SOURCE: Neste Oil Oyj

October 30, 2007 03:40 ET

NESTE OIL'S INTERIM REPORT FOR JANUARY-SEPTEMBER 2007

ESPOO, FINLAND--(Marketwire - October 30, 2007) -



- Comparable operating profit came in at EUR 159 million in the third quarter

The third quarter in brief:

- Comparable operating profit of EUR 159 million (Q3/06: 202 million)
- Operating profit of EUR 180 million (Q3/06: 254 million)
- Earnings per share of EUR 0.52 (Q3/06: 0.72)
- Comparable operating profit of Oil Refining EUR 154 million (Q3/06:
183 million), Oil Retail EUR
   22 million (Q3/06: 22 million), and Shipping EUR -2 million
(Q3/06: 4 million)
- Softer refining market compared to the third quarter of 2006
- The new diesel line contributed positively to the total refining
margin of USD 10.20 /bbl (Q3/06:
   USD 10.80 /bbl)
- The first deliveries of NExBTL Renewable Diesel were supplied

Risto Rinne, President & CEO:

"The market was very volatile during the third quarter and challenging for Oil Refining and Shipping, in particular. Despite this and the challenge of the start-up of our two new production lines, our performance was satisfactory."

"Although our new diesel line was operational for only part of the quarter, it already proved its ability to contribute to the total refining margin according to our expectation. With regard to the recent valve problems, the valves are now changed and the line is being started up."

"In renewables, we have faced two challenges, namely the new unique technology and feedstock sustainability. Now the technology is proven to function and the first deliveries have been supplied to the customers. We will use various feedstocks, and the work to ensure their sustainability will continue. This includes complete traceability of the palm oil whenever it is used, and building certification systems for sustainable production."


Further information:

Risto Rinne, President & CEO, tel. +358 10 458 4990
Petri Pentti, CFO, tel. +358 10 458 4490

News conference and conference call

A press conference in Finnish on the third-quarter results will be held today, 30 October 2007, at 11:30 am EET in the Mirror Room at Hotel Kämp, Pohjoisesplanadi 29, Helsinki. www.nesteoil.com will feature English versions of the presentation materials.

An international conference call for investors and analysts will be held today, 30 October 2007, at 3:00 pm Finland / 1:00 pm London / 9:00 am New York. A live webcast of the conference call can be followed at www.nesteoil.com. The call-in numbers are as follows: Europe: +44 (0)20 3023 4426, US: +1 866 966 5335. An instant replay of the call will be available for one week at +44 (0)20 8196 1998 for Europe and +1 866 583 1035 for the US, using access code 725434.

NESTE OIL INTERIM REPORT 1 JANUARY - 30 SEPTEMBER 2007

Unaudited

Figures in parenthesis refer to the third quarter of 2006, unless stated otherwise.


KEY FIGURES

EUR million, unless otherwise stated.


                                                              Last 12
                           7-9/07 7-9/06 1-9/07 1-9/06   2006  months
Sales                       2,978  3,464  8,642  9,778 12,734  11,598
Operating profit before
depreciation                  235    292    797    800  1,007   1,004
Depreciation, amortization
and
impairment charges             55     38    139    113    153     179
Operating profit              180    254    658    687    854     825
Comparable operating
profit *                      159    202    542    510    597     629
Profit before income tax      168    246    633    676    841     798
Earnings per share, EUR      0.52   0.72   1.86   1.92   2.46    2.39
Capital expenditure and
investment in shares           59    139    236    384    535     387
Net cash from operating
activities                    -32    248    321    376    512     457




                                         30 Sep 30 Sep 31 Dec Last 12
                                           2007   2006   2006  months
Total equity                              2,331  1,941  2,097       -
Interest-bearing net debt                   879    850    722       -
Capital employed                          3,265  2,902  2,890   3,265
Return on capital employed
pre-tax (ROCE), %                          28.5   34.1   31.9    26.8
Return on average capital
employed after tax
(ROACE), %                                    -      -   15.4    15.8
Return on equity (ROE), %                  28.7   37.3   34.3    28.9
Equity per share, EUR                      9.10   7.54   8.15       -
Cash flow per share, EUR                   1.25   1.46   2.00    1.79
Equity-to-assets ratio, %                  49.4   43.0   48.4       -
Leverage ratio, %                          27.4   30.5   25.6       -
Gearing, %                                 37.7   43.8   34.4       -

* Comparable operating profit is calculated by excluding inventory gains/losses, gains/losses from sales of fixed assets, and unrealized changes in the fair value of oil and freight derivative contracts from the reported operating profit.

The Group's third-quarter results

Neste Oil's sales totaled EUR 2,978 million in the third quarter (3,464 million). This decrease of 14% was mainly due to the divestment of the Group's stake in Eastex Crude Company earlier in the year. Excluding this, sales were largely unchanged.

The Group's operating profit for the period was EUR 180 million (254 million). Operating profit includes unrealized changes of oil derivatives valued at EUR -15 million (18 million) and inventory gains of EUR 36 million (-61 million).

The comparable operating profit for the quarter totaled EUR 159 million, which is some 21% lower than in the corresponding period last year (202 million). The most significant impact came in the form of a lower total refining margin, a weaker US dollar, and lower shipping crude freight rates. In addition, comparable operating profit was affected by increased fixed costs linked to the Group's growth projects and a higher level of depreciation. A fine was imposed by the European Commission on Nynäs Petroleum, a Neste Oil joint venture, and this had a negative impact of EUR 5 million.

Oil Refining posted a comparable operating profit of EUR 154 million (183 million), Oil Retail EUR 22 million (22 million), and Shipping EUR -2 million (4 million).

