NESTE OIL AIMS TO BECOME THE WORLD'S LEADING BIODIESEL PRODUCER
Stock Exchange Release
27 September 2006 at 8:30 a.m. EET
Neste Oil's Board of Directors has approved a strategy aimed at making the company the world's leading biodiesel producer. Oil refining will remain as Neste Oil's central business, however, and the company will continue to invest in new conversion capacity at its current refineries. The foundation of Neste Oil's strategy will remain based on the company's ability to use its unique refining know-how to produce high-quality fuels for cleaner traffic from a variety of lower-cost raw materials. Neste Oil expects to invest several billion euros in growth projects over the next 10 years.
"The central message that we want to communicate is that we have both the will and the financial resources to invest in growth in the areas where we are strong. By following our strategy, we will make the best use of our know-how. We are aiming to be the world's leading biodiesel producer, which means production volumes of millions of tons annually. Our proprietary biodiesel, which is based on a long-term R&D effort, can be produced from a variety of vegetable oils and animal fats - and is a premium-quality fuel that clearly outperforms both the vegetable oil and crude oil-based diesel fuels currently on the market," says Neste Oil's President & CEO, Risto Rinne.
"We will build several biodiesel production facilities in various market areas, either alone or with partners, in the years to come. In addition, we will be even more active in research and development in the biofuels area to utilize different renewable raw materials - while continuing to invest in new conversion capacity at our refineries in Porvoo and Naantali," Rinne continues.
"Neste Oil's largest-ever investment, in a new diesel production line at the Porvoo refinery, is due to be completed this winter, and will enhance the company's performance and cash flow significantly," says Timo Peltola, the Chairman of Neste Oil's Board of Directors. "The Board has reviewed a number of strategic options of how we can best ensure that this enhanced profitability and cash flow benefits our shareholders. And we have concluded that a strong growth strategy, based on biodiesel production and driven by our own technology, is the best way of generating shareholder value."
Parallel to the updated strategy, the Board also approved the following financial targets:
- Return on Average Capital Employed after tax (ROACE) of at least 15% over the cycle
- Dividend payout ratio of at least one third of underlying profits
- Target leverage range of 25-50%
Mission and vision confirmed
The Board confirmed 'Refining the future' as the company's mission. Neste Oil's strategy of producing clean traffic fuels is very clearly linked, therefore, to the company's underlying mission.
The Board defined the company's vision to be 'The leading provider of cleaner traffic fuels'. Neste Oil has been very active in launching cleaner petroleum products that have been based either on proprietary technology or the rapid introduction of other new technologies. The most recent example of the company's pioneering role is Neste Oil's premium-quality biodiesel that gives the company a head start over its competitors. The company's potential for achieving its vision is, therefore, realistic.
Putting Neste Oil's strategy into practice will depend to an important extent on the company's values - excellence, innovation, responsibility, and cooperation - which the Board of Directors has approved earlier.
The role of Neste Oil's different businesses
Neste Oil's updated strategy highlights the importance of biodiesel and oil refining for generating growth for the company. In addition to these core businesses, promising growth opportunities can be seen in high-quality gasoline and lubricant components, most of which are based on in-house expertise. Neste Oil is already the leader on the European merchant market for top-tier lubricant base oils.
The company also has two divisions that play a supporting role for its core businesses. Shipping handles Neste Oil's raw material input and product shipments and Oil Retail is responsible for fuel marketing and sales through channels such as Neste stations. Neste Oil is also the majority owner in Neste Jacobs, an engineering services provider, which gives Neste Oil a valuable competitive edge in implementing growth projects. This is particularly critical on today's markets because of the global shortage of quality engineering services.
Competitiveness assures growth
"While we are aiming for growth by strengthening our organization, know-how and financial position, we will continue to promote competitiveness and efficiency in all of our operations. By securing operational and financial excellence in our current businesses, we will be able to provide a solid platform for future growth," says Risto Rinne.
Neste Oil Corporation
President & CEO
For further information, please contact:
Risto Rinne, President & CEO, on +358 10 458 4990
Petri Pentti, CFO, on +358 10 458 4490
Jarmo Honkamaa, Executive Vice President, Oil Refining, on +358 10 458 4758
Kimmo Rahkamo, Executive Vice President, Components, on +358 10 458 4247
Neste Oil Corporation is a refining and marketing company focusing on advanced, clean traffic fuels. Neste Oil's refineries are located in Porvoo and Naantali in Finland, and have a total refining capacity of approx. 250,000 bbl/d. The company employs around 4,600 people. Neste Oil is listed on the Helsinki Stock Exchange (symbol: NES1V). For further information, see www.nesteoil.com.