SOURCE: Neste Oil Oyj

February 04, 2010 03:41 ET

Neste Oil's Financial statements for 2009

ESPOO, FINLAND--(Marketwire - February 4, 2010) -


Stock Exchange Release

Neste Oil Corporation

4 February 2010 at 9.00 a.m. (EET)

- Full-year comparable operating profit of EUR 116 million (2008: 602 million)

- The year ended with a Q4 comparable operating profit of EUR -29 million, including a negative impact of EUR 30 million from non-recurring items

2009 in brief:

* A new operational model was introduced, aimed to improve implementation of our strategic projects and to make the most of our best practises and expertise

* Comparable operating profit was EUR 116 million (2008: 602 million)

* IFRS operating profit was EUR 335 million (2008: 186 million)

* Investments totaled EUR 863 million (2008: 508 million), of which EUR 625 million was allocated to Renewable Fuels

* Sales volumes decreased by approx. 400,000 tons year-on-year, as a result of contango storage

* Contango storage had a negative impact on net cash from operations, which came in at EUR 177 million (2008: 512 million)

* Interest-bearing net debt increased to EUR 1,918 million (2008: 1,004 million)

* The Group's safety performance improved compared to 2008

* The Board of Directors will propose a dividend of EUR 0.25 per share (2008: 0.80)


Fourth quarter in brief:

* Comparable operating profit of EUR -29 million (Q4/2008: 103 million), including the following non-recurring negative items:

- EUR 10 million environmental provision (non-cash) booked against Nynas AB's result in Others

- EUR 9 million one-off costs resulting from personnel reductions announced in October

- EUR 3 million additional depreciation charge (non-cash) at Renewable Fuels

- EUR 4 million additional depreciation charge (non-cash) booked at Oil

Products related to the Porvoo refinery's major turnaround in 2005

- EUR 4 million IFRS pension cost adjustment (non-cash), booked in Others

* IFRS operating profit of EUR 9 million (Q4/2008: -352 million)

* Total refining margin of USD 5.85/bbl (Q4/2008: 15.05)

* Significant contango storage was built up in anticipation for the maintenance turnaround at the Porvoo refinery

* Contango storage depressed cash flow from operations by approximately EUR 250 million, leading to a net cash from operations figure of EUR -225 million (Q4/08: 486 million)


President & CEO Matti Lievonen:

The refining industry had a very difficult year in 2009, which was reflected clearly in our result. A virtually unprecedented drop in oil demand, coupled with increased new refining capacity, led to lower refining margins compared to recent years. During these challenging times, I would like to thank our personnel for their hard work and what we achieved during the year. We were able to bring our fixed costs down by 10% and started many improvement projects that will benefit us in the future.

2010 appears likely to be another challenging year due to the slow pace of economic recovery. We will put a lot of focus on implementing our strategy and will be aiming for a smooth ramp-up of the new renewable diesel plant in Singapore during the second half. In addition, we will concentrate on ensuring a problem-free maintenance turnaround at the Porvoo refinery during the second quarter.

NESTE OIL FINANCIAL STATEMENTS, 1 JANUARY - 31 DECEMBER 2009

10-12/2009 and 10-12/2008 unaudited, full year 2009 and 2008 audited

Figures in parentheses refer to the corresponding period for 2008, unless otherwise stated.

KEY FIGURES

EUR million (unless otherwise noted)


                                      10-12/09 10-12/08 7-9/09  2009   2008
---------------------------------------------------------------------------
 Revenue                                 2,491    2,805  2,500 9,636 15,043

 Operating profit before depreciation       74     -297    171   569    409

 Depreciation, amortization,

 and impairments                            65       55     58   234    223

 Operating profit                            9     -352    113   335    186

 Comparable operating profit *             -29      103     42   116    602

 Profit before income tax                    4     -382    102   296    129

 Earnings per share, EUR                 -0.01    -1.14   0.29  0.86   0.38

 Investments                               263      185    216   863    508

 Net cash from operating activities       -225      486    162   177    512


                                                            31 Dec 31 Dec

                                                              2009   2008
-------------------------------------------------------------------------
 Total equity                                               2,222  2,179

 Interest-bearing net debt                                  1,918  1,004

 Capital employed                                           4,257  3,237

 Return on capital employed pre-tax (ROCE), %                 9.0    6.1

 Return on average capital employed after tax (ROACE)**, %    2.5   13.1

 Return on equity (ROE), %                                   10.2    4.4

 Equity per share, EUR                                       8.64   8.48

 Cash flow per share, EUR                                    0.69   2.00

 Equity-to-assets ratio, %                                   39.1   46.3

 Leverage (Net debt to capital), %                           46.3   31.5

 Gearing, %                                                  86.3   46.1


* Comparable operating profit is calculated by excluding inventory
gains/losses,
capital gains/losses, and unrealized changes in the fair value of oil and
freight derivative contracts from the reported operating profit. Inventory
gains/losses include changes in the fair value of all trading inventories.

** Rolling 12 months

The Group's full-year results for 2009

Sales at the Neste Oil Group totaled EUR 9,636 million, compared to EUR 15,043 million in 2008. The decline primarily resulted from lower petroleum product prices.

The Group's comparable operating profit was EUR 116 million, compared to EUR 602 million in 2008. The most important negative contributor was the significantly weaker market environment experienced in all segments, particularly Oil Products. This was only partly offset by an 10% reduction in fixed costs, which totaled EUR 604 million (679 million).

Oil Products' full-year comparable operating profit was EUR 105 million (602 million), Renewable Fuels' EUR -30 million (2 million), Oil Retail's EUR 50 million (22 million), and Others' -7 million (-29 million).

Profits from associated companies and joint ventures totaled EUR 20 million (13 million).

Operating profit under IFRS was EUR 335 million (186 million). The increase originated from inventory gains that totaled EUR 261 million and compares to an inventory loss of EUR 453 million in 2008.

The full-year profit before taxes was EUR 296 million (129 million) and the effective tax rate was 23.8% (21.8%). Profit for 2009 was EUR 225 million (101 million) and earnings per share were EUR 0.86 (0.38)

Given the capital-intensive nature of its business, Neste Oil uses return on average capital employed after tax (ROACE) as its primary financial target. ROACE calculation is based on comparable results. At the end of December, the rolling twelve-month ROACE was 2.5% (2008 financial year: 13.1%).

The Group's fourth-quarter results in 2009

Neste Oil's fourth-quarter sales totaled EUR 2,491 million (2,805 million), reflecting lower sales volumes.

The Group's comparable operating profit was EUR -29 million in the fourth quarter, compared to EUR 103 million a year earlier. The weak result was mainly a consequence of a 61% drop in the total refining margin year-on-year and a weaker freight market compared to 2008. Oil Retail's profitability improved compared to the last quarter of 2008, which included significant inventory losses. A reduction in fixed costs of 10% compared to the fourth quarter of 2008 made a positive contribution.

Oil Products' comparable operating profit was EUR -11 million (154 million) in the fourth quarter, Renewable Fuels' EUR -10 million (-10 million), Oil Retail's EUR 5 million (-5 million), and Others' EUR -11 million (-38 million).

Profits from associated companies and joint ventures totaled EUR -1 million (-26 million), and were depressed by a EUR 10 million provision at Nynas AB. Nynas booked major inventory losses in the fourth quarter of 2008.

The Group's fourth-quarter 2009 IFRS operating profit was EUR 9 million (- 352 million), as inventory profit totaled EUR 58 million, compared to an inventory loss of EUR 467 million in 2008.

Pre-tax profit was EUR 4 million (-382 million). Profit for the period was EUR 1 million (-289 million) and earnings per share EUR -0.01 (-1.14).

