Earnings Call: Q3 2020

Oct 22, 2020

Thank you, and good afternoon, ladies and gentlemen, and welcome to this conference call to discuss Neste's 3rd quarter results published this morning. I'm Juha Pekka Kekalainen, Head of Neste IR. And here with me on the call are President and CEO, Peter Vanacker CFO, Jyrki Makikala and the business unit heads, Matt Dilehmos of Renewables Platform Marko Pekpolo 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 disclaimer since, as always, 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 a lot, JP, and a very good afternoon also on my behalf. A distinctive feature of the Q3 summer period was a gradual recovery from the 1st wave of the COVID-nineteen pandemic, and this naturally varies country by country, and we now seem to be moving to the worse again. In these circumstances, we are very pleased to be able to share with you our very good overall performance in the past quarter. I must say that the Neste employees have done a superb job again during this quarter. It's a lot of fun and a lot of joy to work with such passionate people. If we move to Slide number 4, despite the market turbulence caused by the COVID-nineteen pandemic, our performance was solid in the Q3. The group's comparable EBIT was €373,000,000 Renewable Products had another strong quarter as the business continued to be very resilient. And from a financial point of view, this was one of the best quarters in renewables ever. The renewable diesel demand remained good, and our sales volume was stable at 730,000 tonnes. Sales volumes were slightly down from the record levels in Q2, but higher than in the corresponding period last year. Our production facilities operated at a high 95% utilization rate, even including the scheduled catalyst change as at the Singapore refinery that was completed in early July, and we had also 1 at the Porvoo Units in September. As expected, the feedstock markets remained tight, and particularly, the palm oil price continued its way up. As a result of successful sales performance and a positive contribution from the feedstock market movements combined with our hedging, we were able to increase our sales margin to an exceptional $7.44 per ton, again an exceptional achievement. The Oil Products was impacted by a continued very weak refining markets caused by the global COVID-nineteen related demand reduction and the resulting oversupply situation. The reference margin, reflecting the general market conditions, averaged at minus $0.8 per barrel in the 3rd quarter. It was the lowest quarterly level in at least the past 20 years and had a negative impact of EUR 170,000,000 on the comparable operating profit year on year. The comparable EBIT remained slightly negative. And on a positive note, our additional margin was strong at $6.7 per barrel, supported by good operational performance, currency hedging and some contango inventory profits. Several cost reduction measures have been successfully taken in Oil Products. Our Marketing and Services segment performed very well the challenging market also considering the divestment of the Russian operation that we completed last year. Sales volumes were still impacted by the COVID-nineteen pandemic, but we were able to improve our unit margins. And also, marketing and services has done a great job in reducing their cost basis. We continue to take the risks related to the COVID-nineteen pandemic seriously. Our primary objective is to ensure the health and safety of our employees, our customers and other partners as well as to ensure the continuity of our operations and secure supply of products. Our occupational safety performance was very good in the Q3, and the total recordable incident frequency was 0.4 incidents per 1000000 hours, which is really a record in the entire industry. This is the lowest quarterly result also for Neste ever. The process safety event rate also improved to 1.5, but we still have to work to reach the targeted level. Despite the market turbulence, we continue to focus on our strategy execution, and I will come back to that at the end of the presentation as usual. As you have surely noticed, we have initiated cooperation negotiations on a plan to restructure our refinery operations in Finland. It is done in order to ensure the long term competitiveness of the oil products business. We're exploring the shutdown of the refinery operations in Naantali and focusing the site on a terminal and harbor operations as well as transforming the Porvoo refinery operations to co processing of renewable and circular raw materials. And if implemented, the plans would mean up to 470 redundancies, including possible outsourcing. The decisions on the measures and impacts will be made after the negotiations have been concluded. The planned changes are expected to result in annual fixed cost savings of approximately €50,000,000 Although the time is not optimal and this is definitely news that is unfortunate