Profit before taxes was EUR 168 million in the third quarter (246 million), and net profit for the period was EUR 132 million (186 million). Earnings per share was EUR 0.52 (0.72).


The Group's January-September results

The Group's sales in the first nine months of 2007 totaled EUR 8,642 million (1-9/06: 9,778 million).

Operating profit totaled EUR 658 million (1-9/06: 687 million) and comparable operating profit EUR 542 million (1-9/06: 510 million). The comparable operating profit was positively impacted by high total refining margin in the first half of the year.

Oil Refining posted a comparable operating profit of EUR 493 million (1-9/06: 455 million), Oil Retail EUR 49 million (1-9/06: 49 million), and Shipping EUR 31 million (1-9/06: 31 million) during the first nine months.

Profit before taxes was EUR 633 million (1-9/06: 676 million) and net profit for the period EUR 477 million (1-9/06: 496 million). Earnings per share was EUR 1.86 (1-9/06: 1.92).

Given the capital-intensive nature of its business, Neste Oil uses return on average capital employed after tax (ROACE) as its primary financial indicator. At the end of September, the rolling twelve-month ROACE was 15.8% (2006 financial period: 15.4%).




                                 7-9/07 7-9/06 1-9/07 1-9/06 LTM 2006
COMPARABLE OPERATING PROFIT         159    202    542    510 629  597
- changes in the fair value of
open
  oil derivative positions          -15     18     -9      8 -26   -9
- inventory gains/losses             36    -61    120     42 134   56
- gains/losses from sales of
fixed assets                          0     95      5    127  88  210
OPERATING PROFIT                    180    254    658    687 825  854

Capital expenditure

After the completion of two major projects, Neste Oil's capital expenditure in January-September 2007 totaled EUR 236 million (1-9/06: 384 million). Oil Refining accounted for EUR 199 million of investments (1-9/06: 348 million), Oil Retail EUR 27 million (1-9/06: 24 million), and Shipping EUR 2 million (1-9/06: 9 million).

Depreciation in January-September was EUR 139 million (1-9/06: 113 million).


Financing

Interest-bearing net debt amounted to EUR 879 million at the end of September (31 Dec 2006: 722 million). Net financial expenses between January and September were EUR 25 million (1-9/06: 11 million).

The average interest rate of borrowings at the end of September was 4.5%, and the average maturity 3.9 years.

Net cash from operating activities between January and September was EUR 321 million (1-9/06: 376 million). A high level of working capital had a significant impact on the third-quarter cashflow of EUR -32 million (248 million).

The equity-to-assets ratio at the end of September was 49.4% (31 Dec 2006: 48.4%), the gearing ratio 37.7% (31 Dec 2006: 34.4%), and the leverage ratio 27.4% (31 Dec 2006: 25.6%).

Cash and cash equivalents and committed, unutilized credit facilities amounted to EUR 1,593 million at the end of September (31 Dec 2006: 1,667 million).


Market overview

Gasoline margins weakened dramatically in July, once higher refinery runs had balanced supply and demand in the US. Towards the end of the quarter, however, stocks dropped to their lowest level in five years as gasoline production was cut due to refinery problems and planned maintenance outages. As a result, gasoline margins increased and were further supported by growing hurricane fears.

In July, the weak gasoline market pushed refining margins down. The very strong physical North Sea crude oil market also put pressure on margins. In August and September, improving distillate margins helped refining margins recover. The international reference refining margin in North West Europe, IEA Brent Cracking, averaged USD 4.18 /bbl (4.42) during the quarter.

Turmoil on the financial markets and investor activity kept crude oil prices very volatile. After falling in the wake of weakening gasoline prices, tightening crude oil market fundamentals pushed them up again in late August, when Brent Dated reached an all-time high of USD 81.10 /bbl. In the third quarter, Brent Dated averaged USD 74.87 /bbl (69.49). New record prices for crude were seen at a number of points in October after the reporting period. The price differential between Urals and Brent Dated narrowed during the third quarter due to increased demand for heavier crudes. In addition, the Brent Dated basket has become heavier in 2007. The differential averaged USD -2.53 /bbl (-4.21) in the third quarter.

Distillate margins widened during the third quarter as inventory balances tightened on both sides of the Atlantic. The growth in diesel demand stayed healthy and refinery shutdowns supported diesel margins, especially in North-west Europe.

The price differential of both low-sulfur and high-sulfur fuel to crude remained widely negative. Low-sulfur product still suffered from poor demand, and expectations of a price increase following the tightening of the North Sea bunker fuel sulfur specification in August failed to materialize.

The first-generation biodiesel (FAME) industry has continued to suffer from over-capacity and low profitability. Public discussion on raw material sustainability has intensified and a lot of work is being done to build objective sustainability criteria. Demand for high-quality renewable diesel remains healthy.

Crude freight rates in the North Sea were 28% lower compared to the third quarter of 2006, and those from Primorsk 24% lower.

Key drivers

                             7-9/07 7-9/06 1-9/07 1-9/06 Oct 07  2006
IEA Brent cracking margin,
USD/bbl                        4.18   4.42   5.26   4.42   2.85  3.73
Neste Oil's total refining
margin, USD/bbl               10.20  10.80  10.63   9.62   n.a.  9.11
Urals-Brent price
differential, USD/bbl         -2.53  -4.21  -3.18  -4.44  -2.80 -4.28
Brent dated crude oil,
USD/bbl                       74.87  69.49  67.13  66.96  81.42 65.14
Crude freight rates, Aframax
WS points                       107    147    131    138    122   145




SEGMENT REVIEWS

Neste Oil's businesses are grouped into four segments: Oil Refining, Oil Retail, Shipping, and Other. Biodiesel is included in Oil Refining.