                                       10-12/09 10-12/08 7-9/09 2009 2008
-------------------------------------------------------------------------
 COMPARABLE OPERATING PROFIT                -29      103     42  116  602

 - inventory gains/losses                    58     -467     62  261 -453

 - changes in the fair value of open oil
 derivatives                                -20       10      8  -43   24

 - capital gains/losses                       0        2      1    1   13

 OPERATING PROFIT                             9     -352    113  335  186

Cash flow, investments, and financing

Neste Oil Group's net cash from operating activities between January and December totaled EUR 177 million (512 million). The difference compared to 2008 resulted from an increase in working capital, largely due to the contango storage of petroleum products. Approximately EUR 250 million was tied up in contango storage at the end of the year.

Investments totaled EUR 863 million in 2009 compared to EUR 508 million in 2008. Oil Products' capital spending was EUR 198 million (165 million), Renewable Fuels' EUR 625 million (249 million), Oil Retail's EUR 29 million (63 million), and Others' EUR 11 million (31 million).

The Group's interest-bearing net debt was EUR 1,918 million at the end of the year (1,004 million). Net financial expenses between January and December were EUR 39 million (57 million). The average interest rate of borrowings at the end of 2009 was 2.2%, and the average maturity 3.8 years.

The year-end equity-to-assets ratio was 39.1% (46.3%), the leverage ratio 46.3% (31.5%), and the gearing ratio 86.3% (46.1%).

The Group's liquidity remained healthy. Cash and cash equivalents and committed, unutilized credit facilities amounted to EUR 1,407 million at the end of December (1,536 million). In September, Neste Oil issued a EUR 300 million seven-year domestic bond with an annual coupon of 6.00%, and raised a bilateral bank loan of EUR 200 million in December. There are no financial covenants in existing loan agreements.

In accordance with its hedging policy, Neste Oil has hedged the majority of its net foreign currency exposure for the next 12 months, mainly using forward contracts and currency options. The most important hedged currency is the US dollar.

Main events during the reporting period

On 5 February 2009, Neste Oil announced that its operations would be reorganized around three business areas, Oil Products, Renewable Fuels, and Oil Retail, and seven common functions as of 1 April 2009. The new Neste Executive Board (NEB) was appointed.

On 28 April, Neste Oil announced that it would postpone its plans to investment in an isomerization unit at the Porvoo refinery. The decision resulted from the weaker demand for petroleum products, and enabled resources to be concentrated on the company's strategic growth projects. The cost of the isomerization unit was estimated to be approximately EUR 80 million. The engineering work for the unit is largely complete, and the intention is to move ahead with construction when the market situation improves.

On 11 June, Neste Oil and Stora Enso inaugurated their demonstration plant for biomass to liquids (BtL) production utilizing forestry residues in Varkaus, Finland. A 50/50 joint venture, NSE Biofuels Oy, has been established to develop technology for commercial-scale biocrude and later to produce this product as a feedstock for renewable diesel.

On 29 July, Neste Oil announced that it has successfully started up its second NExBTL renewable diesel plant at the Porvoo refinery, bringing the company's total nameplate capacity of renewable diesel to 340,000 t/a.

On 5 August, Neste Oil announced its intention to save over EUR 60 million in annual fixed costs and to secure around EUR 30 million of this through personnel-related measures. Statutory employer-employee negotiations and a consultation process were started in Finland and it was anticipated that 450 people would be affected.

On 6 August, a fire broke out on the main diesel production line at the Porvoo refinery. Fortunately, no injuries were caused to personnel and no danger to anyone outside the immediate area. The line was back in normal operation in late September.

On 7 September, Neste Oil issued a EUR 300 million seven-year domestic bond with an annual coupon of 6.00%. The proceeds of the offering were used for general corporate and refinancing purposes.

On 29 September, Neste Oil hosted a Capital Markets Day in Porvoo and Helsinki. The event covered topical issues, such as the profitability of the company's key growth business, renewable fuels, and the company's cost structure and capital investments. The main message of the event was that Neste Oil remains fully committed to its clean traffic fuel strategy. It was announced that the company's financial targets remain unchanged.

On 1 October, the Finnish Court of Arbitration issued an arbitration award on the contract dispute between Neste Oil and YIT Industrial and Network Services relating to disagreements linked to the final financial settlement of mechanical installation work on diesel production line 4 at Neste Oil's Porvoo refinery, which was completed and came on stream in summer 2007. The dispute was put before the Court of Arbitration in April 2008. The final decision had no material impact on Neste Oil's result.

On 13 October, Neste Oil completed the statutory employer-employee negotiations covering Finnish-based personnel employed by the company and its subsidiaries, which began on 5 August 2009. As a result of the negotiations, Neste Oil's personnel in Finland will be reduced by a total of 351. Of these, around 240 people will leave the company through voluntary retirement. The last job losses related to these reductions will take place during 2010.

On 7 December, Neste Oil announced that it will transfer the management of its statutory occupational pensions and the associated pension portfolio to the Ilmarinen Mutual Pension Insurance Company as of 1 April 2010. The statutory pension liabilities that are currently the responsibility of the Neste Oil Pension Fund and that will be transferred to Ilmarinen totaled approximately EUR 310 million as of the end of 2009. As a result of the transfer, a non- recurring charge is expected to be booked against Neste Oil's consolidated IFRS financial statements in the second quarter of 2010. The transfer is expected to have a positive cash flow impact.

Strategy implementation

Neste Oil continued to implement its clean fuel strategy in 2009. The company's current capital projects consist of new plants designed to increase production of renewable diesel and high-quality base oil.

Strategic projects

Construction of two world-scale, 800,000 t/a, renewable diesel plants continued in Singapore and Rotterdam. The plants are expected to be mechanically complete in summer 2010 and spring 2011 respectively. Both projects proceeded on- schedule and on-budget.

Two smaller renewable diesel plants are operational at the Porvoo refinery. The second of these achieved mechanical completion in summer 2009 and started up very successfully in a couple of weeks. The nameplate capacity of both Porvoo plants has been increased to 190,000 t/a each from the original 170,000 t/a.

Construction of a 400,000 t/a base oil plant in Bahrain, jointly owned by Neste Oil (45%) and local partners, has proceeded according to plan. The plant is expected to be mechanically complete in the second half of 2011.

Market overview

After collapsing in the second half of 2008, crude oil prices increased steadily in the first half of 2009 and continued to rise towards the end of the year, despite some short-lived downturns. Brent Dated doubled from around USD 40/bbl to nearly USD 80/bbl towards the end of the year. Prices were mainly driven by news of a recovery in the global economy, strengthening stock and commodity markets, and a weaker US dollar - although oil market fundamentals remained weak. Price differentials between heavier and lighter crudes were very narrow, reflecting the reduced supply of heavier grades following OPEC production cuts.

Refining margins weakened significantly compared to 2008 on the back of poor product demand, especially for middle distillates. As a consequence, refinery runs declined to record low levels, especially in OECD countries. Gasoline margins recovered from the low level seen in 2008 but fell again in the latter half of 2009. Demand for gasoline was quite stable, but production was limited due to low refinery runs. The margins for middle distillates continued to decline and sank to their lowest level in five years during the summer. Demand for middle distillates was hit by the economic recession, and stocks built up to record-high levels despite low refinery runs. The European market nevertheless attracted large import volumes from the US and Asia.

Fuel oil margins were stronger than in 2008, supported by demand in Asia and the US and cuts in refinery output. In addition, due to reduced crude oil usage, some refineries refined light products from fuel oil.

In the biofuel market, feedstock prices increased through the end of 2009, after the low levels seen in spring. This led to lower margins for biofuel producers. The price premium between high-quality renewable diesel and conventional biodiesel remained stable.

In the oil retail market, demand dropped year-on-year in all market areas, and this was most evident in trucking and other business-related traffic. Oil demand decreased in Finland by around 7% in 2009, whereas Baltic Rim markets showed declines of over 10% and even close to 20% in the case of gasoline in the last quarter.

Freight rates for crude tankers in North Sea were only half of those seen in 2008, impacted by the increased number of vessels available.

