Ladies and gentlemen, thank you for standing by, and welcome to the quarter one Neste Corporation earnings conference call. At this time, all participants are in listen only modes. After the speaker presentation, there will be a question- and- answer session. To ask a question during the session, you will need to press star one on your telephone. I must advise you that this call is being recorded today on Friday the 24th of April, 2020. I would now like to hand the call over to your host today, Juha-Pekka Kekäläinen. Please go ahead.
Thank you, good afternoon, ladies and gentlemen, and welcome to this conference call to discuss Neste's first quarter results published this morning. I'm Juha-Pekka Kekäläinen, Head of Neste IR, and with me on the call in various locations are President and CEO, Peter Vanacker, CFO, Jyrki Mäki-Kala, and the business unit heads, Matti Lehmus of Renewables Platform, Marko Pekkola of Oil Products, and Panu Kopra of Marketing & Services. We will be referring to the presentation that can be found on our website. Please pay attention to the disclaimers, as we will be making forward-looking statements in this call. With these remarks, I would like to hand over to our CEO, Peter Vanacker, to start with the presentation. Peter, please go ahead.
Thanks, JP. Thanks a lot everybody for joining us on this call today. Very good afternoon on my behalf. We have, of course, all experienced unprecedented circumstances due to the COVID-19 epidemic, and I hope, of course, that you and your families have stayed safe as well as in good health. We're pleased to share with you our solid performance in the first quarter and the outlook going forward. If we now skip the slides with the disclaimer and immediately go on Slide four on the Q1 highlights. Our first quarter comparable EBIT was EUR 408 million, which is about 8% higher than in the corresponding period last year. Renewable Diesel demand was good in early 2020, but as expected, the feedstock markets remains tight. Combined with the significant impact of the COVID-19 situation on commodity pricing, the tight feedstock market created some pressure on the sales margin.
Our comparable sales margin, including BTC, averaged at $685 per ton during Q1. The EBIT contribution of the BTC was EUR 52 million in the first quarter. The renewable products result was boosted by high sales volumes, 731,000 tons, which was about 6% higher than in the previous year. This was enabled, I am very proud on the work that our people have been accomplishing again. It was enabled by a new quarterly production record of 795,000 tons as the production facilities were operating at a high utilization rate of 101%. This production record would indicate a potential nameplate capacity of close to 3.2 million tons. Crossing the bridge between the 3 million that we had announced last year and the 4.5 million nameplate capacity in the middle of 2022.
Oil Products had a decent result in a very challenging market environment, especially during the second half of the quarter. Its first quarter comparable operating profit was at Q1 2019 level. The reference margin reflected in general market conditions, was very volatile and averaged lower than in the year before. Our good operational and supply performance supported the additional margin, which reached $6.7 per barrel. The warm weather and the COVID-19 epidemic substantially limited air and road traffic. This had an increasingly negative impact on product demand towards the end of the quarter. The Marketing & Services segment had a challenging first quarter in a very competitive market. Its result was impacted by lower sales volumes caused by substantially lower demand due, as said, to the weather and the COVID-19 pandemic.
In addition, of course, the divestment of our Russian business, which was successfully completed in October last year, reduced the comparable EBIT by EUR 3 million. Health and safety remains one of our top priorities, and of course, even more so now with the COVID-19 epidemic, and also, of course, a focus area. Our occupational safety performance, measured by the total recordable incident frequency, was about the average 2019 level, and improvement actions have been defined. Process safety performance continues on a good basis, and we, of course, also implemented far-reaching business continuity plans to ensure safe and reliable operations during the COVID-19 epidemic. We continue to make good progress in our strategy implementation, and I will come back to that at the end of the presentation.
The Neste AGM that was originally scheduled for the 7th of April, had to be postponed due to the COVID-19 restrictions in Finland. The Board of Directors have today given notice of a new AGM date to take place on the 18th of May. The Board of Directors is now proposing a dividend of EUR 0.46 per share as the first installment to be paid in May. The board is also proposing to be authorized to decide separately on a second dividend installment of maximum EUR 0.56 per share. That consists out of the ordinary dividend of EUR 0.46 per share and the extraordinary dividend of EUR 0.10 per share to be paid later in the year. That would be tentatively in October. Here the Board of Directors wants to be prudent in a time of significant market uncertainty.
We move to Slide five on the financial targets. The solid performance is also visible in our financial targets. We reached a record high after-tax ROACE of 26.7% on the rolling 12 months basis, again, clearly exceeding the 15% target. Our leverage ratio remained negative at -1.1% at the end of March. Our strong financial position will support us in navigating through the increasing market volatility. On the next page, let's turn now to the big topic of our lives today. The COVID-19 crisis caused significant and unprecedented uncertainty related to economic development and the demand and prices of Oil Products. A lot will depend on the pace, timing, and geographical distribution of a possible market recovery. Market consultants currently estimate that oil demand will decline somewhere between four and 9 MMbpd in 2020 year-on-year.
The IEA expects 29 MMbpd of year-on-year oil demand decline in April, and 26 MMbpd of year-on-year oil demand decline in May alone. This is expected to have a negative impact on the market demand, the sales and profitability of our Oil Products and Marketing & Services businesses. The biofuel regulations and mandates are expected to continue supporting Renewable Diesel demand. Possible decline in the overall fuel demand could, however, also negatively impact the sales and profitability of renewable products businesses. Neste has a strong balance sheet and the liquidity position, and that is good to navigate through these uncertain and difficult times. Business continuity and contingency plans are in place, and corrective actions have already been started. The Porvoo major turnaround had to be split, as you know, between the years 2020 and 2021.
The Singapore capacity expansion continues to be on track as planned. Lockdown measures by the local government could, however, pose some risks to the progress. I have very full faith in our management and the employees to navigate successfully through these challenging times. Now, with these opening remarks, I would like to hand over to Jyrki to discuss the financials in more detail. Jyrki?
Yes. I hope you can hear me.
Yes, we can hear you.
Yeah, okay. Thank you. Thank you, Peter, and let's move to the next page. Let's talk about the group financials. I have only a few slides here concerning the quarter one figures. If you turn the next page with the figures. Yes, thank you. Talking about the quarter one and making some comparison now for the corresponding quarter last year, our revenues really had this drop that was very visible in the quarter one coming from the Brent oil price drop in the first quarter, and that had roughly EUR 400 million impact on the revenue side. That of course, also caused the fact that we had to do a write-down in the inventories that was roughly EUR 300 million, but that is not part of the comparable figures. I will talk that little bit later.