for many of us, the planned actions to develop our refinery operations are urgently needed to maintain operations and strategic capabilities in refining in Finland and to secure the oil products competitiveness. As authorized by the AGM on the 18th May this year, the Board of Directors have decided on the distribution of the second dividend installment, and they have confirmed the proposal to distribute an ordinary dividend of $0.46 and an extra dividend of $0.10 per share. On Slide number 5, yes, our strong financial position continues to be visible in our financial targets. We reached a high after tax ROACE of 23 0.1% on a rolling 12 month basis, again clearly exceeding the 15% target. And our leverage ratio was 4.5% at the end of September. As stated before, the strong financial position enables the implementation of our growth strategy going forward, and this is even more important in these turbulent times. Now with these remarks, I would like to hand over to Jyrki, our CFO to discuss the financials in more detail. Yes. Thank you, Peter. If we take the summary page there, it's basically good early afternoon. Like already stated just a few minutes ago, we delivered good quarter 3 results despite another quarter affected by the ongoing COVID-nineteen pandemic on our global operation. We managed to deliver good operating profit, strong cash flow and even strengthen our already strong balance sheet. If we look at the figures, I will more comment here the quarter to quarter items. If we take the top line, quarter 3 revenues were some €3,000,000 higher than in quarter 2, but clearly lower than 2019 quarter 3, and that was roughly EUR 1,100,000,000. And comparing to 2019, €700,000,000 out of that is coming from the crude oil price effect and slightly lower sales volumes in Marketing and Services of roughly EUR 300,000,000 And if you really look also the year to date September position, the revenue difference is roughly €3,000,000,000 So it's roughly €1,000,000,000 per quarter how it will be seen in our top line revenues. If we then move to the comparable EBIT, EUR 370,000,000, it was some EUR 60,000,000 below quarter 3 2019 when we take into account the fact that we had also retrospective BTC from 2019. And if you look at the figures, it's really a matter of oil product that had a hit of €100 and 14,000,000 on the group level EBIT. But if you look to Renewable Products as a whole, you are seeing that we made 94% of the quarterly comp EBIT out of Renewable Products. They posted EUR 47,000,000 higher comp EBIT than previous quarter 2019, but really when taking into account this retrospective 2019 BTC, the comp EBIT was pretty much at the same level as in 2019. The weakening U. S. Dollar made some $22,000,000 hit on our 2020 quarter 3 financials versus previous year, but that was really compensated by higher sales volumes and higher sales margin that were both up by some 2% or 3% compared to previous year. Matti Lehmus will open the development a bit more in his presentations. If we move then to the Oil Products part, I think the important thing is that they managed to push their comp EBIT after the low levels quarter to 60,000,000 negative to a slightly negative, very close to 0 level in quarter 3. The reference margin was basically $80 per barrel lower than previous year, and this had an effect of EUR 170,000,000, which was then partially compensated by the action that the segment was able to do, like 41% higher additional margin and EUR 22,000,000 lower fixed cost. For example, if you look the details in the material, even the refinery production costs were one of the lowest during the last 6 quarters. And it's very notable that in quarter 2 2020, the reference margin was minus 0.3%, and now it was minus 0.8%. Quarter 2, out of the fixed cost and also from the CapEx point of view, we had the first part of the Porvoo turnaround, and now 2021, we'll have the second part of the turnaround. And Marco Pekkola will open the results more in his presentation. If we go then to Marketing and Services, like stated earlier, they actually delivered their strongest comp EBIT with the current setup after Russian business was sold 2019 that had roughly EUR 4,000,000 comp EBIT contribution for the quarter 3 2019. So EUR 26,000,000 comp EBIT in a quarter is an excellent achievement in the COVID affected environment. Sales were slightly lower by volumes, but the margin were higher, And also the management was able to lower the fixed costs significantly during the quarter. And Panu Kopra will also describe more in details a bit later. The segment Others that basically going forward, it's only about our engineering unit and our corporate cost as we sold Nynas AP shares in September. So we had EUR 6,000,000 better comp EBIT coming out of the other segment. If we then look to cash flow before the financing activities, I. E, free cash flow, it improved now clearly to the level of EUR 350,000,000 versus