Key drivers

                        10-12/09 10-12/08 7-9/09  2009   2008 Jan 10 Jan 09

 Reference refining margin,
 USD/bbl                    1.73     8.66   2.20  3.14   9.93   2.81   6.62

 Neste Oil total refining
 margin, USD/bbl            5.85    15.05   5.97  7.35  13.39   n.a.   n.a.

 Urals-Brent price
 differential, USD/bbl     -0.68    -1.82  -0.46 -0.81  -2.95  -0.46  -1.11

 NWE Gasoline margin*,
 USD/bbl                    7.73     2.69  10.09  9.26   5.34   10.0   3.95

 NWE Diesel margin*,
 USD/bbl                   10.14    28.04   9.24 11.18  31.23   10.4  20.51

 NWE Heavy fuel oil
 margin*, USD/bbl          -6.41   -16.16  -5.95 -7.44 -25.16   -5.6  -9.27

 Brent Dated crude oil,
 USD/bbl                   74.56    54.87  68.27 61.51  96.98  76.19  43.59

 USD/EUR, market rate       1.48     1.32   1.43  1.39   1.47   1.43   1.32

 USD/EUR, hedged            1.33     1.45   1.40  1.41   1.42   n.a.   n.a.

 Crude freights, WS points
 (TD7)                        97      144     70    81    179    132    144
---------------------------------------------------------------------------

Production and sales

Neste Oil's total production in 2009 was 15.5 million tons (15.5 million), of which 0.2 million tons (0.1 million) took the form of NExBTL renewable diesel. A total of 15.1 million tons (15.2 million) of crude oil and other hydrocarbon-based feedstocks were refined, 12.5 million tons (12.4 million) at Porvoo and 2.6 million tons (2.8 million) at Naantali.

During the fourth quarter, the corresponding figure for total production was 4.1 million tons (4.0 million), with a NExBTL renewable diesel accounting for 0.1 million tons (0.0). Neste Oil refined 3.3 million tons (3.3 million) at Porvoo and 0.7 million tons (0.7 million) at Naantali, totaling 4.0 million tons (4.0 million).

The Porvoo refinery operated at an average capacity utilization rate of 87% (82%) in 2009, while Naantali reached 87% (92%). Utilization at the Porvoo refinery was negatively affected in August and September by a fire on Line 4. Excluding the latter incident, the line's performance improved compared to 2008, which was the main reason behind Porvoo's higher utilization rate. At Naantali, capacity utilization was negatively affected by unplanned maintenance shutdowns during the first half of the year. During the fourth quarter, both refineries operated well, with capacity utilization at Porvoo running at 92% (89%) and at Naantali at 89% (91%).

The proportion of Russian Export Blend (REB) in Neste Oil's total refinery input rose to 63% (57%) for the year as a whole and 67% during the fourth quarter (57%).

Refinery production costs decreased to USD 4.4/bbl (5.9) for the year as a whole. In the fourth quarter, the figure was USD 4.3/bbl (6.3).

The proportion of diesel fuel in Neste Oil's sales remained close to 40% in 2009, while the proportion of gasoline and heavy fuel oil increased. Less favorable arbitrage economics resulted to a shift of gasoline exports from the US to other markets.

During the fourth quarter, a total of 400,000 tons of gasoline and middle distillates were stored in preparation for the Porvoo refinery's scheduled maintenance shutdown during the second quarter of 2010. As of the end of 2009, Neste Oil's contango storage stood at around 570,000 tons, which is scheduled to be sold during the second quarter of 2010.

Neste Oil's sales from in-house production, by product category (1,000 t)

                 10-12/09   % 10-12/08   % 7-9/09   %   2009   %   2008   %

 Motor gasoline       837  24    1,052  28  1,146  33  4,218  30  4,056  28

 Gasoline components   51   1       33   1     62   2    270   2    253   2

 Diesel fuel        1,449  41    1,585  42  1,292  37  5,228  37  5,583  38

 Jet fuel             191   5      154   4    136   4    613   4    658   5

 Base oils             62   2       58   2     66   2    257   2    278   2

 Heating oil          178   5      245   7     99   3    631   4    763   5

 Heavy fuel oil       291   8      220   6    308   9  1,300   9    981   7

 LPG                   51   1       70   2     27   1    220   2    340   2

 NExBTL renewable
 diesel                66   2       19   1     68   2    209   1     94   1

 Other products       382  11      318   8    318   9  1,233   9  1,565  11
---------------------------------------------------------------------------
 TOTAL              3,559 100    3,755 100  3,522 100 14,178 100 14,571 100


Neste Oil's sales from in-house production, by market area (1,000 t)


                10-12/09   % 10-12/08   % 7-9/09   %   2009   %   2008   %

 Finland           2,034  57    1,942  52  1,831  52  7,580  53  7,537  52

 Other Nordic
 countries           581  16      607  16    580  16  2,210  16  2,056  14

 Other Europe        629  18      734  19    692  20  2,488  18  3,028  20

 USA & Canada        229   6      467  12    357  10  1,686  12  1,857  13

 Other countries       86   2        3   0     62   2    214   2     94   1
---------------------------------------------------------------------------
 TOTAL              3,559 100    3,754 100  3,522 100 14,178 100 14,571 100

SEGMENT REVIEWS

As of April 2009, Neste Oil's businesses were grouped into four reporting segments: Oil Products, Renewable Fuels, Oil Retail, and Others.

Oil Products

                                 10-12/09 10-12/08 7-9/09  2009   2008

 Revenue, MEUR                      1,987    2,221  1,971 7,631 12,641

 Comparable operating profit, MEUR    -11      154     15   105    602

 Operating profit, MEUR                27     -301     80   318    183

 Total refining margin, USD/bbl      5.85    15.05   5.97  7.35  13.39

Oil Products posted a significantly lower comparable operating profit of EUR 105 million in 2009 compared to EUR 602 million in 2008. This decrease is mainly attributable to a major drop in total refining margin, which averaged USD 7.35/bbl (13.39) during the year. The negative impact of market conditions and lower sales volumes was only partly offset by better productivity, contango and trading benefits, and cost reductions. The base oil business suffered from significantly lower demand, and the oil tanker chartering business from very low freight rates. Gasoline components performed better year-on-year, thanks to a better overall gasoline market.

In the fourth quarter, Oil Products' comparable operating profit sank to EUR -11 million compared to EUR 154 million in the same quarter of 2008. Refining operations continued to be profitable despite the considerably weaker market environment, which was reflected in a drop in total refining margin to EUR 5.85/bbl from USD 15.05/bbl in 2008. The profitability of the other businesses in Oil Products' portfolio declined compared to Q4/2008, due to low freight rates in oil tanker chartering, high feedstock price in gasoline components, and lower demand year-on-year in base oils. Oil Products booked additional depreciation of EUR 4 million related to the Porvoo refinery's major turnaround in 2005.

Oil Products' comparable return on net assets was 4.0% (21.2%) in 2009.

Renewable Fuels


                                        10-12/09 10-12/08 7-9/09 2009 2008
 Revenue, MEUR                                61       20     59  182  116

 Comparable operating profit, MEUR           -10      -10     -6  -30    2

 Operating profit, MEUR                      -11       -9     -1  -25    2
--------------------------------------------------------------------------

Renewable Fuels' comparable operating profit was EUR -30 million in 2009, compared to EUR 2 million in 2008. This was the result of lower margins, partly because of a favorable fixed feedstock price in 2008, and costs related to the expansion of business and Research & Technology.

In the fourth quarter, Renewable Fuels posted a comparable operating profit of EUR -10 million (-10 million). This includes a EUR 3 million additional depreciation. Renewable diesel margins were lower in 2009, due to higher feedstock prices, although this was offset by higher sales volumes after the second plant at Porvoo came online during the second half.

Renewable Fuels' comparable return on net assets was -4.8% in 2009 (0.9%).

