be happy to discuss these with you in a moment when we get to the Q&A.

Now let me hand it over to Eeva to talk about the financials. Thank you.

Good afternoon on my behalf as well. And I'll start with the renewables market. This slide shows the reference margin development of renewable diesel. And as you can clearly see, the fourth quarter was better than the previous quarters of '25. We have a bit of a sliding down effect during the quarter and then a small sort of jump at the year-end, quite typical in a way that some late buying tightening the market, which again then typically also in early January of this year has then eased back.

So in this sort of a supportive market environment, our EBITDA on a comparable basis reached EUR 601 million. In Renewable Products, we had a maintenance-heavy quarter, but higher sales volumes and margins offset the higher net production costs. In Oil Products, solid utilization, and the November spike in gas oil market prices supported profitability. And finally, Marketing & Services, we saw a nice sales volume increase in Finland and Estonia.

Looking at the sort of full year 2025. So we reached almost EUR 1.7 billion in comparable EBITDA and really thanks to higher sales volume and lower costs, as you see on the right-hand side graph. Like Heikki already mentioned, all the business areas improved from the previous year, and we're very pleased with that.

The performance improvement program, indeed, 1 year ahead of schedule, so exceeding EUR 350 million by the end of '25 instead of the original target, which was only end of this current year. Very pleased with that. Of the EUR 376 million, that is the run rate in the P&L of 2025, there is EUR 172 million that have come through. And this is just purely from the fact that, obviously, the run rate is ahead as the program started after a few months into the year and then getting sort of all activities ramped up and before there is that annual effect, it takes -- comes then with -- over the coming quarters.

Like Heikki said, very pleased with the amount of activities and kind of actions and the overall engagement of the Neste team in improving our competitiveness. So we're absolutely pushing forward. 75% of what we've achieved so far has come really from cost reduction and the big elements being general procurement and logistics, and then 25% coming from margin and volume optimization.

Then a bit more detail into the quarterly performance by segment. So starting with Renewable Products. So indeed, despite significant maintenance activities in the quarter, the sales volume reached 1.1 million tons and our commercial team did -- worked very hard to -- for this. The comparable EBITDA came pretty close to the third quarter level, which was always going to be a tough target since that was one of more sort of solid operations. But as you can well see, so sales volumes, margins supporting, and then really the maintenance cost visible in fixed costs dragging the result down. But sort of -- no sort of surprises there per se.

Moving to Oil Products. High utilization, we are very proud of this. And especially now in Q4, this was really worth a lot of money for us because the market prices in diesel cracks really went up to almost $30 a barrel. And of course, there being agile and really on top of the market and being able to leverage that opportunity was very, very important in reaching the EUR 321 million for the quarter. And indeed, our refining margin of over $20 is something we're very pleased and did require, as I said, quite a spike in the market price, but good -- really good work from the team here. And with all the volatility that we can expect to continue in the global oil markets, I think this agility continues to be something that we're focusing a lot on in our performance management.

Marketing & Services also did well, EUR 28 million. Unit margins were seasonally weaker. And then the fixed costs were also higher. We have a bit more higher investments ongoing in IT and then also the new retail Huili concept here in the Finnish retail market. But good work on the sales volumes from the team and then supporting the result on to the other direction.

Moving then to cash flow, and this certainly increased markedly. Obviously, improved results helped but also a lot of good work on the net working capital side. EUR 809 million was the cash flow for the quarter, and this then resulted in a full year cash flow before financing activities of EUR 759 million. And this really despite cash out investments being EUR 260 million in the quarter, so a bit higher than the previous 2 quarters, the Rotterdam expansion and then the additional maintenance work behind that, a slightly higher figure.

And as we've said earlier, the Rotterdam investment will keep our investment level high also in '26. And then we have the Porvoo refinery turnaround coming up every 2.5 years, and this is now the time it comes. And so that, of course, adds to the CapEx, but we are guiding on cash out investments to be between EUR 1 billion and EUR 1.2 billion. So very -- I would say, very well in line with what we said a year back.

And still on the net working capital, so maybe a few words. So on the inventory side, you'll remember, we were very clear that fourth quarter will be one of reduced inventories as we really push out the pre-maintenance buildup that we had to do in Q3, which hurt cash flow at that time, succeeded in that. But in addition, we had a lot of focus on AP and also AR. And I think, again, the sort of team did very well on that, and we're certainly very, very pleased with the outcome.

And this then leads to us being well on track with our financial targets. So as Heikki already mentioned, leverage is clearly now below the 40%, and the other financial target on the performance improvement also being accomplished. Now work continues on both of these areas, and we have a lot of things we can and need to do still at Neste to improve, but successful delivery in any case for '25.

And with that, handing back to you, Heikki.

Thank you, Eeva. So let's then talk a bit about regulatory matters. On this list, there's a lot of text here. Sorry for that. We wanted to give you a full compendium of all the things we see happening on the regulatory front, both in North America, Europe and Asia for the different products. I think just the fact that the list is quite long and much longer than we had earlier sends a message that now things are happening here again.

What's particularly interesting on the right-hand side is how much activity we see across all of Asia. Yes, there are small numbers, there are small mandates, 1%, 2%. In some countries, they're more on SAF for international flights, not for domestic flights. But still, Singapore has taken the lead with Japan, and now other countries are following. In Europe, of course, for us, the big thing is the implementation of the Renewable Energy Directive III and specifically what that does to Germany. Since we last have spoken -- or since we last spoke, the process has continued in Germany. Now they are in parliamentary review in the Bundestag, and we hope in the coming months then to get a final resolution. But so far, so good.

Direction of travel is positive. And as we estimate by the end of the decade, the volume of renewable diesel should go from 5 million to over 10 million-plus tons in Europe. And of course, for us, at Neste, where we can produce both SAF and RD in our refinery. So this is really good news. And then in Europe, of course, the mandates will rise in 2030. We are going to continue discussion with the European Union to make sure that, that really then materializes. So overall, very good. And in the U.S., we're waiting for more news on the RVO renewable volume obligation decision, which was part of the big beautiful bill. And also there, we should hopefully get some more news towards the end of the first quarter.

Focus areas for this year. I already talked about these a little bit. But if I just sort of summarize, still what's on my and my team's agenda, so really continuing with the performance improvement program. There's a lot of activity. I've been positively surprised how much team Neste actually is able to do on this front.

Maximization of our asset utilization. Here, I would say that we have our work -- we still have work to do, I need to put more efforts into predictive maintenance, make sure that we really prepare for our turnarounds really well. We get maintenance done on time and on budget. And this year, in particular, we have the big TA coming in Porvoo in the fourth quarter or towards the fourth quarter. It's a very big undertaking, but we are monitoring that carefully. So far, what I've seen, I feel good about the preparatory work. And we also do external benchmarking to see how well we're getting ready. So -- and that benchmarking data also indicates that the team has done good work, and we're -- we will be prepared then for the turnaround.

And then Rotterdam already, we discussed. It is moving according to plan at the moment.

Market opportunities overall. Our world in renewables is -- can be a bit volatile from time to time. As said already, a lot of positive things happening now on the regulatory front. Let's see how those get implemented, but still the tailwind is clearly more positive. The big unknown for us is Chinese SAF volumes, how much will come into Europe. We know there's volume coming. I need to wait and see for the customs data to get a better view on that. We continue to work on SAF, antidumping duties to make sure we have a level playing field on SAF.

And then on uncertainties, maybe I want to highlight the feedstock prices. Of course, in our business, feedstocks account for a very large share of the variable costs. So depending on how they progress for animal fats and UCO and then for the Annex IX feedstocks will be critical to then determining the final margin of our products because we have -- we can hedge these costs to some degree, but not fully. And then I think on geopolitics and trade, otherwise, I don't see anything particularly new happening on that front that would impact Neste at the moment. So that pretty much is that story.

Then in terms of dividend. Our Board recommends to the Annual General Meeting that the dividend would be kept at the same level as last year. So that is EUR 0.20 overall.

And then finally, the outlook for this fiscal year. So renewable product sales volumes in 2026 are expected to be approximately at the same level as in 2025. Oil Products' sales volumes in 2026 are expected to be lower than 2025 due to the planned maintenance turnaround at the Porvoo refinery.

So those are our key messages at this stage, and I think we will hand it over to the operator, right, and take your questions. So thank you very much.

[Operator Instructions] The next question comes from Alejandro Vigil from Santander.

The first one is about the outlook for '26. Of course, you are talking about this guidance of volumes flat year-on-year. And I'm wondering something is going on in terms of utilization rates or why you see this flattish performance year-on-year? That's the first question.