Oil Refining

Oil Refining's third-quarter operating profit stood at EUR 177 million (227 million) and the comparable operating profit at EUR 154 million (183 million). The lower comparable operating profit was mainly due to lower total refining margin, the weak US dollar exchange rate, and higher fixed costs and depreciation compared to the same period last year.

Neste Oil's total refining margin averaged USD 10.20 /bbl (10.80) in the third quarter, while the benchmark margin (IEA Brent cracking) averaged USD 4.18 /bbl (4.42).

The total refining margin was affected by low product margins in July, higher variable costs at the refineries and a narrower price differential between Brent and Russian crude. On the other hand, the new diesel line at Porvoo had a positive impact on the total refining margin.

Oil Refining's comparable return on net assets (annualized) was 25.3% (27.5%).

Key figures

                             7-9/07 7-9/06 1-9/07 1-9/06   LTM   2006
Sales, MEUR                   2,451  2,973  7,053  8,337 9,484 10,768
Operating profit, MEUR          177    227    603    590   684    671
Comparable operating profit,
MEUR                            154    183    493    455   571    533
Capital expenditure, MEUR        46    120    199    348   329    478
Total refining margin,
USD/bbl                       10.20  10.80  10.63   9.62  9.85   9.11


Production

Neste Oil refined 4.0 million tons (3.3 million) of crude oil and other feedstocks at its refineries in the third quarter, of which 3.3 million tons (2.9 million) at Porvoo and 0.7 million tons (0.4 million) at Naantali. Both refineries operated at their full crude distillation capacity during the quarter. In the third quarter of 2006, the Porvoo refinery also operated at full capacity, whereas utilization at Naantali was 60.2%, as a result of a planned maintenance shutdown.

As a result of the start-up of the new diesel line at Porvoo, the proportion of Russian Export Blend used increased to 62% (42%) of total refinery input in the third quarter.


Sales

Sales volumes in Finland totaled 2.0 million tons in the third quarter (2.0 million), and export volumes 1.6 million tons (1.4 million). Thanks to the new diesel production line, diesel sales increased by 22% and sales of heavy fuel oil decreased by 24%. The first deliveries of NExBTL Renewable Diesel took place in July.

Sales from in-house production, by product category (1,000 t)


                              7-9/07 7-9/06 1-9/07 1-9/06   2006
Motor gasoline and components  1,194  1,169  3,630  3,799  4,974
Diesel fuel                    1,421  1,163  3,839  3,550  4,821
Jet fuel                         189    198    532    524    702
Base oils                         74     76    227    231    302
Heating oil                      164    129    539    487    684
Heavy fuel oil                   180    237    775    812  1,069
NExBTL Renewable Diesel            5      0      5      0      0
Other products                   407    421  1,201  1,182  1,543
TOTAL                          3,634  3,393 10,748 10,585 14,095


Sales from in-house production, by market area (1,000 t)

                              7-9/07 7-9/06 1-9/07 1-9/06   2006
Finland                        1,987  2,031  5,981  6,034  8,083
Other Nordic countries           635    517  1,575  1,462  1,906
Russia & the Baltic countries     28     16     44     26     53
Other Europe                     606    539  1,712  1,712  2,420
USA & Canada                     362    284  1,366  1,140  1,417
Other countries                   16      6     70    211    216
TOTAL                          3,634  3,393 10,748 10,585 14,095

Oil Retail

Oil Retail posted an operating profit of EUR 22 million in the third quarter (23 million), and a comparable operating profit of EUR 22 million (22 million). The positive impact from increased volumes was partly offset by higher fixed costs related to expansion of the station network in the Baltic Rim area.

Figures for 2007 no longer include rental and other income from a number of service station properties sold in Finland in 2006.

Oil Retail's comparable return on net assets (annualized) was 19.5% (17.2%).

Key figures

                              7-9/07 7-9/06 1-9/07 1-9/06   LTM  2006
Sales, MEUR                      853    841  2,470  2,470 3,280 3,280
Operating profit, MEUR            22     23     51     53   136   138
Comparable operating profit,
MEUR                              22     22     49     49    65    65
Capital expenditure, MEUR          9     11     27     24    47    44
Product sales volume,
 1,000 m3                      1,087  1,070  3,330  3,248 4,505 4,424


Gasoline sales at Neste Oil's stations in Finland increased by some 4% in the third quarter compared to the same quarter in 2006. Diesel fuel sales were up by almost 6% due to good demand. Heating oil sales, however, declined by 3% as a result of lower demand.

A project is under way in Oil Retail designed to strengthen its profitability and position in Finland.

Sales volumes in the Baltic Rim station network increased by 18% compared to the same quarter in 2006. Sales of diesel fuel increased by 28%. The number of outlets in the Baltic Rim totaled 257 at the end of September.