Oil Retail

Key figures


                                   10-12/09 10-12/08 7-9/09  2009  2008

 Revenue, MEUR                          791      915    789 2,998 4,073

 Comparable operating profit, MEUR        5       -5     19    50    22

 Operating profit, MEUR                   6       -6     19    50    25

 Total sales volume*, 1,000 m3        1,030    1,142    986 4,002 4,353

 - gasoline station sales, 1,000 m3     333      376    374 1,405 1,479

 - diesel station sales, 1,000 m3       345      355    340 1,331 1,406

 - heating oil, 1,000 m3                200      219    156   714   759

 - heavy fuel oil, 1,000 m3              78      105     57   287   356

* includes both station and terminal sales

Oil Retail's comparable operating profit totaled EUR 50 million in 2009, compared to EUR 22 million in 2008. The Comparable operating profit for 2008 included a EUR 15 million write-down on bad debts and EUR 10 million in inventory losses. Volumes were lower in 2009 and there was substantial pressure on margins. A reduction in fixed costs year-on-year provided a positive contribution.

In the fourth quarter of 2009, volumes and margins were weak in the Baltic countries and North-West Russia, and Oil Retail's comparable operating profit came in at EUR 5 million (-5 million). The last quarter of 2008 was depressed by significant inventory losses.

Oil Retail's comparable return on net assets was 15.8% (6.0%) in 2009.

Shares, share trading, and ownership

Neste Oil's shares are traded on the NASDAQ OMX Helsinki Ltd. The share price closed 2009 at EUR 12.42, which is 17% higher compared to the end of 2008. At its highest during 2009, the share price reached EUR 13.44, while at its lowest the price stood at EUR 8.80, with the weighted average for the year coming in at EUR 10.85. Market capitalization was EUR 3.2 billion as of 31 December 2009.

An average total of 1.1 million shares were traded daily. This represents 0.4% of the Company's shares. An average of 22.4 million shares was traded monthly. During the year as a whole, 269 million shares, or 105% of the total number of shares, were traded.

Neste Oil's share capital registered with the Company Register as of 31 December 2009 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 to issue convertible bonds, share options, or new shares.

As of the end of 2009, the Finnish State owned 50.1% (50.1%) of outstanding shares, foreign institutions 17.1% (20.6%), Finnish institutions 18.9% (19.5%), and Finnish households 14.0% (9.8%).

Annual General Meeting

Neste Oil's Annual General Meeting 2009 was held on 3 April at the Helsinki Fair Centre. The AGM adopted the company's financial statements and consolidated financial statements for 2008 and discharged the Supervisory Board, Board of Directors, and management from liability for 2008. The AGM also approved the Board of Directors' proposal regarding the distribution of the company's profit for 2008, sanctioning payment of a dividend of EUR 0.80 per share. Payment was made on Friday, 17 April 2009.

In accordance with a proposal made by the AGM Nomination Committee, the AGM confirmed the membership of the Board of Directors at eight members, and the following were re-elected to serve until the end of the next AGM: Mr. Timo Peltola, Mr. Mikael von Frenckell, Mr. Michiel Boersma, Ms. Ainomaija Haarla, Ms. Nina Linander, Mr. Markku Tapio and Ms. Maarit Toivanen-Koivisto. Mr. Hannu RyÃppÃnen was elected as a new member. Mr. Timo Peltola continued as Chairman and Mr. Mikael von Frenckell as Vice Chairman. The AGM decided to pay the following remuneration to the Board: Chairman EUR 66,000 a year, Vice Chairman EUR 49,200 a year, and members EUR 35,400 a year. In addition, those participating at Board meetings and meetings convened by the Board's committees will receive a payment of EUR 600 per meeting, together with their traveling costs, in accordance with the company's travel policy. A payment of double this, EUR 1,200 per meeting, will be made to Board members living outside Finland.

Convening after the Annual General Meeting, Neste Oil's Board of Directors elected the members of its two Committees. Timo Peltola was elected Chairman and Michiel Boersma, Mikael von Frenckell, and Ainomaija Haarla as members of the Personnel and Remuneration Committee. Nina Linander was elected Chairman and Hannu Ryöppönen, Markku Tapio, and Maarit Toivanen-Koivisto as members of the Audit Committee.

The AGM confirmed that the Supervisory Board shall comprise eight members and the following members were elected: Ms. Heidi Hautala (Chairman), Mr. Kimmo Tiilikainen (Vice Chairman), Mr. Esko Ahonen, Mr. Mikael Forss, Mr. Timo Heinonen, Mr. Markus Mustaj rvi, Ms. Jutta Urpilainen, and Ms. Anne-Mari Virolainen. Mr. Kimmo Tiilikainen was elected for the first time. Members are all Finnish Members of Parliament, with the exception of Mr. Mikael Forss, who is a Director at the Social Insurance Institution of Finland. No changes were made to the remuneration paid to the Supervisory Board, which remains as follows: Chairman EUR 1,000 a month, Vice Chairman EUR 600 a month, and members EUR 500 a month. In addition, those participating at Supervisory Board meetings receive a payment of EUR 200 per meeting.

In accordance with a proposal by the Board of Directors, Ernst & Young Oy, Authorized Public Accountants, were appointed as the company's Auditor, with Authorized Public Accountant Anna-Maija Simola as Responsible Auditor, until the end of the next AGM. Payment for their services shall be made in accordance with their invoice that is accepted by the company.

Following a proposal by the Prime Minister's Office, representing the Finnish State, the AGM decided to establish a Nominations Committee to prepare proposals covering the members of the Board of Directors and their remuneration for consideration by the next AGM. The Nomination Committee comprises representatives of the Company's three largest shareholders and shall also include, as expert members, the Chairman of the Board, together with one member elected by the Board from among its members unaffiliated with any of the Company's major shareholders. In 2009, the Nomination Committee comprised Director General Pekka Timonen from the Ownership Steering Department at the Prime Minister's Office; Timo Ritakallio, Deputy CEO, Ilmarinen Mutual Pension Insurance Company; and Risto Murto, Chief Investment Officer, Varma Mutual Pension Insurance Company. The Chairman of Neste Oil's Board of Directors Timo Peltola and Vice Chairman Mikael von Frenckell served as the Committee's expert members.

Organizational restructuring

Neste Oil's operations were reorganized around three business areas and seven common functions as of 1 April 2009. The new structure is designed to give the company a more cost-efficient and customer-driven operating model, and one that will be better capable of implementing corporate strategy. The new matrix organization will ensure that the best practices and know-how of business areas and functions will benefit the entire company, and that new international units, such as the renewable diesel plants currently being built, can be integrated into the Group's operations more effectively and that reporting will be more efficient.

The business areas are as follows: Oil Products, Renewable Fuels, and Oil Retail. Activities outside these business areas are grouped under Others. The common functions are: Production & Logistics, Finance, Human Resources, Sustainability & HSSE, Communications, Marketing and Public Affairs, Technology & Strategy, and Legal Affairs.

As of 1 April, the Neste Executive Board (NEB) comprises the following members: Matti Lievonen, President & CEO; Matti Lehmus, Executive Vice President, Oil Products; Jarmo Honkamaa, Executive Vice President, Renewable Fuels, Deputy CEO; Sakari Toivola, Executive Vice President, Oil Retail; Ilkka Poranen, Senior Vice President, Production & Logistics; Ilkka Salonen, CFO; Hannele Jakosuo- Jansson, Senior Vice President, Human Resources, Simo Honkanen, Senior Vice President, Sustainability and HSSE; Osmo Kammonen, Senior Vice President, Communications, Marketing and Public Affairs; and Lars Peter Lindfors, Senior Vice President, Technology and Strategy. Matti Hautakangas, General Counsel, acts as secretary to the NEB.