The EUR 500 million lower net sales, like I mentioned, it had an impact coming from the crude oil price, roughly EUR 400 million, and then EUR 100 million lower sales in both OP and also in the Marketing & Services businesses, including really the Russian divestment, what we did later in quarter three 2019. Actually, it was renewable product that increased their net sales coming from higher volume, roughly EUR 100 million impact in quarter one compared to 2019 first quarter figures. If you look at the EBITDA figure, EUR 326 million, it's lower than 2019 by EUR 160 million. Since this is an IFRS figure, this figure includes, for example, the write-down of Oil Products, EUR 300 million inventory write-down.
That certainly is not then part of the comparable operating profit, but it is part of the normal EBITDA, what you can see in this column, EUR 326 million.
We move to the most important figure, what we are always reporting is a comparable operating profit. It improved by EUR 30 million compared to 2019. That is something that is only coming basically from businesses. I will talk a little bit later about those, because renewable products, Oil Products, and also Marketing & Services, they basically have more or less the same comparable EBIT 2019 first quarter and 2020 first quarter. The big improvement, like you see, is in the others, where we had the big negative net profit of our minority-owned company, Nynas, in Sweden, roughly EUR 30 million. That is no longer affecting our comparable operating profit. It was 2019 figures, there you see the big improvement what is in our figures. Operating profit going down, IFRS tax, again, it's lower than last year. Same story here.
It is about the inventory write-down of the Oil Products. Our cash flow, that was negative by EUR 120 million compared to slightly positive 2019. We had much higher investment activities this quarter, 2020, roughly EUR 220 million more, and that is very clearly seen in the cash flow figures. Finally, the comparable earnings per share, it's much higher than 2019 first quarter as the bottom line net profit is much higher than 2019 when we are excluding the inventory write-downs, the EUR 300 million. It's a very good, solid start of the year also from the comparable earnings point of view. If you move to the next slide, that basically tells how the comparable EBIT then moved between 2019- 2020 by business areas. Can you change the slide, please? Okay, thank you. Here is basically the story what I mentioned.
The business is pretty flat from the operating profit point of view, the others improving mainly through Nynas at the end of the day. That's basically how we landed to EUR 408 million. I think the most interesting slide is this one when we are having a breakdown of elements with our comparable EBIT 2020 first quarter. Now it is a little bit different way to show it, because the reason is now very clear. Now that we have the BTC in place for 2020 and also up to 2022, it is an essential part of the performance, the EUR 40 million that is the last part of the material, the EUR 40 million improvement. Really to make things comparable now during 2020, we have allocated basically here the 2019 first quarter BTC, that was EUR 40 million.
We have the true comparison of apples to apples between 2019 first quarter and now certainly the first quarter of 2020. We are looking then comparable 2019 first quarter, it was EUR 418 million when the BTC is included, and this year it is EUR 408 million. It is more drop in the comparable EBIT. If you look first the sales volumes, there is a small increase for the operating profit coming from the sales volumes. That is mainly coming from renewable products. They had a very good, solid first quarter with the volume point of view, both Oil Products and Marketing & Services had a negative impact coming out of the sales volumes with the known reason, especially with the COVID-19.
Like mentioned earlier, Marketing & Services, they divested the Russian business in quarter three 2019. It's no longer in the books of Marketing & Services. That's basically how we land into this 5 million improvement coming from the sales volumes. I think the more important is the sales margin part. It is - 22 million. Basically, the biggest part of that is coming from Renewable Products. They had $71 a ton lower sales margin. That is roughly 45 million EUR impact negative in this column. Oil Products, it has a positive impact, 4 million EUR. It has basically two different kind of elements. It had a lower reference margin 2020 compared to 2019, roughly 4% lower. They had an excellent performance in the operation.
Their additional margin was 35% higher this year than 2019, and that gave a boost of EUR 28 million positive to this margin level. Combined, Oil Products was, with the reference margin, additional margin, EUR 24 million better this year than 2019. Excellent achievement in that sense. Finally, Marketing & Services, it was pretty much flat. There was no impact coming from the margin side. It was more about the volumes, like I mentioned earlier. FX changes. This is a mainly U.S. dollar, mainly impacting renewable products. Roughly 80% of that is in the renewable side, and the rest is mostly in the OP side.
The fixed cost side, we had an increase of fixed cost, like we have said also earlier, high focus on the growth activities in renewable products. They had EUR 31 million higher fixed cost in this first quarter compared to last year. Oil Products was more or less at the same level, EUR 3 million, really focusing on internal efficiencies on a high level. Marketing & Services, they had EUR 7 million lower fixed cost this year than last year. Of course, part of that is the Russian business was sold. That is basically how the things go. The final piece of the puzzle with the fixed cost is EUR 8 million lower fixed cost in the others, mainly group level items. That's basically how we landed to this EUR 19 million higher fixed cost.
Mostly coming out of the renewables with a very good reason, like everybody knows. The last part, the positive thing in the other items, it is a combination of the Nynas profit no longer affecting Neste's comparable EBIT and then higher depreciation due to high CapEx activities, what we had basically also 2019. That's how we basically land to this EUR 408 million comparable EBIT at the end of Q1 2020. These three slides was something that I was planning to present. Now I hand over to Matti Lehmus to describe what happened in renewable products. Matti, please.
Thank you, Jyrki, and good afternoon on my behalf. I'm happy to state that the solid performance of the renewable products continued in the first quarter, and like you could hear, we were able to achieve a comparable result of EUR 329 million. If I immediately comment on the sales margin, like our CFO was explaining, we were coming in at a sales margin of $685 per ton, which is $71 lower than first quarter 2019 if we take into account the retroactive BTC for 2019. I would comment that this is the result of the tight feedstock market in particular, and the fact that we are able to have a good sales margin reflects the successful efforts to mitigate these raw material price increases. On the sales volume side, I'm very pleased with the level of 731 kilotons .
We were able to increase the share of our European sales to 75% versus 60% in the previous quarter. In general, it's good to state that the demand for renewable diesel was solid in the first quarter. Like you have heard, the production ran very well, and we achieved a record production volume of 795 kilotons. I have to say this is a great achievement by the entire supply chain because in practice, we were avoiding any disruptions coming from the lockdowns following the COVID-19 pandemic. If we turn to the waterfall, I think it draws a very clear picture. Again, you can see that the BTC 2019 has been reallocated to 2019 first quarter, so it starts from EUR 377 million. The big items is that we were able to increase our volumes of sales following also a very good production.
That increase of 39 kilotons had a EUR 24 million positive impact. The fact that the sales margin decreased by $71 had a EUR 45 million negative impact. The third big item is the fixed cost increase of EUR 31 million versus a year ago. This indeed reflects, in particular, the investments we have made in strategic growth projects on one hand, and the ongoing studies. At the same time, it also reflects the strengthening of our resources throughout 2019 in order to prepare for the Singapore expansion startup. Turning to the feedstock markets, and obviously, like the title says, there was very high volatility. If I first comment on the vegetable oil prices, they started the year very strong, but you can see that, for example, from the palm oil curve, that they decreased significantly during the first quarter following the outbreak of the COVID-19 crisis.