And the second is regarding profitability. We have seen in the last couple of quarters, EBITDA in the Renewable Products division of about EUR 250 million, EUR 270 million per quarter. This is a good indication of the current status of the market in terms of margins for Neste in this division?

So if I take the outlook and if you talk about the profitability. So well, I would say that at the moment, with respect to our refinery, so we are running fairly close to the capacity we have at the moment that we can get out. We are constantly optimizing and trying to squeeze out more. But in our situation, any debottlenecking that we can do to get more out will have to happen during the turnarounds. And the next opportunity for debottlenecking will be end of this year, early 2027, when we have the next turnarounds in Rotterdam and Singapore.

So you cannot do debottlenecking until you have done a certain amount of engineering and you've ordered different types of equipment and pipes, et cetera. So there's always delays to how quickly you can do the turnarounds and debottlenecking. So that will be a story more towards the end of this year, early next year. And then Rotterdam, of course, will then be the big volume increase, and that will come in 2027.

So that is the situation. And as I said, we are trying to squeeze out safely and reliably as much as possible, but we have to overcome those debottlenecking challenges first.

And Alejandro, on your profitability development question. There, so obviously, sales market prices are important. We've had tailwind that we see continuing. At the same time, if you look at feedstock prices '25 versus '24, they were higher. So it's -- we need to continue to work really on finding the right feedstock and really utilizing the whole global network that we have to maximize the margins. But importantly, then obviously, is the performance improvement program. A lot of the actions are RP focused. And we -- as mentioned, we have more in the pipeline just from a sort of timing perspective, but still working on new actions. So we're certainly very focused on improving the profitability at RP. I think we've -- this is not a level where we're yet satisfied in any way.

The next question comes from Paul Redman from BNP Paribas.

Yes, 2, please. The first one is just back to sales volumes. Could you just be clear? You used to provide a breakout of weeks by refinery of how much turnaround activity will go on in the year. Could you just go through each refinery, just highlighting how many weeks' turnaround you're expecting in 2026? Or as you just mentioned, Rotterdam or Singapore possibly in 2027?

And then secondly, I have a question about -- it's a bit longer term. So when we look beyond 2026, you previously guided to a material reduction in CapEx post 2026 as the Rotterdam facility comes online. If margins continue to be strong, the balance sheet will degear. How do you think about financial priorities post 2026?

Okay. So I will give -- I will start and let Eeva continue. So in terms of this fiscal year, so we have these catalyst changes pretty much every year. And I cannot really give you an exact week number here yet for the turnaround in Rotterdam or in Singapore because they will also include debottlenecking work. So it isn't just the pure catalyst change, but there will be others.

But the Rotterdam TA will be at the end of -- sometime in the fourth quarter. And then Singapore will start Line 2. Now that's the first TA on Line 2 in Singapore, that will be starting probably -- as it was this time, mid-December-ish, somewhere there, and it will flow then into the first quarter. But the exact date still will depend a bit also on the holiday season in Singapore with Chinese New Year, et cetera. So -- but anyway, roughly there. So Singapore more into the '27-ish, and that will also include then debottlenecking work, which has to be done.

Now then to your question about beyond '26 and CapEx and how we're thinking about that, so maybe Eeva?

Yes, financial priorities post '26, Paul, I think it was. So no news here really. Deleveraging is the one word I would say that, obviously, whilst we now had good cash flow and we've clearly turned the corner in leverage, the amount of gross debt remains high and this year being still a sort of CapEx-intensive year, is not going to sort of fundamentally change that. So then as we go into '27, '28, that's really sort of the main focus. And of course, in order then that to build ourselves a stronger balance sheet then that we have more optionality a few years after that.

The next question comes from Henri Patricot from UBS.

I have 2 questions, please. The first one is just another follow-up on the volumes for this year because, Heikki, you mentioned that you're running fairly close to capacity at the moment, but your utilization rate last year was 73%, and Neste used to run much closer to full capacity. Are you saying that we should assume that full utilization would be close to this sort of level because of the frequency of the catalyst changes? Or is there some upside to that utilization rate over the next couple of years?

And then secondly, on the sales structure for 2026. Can you give us an update on the term contracts for this year? Where did you end up in terms of the split between term sales versus spot? And any comment you can make on how this term premium looks in '26 versus '25?

Yes. Thank you. Thank you very much for those questions. Yes, the utilization level, I would like to see that also higher. So -- but that will require some more work in the refineries. There's also a bit of how much do we swing between RD and SAF. So last year, we made over 870,000 ton-ish of SAF. So how much we are swinging back and forth between that also impact the utilization. It isn't just a -- although we're happy about the flexibility, getting -- putting the SAF lines on also impacts a bit the utilization. So the more we can run with 1 grade, RD in particular, that helps that. So -- but we are going to try to improve that further and then do some more debottlenecking.

Then in terms of the term contracts, I said in the last call, I said that we would take our time and not rush. Well, in the end, then we did ultimately then go and term about 60%, roughly, about the same level as the year before. So about that.

Anything you want to add, Eeva?

Well, maybe just to mention, Henri, on the premium, so significantly higher than a year back. Obviously, the market situation was healthy. And thanks to that, that actually was behind our decision to term that much. I mean, originally, we -- I think we discussed also with you that we'd aim a bit higher. But when the market was as good as it was, we felt it was the best decision for shareholder value.

The next question comes from Adnan Dhanani from RBC.

Two for me, please. Just the first one on your CapEx. You were able to lower your guidance a couple of times last year and still end up spending less than the final guidance at the end of the year. Just can we get some color on the moving parts there? Is that just a phasing thing? And if so, could that mean that this year's spend could be towards the higher end of the range you provided?

And then secondly, on your performance improvement program, obviously, very solid results so far. You've noted that the work continues in 2026. Are you able to provide any color on how much further upside there could be beyond the EUR 376 million that's already been achieved?

Yes. Thank you. Maybe I'll take the second one first, and then Eeva can take a crack on the first one. On the performance improvement program, the -- we had the 4 modules which were -- there's the efficient organization, which has been done. There were items on procurements or sourcing. A lot of work has happened. Some of it will flow also into this year. There's the commercial piece. There's -- we've had -- we've optimized our logistics and terminal networks. We've closed some terminals, which had very low utilization. So that -- a bunch of that work has been done.

On the refinery side, there, we do see a lot of further opportunity. That module has been slower to progress because the changes we need to make to these lines, some of them may need some money or they just need some design work, and it just takes more time to do these adjustments, let's say, safely, plus it's just simply more complex work. So we will continue focusing especially on the refinery side in '26. We are not going to set -- give you any guidance or estimate on the upside. As I said, I only can state that I'm really pleased with what we've accomplished this year. We're going to continue focusing particularly on the upside on refineries, and we will then report on a quarterly basis and try to provide you as much color as we can. That is the current way we're going to move forward.

And then in terms of the CapEx, so anything you would like to say regarding...

Yes. Certainly, I think it's not a sort of untypical phenomena that you have a bit of slipping. I wouldn't say that it was more than a few tens of millions. So indeed, we were expecting that, that slipped. Now the estimate is based on what we kind of have currently. And yes, then obviously, we've given a range just because there are some uncertainties. And I'm comfortable with the range, but indeed, I think it's a typical phenomenon, sometimes really difficult to estimate exactly right then on how the sort of payments then go out, but not a big thing for last year.

The next question comes from Artem Beletski from SEB.

So I have 2 to be asked. So the first one is relating to renewables volume outlook for this year and basically split between RD and SAF. Is it fair to assume that there will be growth in RD, and maybe SAF volumes coming down, just looking at the market fundamentals currently and the SAF market being pressured by import volumes coming from China?

And then the second question is relating to Q4 fixed cost. What it comes to renewables? So there has been quite significant increase sequentially, I think, more than EUR 30 million. How big portion of it was related to this maintenance activity happening in the quarter? And maybe you can provide some guidelines for this year as well?

Thank you, Artem. So I'll take a crack at the first one, and then Eeva can talk about the fixed costs. So yes, last year, we sold -- it was 3.5 -- hold on -- 870,000 on the SAF, if I remember correctly, and then the rest was RD. I think I said on the call last time that if the SAF market doesn't develop well, then we have always the option to sell RD, and that is what we will do. So we are constantly optimizing and depending on the -- what really makes sense financially for our shareholders, we will run the refineries according to that.

So it is possible that this year, we'll have a bit less SAF. But let's see, it's early. We're just in January, and let's see how the markets -- what happens with the imports, we really don't know yet very well. We don't have any data yet really for '26. And then based on that, we'll have to make the choice. But we will go with what really maximizes the value for the company.