Oil Retail sales volumes (1,000 m3)

               7-9/07 7-9/06 1-9/07 1-9/06  2006
Gasoline          405    379  1,158  1,062 1,452
Diesel fuel       407    391  1,258  1,107 1,510
Heating oil       172    192    546    686   932
Heavy fuel oil    103    108    367    394   530
TOTAL           1,087  1,070  3,330  3,248 4,424


Oil Retail sales volumes by market area (1,000 m3)

FINLAND        7-9/07 7-9/06 1-9/07 1-9/06  2006
Gasoline          182    175    494    501   652
Diesel fuel       264    250    786    748 1,008
Heating oil       172    177    537    598   814
Heavy fuel oil    103    108    367    394   530
TOTAL             721    710  2,184  2,241 3,004


BALTIC RIM *   7-9/07 7-9/06 1-9/07 1-9/06  2006
Gasoline          223    204    665    560   800
Diesel fuel       143    141    472    359   502
Heating oil         0     15      9     88   118
TOTAL             366    360  1,146  1,007 1,420


LPG (1000 t)       51     59    173    188   254

*Volumes from stations and terminals combined



Shipping

Shipping's operating profit for the third quarter came in at EUR -4 million (11 million) and the segment's comparable operating profit totaled EUR -2 million (4 million). The weaker comparable operating profit was due to significantly lower freight rates and softer US dollar exchange rate.

Shipping's comparable return on net assets (annualized) was 13.6% (13.1%).

Key figures

                            7-9/07 7-9/06 1-9/07 1-9/06    LTM   2006
Sales, MEUR                     82     65    307    220    380    293
Operating profit, MEUR          -4     11     35     69     44     78
Comparable operating
profit, MEUR                    -2      4     31     31     32     32
Capital expenditure, MEUR        1      6      2      9      3     10
Total fleet days             2,871  2,446  8,375  7,071 11,423 10,119
Fleet utilization rate, %       95     93     95     95     94     94


Shipping's total fleet days (the number of days vessels have been operational, including repair and waiting days) amounted to 2,871 in the third quarter (2,446). Fleet days for crude fleet totaled 552 (515), and 2,319 (1,931) for the product fleet.

Neste Oil owned or controlled through contracts a total of 31 (28) tankers as of the end of September. Expansion of the fleet has focused on larger crude and product tankers. Crude carrying capacity as of the end of September was 680,407 dwt (660,767), and for products 606,723 dwt (483,604), totaling 1,287,130 dwt (1,144,371).

The fleet utilization rate for the period remained high, at 95% (93%).


Shares, share trading, and ownership

A total of 119,808,257 Neste Oil shares were traded in the third quarter, totaling EUR 3.1 billion. The share price reached EUR 29.80 at its highest and EUR 23.62 at its lowest, and closed the quarter at EUR 25.67, giving the company a market capitalization of EUR 6.6 billion as of 30 September 2007. A total of 1.8 million shares were traded daily on average, equivalent to 0.7% of the company's shares.

Neste Oil's share capital registered with the Company Register as of 30 September 2007 totaled EUR 40 million, and the total number of shares outstanding is 256,403,686. The company does not hold any of its own shares, and the Board of Directors has no authorization to buy back company shares or issue convertible bonds, share options, or new shares.

At the end of September, the Finnish state owned 50.1% of outstanding shares, foreign institutions 26.9%, Finnish institutions 16.0%, and Finnish households 7.0%.


Divisional restructuring and changes in segment reporting

Neste Oil announced a new divisional structure and new heads for four divisions on 27 September. These changes were designed to give the company better potential to implement its strategy going forward. A new division, Specialty Products, was formed, and includes the base oil and gasoline component businesses and is also responsible for Neste Oil's interests in the joint venture company, Nynäs Petroleum.

The heads of the five divisions are as follows: Jorma Haavisto (Oil Refining), Jarmo Honkamaa (Biodiesel), Kimmo Rahkamo (Specialty Products), Sakari Toivola (Oil Retail), and Risto Näsi (Shipping). Jarmo Honkamaa has been appointed Deputy CEO. These changes came into effect on 16 October.

Neste Oil will change its segment reporting as of 1 January 2008, after which the performance of all five divisions will be reported separately. The figures for Biodiesel and Specialty Products currently come under Oil Refining segment.


Personnel

The Group employed an average of 4,806 (4,678) employees between January and September. The number of employees at the end of September totaled 4,834 (30 September 2006: 4,693).


Health, safety, and the environment

The main indicator for safety performance used by Neste Oil - cumulative lost workday injury frequency (LWIF, number of cases per million hours worked) for all work done for the company, combining the company's own personnel and contractors - stood at 3.1 (3.5) at the end of September 2007.

Under EU emissions trading, Neste Oil's carbon dioxide allowances for 2007 are expected to equal its carbon dioxide emissions for the year and it is likely that no allowances will need to be obtained from the market by the end of 2007.

Neste Oil has been included in the Dow Jones Sustainability World Index, which features over 300 companies from 24 countries that excel in their commitment to a more sustainable future. In addition, the company has participated in the Carbon Disclosure Project (CDP). As a result, Neste Oil's record on emission disclosure was ranked among that of the top 10 Nordic companies in the energy-intensive sector.

Update on growth projects

Neste Oil will continue to implement its clean fuel strategy through a number of projects aimed at building new capacity to produce NExBTL Renewable Diesel and review alternatives for investing in new conversion capacity at its existing refineries.


The new diesel production line

The new diesel production line at the Porvoo refinery was operational for only part of the quarter. The line was stopped in mid-September for a short maintenance outage, during which a number of faulty valves were identified. This kept the line down throughout October. Despite this, the new line has already contributed to higher diesel sales and lower heavy fuel oil sales and made a positive contribution to the total refining margin in the third quarter.

The company estimates that the new line will contribute an additional refining margin of more than USD 2 /bbl on its total output of approximately 100 million barrels a year over the long term.


NExBTL Renewable Diesel

Neste Oil is aiming to become the world's leading producer of renewable diesel. The cornerstone of this strategy is the company's proprietary NExBTL technology, which produces a premium-quality diesel fuel that outperforms both existing biodiesel and crude oil-based diesel grades currently on the market.