It has been also here on the vegetable oils, like palm oil, quite a significant move because the starting level at the beginning of the year was EUR 900 per ton, and the quarter ended below EUR 600 per ton. At the same time, it's good to note that quarter-on-quarter, the Q1 average versus the fourth quarter last year was still reflecting a higher price for palm oil, for example, by EUR 27 per ton. The average was still higher. Turning to the waste and residue prices, it's good to state that they have also reacted to the business environment change, but to a much lesser extent during quarter one because the market remained very tight.
This is, for example, reflected if you look at the animal fat curve by the fact that the quarterly average for animal fat increased by more than EUR 50 per ton from the fourth quarter to the first quarter, and also used cooking oil prices increased from the previous quarter. I reiterate, waste and residues have reacted to the COVID market change, but effect has been much slower, much less pronounced than for Oil Products. If I comment a bit on the supply, I would state that the animal fat supply volume has been quite stable. For example, for used cooking oil, the availability has decreased following restaurant lockdowns in a number of regions. This completes the feedstock part.
If I look at the U.S. market briefly, I would state that LCFS credits, which is important for the California market, averaged $206 per ton during Q1, which is, as in the previous quarter, a very strong level close to the cap that has been set. Like you can see from the price curve, after reaching actually that $210 per ton level in early 2020, the LCFS, there was some volatility after the outbreak of the COVID situation, prices momentarily dropping under $180 per ton, they have recovered to over $ 190, which reflects a solid demand for credits. On the RIN side, prices have actually, on the D4 RINs, been relatively stable in Q1, the average being $0.47 per gallon.
If again, comparing to the previous fourth quarter last year, this is slightly lower, which is obviously also a reflection that the RINs came down after the BTC was announced in December. It will be interesting to follow the RIN development going forward as biodiesel margins at the moment are very weak in the U.S. market. Finally, a few comments on sales margins. The sales margin were at a solid level of $685 per ton in the first quarter. Compared to the first quarter 2019, also the fourth quarter of 2019, this is somewhat lower when we take into account the retroactive BTC for the 2019 numbers. For example, compared to the first quarter, the comparable number would be $756 per ton. The sales margin development was driven by two main factors.
Firstly, the market movement had a decreasing impact on the margin, stemming from the combination of tight waste and residue feedstock markets, resulting in increasing feedstock costs. At the same time, decreasing oil product prices, and in particular, also diesel, on the other hand. Our hedging strategy, of course, softened this impact slightly, but only partial mitigation was possible. At the same time, the other factor is that the sales performance was very good, and this was reflected in increasing price premia, very good optimization of the sales mix. Like mentioned earlier, as part of this optimization, for example, European sales share increased to 75% from the previous quarter, 60%. Finally, I would like to state that the sales margin in the first quarter was also supported by really good operational performance. We reached 101% utilization, and that means a record production volume of 795 kilotons.
This is, of course, clearly higher than the production volume that we, for example, reached a year ago. With these words, I would be happy to hand over to Marko Pekkola to discuss the Oil Products segment.
Okay. Thank you, Matti. Good afternoon, everyone. Just making sure that you're able to hear me.
Yes, we are.
Good. Okay. I'll comment. Let me change the slide to Oil Products. I'll comment the Oil Products first quarter, starting with the comparable EBIT, where we came in with a decent EUR 74 million. At the same time, when our sales volumes were almost 10% lower versus the first quarter of 2019. The main reasons were the COVID-19 pandemic and then also the warm beginning of the year. Our refinery utilization rates were on a planned level, and then good operational and supply performance supported our additional margin being on a good level of $6.7 per barrel. Investments were higher, compared to 2019. The preparation of the major turnaround in Porvoo, and then which will be as already said, executed in phases during 2020 and 2021.
If we move on to the next slide, I'll comment on the EBIT bridge between first quarter 2020 and 2019. Like I said, main positive impact in Q1 2020, EUR 28 million came from good additional margin. Like I said, also already good operational performance and supply performance behind that. In other items, EUR 17 million negative change versus last year, is reflecting the lower profitability of our trading and specialty products businesses, and also higher depreciations in 2019. If we move on to the next slide, and let's take a look on the markets, where we certainly could see this unprecedented situation of the COVID-19 pandemic, and crude oil price drop impact resulting big volatility in both product margins and also Urals-Brent differential. Urals-Brent differential averaged at -$2.3 per barrel during the first quarter and widened towards the end of quarter.
Crude oil prices were trending down during the first quarter, Brent price fell from level of $66 per barrel to the level of $23 per barrel. We all know what the physical oil demands were first in China and then followed by the Rest of the World. If we move our margin performance, if we move to the next slide. Taking a look at our margin performance, our total margin, refining margin was on a good level of EUR 11 per barrel, supported by strong additional margin, when at the same time, the reference margin, which reflects the general market conditions, averaged on the level of EUR 4.3 per barrel. Refinery costs were below last year's level due to strict cost control and general crude oil-related utility costs coming down.
With good operational and supply performance supporting the additional margins, we were able to deliver comparable, decent result on the same level as in Q1 2019. With this short recap, I would like to hand over to Panu to talk about Marketing & Services.
Thank you, Marko. This is Panu Kopra speaking. Indeed, much worse start for the year than expected. I will go through strictly the reasons behind this. First of all, January and February were roughly 8 degrees Celsius warmer than they average are, and even much more warmer compared to the last year. Obviously, this hit hard to the diesel and light fuel oil demand. Secondly, diesel demand was hit by the February strike here in Finland. Third hammer for the demand was COVID-19, which almost stopped our aviation and marine. In the light of traffic, especially compared to the network, this traffic dropped was roughly 25%-35%, depending on the markets where we operate in. That obviously has a big impact also to our volumes in the network sales.
In order to have something positive to say, I would mention that the heavy traffic is still going quite well, as well as the agricultural volumes. Like Peter already said, the sales of Russia had impact also to our comparable EBIT this year compared to last year. In fixed cost, we were able to save something compared to last year. In spite of this very turbulence in the markets, we were able to continue the expansion of Neste MY availability in all markets we operate. COVID-19 has boosted also the usage of Neste App applications, and our customers have been very satisfied to use touchless payments. This is, of course, good for us also in the future. Now handing over to Peter.
Thank you very much, Panu, and let's now move on to the current topics. First of all, progress in our strategy implementation has continued. I mean, the Singapore renewables capacity expansion project is proceeding as planned within budget and on time. Of course, as discussed earlier, the COVID-19 situation requires a close attention and may impact progress through restrictions set by the local government. A new sales agreement on Sustainable Aviation Fuel has been signed with Finnair and JetBlue, and with others to be communicated later. The current COVID epidemic has reduced, of course, flying significantly and poses a serious issues to the entire aviation industry. However, our customers continue to be committed to reducing their carbon footprint going forward.
A new step in our global feedstock sourcing strategy execution was taken when we announced the acquisition of Mahoney Environmental, which is a major collector and recycler of used cooking oil in the United States. This transaction supports Neste in our efforts to build a global waste and residue feedstock platform that can keep pace with the world's growing demand for renewable products. Closing is expected to happen during Q2. In the renewable polymers and chemicals, the strategic cooperation with Borealis for production of renewable polypropylene has started at Borealis sites in Kallo and Beringen. The biopropane produced at our refinery in Rotterdam is used for this purpose. We also recently announced a combined investment with Mirova into Recycling Technologies, a specialist plastic recycling provider. The aim is to accelerate the development of chemical recycling and foster the transition to a circular economy for plastics.
We are well on track to exceed the targets set for our Neste Excellence program and new higher targets to improve EBIT by EUR 225 million by the end of 2022, and by EUR 300 million by 2030 were introduced at our Capital Markets Day. In the area of innovation, we've made a minority stake investment in Sunfire, a leading developer of high-temperature electrolysis technology. The company's patented technology allows production of renewable hydrogen, as well as a direct conversion of water and CO2 into raw materials for the petrochemical products
Innovation continues to offer us exciting new opportunities to build upon in the medium and long term. These were just a couple of highlights that I wanted to mention. We have a clear strategy and we continue moving ahead consistently. Now let's look at the next slides on the outlook for the second quarter of 2020. First of all, the visibility in the global economic development is extremely low due to the COVID-19 pandemic, as you know. As a consequence, we expect unprecedented volatility in the Oil Products in renewable feedstock and renewable fuels markets to remain very high. Sales volumes of Renewable Diesel are expected to remain relatively stable in the second quarter, despite the market impacts of COVID-19 pandemic.
We expect the waste and residue feedstock markets to remain very tight, also driven by lower availability of used cooking oil due to restaurants not operating. The utilization rates of our renewable production facilities are expected to remain good, except for a scheduled four-week catalyst change at the Singapore refinery in the second quarter. It's currently expected to have a negative impact of EUR 50 million on the comparable operating profit. The exact timing of the catalyst change in Singapore will, however, be subject to the lockdown restrictions set by the local authorities. The oil product second quarter market demand is expected to be severely reduced by the COVID-19 pandemic, and the reference margin is also expected to be lower than in the first quarter of 2020, and very high volatility is expected to continue.
As announced on the 23rd of March, the scheduled major turnaround at the Porvoo refinery has been postponed to 2021, and only business-critical unit maintenance will be performed during the second quarter of 2020. The maintenance of the critical units is currently estimated to have a negative impact of approximately EUR 85 million on the segment's comparable operating profits, and that mainly in the second quarter. As Panu also alluded to, in Marketing & Services, the COVID-19 pandemic is expected to have a significant negative impact on the demand and sales volumes in the second quarter as well. Moving to the next slides, let's then conclude with some other topics of the remainder of the year. In the current volatile business environment, Neste continues to implement the Singapore capacity expansion project, the modified Porvoo turnarounds, and other strategic projects according to plan. All other projects are being reprioritized.
As a result, we expect that the group's full- year 2020 capital expenditure will be reduced from the previously estimated EUR 1.2 billion to approximately EUR 950 million, excluding possible M&A. We've scheduled a four-week catalyst change at the Rotterdam refinery in the fourth quarter, and this catalyst change maintenance is also expected to have a negative impact of EUR 50 million on the comparable operating profit. One renewable diesel unit at the Porvoo refinery is scheduled to have a three-week maintenance break, and that in the third quarter. The EBIT impact of that is estimated to be approximately EUR 10 million. This concludes now our presentation, and we would be happy to take your questions. Thank you very much.
Thank you. Ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel that request, please press the hash key. Your first question comes from the line of Mehdi Ennebati at Bank of America. Please go ahead, your line is now open.
Hi. Good afternoon, all, and thanks for taking my questions. Thanks for the presentation. Two questions, please. The first one regarding the demand for the Renewable Diesel. Renewable Diesel demand is linked to the fossil fuels consumption, which is currently falling. However, you gave us a guidance of stable sales volumes in the second quarter compared to the first quarter. Why aren't you facing a decrease in the Renewable Diesel demand? Is it more linked to the kind of contracts that you have, which are kind of, let's say, take or pay? Are you lowering your Renewable Diesel price to keep relatively high sales volumes? Second question is about your hedging policy. You've told us last time that you hedge your renewable products margins one year ahead.
I wanted to know if you are currently hedging your renewable margins for 2021, knowing that those margins are probably lower than when you were hedging them a year ago. Thank you.
Thank you, Mehdi. This is Matti Lehmus. I'll first comment on the demand for Renewable Diesel. In general, exactly like you state, of course, the COVID-19 situation has had a significant impact on crude oil and fossil oil product demand, like we all have seen. Obviously, this situation also has effects on the global Renewable Diesel demand. The effect is much less pronounced, and I would state a couple of reasons. First of all, it's good to note that diesel in general has been less impacted than gasoline. Obviously, a very important driver for the Renewable Diesel demand is the diesel demand, for example, in trucks. The other comment I would make is that while in some market segments, biofuels mandates are directly linked to fossil fuel volumes
There are also some segments where Renewable Diesel demand is not directly linked. Just to give you one example, for example, in California, the Renewable Diesel demand continues to be very solid. I would state that overall, this means that we expect Renewable Diesel demand in the short- term to remain quite stable, and this is also reflected in our comment that we expect our own sales volume to be stable in the second quarter. On the hedging, I would state that exactly like you stated, we have said that our hedging approach is that we typically hedge approximately 50% using vegetable instruments on one hand and oil product instruments on another hand as a proxy hedge. Indeed, we have also stated the typical duration is around 12 months. In this environment, I would say we have slightly shortened the duration of our hedging.
Thank you very much.
Your next question comes from the line of Joshua Stone at Barclays. Please go ahead. Your line is now open.
I'll just come back on the hedging. Clearly, there must have been a positive impact from hedging in the first quarter on the margin in Renewables. Are you able to quantify that or give us some order of magnitude as to how significant that was for your margin and earnings and Renewables during the first quarter? Any sort of guidance you have to provide what you think the effects might be over the second quarter and the remainder of the year. Secondly, coming back to your comment about overall fuel demand falling and that negatively impacting the Renewable Diesel sales margin for this year. Can you talk about what the mechanism is there for that impact? Is it just simply the lower diesel price? Is it maybe lower biofuel credit prices?
Any kind of information you can provide on the mechanism into that effect would be great. Thank you.
Thank you, Joshua. It's Matti. First on the hedging, we are not quantifying the exact impact of hedging. Like I explained earlier, it is of course, only a proxy hedging approach. We also only hedge part of our sales volume. I would state that it helps mitigate a little bit the impact of feedstock prices going up, while at the same time Oil Products diesel went clearly down. It is only partially mitigating that impact. On the margin outlook, I would say that we are not giving any margin guidance. Of course, what I would state that it's clear, it would be very surprising if the COVID-19 very significant market impacts would not have an impact on our margin going forward. The simple logic is that our prices are to a significant part linked to Oil Products such as diesel, for example.
At the same time, the feedstocks, while they are starting to also react and come down, they have not reacted as quickly and as much as Oil Products. That is the underlying logic.
What I can add to that is, Joshua, you remember that last year in Q2, we talked about the fact that we were moving our business model, building up more optionality, that originally, we were mainly focused on the northern part of Europe as well as California. We had started with the additional volume that we were able to produce to prepare other geographic markets. On one hand side, on the other hand side, also selling our 100% or Neste MY in pump stations, not just in Finland, but also in the Baltics, in California, in the Netherlands, and so on. It's now more than 200 tank stations where you can buy the product.
Having built that optionality in our business model, in addition, also having signed more than usual term contracts for 2020, that gives us, of course, also more room to maneuver in how we are conducting our sales in Renewable Diesel. I think that's also an important factor to look at.
Okay, understood. Thank you very much.
Your next question comes from the line of Antti Koskivuori at Danske Bank. Please go ahead. Your line is now open. Apologies. I'll just open Antti's line now. It's now open. Thank you.
All right. Thank you very much. This is Antti Koskivuori from Danske. Two questions from me. First, on Oil Products and the reference margin guidance that you give for Q2 saying that it will be likely lower than in Q1. Yet in April, according to the website calculator from your own website, the reference margin has realized more or less double the level that was on average in Q1. Is your view on Q2 as a whole based on forward curve or what's behind this assumption? Secondly, on the changed dividend proposal now to be paid in two parts. I understand this is a board decision, but if you could give some light to the reasons behind this decision, as by looking at your balance sheet, one doesn't easily see why this is necessary at this point. Thanks. Those would be my questions.
Okay. Let's take your first question. Of course, let me allude again to Q2. Yeah. Everything is very volatile at this point in time. Marko, do you want to add something, to the OP reference margin?
Yeah, I can. Thank you, Peter, thank you for the good question. Of course, now for the Q1 and what we can see already based on the calculation, we had a good operational performance and supply performance that's also including the timings that we have, and then also the wider Urals differential during that time. Now like Peter highlighted, now when we see this very unprecedented situation, lot of volatility in the area and also uncertainty, so it's really difficult to forecast. The forwards are not our forecast in that sense.
Is it fact that the spot margins haven't come down yet? Is that the right conclusion?
Well, I would say that that's very hard to forecast and I would maybe show or highlight that with an example, that even during one day, the spot margins can change from one to even $9 per barrel. When the variance is that much, so it is really hard to forecast in that dynamic.
Yeah. We've seen these changes on a daily basis, spot margins being at EUR 2 a barrel and then a bit later, even at the same day, going to EUR 5 or EUR 6 per barrel. I think currently they are at EUR 2 per barrel. I understand your question, Antti, but this market is very volatile. The important thing here is how also in Q1 our people have been able to maneuver through that situation with, I would say, in Q1, a very good result. That will be the same modus vivendi that we have in Q2, yeah? As you can imagine, this is another way of working than usual, which means that many touch points on a daily basis between our operational teams and how to steer through that volatile period. Now, coming to your second question, at the end regarding the dividend proposal.
First of all, one can say the dividend proposal has not really changed to the previous proposal that has been made by the board to the AGM. The only thing that has changed is that on the second tranche and the extraordinary dividend, the board is asking the AGM to delegate the responsibility to the board to decide on its discretion then, and we guide it towards October, because that is when we have the Q3 results then also available and we communicate them to then take the final decision. This is, I would say, just in this very volatile environment, like you have seen for many other companies, just being very prudent in how to look at the future.
All right. Thank you very much.
You're welcome.
Your next question comes from the line of Thomas Adolff at Credit Suisse. Please go ahead. Your line is open. Thomas, please go ahead. Your line is open.
Hello. Can you hear me?
Yes.
Sorry. A few questions from me, please, as well. Just going to the Renewable business. I think last quarter or at the strategy update you talked about term contracts being 70% or more than that. Can you give us an update where we are on that? Is that still around that level? Are you willing to offer some flexibilities if customers asking for less volumes given the current environment? Secondly, just on the sales margin in the first quarter, perhaps if we can deconstruct it more directionally. Did the March sales margin look weaker than the first quarter average? What are you seeing so far in April compared to March? Finally, just on the additional margin in Oil Products, I wonder if you can be a little bit more specific. You talked about the better operational performance and also about supply management.
Is it purely or largely a function of the more attractive feeds of pricing there? Perhaps linked to that also, if you can say what the current utilization rates are at the refineries in April?
Yeah. Let's first of all take your questions in the renewable area, and I would ask Matti to take those questions.
Yes. Thank you, Thomas. On the term contracts, indeed, what we have been over the last year or so communicating, we typically tend to have something like 60%-75% range of term contracts. Exactly like you commented for 2020, we have been at the higher end of that range, and that is still the situation. It has not changed. The share of term contract is somewhat higher this year than it was last year. Around the 70%. In a way, you asked also whether we have had needs to reallocate the volumes. We haven't had lot of need to touch the volumes. The demand in the Q1 was solid.
Then to the flexibility offered, of course. In these term contracts, there is a little bit of flexibility also always in. On the other hand side, we have then the optionality in covering more customers, direct business, as well as in the geographies.
Okay. If there is not much flexibility, I wonder why you're being so cautious about that second installment of the dividend. Essentially, you have a very strong balance sheet. Your gearing is in negative territory, and you have these term contracts in place. There's some flexibility. You have some margin hedges in place. If there's one company that can pay that dividend with ease, that would be you. I'm just a little bit puzzled by having that flexibility on the second installment.
Yeah. Thomas, nobody has said that, at this point, that the second tranche and the extraordinary will not be paid. Yeah. It is just a matter of prudence here. I answered that question already before that the board has decided to be prudent and take the decision then finally, later in the year.
Okay. Yeah.
Then there was another question on the sales margin, more specifically month by month, let's say. We are obviously not opening that month- by- month. I think in a way, if you look at just the description that when we went through the markets earlier in the presentation and you look at the curves, of course, it's clear that the beginning of the year was different in terms of where crude price was. If you look at what has happened since then, we have seen decreasing trend clearly on crude prices that have come from the beginning of the year of $60, more towards $20.
At the same time as our feedstock markets have remained tight, we haven't seen big movements. We have started seeing downward movement recently on animal fats, also on used cooking oils. It's clear that these movements have been much slower and much less pronounced than in crude oil. Like mentioned by our CEO, we of course continue at the same time to continuously optimize and use the optionality we have to optimize our sales and feedstock mix.
Then we have the additional margin question on OP. Marko, if you can take that question also with relation to utilization rate.
Yeah, I can take it. Then, I'll try to open it. When we say that good operational performance, that means that our one refinery set up now when we are in both including Naantali and Porvoo, the running rates and utilization rates, they were on a good level. In addition, with the rapid changes, what we could see on the products with the existing setup what we have, we were able to change the operations in the refinery. That I would little bit more to open what the good operational performance means. On the supply performance, like Peter already said earlier, I think we have very good knowledge and skills inside in the house.
We were able to benefit now on the changes in the market, what we produce, also on the other side, it's also like as it's about the pricing when the deals were done and the purchases. The big impact there is, of course, that the wider Urals, which especially now during towards the end of the Q1 were on the widest. On the utilization rates, we are still operating with a slightly reduced utilization rates in both in Porvoo and Naantali.
Thank you.
I hope that answers it.
Your next question comes from the line of Michael Alsford at Citigroup. Please go ahead. Your line is open.
Hello. Thanks for taking my questions. I've got a couple, please. I guess firstly on the production performance in renewable products, it was obviously particularly strong in the quarter. I guess when you annualize that, you get close to that 3.2 million tons of volumes, which was your target for capacity creep, ahead of Singapore startup. I'm just wondering, when you do the catalyst changes through this year, should we therefore think that actually you could get more capacity creep than you previously indicated from the existing plant and capacity? That's my first question. secondly, more around the balance sheet, and clearly there's huge dislocations in the market, but you are sitting with a very strong balance sheet. I'm wondering whether there is areas where you could perhaps accelerate your plans and your strategy. I'm thinking capacity expansion.
Is there value chain integration opportunities where you can use M&A or other areas to accelerate your growth plans? Thanks.
Okay. First question, Matti?
Yes, thank you. Question on the production volume, and indeed, I think it's a great indication that, with all the work we have done on the operational excellence, on reliability, safety, but also on finding ways to debottleneck the production, the pretreatment. I think the first quarter shows that in a quarter where things run really well, no plant maintenance, also no interruptions, that we can at the moment be very close to that 800 kiloton per quarter. In a way, in that scenario. Of course, we continuously look for further opportunities, but let's say I'm already very pleased that we were able to reach this level in the first quarter, and that will be a continuous effort going forward.
We have not formally and officially announced now that we are increasing our nameplate capacity from 3 to 3.2 million tons. We're not yet at that point. We have a very good practice during the first quarter. We are very confident about it's not yet that we say, Okay, now we have achieved it. Therefore, the gap between, remember, the original 2.7 million tons and then the announced 4.5 million tons with the Singapore facility in 2022 has been completely closed. Also like Matti said, Neste Excellence is a very important element of our strategy. Every time you find a creative solution to avoid the bottleneck, you then start focusing on the next bottleneck. Rest assured, that our excellent people will continue to do that.
On your second question, which is strategic in nature and with regards to balance sheet expansions, M&A, we have talked about that also in the Capital Markets Day. With regards to the HVO expansions, we are currently doing the respective studies. We are proceeding with that, so we're not putting them on hold because of coronavirus situation. Actually, the locations, Rotterdam and Porvoo, as two potential locations, this is now starting to move into environmental impact analysis studies. You may see, especially with regards to Porvoo, because this is, of course, then locally is public, so you may see that appearing also in the regional news, eventually. We continue with full speed ahead on that, whilst we, of course, continue to focus on building up our sites in Singapore. One point that I, and you probably read it when I was giving my introductory comments.
From today's point of view in Singapore, on the new plant, we continue to be within the timeline that we have communicated, so start up middle of 2022. Currently, the construction site has been closed because Singapore, the authorities, they have imposed a new lockdown. They have quite some imported cases now. You can say it is a second wave of COVID-19. They have taken, rightfully so, very rigorous measures to contain that. That lockdown has just a couple of days ago, been expanded from the beginning of May now to the 1st of June.
As said, if that continues to be and we start up again in June, then the current guidance continues to be that we will be on time in the middle of 2022 because we were running a bit ahead in terms of the construction work that we were doing there at the site. M&A, we continue, of course, to look at opportunities in M&A, like we said in the Capital Markets Day 2019, as well as in 2020. That continues to be, of course, on our table. We have a focus on closing the acquisition in the United States. Of course, we continue to look broad where it fits to our strategy. You've seen, also in terms of equity investment with startup companies, what I talked about, that also there we are active.
Okay. Thank you.
Welcome.
Your next question comes from the line of Nick Konstantakis at Exane. Please go ahead. Your line is open.
Hi, guys. Thank you for taking the question. The first one I'm afraid is on diesel sensitivity. We've touched on this before, and you explained the link through the long-term contracts. Looking at where diesel is today, EUR 300 per ton. That was the level in 2016 when your margins were materially lower, but your business model obviously different. The question is, within your agreements, are there any dampening effects to mitigate this extreme move in diesel? Are we going to see a bigger potential impact quarter on quarter, if you want, on your sales margin? That would be the first. Secondly, looking at your country's split of sales for renewable products, I mean, clearly a great increase in the volumes in other European countries. Could you just elaborate on where do these extra volumes go to, which countries?
If you are already at the pricing level you want to be there? Thank you.
Matti, you want to take Nick's questions?
Yes. Thank you. Perhaps on the term contract question, without going in detail, I would perhaps highlight the fact that given that we are selling into a number of countries with very different regulatory schemes, very different customer segments, we also have a variety of different type of term contracts. And like I commented earlier, quite typical is that there is some link to an oil product, for example, a diesel type product quote
We have different schemes. The other question on the sales side, if you have followed what we have been commenting over last year, I think it's been a very systematic work that while we obviously have had for a number of years, a number of countries and regions that are important for us, both in North America and Europe, we have also systematically increased the number of customers and customer segments, markets that we operate in. For example, in the European market, which is fragmented. I think in this type of situation that is again, very valuable that we, of course, continue to keep all these customer segments and markets active. We will also then be optimizing our sales in a way to find the best outlets going forward.
I'm sorry to push on a follow-up, but could you broadly give us a rule of thumb if you want on the diesel sensitivity or is it 5% of the volumes impacted, 10%, or anything you can give incrementally will be very much appreciated?
You mean, Nick, impacted by what then?
By the diesel price, sorry. By the diesel.
By the diesel price?
Yeah.
Well, pretty much so. In California, where you're talking about LCFS, has a link, of course, its price build up, as you know. We have not disclosed any numbers on the European, what is now linked to diesel prices, what is not linked to diesel prices. As you know, everything that we are selling at the pump stations is pretty much looking at diesel prices, and then you have a premium on top of that. Depending, of course, on how the tax regulation is, if you have high blends, tax situations, et cetera. Really, Nick, we have not disclosed how much it is. Yeah.
That's fine.
But it does have an-
Thanks for answering.
The important thing is, it does have an influence. That's very clear. We are not immune, and I said that in the Capital Markets Day as well. We are not immune, in such a situation where you have such a sudden reduction of Oil Products prices in the marketplace. We do everything that is possible to dampen it. Make a couple of comments also on the waste and residues. If you would just calculate, do a back of the envelope calculation on what you assume, what waste and residue prices are today. If you look then at the sales margins in Q1 that we were still able to make, even if you take BTC out of the consideration, I think that shows you also a bit that this is not one-on-one.
If it would have been 100%, waste and residue price increases, + 100%, diesel effect, then of course, our Renewable Diesel sales margins would have been substantially lower.
Okay. Clear. Thank you.
Yeah.
Your next question comes from the line of Henri Patricot at UBS. Please go ahead. Your line is open.
Thank you. Yes. Hello, everyone. A couple of questions left. One on Renewable Products and one on Oil Products. On Renewable Products, Peter, you talked briefly about the situation in the airline industry. You said that the discussions continue. I was wondering if it's fair to expect that the increase in volumes of Sustainable Aviation Fuel could be perhaps slower than previously expected given the financial situation of the airline. On the contrary, do you think that some of the financial support that the airlines received could be perhaps linked to faster decarbonization and hence perhaps actually accelerate things around Sustainable Aviation Fuel? I'm interested to hear your views around that. Secondly, on Oil Products, I wanted to ask about contango, and whether you're playing the contango that we were seeing in the market at the moment.
I remember there used to be quite a substantial contribution in the past. You'd like it to be the case again this year. Any guidance you could give would be very helpful. Thank you.
Okay. Let me take the first question. Marko will take the second question with regards to contango. As I said, in the airline industry, of course, it's a very difficult situation for the entire airline industry. That's very clear. Nevertheless, as we are still in a situation of market making, we continue to see good commitment and good traction by our customers, the ones that we have signed up. We get new customers that join the party, I would say. There may be a little bit of shifting of volumes from the beginning of the year towards the end of the year. Generally spoken, I'm very pleased. The commitment continues to be very high from the airline industry, despite the devastating situation that they are in.
Of course, there is quite a lot of discussion ongoing right now, for example, in Brussels, around the Green Deal. We have also signed a petition that was supported by, if I remember well, about 180 members of Parliament, whereby the main drive, and it came from one member of Parliament that took that initiative, was that let's make sure that we make the connection between recovery, COVID-19, and then the Green Deal. If we are giving incentives, that we also make sure that it brings something in terms of greenhouse gas emission reduction. I see that as a very positive development in Brussels, and that will definitely also be followed up during the next months, quarters. It's good that that topic is as such in the middle of the table of the policymakers.
Of course, as usual, we stay very close to that, and we are supporting it. Marko, can you take the OP contango question?
Yeah. I think the question was done. Thank you for the good question. We have, of course now, when there is a lot of volatility in the market, we are of course following it. We have done some contangos. Coming back to the question on whether it will have a substantial impact, coming back on the historic figures, I think you are not able to compare it back to history. All in all, as the big changes now with the COVID-19 pandemic, I think the contangos will not solve the issue as such on their own.
Okay. Thank you.
Your next question comes from the line of Peter Low at Redburn. Please go ahead. Your line is open.
Hello. Just another question on Renewable Diesel pricing. Conceptually, why is it correlated to diesel? As we're seeing at the moment, the two markets can have very different supply-demand dynamics, given that RD's demand appears to remain robust. Should that not give you a degree of pricing power over and above what regular diesel prices are doing? Then just secondly, you talked in the release about divergence in animal fat and UCO prices. How much flexibility do you have to switch between the two, and is that something you can try and take advantage of? Thanks.
Yes. Thank you for the question, Peter. This is Matti. I'll start with the animal fat used cooking oil question. I think in a way, what we have again, systematically worked on over a long period is that technically we have a lot of flexibility, and the production units can handle different type of feedstock mixes. At the same time, I would highlight that of course it is also a question of customer preferences and feedstock availability, logistics, everything. Let's say technically, we have quite good flexibility. On the other question related to, let's say, pricing power versus fossil diesel, I would highlight that like I commented earlier, that we have definitely markets where it's two different market segments. In some markets, there's a direct link in terms of having a mandated volume of renewable.
In others, like California, I mentioned as an example, it's also a customer choice what they want to use. I think ultimately what we have seen is that the demand for Renewable Diesel has remained stable in this situation.
Thank you.
Your next question comes from the line of Iiris Theman at Carnegie Bank. Please go ahead. Your line is open.
Hello. Thank you for taking my questions. I have three questions. Firstly, there have been discussions that the U.S. EPA could halt biofuels or bioethanol blending given the decrease in oil price. What is your view on this? Do you expect EPA to do this, and could this impact Renewable Diesel blending? If yes, what this would mean to your U.S. volumes.
Okay. Matti,
Yeah.
A brief comment on this one. It is accurate. There have been, to my understanding, a couple of states which have proposed these type of waivers or changes to the system. There is also a number of states who have clearly opposed it. I think as a general comment, I would say that so far in the past, these type of waivers have not been made, and the system itself, that is part of the Renewable Fuel Standard, is also such that the system adapts the volumes when changes happen to the underlying demand. From our perspective, we don't see a need to change the system.
Okay. Regarding the flat Renewable Diesel volume outlook, which already has been discussed, but just wondering that, are your customers blending relatively more Renewable Diesel than previously because you are now guiding flat volumes for Q2, even though the diesel demand is coming down?
Perhaps a very brief comment. I think we touched upon it earlier. We have different types of market segments. In some market segments, the blending mandates are such that they are directly linked to a percentage of the fossil diesel volume. We have also different type of market segments where it's either linked to greenhouse gas reductions or also like the California example, where it's actually a choice that the customer have. I think it will depend market by market. Like commented, overall short-term, what we have seen is that the demand has been quite stable.
Again, expected for Q2 as we guided towards for Q2. Sales volumes expected to be relatively stable. We didn't say that market demand is expected to be relatively stable. We said sales volumes.
Okay. Yes. Thank you. Finally, fixed costs renewable products were around EUR 80 million in Q1. Is this a good run rate going forward in the coming quarters?
What I talked about in my opening comments was that we have put in place business continuity plans. Of course, in such a situation, if you put in place business continuity plans, then you also look at what are your fixed costs, so that there would not be a runner-up, let's say, in fixed costs because of all things like hiring people, et cetera. We have a program that we have put in place that is focused on the fixed costs. Having said that means that you can, from my comments, understand that fixed cost is something that we are very intensively looking at whilst not jeopardizing the implementation of our strategy.