And then on the fixed cost item, so indeed, the growth in fixed cost was really all around maintenance. And looking into '26, so we'll have a similar phenomena that obviously, we have some of the performance improvement savings coming through in the fixed cost, and that's supportive. But then at the same time, we will be increasing somewhat the money spent on maintenance for the obvious reason that we do want to sort of max out on the utilization and reach a better utilization, as Heikki already mentioned. So that will probably mean that in a way, net-net, there's not much improvement in fixed cost per se to be expected. But of course, we're very focused on all elements on the margin, then to sort of improve profitability, nevertheless. Fixed cost, relatively speaking, is not the main item.

The next question comes from Henry Tarr from Berenberg.

The first one is just on premiums and margins. So I think you talked about higher premiums into the term contracts. Obviously, there are lots of push and pull factors, et cetera, driving margins in the renewables business. But as we stand here today, then looking into 2026, does it make sense as a starting point to think about the sort of second half levels from last year being a good base as we think about modeling renewable products? I think that's my first question.

Well, I think that if you use the second half as a reference, it wasn't that maybe impressive in the beginning [ on ]. So I would say that we are aiming to sort of -- aiming upwards on that. But like you rightly say, so obviously, the premium we fixed is dependent also how -- what happens on the feedstock side and how we're able to optimize. But I think it's fair to say that our ambition is higher and hence, the higher term rate.

I think the feedstock pricing is, of course, really critical here for the final margins.

Yes. And that's probably my second question then, which is, what are the key sort of drivers and risks that you see for this year on feedstock?

We try to buy from all jurisdictions. Globally, we're continuing to expand our reach, both for animal fat for UCO. And what's been really interesting, of course, now with the new RED III requirements is these Annex IX feedstocks. I think we're well positioned -- actually pretty well positioned on these Annex IX feedstocks, which I think is -- could become an asset here as we go forward, but let's see. And then in terms of UCO, what I think is playing here a lot into the equation is how much will Chinese demand be, hard to predict and then also what happens with the RIN, the RIN 50% in North America.

So I think those are the 2 maybe triggers which could then impact both UCO and animal fat prices. And then, of course, how much supply of animal fat is available, particularly out of Australia. So I think those are the sort of dimensions or things which are moving the market. But as I said, I think overall, we're probably -- we're the largest buyer of these feedstocks globally, and we have a good sourcing organization. I think we're very well on the pulse of the market, and we have multiple sources to buy from. If one area looks more expensive, we then always have the opportunity to look for other sources. I think that is an advantage. Feedstocks are really critical in this industry.

Next question comes from Nash Cui from Barclays.

Two questions, please. The first one is a follow-up on term sales. I just want to clarify on the ability to lock the margin. From your previous answers, am I right to understand that you can lock the sales price, but not the fixed stock price, so we can still see a bit of volatility on the margin?

Then my second question is on one of your peers' comments, your other European energy peer CEO mentioned some bearish comment on SAF mandate. I wonder what's your view on that?

Well, do you want to comment on the hedging?

Yes, sure. So indeed, I think, Nash, the challenge on the feedstock side is that not all of those products can really be hedged. They are not open transparent market. So more on the -- where you can hedge is then on the sort of soya, palm side, and that means that there's certain limitations when we sort of term a sale. But of course, we sort of -- they do, over time, usually sort of have a correlation and then we sort of try to optimize based on the sort of experience we've built on how to do so. But indeed, there is a certain open position and hence, our cautiousness on the commenting on the final sales margin.

Regarding your question about the SAF mandate. So I said before that at least based on the conversations I've had and we've had with the European Union, they are pretty committed to implementing the SAF mandates for 2030. I mean between now and 2030, nothing specifically will happen. There will be a review probably somewhere between now and 2030 about these mandates. I know the airlines are, of course, pushing back and trying to move the 6% into the longer-term future. But as I said, our indication is that the mandates are going to grow and [ 6 ] is the number that's been -- which has been decided.

I'm very pleased with what we're seeing in Asia. Gradually starting to see mandates coming there as well. I think that's a very positive sign. If Asia now starts to move forward, why would Europe then suddenly move backward, especially when Europe has been the one really pushing for SAF to start off with. So if we hear something different, we will report to you, but I'm not aware of anything that would derail the 2030 program, at least not at the moment.

The next question comes from Alice Winograd from Morgan Stanley.

Just one for me, please. So you said about 60% of sales were termed. Can you give maybe a breakdown between Europe and the U.S. within the term sales? Because the EU margins have been extremely high for the better part of the second half, I think, upwards of $900 per ton. So if there's any indication that a lot of these term sales are in Europe as opposed to the U.S., this has some read across to margins, right? So I appreciate any color you can give.

Alice, thank you for your question. Unfortunately, we only provide information on the aggregated number of terms across the region. So we do not break that out by markets in more specific detail. So sorry about that. But thanks for your question.

The next question comes from IIris Theman from DNB Carnegie.

I have 2 questions, please. So the first one is related to renewable diesel prices, which have come slightly down from Q4 over the past 2 to 3 weeks. So what has been driving prices lower? And do you see any drivers that could affect prices for the remainder of Q1. Yes, so this is my first question.

And the second question is related to your utilization rates in RP. So I think previously, you highlighted the 80% utilization rate as a good proxy for this year in RP, while now it seems to be 75% or something like that. So is there anything that has changed since the Q3 presentation when you highlighted this 80% proxy? Did you, for example, have a longer maintenance in Rotterdam or Singapore that basically has impacted your volumes this year?

So thank you, IIris, for your questions. On the RD prices, on the last few weeks -- I cannot report anything in particular. I think partially it can be also a bit sentiment driven, how these mandates are coming into play. But I think overall, I cannot report anything specific about that. I think what is good is that the level is, of course, much higher for us compared to where we were last year. I think we've now gotten to a more, let's say, healthy level. And I think for Neste, that is what's really critical here.

On the utilization level, as I said earlier, we feel that we have more work to do in terms of these refineries. At the moment, we are running at a level which is fairly close to -- well, let's say, that is the performance of the day, if I would say, so forth. Part of our PIP program, our performance improvement program, specifically focuses on getting more improvements out of the refineries. And therefore, we want to also get that number up. But that is the health of the refinery at the moment.

Regarding the turnarounds that you referred to, Singapore, I think, is very close to starting, if not starting, and both turnarounds have been done. We don't comment specifically on the individual turnarounds per se, but both of them have been now been completed.

The next question comes from Christopher Kuplent from BofA.

I'm afraid I'm going to keep asking about turnarounds. I'm going to focus on Porvoo and the Oil Products division. As far as I can recall, this used to be a 4-year cadence for major turnarounds. I think the last one we had was in Q2 of 2024. And maybe it's my recollection that's off, but I thought it was -- next going to be in 2027, which was already, to me, earlier than the usual 4-year cadence. And you're now, as far as I can tell, telling us that, that 2027 may actually happen in 2026. So I wonder, not whether you can give us the exact week when it's happening, but I wonder what your thinking is behind reducing the cadence and what can explain the more regular turnarounds and shutdowns?

And lastly, again, this is not about a turnaround, but about Rotterdam and the ramp-up that we're looking forward to for 2027. Can you give us an insight into how fast you think that ramp-up can happen once you've gone through the latest rounds of debottlenecking by the end of this year and you then bring the new units online? Is this a 3-month process, a 24-month process, 12 months? What's a reasonable expectation for the speed of that ramp-up, please?

Thank you very much. I think the first question is easier for me to answer. It's a good question. The reason why we have gone to a more frequent turnaround is very straightforward. Here in Finland in the Nordic markets, what we have concluded is that the 4-year cycle is just simply too big a turnaround to pull off safely and reliably. We have -- there are certain sort of limitations on how much workers and contractors we can actually physically get into this fairly small market. And therefore, we've concluded that breaking it into more smaller parts simply makes the turnaround more manageable. This is purely driven by efficiency and safety and productivity rather than anything particularly different. So it will be a bit smaller scope, but then more frequency.

So then -- yes, so the 2.5-year cycle is what is the way that our engineers have concluded is the safest and most efficient way to do it. Obviously, I cannot tell you the exact day when we're starting. We will report back to you on that later. But we are spending a lot of time really to do our utmost to get this turnaround to be good. The previous turnaround we had actually was quite successful. If you look at the performance at Porvoo, I think part of the explanation why we've done so well is that in terms of utilization is that the previous turnaround was done really well. So taking learnings from the previous one into the '26 program, hopefully will then yield good results.

