The production of renewable energy once more generated bigger earnings in the final quarter of the year than conventional oil refining.
Fuel maker Nesteen achieved a record performance last year as a result of the energy crisis. According to CEO Matti Lehmus, the outcome in terms of EBITDA was the best ever.
Comparable EBITDA for the entire year came to 3.54 billion euros for the company, up from 1.92 billion euros the year before. EBITDA refers to the business’s actual operating profit before taxes, financing costs, and depreciation.
In the results statement, Lehmus notes that “the outcome of all our businesses increased in 2022.
The outcome led to a significant increase in Neste’s share price. Neste’s stock price had risen by roughly 11% as of 3 p.m.
Neste’s former core sector, conventional oil refining, in particular, significantly increased its profitability. The petroleum products segment’s comparable EBITDA increased by more than four times from the prior year to 1.65 billion euros. Despite the fact that traditional oil refining accounted for the majority of Neste’s profit in the second half of last year, the production of renewable fuels has long been the company’s main source of cash.
The increase was mostly brought on by Neste receiving a higher price for the goods it sold. Total refining margin, which gauges how profitable oil refining is, was 23.4 dollars per barrel for the entire year, up from just 9.0 dollars the year before. The difference between the selling price of petroleum products and the cost of production is known as the refining margin.
Key product margins considerably increased throughout the year, according to Lehmus.
Diesel production was especially profitable. Middle distillates, which include diesel, account for around half of Neste’s oil product sales. The diesel refining margin surpassed all previous records last summer.
The EU import restriction on Russian oil products went into effect at the beginning of this week, causing chaos on the European fuel market. This largely affects the diesel market because of the EU’s ongoing diesel shortage, which is filled by imports, particularly those from Russia.
According to Neste, the market for oil products will remain unstable, but oil refining will stay profitable at a high level at the start of the year as well.
“Our total refining margin for the first quarter is anticipated to remain stable but slightly decline from the fourth quarter of 2022 based on the current view for the derivatives market. Sales volumes are expected to roughly match those of the prior quarter for the first quarter.”
Lehmus makes no comments on how the import ban will impact Neste’s oil refining’s future financial success.
“The big picture is affected by a variety of circumstances. How the slowdown in global economic growth will impact it is one question. On the other hand, the starting point is that the year’s remaining product inventory levels have been low, which has helped to explain why the processing margin has been high.”
The oil industry has grown so lucrative in the midst of the energy crisis that, for instance, the oil tycoon BP has started to bundle its plans for a green transition and increased investments in oil and natural gas production. Lehmus asserts that Neste has no intentions akin to his.
“No. Our plan is obvious. The growth strategy prioritizes solutions for the circular economy and renewable energy.”
A record performance also increases the owners’ dividend money. The company’s board suggests that the owners receive no more than 1.17 billion euros in distributions from the previous year’s earnings. The dividend pot was 630 million euros the previous year.
The board suggests that the maximum distribution per share be set at EUR 1.52. This is divided into a 1.02 euro actual dividend and two 0.25 euro extra dividends.
The dividend per share was EUR 0.82 a year ago.
The Finnish state, who holds a 36 percent stake in Neste, would receive almost EUR 420 million in annual income from the dividend proposal.
According to Liquid
According to the company’s earnings statement, “We expect substantial volatility to persist in the markets for petroleum products and renewable raw materials, which makes projecting margins in both petroleum products and renewable goods hard.”