Thank you.
Your next question comes from the line of Matthew Lofting at J P Morgan. Please go ahead. Your line is open.
Thanks. Hi. Thank you for the presentation, gents. Two questions if I could. Firstly, just on feedstock markets. In addition to the comments you made earlier on used cooking oil, could you talk more generally about feedstock or raw material availability and how it compares in April to the Q1 environment? Secondly, on the Singapore expansion and the comments that you made earlier, could you just give us a sense of how material the construction commitments or assumptions are for the rest of 2020 in terms of delivering the asset for mid 2022? Thank you.
Matti will take the first one. I will take then the second one.
Yes. Thank you, Matt, for the question. Happy to talk a little bit more about the trends we see in the feedstock market in terms of availability. Perhaps I'll make a couple of comments on each one of the different categories. Used cooking oil is probably a special one because here it's an obvious link between availability of used cooking oil and lockdowns having an impact on restaurants. What I would say in general is that, yes, we have also seen clearly that the COVID situation has had an impact. We have seen impacts bigger than 25% in different regions. What is also interesting is that we, on the other hand, also see that markets such as Asia, for example, are starting to recover also. It is then also depending, of course, on whether restrictions are being lifted on restaurants.
On animal fats, in general, I would say, the supply has been relatively stable. I think the key to watch is then whether the situation has any impact on slaughtering activity. Of course, that is something we are watching very closely, whether we could see decreases in slaughtering activity going forward. On the other hand, on vegetable oils, I'll take the example of palm oil. I think it's good to state that we haven't actually seen supply disruptions really in this part. At the same time, what is important to watch there is whether and to what extent this situation has impacts on the other hand, on the demand. For example, this situation could lead to lower demand if there are, for example, local mandates being adopted because of the big price movements.
With regards to the Singapore expansion, the authorities in Singapore have, also in the first wave that they had experienced, they had undertaken very rigid actions and very good actions, and they were able to relatively fast contain the situation. They kept on monitoring that, and I would make the comparison a bit with South Korea, the same kind of measures that they had put in place. They noticed that in seven dormitories where you have foreign workers living and sleeping, they found out there was an outbreak of COVID-19. Immediately, they put in very rigid actions again. In the first wave, we were able to continue with the Singapore expansion. We had very good support from the authorities on that. Now in this second wave, they don't make any exemption.
It's all the construction sites that are shut down because of the concern that they have that eventually this would spread around with regards to the foreign workers.
If I look at how successful Singapore has been with those kind of actions, and how fast they have been in putting rigorous actions in place. I have more confidence than, for example, if they would have allowed everybody to continue to work, and then everything would have spread around, and it would have been uncontrollable. Yes, they did the first lockdown announcement 13th of April to the 4th of May, and then, a couple of days ago, as I said, now extended to the 1st of June. If it stays to that, and then we start up again during the course of June or even July, then we are confident that the middle of 2022 is still the start-up date for our new refinery.
Of course, if it would be extended and it would be a shutdown for, let's just say, six months, then it's clear that would have an influence, of course, also on the start-up date of the Singapore expansion. We're not there yet. So far, I would say rather happy that they have taken, in that COVID-19 crisis situation, such rigid actions. Of course, we are, and our teams who are on the ground, we are completely committed, of course, on the Singapore expansion. That is without any doubt.
Great. Thanks for the answers. Appreciate it, guys.
You're welcome, Matt.
Your next question comes from the line of Artem Beletski at SEB. Please go ahead. Your line is open.
Yes. Hi, this is Artem from SEB. A couple of questions from my side on renewables. You covered quite a lot the topic relating to collapsing oil price and also fossil diesel. Maybe looking beyond, sort of say, a longer-term picture, do you think that there could be some implications on implementation of mandates as fossil diesel is now roughly five times more cheaper compared to your product? Do you think that, so to say, mandates and targets being set by 2030 and so on, so this will be the powerful mechanism ahead when it comes to demand for Renewable Diesel? The second question is relating to your sales to North America. The portion was 25% in Q1, and you mentioned that, for example, Low Carbon Fuel Standard is not really linked to blending rates and so on.
Do you expect that North American sales will be clearly more than 30% this year? Or what are your expectations on that front? Thank you.
Thanks, Artem. Matti, if you can take the questions.
Yeah. First, on the longer term outlook, I think a bit like Peter commented earlier when talking about the renewable aviation outlook longer- term, I think it's very clear that the commitment to climate targets, to greenhouse gas reduction hasn't decreased. If anything, there may be also indeed opportunities to combine post-COVID recovery with accelerating some of the transitions to a sustainable economy. We do see clearly that the commitment to the longer-term targets is there, and we have not seen any signs of that being questioned. In the shorter run, we have also seen no waivers. I think the only exception I'm aware of is Romania, where some waivers have been put place.
On the other hand side, for example, and you know I'm originally coming from Belgium, so that plays always a bit of a special role for me that actually Belgium has now since April, further increased their biofuel mandate from 9.6%- 9.9%. You see these little indications here and there that are pointing into the right direction. Is that a guarantee that there will not be waivers? Of course, it's never a guarantee. At least from today's perspective, we see that rather positively and not as something threatening.
Exactly. Then just a brief comment on the split or let's say the share of North American sales going forward. Like you have observed, if you look at the past, this has changed, or been a bit variable from quarter- to- quarter. This is a natural outcome of the fact that we optimize our sales mix, based on feedstocks, based on market and margin outlooks. Also shutdowns that we have at individual sites may have this kind of quarterly impact. I don't have a number. It's actually we don't have a target against which we are steering. It's really something we are optimizing quarter after quarter.
Okay, very clear. Thank you.
There are no further questions. Please continue.
Maybe a couple of comments to end. Thank you very much. Very good questions from all of you as usual. Maybe let me point out, if you are looking at Q2 is of course quite extraordinary. On one hand side, of course, we have a minus EUR 85 million effect because of that part of PA 2020 that we are implementing starting next week. We have the Singapore catalyst change with an impact of EUR 50 million. We have a very volatile environment with very low visibility. Of course, as we explained today, a continuously reduced OP and MS demand, that in combination with very high waste and residue costs for the renewable business. It will be Q2, very clear for us, a very challenging quarter.
If I bring it back to the big picture, we continue to work very intensively on the implementation of all the identified actions in our strategy, continue to make very good progress on that as well, and definitely also continue to be very confident on the long-term outlook of our business. That is my final comments.
Thank you, Peter. This concludes the call. We thank you very much for your attention and active participation. Neste's second quarter and half- year results will be published on the 23rd of July. We wish you a very good weekend. Stay safe and in good health. Thank you and goodbye.
That does conclude the conference for today. Thank you for participating. You may all disconnect.