After the initial start-up in July, the first NExBTL Renewable Diesel plant at Porvoo was shut down for modifications and repairs in August and September, and restarted in the beginning of October. The NExBTL technology is now working on an industrial scale, but various opportunities for improving the process and catalysts have been identified. Benefits from these improvements will be taken into account in the designs of future plants.

A second NExBTL plant is under construction at Porvoo with the same capacity, 170,000 t/a, as the first unit. Due to some design changes, the plant is now scheduled to be commissioned in 2009.

Planning work and a lengthy Environmental Impact Assessment (EIA) on a project for a NExBTL plant jointly owned with OMV in Austria is continuing. Neste Oil is also planning further expansion of NExBTL production.

Work to ensure the sustainability of feedstocks used in renewable diesel production is continuing on an active basis.

The company is also committed to further research and development aimed at utilizing a wider range of renewable raw materials.


Potential short-term and long-term risks

The oil market continues to prove very volatile. Oil refiners are exposed to a variety of political and economic trends and events, as well as natural phenomena, which tend to affect the short-term supply of and demand for the products that companies produce and sell. Sudden and unplanned outages at production units or facilities also represent a risk. Rising investment costs and challenges in developing new competitive raw materials may impact the company's growth plans.

The key market drivers for Neste Oil's financial performance are international refining margins, the price differential between Russian Export Blend (REB) and Brent crude, and the USD/EUR exchange rate. Short-term changes in crude oil prices impact Neste Oil's financial results mainly in the form of inventory gains or losses.

For more detailed information on Neste Oil's risks and risk management, please refer to the company's Annual Report and Financial Statements for 2006.


Outlook

Global demand for petroleum products is expected to remain healthy and the amount of new capacity coming on stream limited in the near future. As a result, the outlook for refiners with complex capacity should remain favorable. The market is likely to remain highly volatile, and the reference refining margin has been under pressure in October. Recent record-breaking crude prices have further increased uncertainty on the international oil market.

Low US inventories and refinery maintenance outages seem to keep gasoline margins higher than normal in the fourth quarter. The diesel market is supported by stronger seasonal demand.

Neste Oil's new diesel production line is expected to be operational again in November.

After the ramp-up in October, the NExBTL Renewable Diesel plant is expected to operate normally for the remainder of the fourth quarter.

Demand for high-quality lubricant base oils remains strong.

Oil Retail's margins are expected to be lower in the final quarter compared to the rather good period at end of 2006.

Shipping's market is likely to remain very challenging in the next few years.

Neste Oil's capital expenditure is projected to be approximately EUR 350 million in 2007.


Reporting date for the Financial Statements for 2007

Neste Oil will publish its Financial Statements and fourth-quarter results on x February 2008 at approximately 9:00 am EET.

Espoo, 29 October 2007

Neste Oil Corporation
Board of Directors

The preceding information contains, or may be deemed to contain, "forward-looking statements". These statements relate to future events or our future financial performance, including, but not limited to, strategic plans, potential growth, planned operational changes, expected capital expenditures, future cash sources and requirements, liquidity and cost savings that involve known and unknown risks, uncertainties, and other factors that may cause Neste Oil Corporation's or its businesses' actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. In some cases, such forward-looking statements can be identified by terminology such as "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "intend," "believe," "estimate," "predict," "potential," or "continue," or the negative of those terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Future results may vary from the results expressed in, or implied by, the forward-looking statements, possibly to a material degree. All forward-looking statements made in this report are based on information presently available to management and Neste Oil Corporation assumes no obligation to update any forward-looking statements. Nothing in this report constitutes investment advice and this report shall not constitute an offer to sell or the solicitation of an offer to buy any securities or otherwise to engage in any investment activity.

NESTE OIL GROUP
JANUARY- SEPTEMBER 2007
Unaudited

CONSOLIDATED INCOME STATEMENT


                                                                   Last
                                                                   12
MEUR          Note 7-9/2007 7-9/2006  1-9/2007 1-9/2006  1-12/2006 months

Sales         2, 4 2978     3464      8642     9778      12734     11598
Other income       4        100       21       147       238       112
Share of      4    17       20        31       27        39        43
profit (loss)
of associates
and
joint
ventures
Materials and      -2546    -3098     -7237    -8548     -11183    -9872
services
Employee           -60      -52       -187     -168      -224      -243
benefit
costs
Depreciation, 4    -55      -38       -139     -113      -153      -179
amortization
and
impairment
charges
Other              -158     -142      -473     -436      -597      -634
expenses
Operating          180      254       658      687       854       825
profit

Financial
income
and expenses
Financial          2        2         6        6         8         8
income
Financial          -13      -8        -26      -13       -16       -29
expenses
Exchange rate      -1       -2        -5       -4        -5        -6
and
fair value
gains and
losses
Total              -12      -8        -25      -11       -13       -27
financial
income and
expenses

Profit before      168      246       633      676       841       798
income
taxes
Income tax         -36      -60       -156     -180      -205      -181
expense
Profit for         132      186       477      496       636       617
the period

Attributable
to:
Equity             132      185       475      493       631       613
holders of
the
company
Minority           0        1         2        3         5         4
interest
                   132      186       477      496       636       617

Earnings per
share
from profit
attributable
to the
equity
holders
of the             0,52     0,72      1,86     1,92      2,46      2,39
Company
basic and
diluted (in
euro per
share)

CONSOLIDATED BALANCE SHEET

                                                 30 Sep 30 Sep 31 Dec
MEUR                                        Note 2007   2006   2006

ASSETS
Non-current assets
Intangible assets                           5    40     38     38
Property, plant and equipment               5    2396   2218   2310
Investments in associates and joint              173    148    161
ventures
Long-term interest-bearing receivables           2      14     3
Pension assets                                   83     65     73
Deferred tax assets                              5      16     8
Derivative financial instruments            6    22     22     22
Other financial assets                           3      2      3
Total non-current assets                         2724   2523   2618