Regarding Rotterdam ramp-up, unfortunately, here, I cannot give you any information yet. We're so in the midst of building the refinery. You know we are 1 year late from the initial schedule that was published, I think, in summer of 2022, if I remember. And so there's still a fair amount of work to do. I think probably -- well, let's see when we are closer to startup and when we are in that phase, we will then start telling you more about the ramp-up curve. But at the moment, unfortunately, I cannot -- I don't have any meaningful information to share with you. So sorry about that.

The next question comes from Yulia Bocharnikova from Goldman Sachs.

I have 2, please. First on SAF. So given we see currently SAF trading at discount to RD, is it correct to assume that 100% of SAF should be sold on term contracts? And if you could give any clarification if there is any premium of SAF to RD in terms of prices in term contracts?

And the second one on hedging. So you mentioned there is still palm oil or soybean hedging. Is my understanding correct that if we further see lower diesel prices and higher palm oil prices, that would result in a positive hedging impact in Q1 '26?

So let me address the first one and then on hedging, Eeva. So indeed, you are right that -- the SAF is trading unfortunately, at a discount to RD. I mean, SAF should be trading at a premium because it's -- obviously, it's a more advanced product and more higher value-added product, but that's how the market is today. I can't comment on the particular prices or how we do the terms. The only thing which I would just say is, what I said earlier is that when we look at the SAF business for us, we pretty much optimize it based on what creates more value for us. And depending on the commercial returns, we will then adjust our lines accordingly. That's really all I want to say about the SAF commercial aspects.

Hedging then, please.

Yes. I would say, Yulia, that higher diesel is better both in RP and OP kind of irrespective of hedging. Now obviously, that can sort of have some impact. But -- so I would -- in that sense, their conclusion maybe is a bit sort of too focused on the palm oil side. So the diesel component is important in both businesses. And of course, what we've seen so far in the quarter is a healthy level of diesel prices even if we're not sort of where we were in that sort of November spike.

The next question comes from Matti Kaurola from OP Corporate Bank.

2 questions. First, regarding your production flexibility. So could you open up your kind of flexibility to produce more SAF in case the market is recovering. So how easy the switches do? Are we speaking about like S&OP horizon, like 1 quarter or something like that?

And then the second one is regarding trade policy. So could you help me to understand why the ADDs to our Chinese SAF is pending because it's -- I mean, the case pretty much the same, then with RD aside where we already have those ADDs in place.

Thank you, Matti. I'm sorry, at least I had some difficulty in hearing the...

Yes. The first question for Matti was around how easy it is to switch between RD...

Yes. That's what I got. What about the second question?

And the second was on trade policy that's why -- I believe, Matti, you asked that why don't -- why are we yet to see any ADDs on SAF, that the case would be similar to RD and when we only have RD.

Exactly, exactly. The production is happening in the same facility.

Right. Okay. So very good. So on production flexibility, so it is -- the advantage of our production system is that we can fairly quickly move back and forth in the lines. It is something in our system. I mean, these lines do have that flexibility. But of course, we only do it if we think it is financially viable. The switch is -- we're not talking of very long lead times to go from one product to another. So I don't know if I have much else to say there.

Anything you want to add on the flexibility?

No, no.

And then on the trade policy, yes, we are actively working with the European Union on this. But European Union takes its -- they have their own procedures. They have their own methods and approaches on how they review these things. They have to do a lot of data collection. And sometimes it just takes time to get the data for them to do the actual calculations on potential injury. So we don't have a deep insight into how the processes work inside the union, but we are hopeful that in 2026, we actually could see some progress. So we will report back to you at the moment we know that the European Union is moving forward. I really hope they will make a decision this year. I really hope so.

The next question comes from Alastair Syme from Citi.

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

Okay. Well, thank you for your questions. Thanks for taking the time to discuss with us about 2025 and 2026 outlook. I want to really summarize our presentation with 4 main points. Looking at last year, I'm very happy with how we were able to deliver the financial turnaround compared to 2024. As you've heard, really phenomenally good success on the improvement program, really very happy with exceeding the targets. And I believe there's more to come, and we will report to you on a quarterly basis. Regulatory development looks to be favorable. And as referring to Matti's question about SAF, antidumping duties, hopefully, we can report something on that as well in '26. And really, I believe we have a good foundation. There is still opportunity to improve the company, and we are working towards getting full asset utilization in place in 2026 and then '27, Rotterdam 2 is coming.

So with those messages, both from Eeva, me and Jukka, I wish you all a very good day and look forward to seeing you then after Q1. Take care.

Good noon, everybody. Welcome to discuss Neste's Q3 results that were published this morning. My name is Anssi Tammilehto. I'm SVP for Strategy, M&A and Investor Relations at Neste. Here with me, we have our President and CEO, Heikki Malinen; and our CFO, Eeva Sipila.

We are referring to the presentation that was launched into our website early this morning. And the key highlights of the presentation include, for example, our Q3 financial performance and the status of our financial targets, including the performance improvement program and leverage, and they are actually progressing well. We are also talking about key regulatory developments and also key opportunities and uncertainties in the market. We are also having time for discussion with you all, and that's, of course, last but not least.

And as always, please pay attention to the disclaimer as we will be making forward-looking statements in this call.

And with these remarks, I would like to hand over to our President and CEO, Heikki.

Thank you very much. And good evening to you folks in Asia, and good morning to you in the U.S. Welcome to Neste's webcast. Nice to see you here again. Q3 in brief, let me state that it's actually now 1 year and -- 1 year and 2 weeks roughly, that I've been working for Neste in this role as CEO. It's been a very busy 1 year. I wanted to just take a few minutes and just reflect on this past year.

Obviously, I've had a chance to travel globally widely the company; meet our customers, our suppliers; understand the business; see how our refineries are performing. And I think overall, I really -- the more I -- longer I work here and the more I understand the company, I have come to a conclusion that Neste really is a rough diamond. We have a lot of potential to develop the company further. We have a great group of people here, and as I talked to the Neste folks, I really feel that there's good momentum inside the company and a strong commitment by our staff globally to move this company further. So maybe that sort of more as a context.

We will be discussing Q3 results here today. For me, personally, I'm actually pleased with the results. We're obviously not at the level of overall performance we want to be, but the direction of travel into Q3 is good. And if I look at what we have accomplished here, our refineries have been performing well. I'll talk about safety in a moment.

Sales has picked up. There's even some positive -- actually good momentum in the market and our performance improvement program is on schedule, maybe even a bit ahead of schedule. So these are also positive things that we're adding them up all together and even our fossil traditional Porvoo Oil products business did well. So it's a good basis to move into the -- into then '26.

Well, let's take a look at first safety because safety really is the fundamental of everything that we do. It's a license to operate unless we take good care of safety. We have no right to be making these products. On the left-hand side, you can see the data for our people safety, the total recordable in the incident frequency rate. It is heading gradually down. These numbers, just a reminder, since 2023, they include Mahoney, which is our UCO collection business in the United States, which is a very different type of activity.

But in any case, we need to bring that number down much more, and the team here has very clear plans on how to do that.

On the right-hand side, you can see our process safety figures for this year. So far, 2025 was actually gone, if I can say quite well. Of course, the trend has really fallen. We've had a number of months where we actually had no major incidences in the company on process side. I think it's too early to say how much of a trend this is.

But anyway, the direction of travel is good. And the discussion at least in Neste about process safety is continuous. And we have now, in Q3, launched with a 5-year roadmap journey to further improve our process safety and our ambition is to significantly bring that down even more. But as always, these take time, and it doesn't happen overnight. But anyway, we are systematically moving forward.

We have some major initiatives underway. You will hear more from Eeva about the performance improvement program. I just want to say it's on track. You'll see the curves in the moment, maybe we're slightly ahead of schedule. But even having said that, what's interesting and important to understand is the direction of travel towards the EUR 350 million, I think we can confirm that.

And then the more we do work around this program, the more evident it becomes that there is -- as I said, there are opportunities within the company to perform even better. And that for me as CEO, is of course, a very important piece of information. We have been driving down our costs, fixed costs, variable costs and the refinery performance is rising.

In the middle, you see then the Rotterdam capacity project. It is a significant undertaking. At the moment, having just recently visited the site, and I'm again going in some weeks' time back to Rotterdam. It is very busy. We have approximately 2,300 people from many, many different countries and nationalities working on the site, and the work continues.

But it's a big undertaking. And what I want to say separately is that we've also had very good performance on safety with all the folks on the site, it's very critical that we don't have any accidents and the team has done, and I'd say a really good job in working towards that goal every single day.