last year EUR 71,000,000 and this was really done through very tight working capital management. That impact was €422,000,000 Our year to date free cash flow is still slightly negative by EUR 51,000,000 but one item here is to remember that the effect of the U. S. Lenders tax credit from the years 2018 2019, we received checks 9th October, roughly US355 million dollars So that will further improve our working capital position and increase our free cash flow during quarter 4. And finally, the KPI comparable earnings per share. It is year to date roughly 4% higher than in 2019. So then very briefly about the bridges. The next one is really about segment by segment. But basically, oil product is down due to the negative reference margin, and Renewable Products compensated EUR 47,000,000 through volumes and margins. And then finally, MS actually improved slightly if we think about the sold Russian Business 2019. But everything is around oil products reference margin and then Renewable Products performance. If we look the quarter bridge that is there in the next page with a bit more in details by unit. And let's take first by comparison purposes really this 2019 PTC $56,000,000 to make the figure really comparable. Then OP reference margin, this $80 per barrel, it had a huge impact in 1 quarter, EUR 170,000,000. And then the own actions like mentioned, additional margin improvement, etcetera. The improvement was €39,000,000 in OP. And then Renewable Products, higher sales margin 744 had an improvement of €12,000,000 And all in all, these things meant this €119,000,000 change compared to 2019. And remember that the effect changes in 1 quarter, especially in this case, it had a EUR 34,000,000 negative impact on our comparable EBIT, but compensated nicely by the fixed cost savings. And the year to date reads then the final slide in my presentation, you'll see very clearly that there are 2 big items and then 4 nearly not visible in the material. Just for the comparison purposes, EUR 160,000,000 EUR 65,000,000 sorry, EUR 64,000,000 EUR 66,000,000, sorry. BTC 2019 added, and then we have the comparable figures. And then you'll see that we had improvement with some sales volumes, fixed cost and also in the other BU. But the big ticket item again is the 9 month oil products lower reference margin, dollars 4.8 per barrel. That had a massive impact of €339,000,000 And if you remember that during quarter 1, it was practically 0 compared to 2019. So this is all concerning quarter 2 and quarter 3. But the positive thing certainly is that the OP additional margin, more than EUR 80,000,000 improvement and then Renewable Products with slightly higher slightly higher slightly lower sales margin, negative EUR 65,000,000. So overall, this meant this impact by comparable purposes what is then finally the outcome there. You may say that the fixed cost savings are not visible in this material, but remember that we really sold 2 businesses 2019, Engineering Service, some units and also our Northwest Russian Business in Marketing and Services, and those impact is EUR 40,000,000 in this case. So actually, our savings in fixed costs are much higher than seen in this material. So I end my presentation here and leave the stage to Matt de Lehmus, Please. Thank you, Jyrki, and good afternoon, everybody. I'll be happy to give some comments on the renewables segment. So obviously, what I'll start with is that very happy with a very good EBIT level of EUR 352,000,000 in the 3rd quarter. This was a 15% improvement versus last year 3rd quarter and also 12% improvement versus the previous quarter. And I have to say, I'm very pleased with the operational performance across the chain, whether it's production, whether it's sales, whether it's feedstock supply. One of the highlights in the quarter is, of course, the very good sales margin level at $7.44 per ton. This was stronger than last year, even including the retroactive BTC and clearly stronger than in the Q2 of 2020. Several positive factors supported the Q3 margin in spite of a continued tight feedstock market, including hedging, including sales performance, and I will discuss this later a bit in more detail. Another highlight of the quarter is that the sales volume continued to be at a good level of 7 30 kilotons. This is approximately 5% lower than the record level that we had in the previous quarter, but also a very good level in the Q3. And it reflects the fact that the overall renewable diesel demand continues to be solid in spite of the COVID impacts on diesel demand in a number of markets. If I look at production, we had a very good quarter with 7 62 kiloton production, higher than year ago, also higher than the previous quarter. And this contains the fact that we completed successfully our Porvoo catalyst change and also the ramp up of Singapore in the beginning of the quarter after our catalyst changed there. So in outside of the shutdowns, we were able to