Not for release, publication or distribution in the United States of America.
In connection with the proposed separation of Neste Oil Corporation from Fortum Corporation and the planned listing of Neste Oil Corporation on the Helsinki Stock Exchange in April, Fortum Corporation and Neste Oil Corporation announce the financial performance targets, capital structure targets and dividend policy that Neste Oil Corporation intends to use going forward as a separately listed company.
Financial performance targets
Over the longer term, Neste Oil Corporation will measure its performance using a number of operational and financial metrics. In particular, given the capital intensive and cyclical nature of its business, Neste Oil Corporation will focus on its return on average capital employed after tax(ROACE*) under reference market and operating conditions. Before the completion of the upgrade at the Porvoo refinery (the Diesel Project), the target is:
- ROACE of at least 13 percent
For the purposes of this financial performance objective, reference market and operating conditions comprise primarily of:
- Neste Oil Corporation's total refining margin of USD 6.0 to 6.5 per barrel
-Average annual production volumes of approximately 100 million barrels (for both the Porvoo and Naantali refineries and excluding the impact of a five and six year turnaround respectively)
-Exchange rate of USD 1.30 to EUR 1
Capital structure targets
Over the cycle, Neste Oil Corporation’s leverage ratio is likely to fluctuate and it will be Neste Oil Corporation’s objective to maintain its leverage ratio (the ratio of net debt to net debt plus shareholders equity plus minority interests) within the range of 25 to 50 percent. However, because of the scheduled upgrade at the Porvoo refinery to be completed by the end of 2006 (the Diesel Project), Neste Oil Corporation’s leverage ratio at year end 2005 may be higher than the target leverage ratio of 25 to 50 percent.
Furthermore, Neste Oil's leverage ratio may vary outside this range of 25 to 50 percent to the extent that Neste Oil Corporation identifies investment or acquisition opportunities where the risk adjusted returns are believed to justify increases in leverage for periods of time.
Based on Neste Oil Corporation's expectations for net income for 2005, it would expect to recommend a dividend of 25 to 50 percent of its net income for the year ending 31 December 2005. Following the year 2005, and assuming reference market and operating conditions in subsequent years (as outlined above), Neste Oil Corporation would expect to propose dividends to shareholders annually at levels consistent with its net results of operations and targeted and actual financial position.
A teleconference for international analysts and investors will be arranged on Tuesday, 15 March at 4:00 pm Finnish time (GMT+2). To listen to the call please dial +44 (0) 1452 568 061.
In connection with the proposed separation of Neste Oil from Fortum Corporation, a presentation was given to research analysts from a number of institutions. This presentation may be found on the Fortum website at www.fortum.com/Investors.
Senior Vice President, Corporate Communications
Helsinki Stock Exchange
For further information please contact
Juha Laaksonen, CFO, tel. +358 10 452 4519
Petri Pentti, CFO, Neste Oil Corporation, tel. +358 10 452 4490
*) ROACE =
(Net profit** + Minority interest + Net interest expenses)
Average capital employed***
** Net profit is adjusted for inventory gains or losses (net of tax) and non recurring items (net of tax)
*** Capital employed is defined as Shareholders equity (including net profit for the period adjusted for inventory gains or losses (net of tax) and non recurring items (net of tax)) + Minority interests + Interest-bearing net debt
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