And then on the right-hand side, operational achievements. Actually, I think there are many, but we wanted to just highlight maybe two. One was that on subside, we had record high SAF sales volume. We are clearly -- the market is picking up, even though the mandates are still somewhat were clearly below our hope in Europe, 2% vis-a-vis 6%. And then as you can see, the market has become stronger and Neste has been successfully able to leverage the tailwind.

I want to highlight a couple of numbers from the third quarter over 1 million tons of renewable products sales volume of which SAF was about 244 produced tons. So year-to-date, we have produced about 741 tons of SAF. So the journey has clearly started. Our comparable sales margin in RP rose clearly to almost $500 per ton. What was also very positive and helped our result was that the total refining margin for Oil Products exceeded $15 per barrel. And that, of course, then helped the results.

EBITDA EUR 531 million, heading in the right direction. Cash, I'll let Eeva talk about cash in a moment. But of course, that's something we monitor very carefully as we do when it comes to the 40% leverage ceiling if I want to use that word.

My final slide here before I hand it over to Eeva, and then I'll come back later, it's about the performance improvement program. This is -- for me, this is sort of more than just the performance program. It is very much a journey that will ultimately then move us into what I've called inside the company, a journey of continuous improvement, continuous development.

While we're doing this program, we're also building more systematic methods on performance management. We've reviewed all of our KPIs, and we continue to do that because, of course, you get what you measure. We have very systematic cadence on performance reviews. This whole approach, we've really pushed that forward harder, and we will continue to do that, bring it down deeper and deeper into the organization. So I see this is an important part of moving forward with this program.

We also track our various activities in this program very carefully. I personally participate in biweekly reviews of all the initiatives that we approved before they even get included in this calculation. So I think I have a good understanding of where the program is going, and I'm happy to say that I really like what I see. I see -- I really like what I'm seeing in the teams. So good work and big thanks to the team Neste on this one.

So we are heading well towards EUR 350 million, and so far, EUR 229 million annualized run rate improvement by the end of Q3. And with those words, I give it over to Eeva. So Eeva, please take it from here.

Thank you, Heikki, and good afternoon to everyone on my behalf as well. I'll start with the familiar reference margin of renewable diesel. And just as a reminder. So at least do note this is a gross margin. So it deducts only the feedstock cost and is hence different from the sales margin, we'll discuss later on.

But indeed, I think this trend line shows very well the strength and recovery we've seen in the European markets in the quarter. Then just to break down by segment are EUR 531 million of comparable EBITDA, so EUR 266 million coming from Renewable Products, EUR 232 million from Oil Products and then EUR 34 million for Marketing & Services. And I'll maybe comment the segments a bit more in detail in that -- very shortly.

As Heikki already said, so the performance improvement program is obviously an important part of our EUR 531 million result. We're very pleased with the run rate of EUR 229 million achieved at the end of Q3. And then this gives a year-to-date impact in our figures of EUR 84 million.

Now a few points on the EUR 229 million. So if we break it into cost reduction versus more margin volume optimization, it's roughly 80-20 split. And maybe also good to remind you that there is an element of lease costs here, especially on the logistics side, which then are actually not visible in the EBITDA rather in decreased depreciation as we have fewer leases. So roughly a bit more than 10% of the 229 is related to that.

Overall, the bigger categories are really around logistics, transportation in all forms and fashion, the optimization there and the lower discretionary spend across everything we do.

Moving then to the business segment commentary. So Renewable Products. We're very pleased with the reliability of the operations. We almost reached a similar sales volume, as you see from the left-hand side pillars as we did in Q2, and then the sales margin continued to tick up.

If we move to the right-hand side and look at the sort of comparison between our Q3 results versus Q2, you see that the big change really comes from the sales margin area. And naturally, the diesel price has supported as it had a positive impact on our margins to actually both of the two segments and also OP, but important here as well, we continue to see some headwind in the feedstock cost. But then we also had a more one-off positive, which comes from the SAF BTC, so the -- now expired tax credit program in the U.S. which was in place for SAF until September. And we actually booked the full EUR 27 million benefit of those credits in Q3 and that it may be worthwhile noting.

On the CFPC side, the continuing tax credit system, we continued on a similar path as in Q2. So looking EUR 27 million in there as well.

Then moving into the Oil Products side. So Here, the diesel crack clearly contributed a much better market environment than in Q2, but also, we had a better raw material or crude feed cost level in our Q3 and that supported the $15 per barrel margin as well. Overall, as Heikki already mentioned, so we're pleased with good utilization rate, very stable utilization across the quarters as you see well from the left-hand side.

And then really on the right-hand side, maybe in sort of additional point to note is indeed the utilization of 91 and also some fixed cost improvement in the figures.

Finally, on Marketing & Services, we had a good season, the Q2 driving season, supporting the results, but the team continues, it's very good and diligent work on the fixed cost side and supporting then the result.

Moving then to cash flow and profitability. So the CapEx continues at a very -- under sort of very tight control. We have upgraded now our annual guidance to a level that we expect the CapEx this year to be around EUR 1 billion, so slightly down from the earlier range. And this is really, really thanks to sort of a lot of good discipline across the segments.

Now we knew going into Q3 that we'll have a tougher quarter when it comes to cash flow due to the upcoming maintenance or now already started maintenance -- ongoing maintenance, should I say, in Rotterdam and upcoming maintenance in Singapore which meant that we had to build inventories during Q3 to be able to serve our customers during the Q4 period, and that obviously had some headwind on our working capital.

But I'm very happy that the total outcome was minus EUR 50 million for the quarter because this is the -- also the year-to-date number, and this obviously gives us confidence that we can deliver positive cash flow for the full year as we work to deliver those built up inventories to our customers in the coming months.

So as said, a slight headwind on the cash flow visible also in the leverage, but we're well below our 40% target and we're happy with that performance. So with that, I think Heikki it's back to you.

Thank you, Eeva. So a few words about topical matters and then the outlook. So as always, we need to discuss briefly what's happening on regulation. I think overall, our view is that the recent news and decisions are supporting the long-term renewables demand outlook whether you can say it's enough to say there's a long-term secular growth, not completely sure, but at least momentum is building.

Here in Europe was, of course, extremely important are the decisions related to implementation of RED III. And the Netherlands, Germany, Italy, France, all moving forward, waiting eagerly to see what happens with Germany. The preliminary information was that they are looking to increase the volumes potentially quite substantially, but still waiting for that decision, hopefully, by the end of the fourth quarter, we will know then which way the direction is in Germany. And then, of course, will the implementation start in '26 or '27. But anyway, it seems to be heading in the right direction, so but still need to be patient here some weeks.

On aviation, nothing really major to say other than that, maybe in Asia, South Korea, Singapore, of course, Japan has announced SAF mandates and then Indonesia is also looking at it. So gradually also those countries which have been maybe less advanced in moving forward with these mandates are starting to consider them and discuss them. So that's also a positive when it comes to SAF sales.

On the U.S. side, the summer was very busy with the Big Beautiful Bill. A lot of major decisions were made now with the U.S. government in the shutdown, we're waiting to see how the implementation then progresses. But as I said in the -- at the end of Q2, I think if I look at all of these regulatory changes in the U.S. I think for Neste, it's still sort of net positive, some things that are clearly positive, some are negative, but overall, net-net, more on the positive side. And I think that's the main news on regulation and I sit waiting then for Germany and their decisions.

The market, let's see. So in terms of opportunities and uncertainties, well, already discussed the German part. On the feedstock side, I think what's worth mentioning is that with the various changes in tariffs, we've now started to see some clear decline in animal prices -- animal fat prices, particularly in Asia, Australia.

So that is sort of impacting -- that's a potential a bit of a tailwind for our business. However one needs to always remember that some countries accept animal fats, in their renewable fuels and others don't, so we always need to match the feedstocks with the actual market requirements. But we're very good at that.

On the crude oil slate, we, of course, use a lot of crude oil in Porvoo refinery. As part of the performance improvement program, we really started to work systematically and try to see how can we diversify the crude oil slate even further. And we've done in an accelerated fashion, a lot of research here on the various technical limits by crude oil type and have actually been able to identify ways, how can we modify them and also then expand the number of crude oil options we have at our disposal.

So I'm very pleased with the results. There are actually quite a number of options we have to expand the crude oil supply. And that, of course, gives us then hopefully, some options to negotiate more favorable arrangements for the company.

We already talked about the performance improvement program and the potential even more beyond.