Personnel

Neste Oil employed an average of 5,286 (5,174) employees in 2009, of which 1,333 are based outside Finland. As of the end of December, the company had 5,092 employees (5,262), of which 1,424 are located outside Finland. Wages and salaries paid by the company totaled EUR 233 million in 2009 (251 million).

Health, safety, and the environment

The main indicator for safety performance used by Neste Oil - total recordable injury frequency (TRIF, 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 (5.2) at the end of 2009. The target for 2009 was below 4. Lost workday injury frequency (LWIF) stood at 2.2. The target for 2009 was below 2. LWIF in 2008 was 3.2. Safety performance during 2009 was the best in the company's history.

No serious environmental accidents resulting in liability occurred at Neste Oil's refineries or other production facilities in 2009. The environmental emissions of Neste Oil's operations remained low throughout the year, with the exception of short-term sulfur dioxide emissions in July, resulting from flaring due to technical and operational problems. Permitted emission limit values were not exceeded. The wastewater treatment plants at the refineries operated very well. The oil content of waterborne emissions was 0.07 g/ton of crude oil processed. This is less than 2.2% of the 3 g/ton maximum emission recommendation by the Baltic Marine Environment Protection Commission.

Neste Oil has successfully fulfilled all the requirements related to carbon dioxide emissions in 2009. The verification of emissions for 2009 is scheduled, and the company is able to report and surrender allowances equal to its total emissions in 2009. The company has received emission rights for 3.6 million tons of CO2 emissions a year between 2008 and 2012, and will need to acquire rights from the market to cover expected future emissions.

The REACH (Registration, Evaluation and Authorization of Chemicals) regulation came into force in the EU on 1 June 2007. Neste Oil has contributed to joint work carried out under the framework of the European oil companies' organization, Concawe, and the company's project for meeting REACH requirements has progressed according to plan.

Neste Oil retained its position in or was selected for inclusion in a number of sustainability indexes during 2009. It was included in the Dow Jones Sustainability World Index for the third year in a row. Neste Oil has been awarded 'Best in Class' recognition for its social accountability by the Norwegian banking group, Storebrand, and has been included in Innovest's Global 100 list of the world's most sustainable companies three times, and featured in the Ethibel Pioneer Investment Register.

Research and development

Research and development focusing on both crude oil-based and renewable traffic fuels is crucial in implementing Neste Oil's strategy. Neste Oil's R&D expenditure totaled EUR 37 million in 2009 (37 million). The company's main R&D projects were related to extending the raw material and technological base for renewable fuels.

Events after the reporting period

On 12 January 2010, Neste Oil decided to transfer the management of its supplementary pension benefits and the associated pension portfolio of its Finnish companies to OP Life Assurance Company Ltd. The move is expected to take place on 1 April 2010. A non-recurring charge is expected to be booked against Neste Oil's consolidated IFRS financial statements in the second quarter of 2010. The transfer is expected to have a positive cash flow impact.

On 1 February 2010, Neste Oil announced that it is to receive a total of EUR 47.5 million in compensation for damage and lost production volumes following a fire on Line 4 at the Porvoo refinery on 4 April 2008. The compensation will be booked against the company's first-quarter 2010 result.

Potential short-term and long-term risks

The oil market has been and is expected to continue to be very volatile. Oil refiners are exposed to a variety of political and economic trends and events, as well as natural phenomena that affect the short- and long-term supply of and demand for the products that they produce and sell.

The largest uncertainty over the short term continues to be the pace of the anticipated recovery of the world economy, which is likely to have a material impact on the demand for petroleum products generally and diesel fuel in particular.

Sudden and unplanned outages at Neste Oil's production units or facilities continue to represent a short-term operational risk.

Rapid and large changes in feedstock and product prices may lead to significant inventory gains or losses, or change in working capital. These may have a material impact on the company's IFRS operating profit and net cash from operations.

Over the longer term, access to funding and rising capital costs, as well as challenges in procuring and developing new competitive and reasonably priced raw materials, may impact the company's growth plans.

The implementation of biofuel legislation in the EU and other key market areas may influence the speed at which the demand for these fuels develops. Risks include also any problems or delays in completing the NExBTL renewable diesel investments or failure to capture the anticipated benefits from these investments. In the longer term, failure to protect its proprietary technology or introduction and implementation of competing renewable fuel technologies or hybrid and electric engines may have a negative impact on the company's results.

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.

For more detailed information on Neste Oil's risks and risk management, please refer to the company's Annual Report and Financial Statements for 2009.

Outlook

The market environment is likely to remain challenging in 2010. It is still too early to say whether the global economy has returned to sustainable growth even if there are some positive signs. Oil demand forecasts for 2010 indicate growth, primarily in non-OECD countries, after the historical collapse seen in 2009, but demand will be largely dictated by general economic developments.

Refining margins are expected to increase only gradually, due to the slow recovery of demand and the new capacity set to come on stream in 2010, as well as high petroleum product inventories. It is likely that refinery utilization rates will be limited globally and that more capacity will be closed either temporarily or for good.

Diesel and middle distillate margins have strengthened somewhat during January 2010, resulting from the cold weather and normal seasonal demand. Margins are not expected to increase significantly before inventories, both onshore and floating, which are running at high levels, have been drawn down. This is expected to take at least six months, depending on how demand develops. Gasoline inventories are close to normal levels, and there is a possibility of positive seasonal impact to gasoline margins ahead of the driving season.

A major planned six-week turnaround will be carried out at Neste Oil's Porvoo refinery starting at the beginning of April. During this, Neste Oil will sell stored products, which totaled appr. 600,000 tons (over 4 million barrels) at the end of 2009. This will have a positive impact on the operational cash flow in the second quarter.

The Renewable Fuels business is anticipated to report negative results until sales volumes increase significantly, which is expected during the last months of 2010 when the new plant in Singapore is scheduled to come on stream.

No significant recovery of demand is expected on oil retail markets, either in Finland or elsewhere. Increased economic activity would have a positive impact on diesel demand in trucking and other transport use. Neste Oil will continue to offset the impact of a weak market by increasing its internal efficiency.

A non-recurring insurance compensation of EUR 47.5 million will be booked in the first quarter operating profit.

A non-recurring charge is expected to be booked in the second quarter 2010 operating profit relating to transfer of the Neste Oil Pension Fund outside the company. The cash flow impact of these transfers in the second quarter will be positive.

The Group's fixed costs are estimated to be on a similar level to those in 2009.

The Group's cash investments are expected to be around EUR 920 million (870 million), of which strategic investments will account for 580 million (670 million), maintenance investments 310 million (160 million), and productivity investments 30 million (40 million).

Dividend distribution proposal and the AGM

The Board of Directors' dividend proposal to the Annual General Meeting is EUR 0.25 per share for 2009, totaling EUR 64 million.

The Annual General Meeting will be held on 15 April 2009 at 11:00 a.m. EET at the Helsinki Fair Centre.

Reporting date for the first-quarter 2010 results

Neste Oil will publish its first-quarter results for 2010 on 29 April 2010 at approximately 9:00 a.m. EET.

Espoo, 3 February 2010

Neste Oil Corporation

Board of Directors


Further information:

Matti Lievonen, President & CEO, tel. +358 10 458 11

Ilkka Salonen, CFO, tel. +358 10 458 4490

Investor Relations, tel. +358 10 458 5132

News conference and conference call

A press conference in Finnish on the fourth quarter and full-year results will be held today, 4 February 2010, at 11:30 am EET at the company's headquarters, Keilaranta 21, Espoo. www.nesteoil.com will feature English versions of the presentation materials. A conference call in English for investors and analysts will be held on 4 February 2010 at 3:00 pm Finland /1:00 pm London / 8:00 am New York. The call-in numbers are as follows: Europe: +44 (0)20 3023 4426, US: +1 866 966 5335. The conference call can be followed at http://www.thomson-webcast.net/uk/dispatching/?event_id=e52f403b5265cf27b5210a23 f0da8265&portal_id=87cf8ed9b77cfb128c775d5a0751c499. 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#.

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- DECEMBER
 2009

 10-12/2009 and 10-12/2008
 unaudited, full year 2009 and
 2008 audited


 CONSOLIDATED INCOME STATEMENT

 MEUR

                  Note

                                  10-12/2009 10-12/2008 1-12/2009 1-12/2008



 Revenue            3                2 491      2 805     9 636    15 043

 Other income                            6          7        29        44

 Share of profit (loss)
 of associates and joint

 ventures           3                   -1        -26        20        13

 Materials and
 services                            -2 180     -2 789    -8 167   -13 657

 Employee benefit
 costs                                 -80        -84      -301      -315

 Depreciation,
 amortization and
 impairments         3                  -65        -55      -234      -223

 Other expenses                        -162       -210      -648      -719

 Operating profit                         9       -352       335       186



 Financial income and
 expenses

 Financial income                         4          2        10         8

 Financial
 expenses                                -8        -28       -44       -70

 Exchange rate and fair value
 gains and

 losses                                  -1         -4        -5         5

 Total financial income and
 expenses                                -5        -30       -39       -57



 Profit before income taxes               4       -382       296       129

 Income tax
 expense                                 -3         93       -71       -28

 Profit for the
 period                                   1       -289       225       101



 Profit
 attributable to:

 Owners of the parent                    -1       -290       221        97

 Minority interest                        2          1         4         4

                                          1       -289       225       101



 Earnings per share from
 profit

 attributable to the
 owners

 of the parent basic and

 diluted (in euro per
 share)                               -0,01      -1,14      0,86      0,38





 CONSOLIDATED STATEMENT OF
 COMPREHENSIVE INCOME

 MEUR

                                 10-12/2009 10-12/2008 1-12/2009 1-12/2008



 Profit for the
 period                                   1       -289       225       101

 Other
 comprehensive
 income for the
 period,

 net of tax:

 Translation
 differences and
 other changes                            3        -34         9       -44

 Cash flow hedges

 recorded in
 equity                                  -2        -22         3       -23

 transferred to
 income statement                       -11         21        15       -25

 Net investment
 hedges                                   0          0         0         0

 Hedging reserves in
 associates and joint
 ventures                                 0          0        -2        -1

 Other comprehensive
 income for the period,
 net of tax                             -10        -35        25       -93



 Total
 comprehensive
 income for the
 period                                  -9       -324       250         8



 Total
 comprehensive
 income
 attributable to:

 Owners of the
 parent                                 -11       -325       246         4

 Minority interest                        2          1         4         4

                                         -9       -324       250         8


CONSOLIDATED
 BALANCE SHEET

                                                              31 Dec 31 Dec

 MEUR            Note                                           2009   2008



 ASSETS

 Non-current assets

 Intangible assets  4                                             48     51

 Property, plant and
 equipment          4                                          3 235  2 675

 Investments in
 associates and joint

 ventures                                                        216    152

 Non-current receivables                                           3     13

 Pension assets                                                  111    105

 Deferred tax assets                                              11     16

 Derivative financial
 instruments         5                                             3     16

 Available-for-sale
 financial assets                                                  1      1

 Total non-current
 assets                                                        3 628  3 029



 Current assets

 Inventories                                                   1 148    637

 Trade and other
 receivables                                                     757    786

 Derivative financial
 instruments         5                                            50    213

 Cash and cash
 equivalents                                                     117     55

 Total current
 assets                                                        2 072  1 691



 Total assets                                                  5 700  4 720



 EQUITY

 Capital and reserves
 attributable to the owners

 of the parent

 Share capital                                                    40     40

 Other equity        2                                         2 170  2 131

 Total                                                         2 210  2 171

 Minority interest                                                12      8

 Total equity                                                  2 222  2 179



 LIABILITIES

 Non-current
 liabilities

 Interest-bearing
 liabilities                                                   1 590    926

 Deferred tax
 liabilities                                                     328    297

 Provisions                                                       22     24

 Pension liabilities                                              10     12

 Derivative financial
 instruments         5                                            15     32

 Other non-current
 liabilities                                                       0      3

 Total non-current
 liabilities                                                   1 965  1 294



 Current liabilities

 Interest-bearing
 liabilities                                                     445    133

 Current tax
 liabilities                                                       5      1

 Derivative financial
 instruments        5                                             83    197

 Trade and other
 payables                                                        980    916

 Total current
 liabilities                                                   1 513  1 247



 Total liabilities                                             3 478  2 541



 Total equity and
 liabilities                                                   5 700  4 720



 CONSOLIDATED STATEMENT OF CHANGES IN TOTAL
 EQUITY


                              Attributable to equity holders of the
                                           Company

                    Share Reserve     Fair Translation    Re-    Mi-  Total

                      ca-    fund    value      diffe- tained nority equity

                    pital              and      rences   ear-  inte-

                                     other              nings   rest

 MEUR                             reserves
 Total equity at 1
 January 2008        40      10       42         -11   2342      4  2 427

 Dividend paid                                        -256           -256

 Share-based
 compensation                                            0              0

 Transfer from
 retained earnings                                                      0

 Total comprehensive
 income

 for the period                      -49         -43     96      4      8

 Total equity at 31
 December

 2008                 40      10       -7         -54   2182      8   2179



                    Share Reserve     Fair Translation    Re-    Mi-  Total

                      ca-    fund    value      diffe- tained nority equity

                    pital              and      rences   ear-  inte-

                                     other              nings   rest

 MEUR                             reserves

 Total equity at 1
 January 2009        40      10       -7         -54   2182      8  2 179

 Dividend paid                                        -205           -205

 Share-based
 compensation                                           -2             -2

 Transfer from
 retained earnings         1                            -1              0

 Total comprehensive
 income

 for the period                       16           9    221      4    250

 Total equity at 31
 December

 2009                40      11        9         -45  2 195     12  2 222


CONDENSED CONSOLIDATED CASH
 FLOW STATEMENT



 MEUR                        10-12/2009 10-12/2008    1-12/2009   1-12/2008

 Cash flow from operating
 activities

 Profit before taxes                  4       -382          296         129

 Adjustments, total                  81         93          268         249

 Change in working
 capital                           -345        836         -450         248

 Cash generated from
 operations                        -260        547          114         626

 Finance cost, net                   29          6           20         -29

 Income taxes paid                    6        -67           43         -85

 Net cash generated from
 operating activities              -225        486          177         512

 Capital expenditures              -248       -184         -816        -497

 Acquisition of
 subsidiary                           -          -            -         -10

 Acquisition of
 associates and joint
 ventures                           -15         -1          -47          -1

 Proceeds from sales of
 fixed assets                         1          5            7           9

 Proceeds from sales of
 shares                               0          2            0          12

 Change in other
 investments                        -16        -12          -29          -8

 Cash flow before
 financing activities              -503        296         -708          17

 Net change in loans and
 other financing

 activities                         551       -346          975         244

 Dividends paid to the
 owners

 of the parent                        0          0         -205        -256

 Net increase
 (+)/decrease (-) in cash            48        -50           62           5

 and cash equivalents



 KEY FINANCIAL
 INDICATORS

                                                        31 Dec      31 Dec

                                                          2009        2008

 Capital employed, MEUR                                   4257        3237

 Interest-bearing net
 debt, MEUR                                               1918        1004

 Capital expenditure and
 investments in shares,
 MEUR                                                      863         508

 Return on average capital
 employed, after tax, ROACE
 %                                                         2,5        13,1

 Return on capital
 employed, pre-tax, ROCE
 %                                                         9,0         6,1

 Return on   equity, %                                    10,2         4,4

 Equity per share, EUR                                    8,64        8,48

 Cash flow per share, EUR                                 0,69        2,00

 Price/earnings
 ratio (P/E)                                             14,42       28,03

 Equity-to-assets ratio,
 %                                                        39,1        46,3

 Gearing, %                                               86,3        46,1

 Leverage ratio, %                                        46,3        31,5

 Dividend per
 share 1)                                                 0,25        0,80

 Dividend payout
 ratio, % 1)                                              29,0       211,9

 Dividend yield, %
 1)                                                        2,0         7,6

 Average number of shares                            255903960   255903686

 Number of shares at the
 end of the period                                   255913686   255903686

 Average number of
 personnel                                                5286        5174


 1) Board of Directors
 proposal to the Annual
 General Meeting





NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The report on Annual Financial Statements has been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by EU. The accounting policies adopted are consistent with those of the Group's annual financial statements for the year ended 31 December 2008 with the changes described below.

The Group applies the following interpretations or amendments as of 1 January 2009:

- IAS 1 Presentation of Financial Statements - Revised. This revised
standard
 separates changes in equity of an entity arising from transactions with
owners
 from other changes in equity

 - Amendments to IFRS 7 Financial Instruments: Disclosures. This amendment
 enhance disclosures about fair value measurement and liquidity risk.

 - IAS 23 Borrowing Costs - Revised. The Group has revised the accounting
 principle for capitalizing borrowing costs in accordance with the revised
 standard. The revised accounting principle had no effect to the reported
 figures.

 The following interpretations are mandatory for the financial year
 ending 31 December 2009, but not relevant for the Group:

 - IFRIC 13
 Customer Loyalty
 Programmes

 - Annual
 improvements 2008

 - Amendments to IFRS 2
 Share-Based Payment: Vesting
 Conditions and Cancellations

 - Amendments to IAS 32 Financial instruments: Presentation and IAS 1
 Presentation of Financial Statements - Financial Instruments Puttable at
Fair
 Value and Obligations Arising on Liquidation

 - Amendments to IFRIC 9 Remeasurement of Embedded Derivatives and IAS 39
 Financial Instruments: Recognition and Measurements - Embedded derivatives


2. TREASURY SHARES



In 2007 Neste Oil entered into an agreement with a third party service provider concerning the administration of the share-based management share performance arrangement for key management personnel. As part of the agreement, the service provider 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 possible future payment of the rewards, which will take place partly in Neste Oil shares and partly in cash during 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. In December 2009 Neste Oil decided to assign 10,000 shares held by the third party service provider. At the date of the transfer, the value of the shares was 119 thousand euros. As at 31 December 2009 there were 490,000 shares accounted for as treasury shares.


3. SEGMENT INFORMATION


Neste Oil's operations are grouped into four segments: Oil Products, Renewable Fuels, Oil Retail and Others.

Group administration, shared service functions as well as Research and Technology, Neste Jacobs and Nynas AB are included in the Others segment.



REVENUE

 MEUR                     10-12/2009     10-12/2008 1-12/2009     1-12/2008

 Oil Products                   1987           2221      7631         12641

 Renewable Fuels                  61             20       182           116

 Oil Retail                      791            915      2998          4073

 Others                           44             43       164           143

 Eliminations                   -392           -394     -1339         -1930

 Total                          2491           2805      9636         15043


 OPERATING PROFIT

 MEUR                     10-12/2009     10-12/2008 1-12/2009     1-12/2008

 Oil Products                     27           -301       318           183

 Renewable Fuels                 -11             -9       -25             2

 Oil Retail                        6             -6        50            25

 Others                          -11            -38        -6           -29

 Eliminations                     -2              2        -2             5

 Total                             9           -352       335           186



 COMPARABLE
 OPERATING PROFIT

 MEUR                     10-12/2009     10-12/2008 1-12/2009     1-12/2008

 Oil Products                    -11            154       105           602

 Renewable Fuels                 -10            -10       -30             2

 Oil Retail                        5             -5        50            22

 Others                          -11            -38        -7           -29

 Eliminations                     -2              2        -2             5

 Total                           -29            103       116           602



 DEPRECIATION, AMORTIZATION
 AND IMPAIRMENTS

 MEUR                     10-12/2009     10-12/2008 1-12/2009     1-12/2008

 Oil Products                     48             44       178           175

 Renewable Fuels                   6              2        14             7

 Oil Retail                        8              6        31            31

 Others                            3              3        11            10

 Total                            65             55       234           223



 CAPITAL EXPENDITURE AND INVESTMENTS IN
 SHARES

 MEUR                     10-12/2009     10-12/2008 1-12/2009     1-12/2008

 Oil Products                     59             47       198           165

 Renewable Fuels                 191            108       625           249

 Oil Retail                       10             22        29            63

 Others                            3              8        11            31

 Total                           263            185       863           508



 TOTAL ASSETS                                          31 Dec        31 Dec

 MEUR                                                    2009          2008

 Oil Products                                            3750          3352

 Renewable Fuels                                         1080           450

 Oil Retail                                               545           568

 Others                                                   281           265

 Unallocated
 assets                                                   234           240

