Neste Reports Weak Q2 With Guidance Cut And Higher Leverage; Credit Negative

Rating: A3 EUR 29s/31s/33s 3bp Wider

• Equity has pared earlier losses though the report looks credit negative to us on the Q2 EBITDA miss, reduced renewables guidance, higher leverage and outlook for continued market volatility.
  
  
• Q2 comparable EBITDA of EUR 240mn down from EUR 784mn in Q223 (-25% vs. BBG consensus).
• Oil margins soft at USD 15.1/bbl from USD 20.4 in Q1 and USD 16.7 in Q223 (vs. USD 16.3 BBG consensus). FY guidance left in place.
• Renewables sales margin of USD 382/ton down from USD 562 in Q1 and USD 800 in Q223. FY margin guidance downgraded from USD 480-580/ton to USD 480-650/ton. Volume guidance left in place albeit with the guided contribution from SAF changed from 0.5-1mton to 0.5-0.7mton.
• Credit metrics weaker; CF before financing of EUR -461mn from EU -24mn in Q223. NIBD of EUR 4bn up from EUR 2.5bn at FY23 with EBITDA leverage of 1.9x up from 1.1x at FY23 and and 1.1x at H123. “
• “The uncertainty in the global economic outlook and geopolitical situation continues to create market volatility. In Renewable Products, bioticket and renewable credit prices and renewable diesel price premiums are expected to remain at a low level compared to 2023 and feedstock prices are expected to remain volatile. In Oil Products, the refining market continues to be impacted by geopolitical tensions.”