Current assets
Inventories                                      935    739    697
Trade and other receivables                      905    936    808
Derivative financial instruments            6    104    158    77
Cash and cash equivalents                        55     108    62
Total current assets                             1999   1941   1644

Non-currents assets classified as held for  2    0      53     78
sale

Total assets                                     4723   4517   4340

EQUITY
Capital and reserves attributable to the
equity
holders of the company

Share capital                                    40     40     40
Other equity                                3    2288   1894   2049
Total                                            2328   1934   2089
Minority interest                                3      7      8
Total equity                                     2331   1941   2097

LIABILITIES
Non-current liabilities
Interest-bearing liabilities                     601    663    516
Deferred tax liabilities                         278    224    239
Provisions                                       6      14     12
Pension liabilities                              11     12     12
Derivative financial instruments            6    18     24     21
Other non-current liabilities                    7      13     4
Total non-current liabilities                    921    950    804

Current liabilities
Interest-bearing liabilities                     333    298    267
Current tax liabilities                          24     63     43
Derivative financial instruments            6    62     123    38
Trade and other payables                         1052   1139   1027
Total current liabilities                        1471   1623   1375

Liabilities directly associated with             0      3      64
non-current assets classified as held for   2
sale

Total liabilities                                2392   2576   2243

Total equity and liabilities                     4723   4517   4340

CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY

                         Attributable to equity holders
                         of the
                         company
                 Share   Reser- Fair   Transla-  Retained Minority Total
                 capital ve     value  tion      earnings
                         fund   and    differen-
                                other  ces
                                reser-
                                ves
MEUR        Note
Total            40      9      -33    8         1581     7        1612
equity at 1
January
2006
Dividend                                         -205              -205
paid

Income and
expense
recognized
directly in
equity
Translation                            -4                          -4
differences
and
other
changes
Cash flow
hedges
recorded in                     57                                 57
equity, net
of
taxes
transferred
to
income
statement,
net of tax                      -13                                -13
Net                                    1                           1
investment
hedges, net
of
taxes
Change in                                                 -3       -3
minority
Items                           44     -3        0        -3       38
recognized
directly in
equity

Profit for                                       493      3        496
the
period
Total                           44     -3        493      0        534
recognized
income and
expenses
Total            40      9      11     5         1869     7        1941
equity at
30
September
2006


                  Share   Reser- Fair   Transla- Retained Minority Total
                  capital ve     value  tion     earnings
                          fund   and    diffe-
                                 other  rences
                                 reser-
                                 ves
MEUR         Note
Total equity      40      9      26     3        2011     8        2097
at 1
January 2007
Dividend                                         -231              -231
paid
Treasury     3                                   -12               -12
shares

Income and
expense
recognized
directly in
equity
Translation               1             -2       -1                -2
differences
and
other
changes
Cash flow
hedges
recorded in                      -18                               -18
equity,
net of taxes
transferred
to
income
statement,
net of tax                       27                                27
Net                                     -2                         -2
investment
hedges, net
of
taxes
Share-based                      2                                 2
compensation
Change in                                                 -7       -7
minority
Items                     1      11     -4       -1       -7       0
recognized
directly in
equity

Profit for                                       475      2        477
the
period
Total                     1      11     -4       474      -5       477
recognized
income and
expenses
Total equity      40      10     37     -1       2242     3        2331
at 30
September
2007

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

MEUR                  7-9/2007 7-9/2006  1-9/2007 1-9/2006  1-12/2006
Cash flow from
operating
activities
Profit before taxes   168      246       633      676       841
Adjustments, total    60       -84       121      -34       -85
Change in working     -195     104       -254     -166      -106
capital
Cash generated from   33       266       500      476       650
operations
Finance cost, net     -17      13        -24      -3        -7
Income taxes paid     -48      -31       -155     -97       -131
Net cash from         -32      248       321      376       512
operating activities
Capital expenditures  -59      -132      -236     -375      -526
Acquisition of shares 0        -7        0        -9        -9
Proceeds from sales   2        14        14       57        77
of fixed
assets
Proceeds from sales   0        79        -5       79        201
of shares
Change in other       -17      68        -30      19        20
investments
Cash flow before      -106     270       64       147       275
financing
activities
Net change in loans   90       -247      152      91        -74
and other
financing activities
Dividends paid to the 0        0         -231     -205      -205
equity
holders of the
company
Net increase          -16      23        -15      33        -4
(+)/decrease (-) in
cash
and marketable
securities

KEY RATIOS

                          30 Sep     30 Sep     31 Dec     Last 12
                          2007       2006       2006       months
Capital employed, MEUR    3265       2902       2890       3265
Interest-bearing net      879        850        722        -
debt,
MEUR
Capital expenditure and   236        384        535        387
investments in
shares, MEUR
Return on average capital -          -          15,4       15,8
employed,
after tax, ROACE %
Return on capital         28,5       34,1       31,9       26,8
employed,
pre-tax,
ROCE %
Return on  equity, %      28,7       37,3       34,3       28,9
Equity per share, EUR     9,10       7,54       8,15       -
Cash flow per share, EUR  1,25       1,46       2,00       1,79
Equity-to-assets ratio, % 49,4       43,0       48,4       -
Gearing, %                37,7       43,8       34,4       -
Leverage ratio, %         27,4       30,5       25,6       -
Average number of shares  255994173  256403686  256403686  256097393
Number of shares at the   255903686  256403686  256403686  255903686
end of
the period
Average number of         4806       4678       4678       -
employees

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The interim financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU. The interim financial report should be read in conjunction with the annual financial statements for the year ended 31 December 2006.

