Today, 12 March 2020, Neste is holding a Capital Market Day 2020 as a webcast. This includes presentations by President and CEO Peter Vanacker and the Executive Committee on the company's strategy, market outlook and next steps for profitable growth through renewable and circular solutions.
Excellent progress in implementing the strategy - revised vision and values
Neste is well positioned for the second wave of growth and transformation. The company has an excellent track record in terms of security and profitability and has made great progress in implementing its strategy. Neste's ambition to become a world leader in renewable and circular solutions remains unchanged. The Vision Statement has been revised and is now "Leading the way towards a sustainable future together". Neste owes its success to its dedicated and passionate employees. To underline this, the values have also been revised: "We are mindful, We are courageous, We work together". Neste continues to focus on implementing its strategy in the currently volatile market environment.
Market for renewable products records accelerated growth
In the field of renewable solutions for the transport sector, Neste has maintained a strong presence in key markets and has developed new markets. The global climate goals result in high demands for sustainable solutions in the transport sector. Global demand for renewable diesel is expected to exceed 20 million tonnes per year by 2030. Neste's customer-focused approach enables efficient margin optimisation through a combination of strategic distribution channels and flexible sales markets.
In the field of renewable solutions for aviation, passengers want concrete solutions for more sustainable flying. In 2019, Neste has started the commercial distribution of sustainable aviation fuel (SAF). In Europe and North America, regulatory changes are expected to create demand for renewable aviation fuel. Neste's current capacity of 100,000 tons per year for the production of renewable aviation fuel is expected to increase to over one million tons per year by 2022. In addition, new innovations in feedstock will create growth opportunities.
In the field of renewable polymers and chemicals, Neste has started to build a new business area by changing the value chains for plastics and chemicals. The demand for renewable polymers and chemicals is growing and is driven by consumers, brand manufacturers and governments. Neste helps market leaders in polymers and chemicals to make their products more sustainable through readily available solutions. Neste's drop-in solution for renewable polymers has been proven on a commercial scale. With its expertise in using low-grade raw materials, the company enjoys a competitive advantage in the rapidly developing chemical recycling market, where it works in partnership with recyclers and technology developers.
Further progress in the growth of the renewable energy production platform
The investment project to expand capacity in Singapore is proceeding according to plan. The investment of 1.4 billion euros will increase the production capacity of Neste for renewable products by 1.3 million tons per year. The new production facility will also offer the option of producing up to one million tons of renewable aircraft fuel. The Singapore expansion is scheduled to come on stream in mid 2022. By further eliminating bottlenecks at existing sites, Neste intends to increase its renewable product production capacity to 4.5 million tonnes per year by mid 2022.
Neste is currently conducting a feasibility study to increase its renewable aircraft fuel production capacity within the existing capacity at the Rotterdam refinery by 450,000 tonnes per year by 2023. In addition, technical studies are underway on the next steps for capacity expansion at several sites around the world, including existing and some new sites. The concept for these investments is based on the current flexible investment in Singapore. The goal is to further expand the business in the areas of renewable solutions for the transportation sector, aviation and renewable polymers and chemicals. The company aims to make investment decisions on the next production capacity at a global level by the end of 2021 and plans to start production in 2025.
Neste estimates that the global availability of waste and residual materials will increase to over 35 million tonnes by 2030. The raw materials strategy focuses on growth in waste and residual materials and the development of new raw material sources. Neste aims to have waste and residual materials account for 100 percent of renewable resources by 2025. The share of new types of raw materials is expected to grow continuously.
Innovation for transformation and growth impulses
Neste's innovation division is tasked with ensuring the growth of the current business areas and developing new business platforms for further growth in renewable and circular solutions. The focus is on scalable and sustainable renewable carbon sources and technologies. This will be implemented through extensive collaboration with research and value chain partners. Neste will seize new opportunities by investing in innovative facilities and acquiring stakes in start-up companies.
Neste has established three new business platforms:
Lignocellulosic fuels, chemicals and materials
Scalable raw materials for aircraft fuels such as algae and municipal solid waste
Green hydrogen and Power-to-X
Generation of liquid funds and transformation opportunities for oil products
In line with its mission, the Oil Products Division concentrates on generating liquid funds and exploiting transformation opportunities. The optimized refinery configuration of Neste creates opportunities to benefit from fluctuations in a difficult market environment. The shutdown of the Porvoo refinery in the second quarter of 2020 is proceeding according to plan and will ensure the refinery's continued competitiveness through high safety and reliability. The Oil Products Division has the potential for EBIT improvements of €50 million on a comparable basis due to the Neste Excellence program through 2030. The Company is currently evaluating options for co-utilization, HVO expansion and refinery retrofit to optimize profitability and reduce the environmental handprint.
Climate-neutral production by 2035
Based on a detailed potential analysis, Neste undertakes to achieve climate-neutral production by 2035. This goal will be achieved through a series of measures and activities geared to emissions in Scopes 1 and 2 in accordance with the Greenhouse Gas Protocol. Some of these measures will already be implemented during the plant shutdown in Porvoo in the second quarter of 2020. The new commitment complements Neste's existing strategic climate commitment to reduce its customers' greenhouse gas emissions by at least 20 million tonnes of CO2eq per year by 2030.
Updated improvement targets of Neste's Excellence Program
The Neste Excellence Programme is making excellent progress. In 2019, the elimination of bottlenecks and optimisation of catalyst life has resulted in a €120 million EBIT improvement on a comparable basis. The targets for EBIT improvements on a comparable basis for the Neste Excellence Programme have been increased from €100 million to €225 million by the end of 2022 and from €200 million to €300 million by 2030. The comparative basis for these improvements is 2018.
Neste's long-term financial targets are the debt ratio and ROACE after tax. They remain unchanged. The debt target is below 40 percent, the ROACE target is 15 percent. Neste's dividend policy also remains unchanged. The company will pay out at least 50 percent of its net annual profit on a comparable basis in the form of dividends.
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