maximize our utilization very successfully. So overall, very good quarter. Some quick comments on the waterfall on the next page. So obviously, the high level picture is very clear. If you compare the EBIT to the Q3 2019, and I take into account the BTC readjustment, the EBIT level was actually quite similar with a difference of only minus €9,000,000 And this is, of course, a good achievement in a business environment where feedstock prices have been increasing clearly year on year. The drivers are also quite clear. Volumes were slightly higher. Sales margin was slightly higher, and these factors were compensated by the impact of a weaker dollar, which had a EUR 22,000,000 impact year on year. And also, the fixed costs have been slightly higher than last year, reflecting the strengthening of our resourcing to prepare for Singapore expansion start up. Let me then move to some comments on the feedstock markets. My first comment would be that waste and residue market dynamics were quite similar as in the previous quarter. We had a tight market, and also the increasing price trend continued. Demand for waste and residues continues to be solid, but also availability continued gradually recovering. So for example, if I take used cooking oil as an example, in China, we saw that the supply recovered pretty much to the same level as before COVID. The key market driver in the Q3 was a rapidly strengthening vegetable oil market, and both palm oil, soybean oil prices increased significantly during the quarter. For example, crude palm oil average price increased by 25% versus the 2nd quarter. In case of palm oil, there were uncertainties on the production outlook, driven, for example, by the weather, La Nina phenomenon and also at the same time quite solid demand for example into China. If I then turn to the waste and residues such as animal fat and used cooking oil, they did follow partially the vegetable oils, but price movements were clearly less pronounced than for vegetable oils. And in practice, this means like you can see nicely in the chart that the price differential between waste and residue and vegetable oils narrowed during the Q3. And again, if I take the example of used cooking oil, price movement actually stabilized during the quarter as availability was also improving. Some comments on the U. S. Markets on the next slides. Perhaps noting that the LCFS credit prices continued on a high level in Q3, averaging $196 This is actually very similar level as a year ago and also as in the previous quarter. On the RIN values on the same time, if you look at the D4 RIN charts, you can see that there was a clear strengthening to $0.67 a gallon. This actually reflects that the market responded to a widening in price differential between soybean oil and petroleum products like heating oil and also continued solid demand for rinses. Well, then finally, turning to sales margin slides on the next page. The sales margin, like commented earlier, was at a very good level of $7.44 per ton, slightly stronger even than in the Q2. And this was a big in the Q3 last year, I mean. And it was a big margin improvement versus the level of $6.25 per ton in the previous quarter. The high size margin was the result of 2 particular drivers. The first one being that the feedstock market development combined with our hedging supported the margins. Like commented earlier, the waste and residue prices did increase during Q3, but the price differential to palm oil narrowed as vegetable oil prices increased more significantly. And in this situation, our hedging had a positive result and supported the sales margin. Another factor is that the sales performance in the 3rd quarter was also very good. It supported the margin development, And we had a positive development on price premia and also a very successful market optimization. And finally, of course, commenting on the Q3, also the operational performance in production was very good, high utilization rate and this all a smooth operational performance, of course, always also has a positive impact on the margin performance. With these comments, I will hand over to Marco Pekola, who will discuss the Oil Products business. Thank you, Matti. And I'll comment the Oil Products Q3. Comparable EBIT totaled out EUR 1,000,000 negative, driven by still depressed global demand oversupplied market and then positive euro strength differential. During the quarter, the reference margin averaged, as already highlighted, at minus USD 0.8 per panel. Our sales volumes were only 3% higher compared to the Q3 2019 when we had planned maintenance in PL4 in Porvoo, reflecting the lower demand. Refinery utilization rates was adjusted down to 87%. Urals share was 65% on lower level than normal due to mitigation actions for Urals differential being very volatile and averaging higher than Brent during the Q3. If we then move on to the EBIT bridge between Q3 2020 2019, where the impact of