The accounting policies adopted are consistent with those of the Group's annual financial statements for the year ended 31 December 2006.

The following interpretations are mandatory for the financial year ending 31 December 2007, but not relevant for the Group:

- IFRIC 7 Applying the Restatement Approach under IAS 29 Financial
Reporting in
Hyperinflationary Economies
- IFRIC 8 Scope of IFRS 2
- IFRIC 9 Reassessment of Embedded derivatives
- IFRIC 10 Interim Financial Reporting and Impairment.

2. DISPOSALS

Neste Oil closed the divestment of its 70 % holding in Eastex Crude Company in mid February The company has been consolidated as a subsidiary in Neste Oil consolidated financial statements until the closing date and included in the Oil Refining segment. The company had an insignificant impact on Neste Oil's results, but has contributed significant revenues, accounting for EUR 1.8 billion of Neste Oil's total consolidated sales of EUR 12.7 billion in 2006 In 2007, Eastex Crude Company accounted for EUR 151 million of Neste Oil's sales (1-9/2006: EUR 1,441 million).

Non-current assets classified as held for sale comprise of the carrying amount of Eastex Crude Company at 31 December 2006, and carrying amount of Best Chain Ltd as at 30 September 2006.


3. TREASURY SHARES

Neste Oil has entered into an agreement with a third party service provider concerning the administration of the new share-based long-term incentive plan for key management personnel. As part of the agreement, the service provider has purchased a total of 500,000 Neste Oil shares in February 2007

in order to hedge part of Neste Oil's cash flow risk in relation to the future payment of the rewards, which will take place partly in Neste Oil shares and partly in cash during 2010 and 2013. Despite the legal form of the hedging arrangement, it has been accounted for as if the share purchases had been conducted directly by Neste Oil, as required by IFRS 2, Share based payments and SIC-12, Consolidation - Special purpose entities. The consolidated balance sheet and the consolidated changes in total equity reflect the substance of the arrangement with a deduction amounting to EUR 12 million in equity. This amount represents the consideration paid for the shares by the third party service provider.

4. SEGMENT INFORMATION

Neste Oil's businesses are grouped into four segments for external reporting purposes: Oil Refining, Oil Retail, Shipping and Other. The biodiesel business is included in Oil Refining, Other segment includes corporate centre.

SALES

MEUR         7-9/ 7-9/ 1-9/  1-9/  1-12/ Last
             2007 2006 2007  2006  2006  12 months
Oil Refining 2451 2973 7053  8337  10768 9484
Oil Retail   853  841  2470  2470  3280  3280
Shipping     82   65   307   220   293   380
Other        5    4    14    12    16    18
Eliminations -413 -419 -1202 -1261 -1623 -1564
Total        2978 3464 8642  9778  12734 11598

OPERATING PROFIT

MEUR         7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
             2007 2006 2007 2006 2006  12 months
Oil Refining 177  227  603  590  671   684
Oil Retail   22   23   51   53   138   136
Shipping     -4   11   35   69   78    44
Other        -18  -8   -32  -26  -35   -41
Eliminations 3    1    1    1    2     2
Total        180  254  658  687  854   825

COMPARABLE OPERATING PROFIT

MEUR         7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
             2007 2006 2007 2006 2006  12 months
Oil Refining 154  183  493  455  533   571
Oil Retail   22   22   49   49   65    65
Shipping     -2   4    31   31   32    32
Other        -18  -8   -32  -26  -35   -41
Eliminations 3    1    1    1    2     2
Total        159  202  542  510  597   629

DEPRECIATION, AMORTIZATION AND WRITE-DOWNS

MEUR         7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
             2007 2006 2007 2006 2006  12 months
Oil Refining 43   25   106  75   105   136
Oil Retail   7    7    20   21   27    26
Shipping     4    5    11   15   18    14
Other        1    1    2    2    3     3
Total        55   38   139  113  153   179

SHARE OF PROFITS IN ASSOCIATED COMPANIES AND JOINT VENTURES

MEUR         7-9/ 7-9/ 1-9/ 1-9/ 1-12/ Last
             2007 2006 2007 2006 2006  12 months
Oil Refining 17   20   31   27   39    43
Oil Retail   0    0    0    0    0     0
Shipping     0    0    0    0    0     0
Other        0    0    0    0    0     0
Total        17   20   31   27   39    43

NET ASSETS

             30 Sep 30 Sep 31 Dec
MEUR         2007   2006   2006
Oil Refining 2713   2294   2389
Oil Retail   368    426    336
Shipping     298    308    298
Other        9      5      10
Eliminations 2      -1     -1
Total        3390   3032   3032

RETURN ON NET ASSETS, %

             30 Sep 30 Sep 31 Dec Last
             2007   2006   2006   12 months
Oil Refining 31,0   35,7   29,9   27,0
Oil Retail   20,3   18,6   37,2   38,5
Shipping     15,4   29,2   25,0   14,4

COMPARABLE RETURN ON NET ASSETS, %

             30 Sep 30 Sep 31 Dec Last
             2007   2006   2006   12 months
Oil Refining 25,3   27,5   23,8   22,5
Oil Retail   19,5   17,2   17,5   18,4
Shipping     13,6   13,1   10,3   10,5