On the uncertainties, regulatory matters, of course, still uncertain geopolitics is still around. The whole question about what will happen to Russian refineries, Russian oil, global oil markets. I think the forecast -- the variance between the forecast is very broad. So it's very difficult to make any accurate predictions about that.

And maybe the last thing I want to mention briefly is China. China exports. So in the last weeks, we have seen news that China is considering permitting the export of SAF out of their country and remains now then to be seen how much and into what markets that Chinese SAF ultimately goes. So we are keeping a close eye on that as well as we head into 2026.

The market outlook pretty much as we have communicated, I would say earlier. And when it comes to the guidance, that guidance is also unchanged. So I wanted to accelerate here to make sure we have plenty of time for Q&A. So maybe with those words, I hand it over to the operator. Thank you very much.

[Operator Instructions] The next question comes from Alejandro Vigil [ Garcia ] from Santander.

Congratulations for the strong results. The first question is about the flow of products export/import in the Renewable Products division because as you mentioned before, now we could see China exporting SAF. And I'm also interested in your thoughts about the different regions, the U.S., Europe and Asia in terms of capacity and balance of export/imports. And the second question is about, what you mentioned about Germany, which is the potential volume upside coming from this RED III implementation in Germany? .

Thank you very much. So thank you, Alejandro for the questions. Yes, of course, the thing with these products, once you put them on a vessel, you can ship them in many directions. I think maybe the three things as far as Neste is concerned, so as we already discussed in the spring, so our exports from Singapore to the U.S. have been pretty much constrained. Nothing really has changed there. So as the incentives have gone away, so also our exports have been significantly diminished. That is the case still today. And unless the regulation changes, that will probably be the case also for the near midterm.

Then we feel like to --know where is that volume going? Volume has been coming to Europe. The European market has been able to absorb the Singapore refinery volume, and we've had actually reasonably good sales here in this market. Regarding China, it is not easy to get a good sense for what's actually happening there. So of course, we have to also rely on different sources here. But our sense still is that, of course, they have domestic UCO, quite substantial amounts of that. We've seen that UCO prices in that region have not declined as much as one would have expected.

So someone is buying that and producing. And now we will then have to wait and see how much tonnage actually comes out of China, and where does it ultimately land? So I think that we will probably be able to report more in the Q4 results once we see that situation evolving. Regarding Germany, yes, this is a very exciting news. I mean the numbers in terms of incremental demand have ranged anywhere from 1 million to 2 million tons.

So I mean, whether it's on the low end or on the high end, I mean, it's still positive. And hopefully, the other European countries will then follow up. But Germany, of course, is the biggest market, and that's why it is so critical that, that decision would be positive. Hopefully -- we're hopeful.

The next question comes from Derrick Whitfield from Texas Capital.

Congrats on your results for the quarter. I have two questions for you. First, regarding the short-term market tightness you're referencing on Slide 10. Could you elaborate on this dynamic as we're generally seeing the drivers as being more secular versus short term in nature?

And then second, if you could elaborate on the trends you're seeing across the global waste feedstock markets. While you're referencing higher feedstock costs on Slide 13, Tallow and UCO spreads appear to be a bit more favorable for you for the quarter and seemingly have the potential to remain favorable as U.S. regulatory and tariff policy have taken U.S. producers out of the market.

Yes, it's a very big question. The short-term demand versus secular demand. I mean, ultimately, the whole matter of having -- moving to clean fuels, especially in SAF, I mean, there's no option. So I mean, logically, you would say that's really the direction of travel for us, of course, at Neste and that's more of a supply issue. It is the fact that we are moving forward with Rotterdam, second-line construction, the more I look at it, the more convinced I am that even though it's a quite formidable task, it is still the right thing to do.

And if everything goes well, we should be well positioned as we head into the latter part of this decade. If this RED III implementation goes in a positive way, that, of course, will then give quite a substantial boost in diesel. And don't forget, Neste has the ability to move its capacity fairly flexibly from SAF to RD. So -- and we will take advantage of that flexibility depending on how the market ebbs and flows.

Regarding feedstocks, yes, I have to say that it is clear that regulatory decisions on your side of the continent has -- have impacted that some of the buyers seem to have disappeared or at least procuded their procurement from Europe and from Asia. So hopefully, that will ultimately bring some price levels down. But I would say, so far, it's been more of an Asian phenomenon and maybe Australian phenomenon on the animal fat. UCO prices, of course, have, as I said earlier have been holding fairly well. And then I would say in the U.S., we saw this movement up in feedstock prices, but maybe the uncertainty around the implementation of these regulatory decisions is maybe taking a bit the air out.

But let's see once the decisions are clear, whether there's another momentum move upward. So Neste is one of the largest buyers of these feedstock, if not the largest buyer, and I think we have a good global setup. We have a good team. We're able to optimize that constantly. We can also trade internally inside the system, but also trade with third-party if we want. So I think we're well positioned for that. I think that's about all the key things I can share with you now. Thank you, Derrick.

The next question comes from Henri Patricot from UBS.

Two questions, please, both on the Renewable Products margin. The first one, I wanted to check if you can give us some indications as we think about the fourth quarter margins to what extent you're able to capture what seems to be very good spot margins in Europe? Or are you quite constrained because of the maintenance?

And then I wanted to also check on the -- on SAF. We've seen quite an increase in SAF prices. Are you able to give us some color on your margins on that side of the business. Have you seen as well an improvement in the SAF margins in the third quarter and in the fourth quarter as demand seems to have picked up?

Thanks, Henri. So I would say that we were somewhat constrained in the Q3 as well on taking advantage of really the spot market prices. I think they were relatively high. But obviously, we're very pleased that we were able to utilize even smaller pockets to end up to the $480 that we did. Now going into Q4. So I think the big impact you need to take into consideration is really the maintenance ongoing Rotterdam and coming up in Singapore. And if you look at sort of a year back when we had similar maintenance, be it in Q3, Q4, it is roughly $100 per ton impact.

So don't forget that. Otherwise, obviously, we are very much now selling what we have produced to inventory. If all goes well, we will push -- we will hope to be sort of ramping up well and having a bit more still volume to push out really to take into -- take the benefits of the current market, obviously, we are focused on that.

But I think we have sort of more limiting factors. And then obviously, please do remember that now in Q3, we had the BTC one-off that will not reappear in Q4 as that sort of legislation. This has now ceased or expired.

What comes then to SAF prices. I think the -- indeed, the market turned out to be a bit better than it looked in -- during the summertime when there was a period where one had to consider that whether it makes sense to produce SAF or just focus on renewable diesel, the end outcome was better. I think maybe partly also due to just sort of a bit of lack of product and very, very low exports into the European market, and that helps strengthen the market, and then we obviously took advantage. And like Heikki said, so we are very flexible between the renewable diesel and SAF, and we'll continue to sort of focus on that flexibility really to be to Q4 or '26 for that matter.

The next question comes from Matthew Blair from TPH.

Could you provide an update on your Martinez refinery? Is this plant EBITDA positive? Or -- are you actually seeing any export opportunities out of California into more attractive markets? And any sort of commentary on the feedstock slate. It looks like veg oils might be a little bit more attractive at certain points during the quarter than some of the low CI feeds.

And then on the Oil Products side, could you expand a little bit more on the opportunities on the crude slate. It sounds like you're able to implement a little bit more flexibility. Do you have any examples of crude that you've been switching to and switching away from?

Thank you, Matthew. So if I take a stab and then Eeva can continue. So obviously, our Martinez is important. Don't forget, we have a joint venture. Marathon is the operating partner, and we, of course, are actively contributing, but they are the operating partner. So they run the operations day-to-day.

I think overall, the refinery is now -- has been running quite well. I would call it from Neste angle that we've come out of the project phase and we're now moving into the more continuous operating phase. And having just some time ago, visited Martinez, so I really feel that they have a really good team on location in California running this. But still, it's early days in this journey of making these renewable fuels even for that team.

On the export opportunities, I think the -- I think this is a general comment that with all the different regimes globally, the cost of feedstocks, I don't sort of at least at the moment, I think it's very much focusing on domestic sales. That is kind of where the opportunity aligns at least in the short to medium term.

On the feedstock side, I think it's been quite volatile recently, both of the partners supply feedstocks. And then, of course, the refinery can buy whoever they want. So this is -- I don't really -- I can't comment on what the actual substance of the feedstock mixes due to the structure of the joint venture.

On the Oil Products side, yes, the crude slate is really interesting because, of course, we buy a lot of it. We have -- our primary sources, the North Sea, has been. And we know we've had a good relationship, getting feedstocks out of there. But -- I'm sorry, a crude out of there. But of course, in the spirit of trying to make more money and improve our performance, we have to look at options.

And the only thing I can say is over the last three quarters, our engineers and chemists in Porvoo have really looked at a very, very broad set of options. And out of that, they're now narrowed it down to let's say, a shorter list, but there are some very interesting things, and we're testing them in production level mode to see how they perform.

But anyway, the options are evident, and we will continue to work. I think we'll be able to report more as we head into 2026. But I'm very pleased with the work they've done on this crude side.

The next question comes from Peter Low from Rothschild.

The first was just on perhaps your term contract negotiations for 2026. I think those usually take place around this time of year. Can you comment at all on how those negotiations are progressing? And whether the current tightness in the spot market confers on your degree of pricing power?

And then the second question was on the outstanding BTC, which you recognized as a contingent asset in the first quarter, but I don't think you booked in the underlying results. I think that was EUR 30 million to EUR 40 million, as you said at the time. Can you give us any update on when do you expect you might be able to formally recognize that?

So if I -- thanks, Peter. Thanks for your two questions. If I take the first one and then Eeva will take the second. Yes, this is indeed the time of the year when it is a term contract time, so to speak. I think last year, we said that for 2025, I think we said about 2/3 of the volume had been termed -- yes, about 2/3.

I think, of course, the market has changed quite a lot. We also have the SAF market is now active with the mandates. What I would like to say here is that we will always term some volume, but I think at the moment, we're a little bit monitoring the situation. We're in no rush to make any decisions here. Let's see how the weeks now move forward. We will term some, but I will then report to you probably in Q4 how these things ended. But at the moment, we're in no rush.

And regarding, Peter, the Q1 CFPC credit. So we're working on a deal to monetize all of the '25 credits and targeting to be successful during the fourth quarter, and that would then probably be the trigger for us to recognize the Q1 as well.

The next question comes from Adnan Dhanani from RBC.

Two for me, please. First, as it relates to your operated production facilities, utilization rates have been around the 80% mark in recent quarters. How do you see that evolving in the coming quarters? And are there any hurdles there to materially increasing it beyond that 80%? And then secondly, on the opportunity you mentioned from the lower animal fat prices. Can you just provide some color on the current split you have in your operated refineries between UCO and animal fats? And where that could go to take advantage of that opportunity?

So the first one, Eeva, on utilization, I think 80% has been sort of a good number for modeling, would you not agree?

Yes. Yes. I would say, Adnan, that whilst, of course, it's not necessarily an indication that we're satisfied with the 80%, but just realistically thinking of where we are. I would use that as the right -- as the number also going forward into '26. Now we have identified quite some bottlenecks in our processes, which we are working on to improve the number, but some of them are also tied to maintenance and CapEx, and hence, the sort of progress will not be sort of massive in -- going into '26. So that's a good number for you to use.

I would agree. And I think Neste has a -- might if I look at the last decade, Neste actually has quite a good history in debottlenecking these lines, both Singapore Line 1 and Rotterdam Line 1, both have been able to get beyond the nameplate capacity. So we are constantly working -- I mean, under the performance improvement program, we're very systematically turning every corner in those refineries to see how can we get more tonnage.

But as Eeva said, a number of these things, they require some investments, not massive, but some money and some of these investments, you can only do when you have a bigger turnaround. So that really creates the delay. But I'm actually very pleased also with the work the engineers are doing. Then on the animal fat, the blending -- I don't want to go into the detail of the blends. It is a bit sensitive.

And obviously, UCO plays a big role as does animal fat. What I can say to you, though, is that Neste has invested a lot in pretreatment technology. We have heat treatment. We have pretreatment technologies. We're able to clean up a lot of the bad stuff, if I may use that term from the feed.

So it doesn't go into the refinery. And constantly, we're trying to optimize within the technical limits to get as much of the cheap stuff or cheaper stuff in there as we can. But I want to still mention that in some European countries, for example, animal fats are not really allowed. And that does, to some degree, restrict the potential. But I'm pleased anyway with the direction of travel on animal fat prices. That is a good thing.

The next question comes from Artem Beletski from SEB.

So I would like to ask two relating to European regulation. And the first one is relating to RED III implementation. So you have been discussing about Germany and the impact on the demand for next year. But maybe could you talk about some other markets which are also doing RED III transposition and increasing targets in 2026?

What are interesting opportunities you see there? And the second question is relating to some discussions out there when it comes to product certification and some actions or plans to make more strict approach in some markets like Germany or Netherlands. How much is this actually visible when it comes to our customers' behavior? And maybe what comes to preferring U.S. supplier on European market?

So thank you very much. So of course, for us, what's very important is what happens here in the Nordics, both Finland and Sweden, very -- Sweden, very critical. Remember, Sweden actually dropped the mandate quite a lot here some years ago. We believe we're going to see gradual movement of the percentages as we head into '27 and '28 and even towards '30.

So it's gradual because, of course, people are worried about inflation and so forth. But I think that's all positive. In Central Europe, of course, Germany is just a very big thing. Other markets, we are looking closely at is, Italy is interesting. The Netherlands. And then small markets like Portugal, but volume-wise, Portugal, Spain, are small.

I would say, Italy, Germany, Netherlands and then Nordics are critical. And I think overall direction at the moment looks positive. On product certification, this is a really critical thing because -- this is, of course, a trust-based system. The value of the certificates, the biocredits fundamentally related to the fact that the feedstock you procure and use is really the stuff it's supposed to be, and that you have very good tracking. And Neste spends a lot of time and money to make sure that we track with our business partners resources and that we are using the right feedstocks.

I can't comment on other industry players. Only to say that I do think that at least the savvy customers are aware of the importance of this, and then they've recognized, that Neste is a reliable partner. I think that's what I would -- that's all I would say. And I think the German legislation, if it goes forward, we'll sort of further heighten the importance that the feedstock needs to be the right kind and from a reliable source or acceptable source if I use that word. So that would be good for us as well.

The next question comes from Nash Cui from Barclays. .

Two questions from me, please. The first one is on the Q4 margin impact. I think you provided a very helpful comment earlier talking about $100 per ton impact from similar maintenance previously but we are having two major maintenance this quarter, including Singapore for half of December, I think. So I wonder, could we see more impact over there because there are two plants of in Q4. Then my next question is on inventory. So I wonder if you have built enough inventory to sustain a run rate sale about 1 million to 1.1 million ton in Q4?

Sure. Thanks, Nash. So you're right to highlight that there is indeed two breaks. But obviously, the Rotterdam is the sizable because it's full for the quarter, and it's really the start of the Singapore shutdown that impacts this quarter, a bigger bulk actually goes into Q1. So I think the reference is not sort of -- is a pretty good one.

Of course, it depends on also how the maintenance breaks go. And a part of this industry is such that when you stop and you open certain things, you sometimes do have surprises. So obviously, the syndication is assuming that we don't have big surprises. And more importantly, that we have very organized and speedy ramp-up in Rotterdam.

So it is not meant to be sort of exact guidance, but I just thought it's helpful because it indeed the magnitude is such that if you ignore it, your models will probably lead you to a too high number. Then when it comes to the inventory, I think we are well provided with what we produced into inventory to serve our customers as per our customer promises.

It's more than a question of really on our ramp-up time in Rotterdam that the faster we are, we may have some excess to sell in the quarter. And if we then have any issues, we might miss that opportunity to really tap on the spot market.

I just wonder if we put margin aside, is there any color you can give on the absolute cost side of this on the two maintenance? Can you say on EBITDA? What is the absolute cost? .

Well, we haven't really given such numbers, this per ton is what I think is -- gives you a helpful indication of the impact in the quarter.

The next question comes from Alice Winograd from Morgan Stanley.

Two questions from me please. First, looking to 2026, what do you think are the key building blocks of supply growth and demand growth for HVO, for instance, you mentioned Germany, adding some 1 million or 2 million tons in demand. And what else is on your radar that you can maybe quantify from a fundamental perspective? And the second question is on FX. I believe you printed EUR 109 million of FX this quarter? And when do you expect to see the current spot rates to fully show in the P&L because there's quite a gap there?

Do you want to take the FX first?

Yes, sure. So indeed, the bigger FX move started or the appreciation of the euro started more -- during the quarter, so to say. So the -- as we are hedged, it comes with a delay. We'll start to -- now that levels are obviously kind of, I would say, stabilized at least to some extent to these current levels. So that will start coming through in the Q4. We typically don't have a super long hedging when it comes to FX, but obviously, some going also into next year.

Yes, of course, 2026, that goes into the department of forecasting, which has not been easy in this business. I think on a very high level, I think three things. Of course, the macro situation. Europe, as you know, has been overall quite weak here for a number of years on macro. Some minor signs of improvement as we head into next year, but still very early to say.

I think the big thing is really regulation because that, of course, will create instant demand. And then when you look at the overall level of how the market is behaving, now looking more at the fossil diesel because that, of course, impacts then the renewables market as well. What is happening with this whole Ukraine-Russia matter?

How are these refined products being moved around? That may also have some impact. Inventory levels have been overall quite low here. As we came out of the summer, that's also been supported. So maybe that will a little bit boost as you head into the new year. But for me, really the big thing is what's going to happen in the coming years. And I think it's very much about RED III.

The next question comes from Matt Lofting from JPMorgan.

Two, if I could, please. First, Slide 10 in your deck shows the improvement through recent months in the gross renewable diesel margin. It sounds like you're sort of saying at least to this point that feedstock costs have been relatively sort of high or stable. So I just wondered if you could disaggregate roughly sort of how much of the improvement in the gross margin you think is indexed to the strength in fossil fuel diesel market versus being driven by underlying improvement in the renewable fuels market?

And then secondly, I noticed that you mentioned listed trade policy, unpredictability in your list of uncertainties. To this point in the year, sort of what have you seen from that perspective in terms of any impact on the business and the market. Just wondering how much of a, let's say, base case versus sort of tail risk you see there?

Do you want to do the feedstock,? I'll come to trade.

Yes, it was Matt -- your question on the unpredictably really around the feedstock, did I get it right?

Yes, yes.

Yes. So well, I think considering how volatile the feedstock market has been this year and I think it's prudent to sort of assume that there's some unpredictability into that. Now of course, as the year draws to a close, what we have and now either at the production facilities or close by, obviously, it starts to be more predictable.

The -- but it's really these sort of trade barriers that have now been a sort of big area of causing this sort of unpredictability. And I think now the animal fat, where the price has decreased, which is in our favor, is a prime example because it really comes mainly from the fact that we see less U.S. buying and less buyers, hence, around whereas then the UCO has been moving a lot less because actually, the sort of the Chinese buyers have been picking up if there was anything sort of left unpicked from U.S.

But as we've all seen, these trade topics change on a daily basis. They're dynamic to say the least. So many things can happen. And then, of course, when it comes to our inventory valuations and those type of things, then the sort of it matters what the prices are at the year-end. And hence, we want to sort of highlight that as a real uncertainty. But I don't think I can really provide any more clarity unfortunately, on the topic.

Maybe to your question about trade policy. I mean, of course, there's a lot of stuff, but if I raise two uncertainties. One is regarding the U.S. importation of foreign feedstocks in the RIN 50. Obviously, I think not all industry participants are necessarily of the view that, that is the right thing.

So the debate, I think, we didn't have visibility on the debate, how will that ultimately then end? Will it go forward as proposed or will it change? But as I said, my understanding is there are different views on what is the right way forward. So we'll just have to see. And then I think from the European standpoint, Neste, we, of course -- as I referred to the Chinese SAF, the European Commission at the moment is monitoring the SAF situation.

And then we'll have to see in '26 or '27, depending on now what happens, what will happen on -- as you know, on renewable diesel, we have antidumping duties. But on SAF at the moment, it's monitoring is what's being done. So that will be some uncertainty. That's worth understanding and noting.

The next question comes from Paul Redmond from BNP Paribas.

My question was just about in preparation for Q4, you have been building inventories. I just wanted to confirm where the focus of that build was. Was it on sustainable aviation fuel or renewable diesel? And then secondly, just a question about CapEx. You reduced your CapEx. If we could just get some insight on what the key drivers are of that? Is it phasing or a true reduction in CapEx? And you were forecasting to a similar spend in 2026. Should we think there's any change there?

Yes, I can certainly start with the CapEx. So I would say that Obviously, when the guidance was given, it was very sort of quickly after Heikki started, and we've done a lot of work on reviewing really the amount of CapEx spend that it drives and fulfills our return requirements. And hence, there's been a real reduction of scope in -- but then what comes to the bigger bulk of the CapEx, obviously, related to Rotterdam that has moved, and we expect that to sort of be the bulk of next year as well.

So there's really no -- I wouldn't -- we're not expecting a change to the earlier view on next year. But of course, the more you work on, there's always areas of cost efficiency that can be applied and tighter and better procurement, and we're obviously trying to sort of make sure the organization is really alert on all of those topics. But yes -- and then on the Q4 preparation. Well, we obviously know our commitments and have balanced both. So there is an inventory on both RD and SAF. But of course, volume-wise, the RD is much bigger.

Maybe if I can just build on that. I remember our conversation after Q1 and after Q4 of last year was very much about, okay, so how will the SAF procurement actually take place in Europe in 2025? And this is the first year when we have the mandate. And coming into this year, we really didn't know exactly, is there going to be seasonality around the summer. Will there be buying later in the year?

Or will there be buying equal amounts through the year?

So it's been a bit difficult also to plan the inventory when we don't really exactly have any data on the buying behavior and the buying profile. But as we have this year's data and next year's, then we'll probably become also smarter on how do we sort of build our own inventories as the market develops. So just more as a context, remembering those discussions in the spring of this year.

The next question comes from [ Matti Carola ] from OP Corporate Bank.

First one regarding the performance improvement program. Could you a little bit elaborate the impact on the variable cost and how much is visible already in the sales margin you have right now? So I mean, the big part is, of course, big part of the headcount reduction, but if you could give a color about this impact on sales margin.

Then the second one is about the SAF next year. How do you see SAF market going as the Netherlands opt in this is done and also the U.S. reduction is a little bit killing the exports from Singapore. So do you see potential for RD -- or how do you see the market?

You do the first one?

Yes, I can comment on the performance improvement. So -- well, the headcount is important, it for regulatory reasons, obviously, it comes a bit in phases that there's still people have certain tenures that we need to respect and hence, not all the savings are in.

So actually, I would say that the biggest impact in the P&L is really around the overall procurement, spending less and spending more wisely. And that's by far the biggest. Then the logistics side is important, but part of those savings obviously land into reduced leases and hence in the depreciation role, but still significant also in the P&L.

That's your question, I'm trying to recall exactly the wording on the Dutch opt in clause, whether that actually -- I mean, that has, of course, been favorable for SAF, but now if it is going away it could be not exactly sure how much -- yes, I'm not exactly sure how much of a hit that will really mean. On the U.S. side, of course, the fact that you have this equalization from the incentives regarding SAF and RD, of course, that, of course, then reduces in some ways the attractiveness, if I may use our competitiveness coming out of Singapore. So that will be sort of a net negative, I would say.

The next question comes from Christopher Kuplent from BofA.

I've got really only ones remaining on Rotterdam. Could you tell us how much of the project CapEx is still left to be spent? And slightly related to that, what that will do to your depreciation charges running through the RP line? I mean, we're sort of at EUR 140 million, EUR 150 million per quarter right now. Where is that going to pan out once Rotterdam is fully ramped up into '27?

Sure. So Christopher, what we are expecting in Rotterdam as CapEx next year is around EUR 700 million. And then now the '27 number on top of my head is obviously a lot lower because there's -- by that time, everything will be built up, but there are some tails 100-ish, if I remember right, in '27.

So then that all kind of adds to the depreciation. Obviously, there is a relatively long depreciation time for -- because the asset will be around for decades. So the imminent increases is, of course, visible but based on that, if we can come back to a more exact number, but that would be the number to use on top of what you're seeing today.

Okay. And just to confirm, you're not fully depreciating the asset until it's ramped up, right? So even the CapEx spend to date is not in your quarterly charge yet?

Correct. We have the -- what we call sort of comparability in use. So as it is a site in progress, so to say, asset under construction. So yes, that's very true.

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

Once again, it was a pleasure to spend this hour with you. Summary, I wanted to touch on the four key points. As I've said, I think we're making really good progress on the performance improvement program. You see the numbers. We will continue to report on that, actually see there is more potential. And I think that we will continue to work on this going forward.

Regulatory developments very much focused now in Germany. Let's keep our thumbs up, if I can use that word. There is positive momentum in the market. Let's see how much that holds into '26. And then on the balance sheet, which we maybe didn't have to discuss this much this time. So we are below the 40% leverage number. And that, of course, is something we've aspired to do with the help of these initiatives.

So with those words, let me thank you, on Eeva's and on my behalf and wish you all well. And to the Americans, Happy Halloween. And we will then see you again in February. Take care.