exceptionally weak product market can be seen. This resulted in refining margin trading mostly at negative values during the quarter, which has a negative impact of €170,000,000 on the comparable operating profit year on year. Main positive impacts in Q3 20, €39,000,000 came from additional margin, which was supported by Goodwill Corporation performance, current share currency hedging and contact low inventory profits. Positive impact of SEK 22,000,000 came from successfully implemented short term cost reduction measures. If then move on and let's have a look at the markets, where we could also see the continued impact of COVID-nineteen pandemic on physical product demand and low margins in both diesel and gasoline. Urals Brent differential was very narrow during the quarter, mainly due to the lower export volumes of Russian export Brent. The U. S. Differential averaged at positive $1.0.1 per barrel for the quarter. Brent crude oil price was trading in a fairly narrow range between USD 39 to USD 46 per barrel during the quarter. When then let's move on and take a look on our own margin performance. Our total refining margin was very low at level of $5.9 per barrel, but supported by strong additional margin of $6.7 per barrel in Q3 2020. Refinery production costs were below last year's level, mainly due to the successful implementation of short term cost reduction measures. And as already mentioned by Peter, in order to ensure the long term competitiveness of our products business, we have initiated the cooperation negotiations on a plan to restructure refinery operations in Natalia and Porpo. The cooperation negotiations are ongoing, and the planned changes are expected to result in annual fixed cost savings of approximately EUR 15,000,000. And this is a very important part of our product's future success to continue solid gas generation. With these comments, I would like to hand over to Panu to talk about Marketing and Services. Thank you, Marco. Hello to everybody. This is Panu Kopra speaking. Taking into account all different kind of circumstances in the markets, I can say that we performed very well. When we eliminate the impact of the Russian divestment, we actually improved our operating profit compared to last year. During Q3, we suffered still low bunker and Jet Day 1 volumes. However, traffic on the roads was not so low anymore than it used to be in Q2. Lower volumes were compensated by healthy margins, mainly due to excellent network pricing. We also did a lot of work for cutting off fixed costs, and outcome of that is also clearly visible in operating profit. Return on net assets, again, above 26 process, which is in retail business healthy figure. The availability of Neste MY is expanding not only in Finland, but also in the Baltic countries. Now Neste MY is available roughly in 120 stations. Sales results clearly shows that those companies and consumers who has a high priority for sustainability are moving as a first to use Neste MY. We see transformation ongoing from fossil diesel to renewable. And it is not only about the sales of Neste MY as a product, it is even more. We have started to sell additionally CO2 reporting services to our customers in order to make their life easier and a sustainability indicator transparent and reliable. This is what we call selling of sustainable solutions, and it comes on top of product sales and margins. Number of Neste mobile app users is increasing very rapidly. Customers prefer to pay fuel by their own mobile device instead entering into normal payment terminals. Same time, we collect a lot of direct marketing permissions and develop efficient communication channel to our customers. All in all, solid Q3 in marketing and services. Handing over back to Pete. Yes. I agree, Panu. Very, very good results in Marketing and Services. I'm very happy with that. Let's now move on to the current topics. And first of all, on strategy implementation, the very good progress on our strategy implementation has continued. The Singapore Renewables capacity expansion is proceeding well, and the updated completion schedule targeting start up in Q1 of 2023 remains valid. We naturally need to take all precautions and follow the development of the COVID-nineteen situation in Singapore very carefully. The feasibility study phase of the next renewables capacity expansion project in Europe is also progressing well. The next step for decision making will be to select the sites, and we hope to be able to give more news on this during the first half of twenty twenty one. This is, of course, not a final investment decision since such a decision is only made shortly before starting the construction. Several new contracts and partnerships have been made in the Renewable Aviation and Renewable Polymers and Chemicals businesses. As examples, I would like to mention, getting access to the fuel pipeline delivery system of San Francisco International Airport and sustainable