QUARTERLY SEGMENT INFORMATION

QUARTERLY SALES

MEUR         7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
             2007 2007 2007 2006   2006 2006 2006
Oil Refining 2451 2673 1929 2431   2973 3056 2308
Oil Retail   853  843  774  810    841  817  812
Shipping     82   115  110  73     65   69   86
Other        5    4    5    4      4    5    3
Eliminations -413 -428 -361 -362   -419 -429 -413
Total        2978 3207 2457 2956   3464 3518 2796

QUARTERLY OPERATING PROFIT

MEUR         7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
             2007 2007 2007 2006   2006 2006 2006
Oil Refining 177  288  138  81     227  234  129
Oil Retail   22   18   11   85     23   17   13
Shipping     -4   16   23   9      11   38   20
Other        -18  -5   -9   -9     -8   -9   -9
Eliminations 3    -3   1    1      1    0    0
Total        180  314  164  167    254  280  153

QUARTERLY COMPARABLE OPERATING PROFIT

MEUR         7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
             2007 2007 2007 2006   2006 2006 2006
Oil Refining 154  205  134  78     183  178  94
Oil Retail   22   16   11   16     22   15   12
Shipping     -2   12   21   1      4    5    22
Other        -18  -5   -9   -9     -8   -9   -9
Eliminations 3    -3   1    1      1    0    0
Total        159  225  158  87     202  189  119

QUARTERLY DEPRECIATION, AMORTIZATION AND WRITE-DOWNS

MEUR         7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
             2007 2007 2007 2006   2006 2006 2006
Oil Refining 43   35   28   30     25   25   25
Oil Retail   7    7    6    6      7    7    7
Shipping     4    3    4    3      5    4    6
Other        1    0    1    1      1    1    0
Total        55   45   39   40     38   37   38

QUARTERLY SHARE OF PROFITS IN ASSOCIATED COMPANIES AND JOINT VENTURES

MEUR         7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
             2007 2007 2007 2006   2006 2006 2006
Oil Refining 17   13   1    12     20   11   -4
Oil Retail   0    0    0    0      0    0    0
Shipping     0    0    0    0      0    0    0
Other        0    0    0    0      0    0    0
Total        17   13   1    12     20   11   -4

5. CHANGES IN INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT AND CAPITAL COMMITMENTS

CHANGES IN INTANGIBLE ASSETS AND PROPERTY, PLANT AND EQUIPMENT

                                              30 Sep 30 Sep 31 Dec
MEUR                                          2007   2006   2006
Opening balance                               2348   2059   2059
Depreciation, amortization and impairment     -139   -113   -153
Capital expenditure                           236    375    526
Disposals                                     -12    -14    -22
Disposal of a subsidiary                      0      0      -39
Classified as assets held for sale            0      -48    -10
Translation differences                       3      -3     -13
Closing balance                               2436   2256   2348

CAPITAL COMMITMENTS

                                                 30 Sep 30 Sep 31 Dec
MEUR                                             2007   2006   2006
Commitments to purchase property, plant and      76     47     44
equipment
Commitments to purchase intangible assets        1      2      2
Total                                            77     49     46

6. DERIVATIVE FINANCIAL INSTRUMENTS

                  30 Sep 2007       30 Sep 2006       31 Dec 2006
Interest rate and Nominal Net       Nominal Net      Nominal Net
currency          value   fair      value   fair     value   fair
derivative                value             value            value
contracts and
share forward
contracts
MEUR
Interest rate     297     2         304     1        301     2
swaps
Forward foreign   1155    35        1072    7        992     23
exchange
contracts
Currency options
Purchased         334     7         458     -6       290     4
Written           199     2         458     8        274     5
Share forward     17      3         8       1        8       1
contracts

Oil and freight derivative contracts

                   Volume    Net fair Volume    Net fair Volume Net
                             value              value           fair
                                                                value
                   1 000 bbl Meur     1 000 bbl Meur     1 000  Meur
                                                         bbl
Sales contracts    73394     -38      97038     110      79094  29
Purchase contracts 86953     34       116930    -87      106339 -25
Purchased options  2503      0        2185      -5       0      0
Written options    671       0        2160      4        0      0

The fair values of derivative financial instruments subject to public trading are based on market prices as of the balance sheet date. The fair values of other derivative financial instruments are based on the present value of cash flows resulting from the contracts, and, in respect of options, on evaluation models. The amounts also include unsettled closed positions. Derivative financial instruments are mainly used to manage the group's currency, interest rate and price risk.

7. CONTINGENT LIABILITIES

                                  30 Sep 30 Sep 31 Dec
MEUR                              2007   2006   2006
Contingent liabilities
On own behalf
For debt
Pledges                           9      8      8
Real estate mortgages             26     27     25
For other commitments
Real estate mortgages             0      1      0
Other contingent liabilities      28     13     28
Total                             63     49     61
On behalf of associated companies
Guarantees                        3      13     6
Other contingent liabilities      1      4      1
Total                             4      17     7
On behalf of others
Guarantees                        5      2      6
Other contingent liabilities      0      1      1
Total                             5      3      7
Total                             72     69     75

                                                 30 Sep 30 Sep 31 Dec
MEUR                                             2007   2006   2006
Operating lease liabilities
Due within a year                                116    111    117
Due later than one year and not later than 5     178    176    191
years
Due later than five years                        125    144    165
Total                                            419    431    473

Other contingent liabilities

Neste Oil Corporation has a collective contingent liability with Fortum Heat and Gas Oy of the demerged Fortum Oil and Gas Oy's liabilities based on the Finnish Companies Act's Chapter 17 Paragraph 16.6.

Neste Oil Q3 Interim Report 2007: http://hugin.info/133386/R/1163974/227035.pdf



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