 Eliminations                                            -190          -155

 Total                                                   5700          4720



 NET ASSETS                                                   31 Dec 31 Dec

 MEUR                                                           2009   2008

 Oil Products                                                   2943   2436

 Renewable Fuels                                                 940    381

 Oil Retail                                                      305    351

 Others                                                          234    201

 Eliminations                                                      1      4

 Total                                                          4423   3373



 RETURN ON NET ASSETS, %                                     31 Dec 31 Dec

                                                               2009   2008

 Oil Products                                                  12,0    6,4

 Renewable Fuels                                               -4,0    0,9

 Oil Retail                                                    15,8    6,8



 COMPARABLE RETURN ON NET ASSETS, %                          31 Dec 31 Dec

                                                               2009   2008

 Oil Products                                                   4,0   21,2

 Renewable Fuels                                               -4,8    0,9

 Oil Retail                                                    15,8    6,0



 QUARTERLY SEGMENT INFORMATION



 QUARTERLY REVENUE

 MEUR

                         10-12   7-9   4-6   1-3 10-12   7-9    4-6    1-3

                         /2009 /2009 /2009 /2009 /2008 /2008  /2008  /2008

 Oil Products             1987  1971  2091  1582  2221  3907   3798   2715

 Renewable Fuels            61    59    38    24    20    27     46     23

 Oil Retail                791   789   727   691   915  1132   1078    948

 Others                     44    37    41    42    43    36     33     31

 Eliminations             -392  -356  -305  -286  -394  -581   -535   -420

 Total                    2491  2500  2592  2053  2805  4521   4420   3297



 QUARTERLY OPERATING PROFIT

 MEUR

                         10-12   7-9   4-6   1-3 10-12   7-9    4-6    1-3

                         /2009 /2009 /2009 /2009 /2008 /2008  /2008  /2008

 Oil Products               27    80   105   106  -301    15    272    197

 Renewable Fuels           -11    -1    -3   -10    -9    -2     12      1

 Oil Retail                  6    19    13    12    -6     9     11     11

 Others                    -11    17    -1   -11   -38    21     -4     -8

 Eliminations               -2    -2     4    -2     2     1     -1      3

 Total                       9   113   118    95  -352    44    290    204


 QUARTERLY COMPARABLE OPERATING PROFIT

 MEUR

                         10-12   7-9   4-6   1-3 10-12   7-9    4-6    1-3

                         /2009 /2009 /2009 /2009 /2008 /2008  /2008  /2008

 Oil Products              -11    15    37    64   154   173    162    113

 Renewable Fuels           -10    -6    -7    -7   -10    -3     13      2

 Oil Retail                  5    19    14    12    -5     7     11      9

 Others                    -11    16    -1   -11   -38    21     -4     -8

 Eliminations               -2    -2     4    -2     2     1     -1      3

 Total                     -29    42    47    56   103   199    181    119


 QUARTERLY DEPRECIATION, AMORTIZATION AND IMPAIRMENTS

 MEUR

                         10-12   7-9   4-6   1-3 10-12   7-9    4-6    1-3

                         /2009 /2009 /2009 /2009 /2008 /2008  /2008  /2008

 Oil Products               48    43    43    44    44    44     41     46

 Renewable Fuels             6     4     2     2     2     2      1      2

 Oil Retail                  8     8     8     7     6     9      8      8

 Others                      3     3     3     2     3     1      3      3

 Total                      65    58    56    55    55    56     53     59


 QUARTERLY CAPITAL EXPENDITURE

 AND INVESTMENTS IN SHARES

 MEUR

                        10-12   7-9   4-6   1-3 10-12   7-9    4-6    1-3

                        /2009 /2009 /2009 /2009 /2008 /2008  /2008  /2008

 Oil Products              59    45    51    43    47    46     39     33

 Renewable Fuels          191   161   150   123   108    64     50     27

 Oil Retail                10     9     6     4    22    18     15      8

 Others                     3     1     3     4     8     3      6     14

 Total                    263   216   210   174   185   131    110     82



 4. CHANGES IN INTANGIBLE ASSETS AND PROPERTY,

 PLANT AND EQUIPMENT AND CAPITAL COMMITMENTS



 CHANGES IN INTANGIBLE ASSETS AND PROPERTY,

 PLANT AND EQUIPMENT                                    31 Dec     31 Dec

 MEUR                                                     2009       2008

 Opening balance                                          2726       2477

 Depreciation, amortization and
 impairments                                              -234       -223

 Capital
 expenditure                                               820        497

 Disposals                                                 -21         -8

 Translation
 differences                                                -8        -28

 Acquired group
 companies                                                   0         11

 Closing balance                                          3283       2726



 CAPITAL COMMITMENTS                                    31 Dec     31 Dec

 MEUR                                                     2009       2008

 Commitments to purchase
 property, plant and equipment                             431        540

 Total                                                     431        540


 Capital commitments include EUR 63 million future commitments related to
 energy and utility supply agreements, which will be accounted for as
finance
 leases.


 5. DERIVATIVE
 FINANCIAL
 INSTRUMENTS

                                    31 Dec 2009               31 Dec 2008

 Interest rate and
 currency

 derivative
 contracts and

 share forward
 contracts                     Nominal         Net     Nominal        Net

 MEUR                            value  fair value       value fair value

 Interest rate
 swaps                             723         -13         475        -13

 Forward foreign
 exchange
 contracts                        1759          -7        1381         17

 Currency options

 Purchased                         115          -1         336         -5

 Written                           114           2         256        -11

 Share forward
 contracts                           9          -4          14         -8





 Oil and freight
 derivative                              Net fair               Net fair
 contracts                        Volume       value      Volume      value

                             million bbl        Meur million bbl       Meur

 Sales contracts                      18         -32          28        166

 Purchase
 contracts                             7          10          32       -147

 Purchased options                     1          -8           1        -12

 Written options                       1           8           1         12


 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.


 6. RELATED PARTY
 TRANSACTIONS



 Details of transactions between the Group and
 associates/joint ventures are disclosed below.

                                                       1-12            1-12
 Transactions carried out with
 associates and joint ventures                        /2009           /2008

 Sales of goods and
 services                                                70             110

 Purchases of goods and
 services                                                48              72

 Receivables                                             23              14

 Financial income and
 expenses                                                 0               0

 Liabilities                                              2               9


 7. CONTINGENT
 LIABILITIES

                                                    31 Dec          31 Dec

 MEUR                                                 2009            2008

 Contingent liabilities

 On own behalf for
 commitments

 Real estate mortgages                                  26              26

 Pledged assets                                          2               3

 Other contingent
 liabilities                                            48              37

 Total                                                  76              66

 On behalf of associates
 and joint ventures

 Guarantees                                              4               5

 Other contingent
 liabilities                                             2               2

 Total                                                   6               7

 On behalf of others

 Guarantees                                             18              12

 Total                                                  18              12

 Total                                                 100              85



                                                    31 Dec          31 Dec

 MEUR                                                 2009            2008

 Operating lease
 liabilities

 Due within one year                                    82             106

 Due between one and five years                        166             190

 Due later than five
 years                                                 120             123

 Total                                                 368             419

The Group's operating lease commitments primarily relate to time charter vessels, land and office space. In 2008 the lease commitments included operating leases contained in hydrogen supply agreements. Based on updated information the hydrogen supply agreements have been reassessed in 2009 and will be accounted for as take-or-pay contracts. The previous years figures concerning operating lease liabilities have been restated accordingly.



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.


CALCULATION OF KEY FIGURES

CALCULATION OF KEY FINANCIAL INDICATORS

Operating profit = Operating profit includes the revenue from the sale of goods and services, other income such as gain from sale of shares or non- financial assets, share of profits (loss) of associates and joint ventures, less losses from sale of shares or non-financial assets, as well as expenses related to production, marketing and selling activities, administration, depreciation, amortization, and impairment charges. Realized and unrealized gains or losses on oil and freight derivative contracts together with realized gains and losses from foreign currency and oil derivative contracts hedging cash flows of commercial sales and purchases that have been recycled in the income statement, are also included in operating profit.

Comparable operating profit = Operating profit -/+ inventory gains/losses - /+ gains/losses from sale of shares and non-financial assets - unrealized change in fair value of oil and freight derivative contracts. Inventory gains/losses include the change in fair value of all trading inventories.

Return on equity, (ROE) % = 100 x (Profit before taxes - taxes) / Total equity average

Return on capital employed, pre-tax (ROCE) % = 100 x (Profit before taxes + interest and other financial expenses) / Capital employed average

Return on average capital employed, after-tax (ROACE) % = 100 x (Profit for the period (adjusted for inventory gains/losses, gains/losses from sale of shares and non-financial assets and unrealized gains/losses on oil and freight derivative contracts, net of tax) + minority interest + interest expenses and other financial expenses related to interest-bearing liabilities (net of tax)) /Capital employed average


Capital employed = Total assets - interest-free liabilities - deferred tax liabilities -provisions

Interest-bearing net debt = Interest- bearing liabilities - cash and cash equivalents

Leverage ratio, % = 100 x Interest- bearing net debt / (Interest- bearing net debt + Total equity)

Gearing, % = 100 x (Interest bearing net debt / Total equity)

Equity-to assets ratio, % = 100 x Total equity / (Total assets - advances received)

Return on net assets, % = 100 x Segment operating profit / Average segment net assets

Comparable return on net assets, % = 100 x Segment comparable operating profit /Average segment net assets

Segment net assets = Property, plant and equipment, intangible assets, investment in associates and joint ventures including shareholder loans, pension assets, inventories and interest-free receivables and liabilities allocated to the business segment, provisions and pension liabilities

Research and development expenditure = Research and development expenditure comprise of the expenses of the Research & Technology unit serving all business areas of the Group, as well as research and technology expenses incurred in business areas, which are included in the consolidated income statement. Depreciation and amortization are included in the figure. The expenses are presented as gross, before deducting grants received.

CALCULATION OF SHARE-RELATED INDICATORS

Earnings per share (EPS) = Profit for the period attributable to the equity holders of the company / Adjusted average number of shares during the period

Equity per share = Shareholder's equity attributable to the equity holders of the company/ Adjusted average number of shares at the end of the period

Cash flow per share = Net cash generated from operating activities /Adjusted average number of shares during the period

Price / earnings ratio (P/E) = Share price at the end of the period /Earnings per share

Dividend payout ratio, % = 100 x Dividend per share / Earnings per share

Dividend yield, % = 100 x Dividend per share / Share price at the end of the period

Average share price = Amount traded in euros during the period / Number of shares traded during the period


Market capitalization at the end of the period = Number of shares at the end of the period x share price at the end of the period

Trading volume = Number of shares traded during the period, and number of shares traded during the period in relation to the weighted average number of shares during the period


Financial Statements 2009: http://hugin.info/133386/R/1380512/340043.pdf

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