aviation fuel deliveries to American Airlines, Alaska and JetBlue and new sales agreements also with Air BP and Shell. In October, we announced getting Unilever on board in our cooperation with Recycling Technologies in the United Kingdom in the area of waste plastic recycling developments. There's a lot going on in the new businesses and their traction is good. But both are still in the early market making phase, of course. Based upon our business continuity plans, we continue to focus on short term cost reduction activities. We're on track with our Neste Excellence program with a target to achieve at least EUR 225,000,000 EBIT improvement by the end of 2022 compared to the year 2018 that we took as a baseline. I already mentioned the plans to restructure the oil products business. The ongoing cooperation negotiations are expected to be completed in the Q4 and decisions will be made after that. In the area of innovation, we've studied further improvements on the NEXPTL pretreatment technology, which has enabled us to increase our nameplate capacity already to the 3,200,000 tonnes that we mentioned during the call after Q2 results. The 1st industrial scale test run of co processing liquefied waste plastic has also been successfully carried out. And these were just some of the highlights because the list is very long that I wanted to mention. We have a clear strategy, and we're moving consistently ahead. Let's have a look at the 4th quarter. What do we see? I think first of all, sales volumes for Renewable Diesel are expected to be slightly lower or maybe similar to the previous quarter. The waste and residue markets are anticipated to remain tight and utilization rates of our renewable production facilities are forecasted to remain high in the Q4, except for a scheduled catalyst change at the Rotterdam refinery. And that is expected to have a negative impact of €50,000,000 on the segment's comparable operating profits, mainly in that 4th quarter. In the 4th quarter, oil products demand is seen to continue recovering slowly, but to be still impacted by the COVID-nineteen pandemic, and the reference margin is expected to remain very low and very volatile. Contango inventory profits were expected to impact the Oil Products 4th quarter result positively. In Marketing and Services, the sales volumes and unit margins are expected to follow the previous year seasonality pattern in the 4th quarter, and some negative impact on demand and sales volumes is still anticipated due to the COVID-nineteen pandemic. On the next slides, our strategic projects proceed as planned, but we reprioritized everything else. Our group capital expenditure is estimated to be approximately EUR 800,000,000 in 2020, excluding M and A. And previously, as you know, the group CapEx was estimated to be €850,000,000 Now this concludes the presentation, and we would now be very happy to take your questions. Operator, if you can open the questions line. Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. And our first question comes from the line of Mehdi Ambati. Your line is open. Hi. Good afternoon, everybody, and congratulations for the very strong on your gross margin. Two questions please from me. The first one is about the trend for the demand of renewable diesel. Would you say that the demand has been strong in the Q3 because there has been some catch up from 2nd quarter level impacted by COVID-nineteen, meaning that in Q4, the demand might come back to a kind of normal level and be lower than Q3? Or on the contrary, would you say that regarding Q4 so far, the demand remains very strong and you might benefit from it. In fact, the aim is just to try to understand the dynamic of the demand and then the potential impact on your boat product pricing in the coming months, quarters? 2nd question, we can't with the feasibility study that you just talked about regarding a new renewable product unit in Europe or in the U. S. I just wanted to know, do you think that under the current environment, you might be able to save some CapEx regarding the construction for that unit, given that the price for services is probably going down on that really? Thank you. Yes. Thank you, Mehdi, for the questions. This is Matti Lehmus. And I'll start with a question on the demand of renewable diesel. So like we commented, we saw the demand in the Q3 being quite solid. And also in a way, we don't see very big changes in that demand pattern. If you look at the big picture, of course, the fact that fossil diesel is in some markets lower by 5%, by 10%, depending on the market, has some impact. But as we, at the same time, have had mandates increasing in 2020 in a number of markets, we have seen pretty solid demand throughout the year. And that's on the diesel renewable diesel demand outlook. On the other question, which was on the feasibility study is ongoing and we are indeed comparing Porvoo and Rotterdam locations as possible locations, It's too early for me to say whether and what type of impact the COVID situation could have on CapEx. This is the type of information where we will have more information as we go forward in our engineering studies. And like commented earlier, we would anyway be targeting to have maturity to make an investment decision towards end of 2021. Yes. I would also confirm what Matti is saying. I mean, on the demand, I have not seen, I mean, any shift, I mean, from 1 quarter to the other quarter. I mean, in terms of demand, demand continues to be solid on the quarterly basis, even on a monthly basis. Of course, you always have certain fluctuations. But here, I would like to point out again, like I did in the Q2 results, the change in business model that we have successfully implemented in the Renewable Road Transportation. If you look at the external revenues, you will find that 37% in the mix is in other markets than our home market in the northern part of Europe or in the United States like in California. And this is repeating what we also have done in Q2, where it was about 40% of the total mix. So you see that successful positioning in different geographic markets, as said, something we started doing in Q2 2019. I'm very pleased, I mean, with that stability and the optionality that we have built in our business model. With regards, I mean, to Q4, I mean, ones need to, of course, consider that there will be because of the catalyst change, I mean, this is about 100 kt of a product that is not available. So one needs to take that into consideration as well in the guidance that we have given on, yes, I would say from today's perspective, it will probably be slightly lower in terms of volumes compared to Q3. I know that we have said slightly, maybe it's going to be on the level. But if you would ask me, then I would say it's going to be slightly lower because of that. Thank you very much for that. Thank you, sir. We will now take your next question. And your next question comes from the line of Irwin Kuehraden. Your line is open. Hi. Thanks for taking my questions and congratulations on the strong quarter. I've got a follow-up on Mehdi's question on the sales level actually into 4Q. I'd just like you to confirm that it's purely that the slightly lower guidance is purely due to maintenance because we're like basically we're 3 weeks into the 4th quarter. So I just want to make sure that basically we'll remain with a healthy outlook through the end of the year. And I guess more longer term, I've seen news recently that a draft in Germany included caps on 1.9% of biofuels made from used cooking oil and animal fats. Should we see should we hit this headline and like basically should it be concerning basically for like future mandates for Neste when it comes to renewable diesel as well as SAFA? These would be my 2 questions. So I can take the first one on the sales level. Basically, reiterating what Peter said, the main thing to take into account is that we do have a turnaround in Rotterdam refinery in the Q4. This is 4 week turnaround. It has an impact of around 100 kilotons on our production. And that is the main reason why we are also commenting on the base outlook that we expect this to be slightly lower, possibly similar than in the Q1. As the other one, Peter, do you want to Yes. I can make a couple of comments, I mean, on what is happening currently, I mean, in Germany. And of course, I mean, it's on that draft that has been introduced, I mean, by the Federal Ministry of the Environment regarding the RED2 implementation in Germany. It's quite disappointing, I mean, that they in that press have not been more aspirational, I would say, by maintaining the existing 6% greenhouse gas reduction targets, I mean, through 2025. Of course, I mean, this is just a draft and if you have followed what has happened, I mean, since that draft has been published, there has been a huge amount of discussion in Germany going on and a huge amount of criticism as well on not being aggressive enough with that. So it's just a drag at this point in time. And as you can hear a bit from my comments, we are of course very Thanks so much, Jose. Yes. General comment, there is also a number of countries, if you look at Europe, you have already decided on the mandate next year. And for example, the Nordic countries, Finland, Sweden, Norway, also for example, Holland, Spain, have already decided on an increasing ambition for next year. Yes. So I guess it comes back, I mean, to our strategy. I mean, it is building up optionality in our business model, not being dependent, I mean, on one particular country in terms of how eager or they or bullish or they. And like Matti said, I mean, if you then see on the other hand side, how some other countries really have substantially gone beyond what is in R and D 2 like in Sweden, for example. Next question. Thank you, sir. And your next question comes from the line of Iris Thiemann. