CEO's Review 2011
2011 was a year very much linked to the implementation of our cleaner traffic strategy. Profitable growth and efficient production are also some of the key goals that we have set ourselves between 2010 and 2013. During 2011, we completed our major investment program aimed at achieving a significant increase in both our NExBTL renewable diesel and base oil capacity. We also took some important steps forward in improving our overall efficiency and productivity.
The recovery of the world economy, geopolitical tensions in oil-producing countries, and fears about a worsening of the Eurozone crisis towards the end of the year were the most important factors shaping the global oil market in 2011. Uncertainty over the likely development of the world economy overshadowed market prospects at the beginning of 2012, as did the expectation that Europe, in particular, was heading for a short-term recession or worse. New oil refining capacity is also expected to come on stream during the year. I believe, however, that advanced refiners such as Neste Oil will be well-placed to weather these and other challenges.
The ramp-up of Neste Oil’s renewable fuels business was particularly prominent in 2011, and the future looks positive in this area, as our premium-quality NExBTL renewable diesel more than meets the requirements expected of tomorrow’s fuels. Demand for biodiesel is expected to grow by a total of 1.6 million tons in Europe and North America in 2012, equivalent to the combined capacity of our new refineries in Rotterdam and Singapore. Legislation on renewable fuels has progressed, but there is still a lot more to do in this area in 2012 and later. I am, nevertheless, happy to report that sales volumes of NExBTL renewable diesel developed positively towards the end of last year, and we aim to continue building on this momentum during 2012.
In terms of our financial targets, our leverage ratio matched our target level, but we failed to achieve our long-term return on capital employed target. The Board of Directors will propose paying a dividend of EUR 0.35 a share to the Annual General Meeting.
Sustainability is central to our operating principles and our core values. It is also a fundamental part of our strategic focus on developing and supplying premium-quality, cleaner products. I am proud to report in this respect that Neste Oil was recently selected for inclusion in The Global 100 list of the world’s most sustainable companies for the sixth year in succession. We were ranked 19th, which I believe is an excellent achievement against such tough international competition. Good examples of the continued progress that we are making in the area of sustainability are the ISCC certificates that we have secured for all our NExBTL plants and our good safety performance in 2011. Both achievements were the result of a lot of systematic and positive work. Although our safety performance in 2011 was our best-ever, we must be careful not to fall into the trap of resting on our laurels, as ensuring that Neste Oil remains a safe workplace will require our ongoing vigilance. And although our safety performance was excellent compared to other Finnish companies, we still have some way to go to attain the safety levels achieved by the very best internationally. Which is why we will be continuing to focus on safety in the years to come.
We launched five internal Value Creation Programs during 2011 to leverage the implementation of our strategy – Profitable Growth, Productivity, Renewables Feedstock, Customer Focus, and Winning Culture – and these highlight the themes that we will be focusing on over the next few years.
We at Neste Oil are committed to becoming a better company and ensuring our future success by being better. This commitment includes making a significant investment in R&D. The major achievements that we have made in R&D recently include our work on microbial oil research, where Neste Oil is now at the cutting edge internationally. We have also not compromised on organizational or HR development work, as we see this as an important investment in our future.
We achieved a lot in 2011, and I would like to thank our personnel, our customers, our suppliers, our shareholders, and all our partners for the contribution they made. What we achieved was the outcome of excellent collaboration between everyone involved, and I hope this will continue during 2012.
President & CEO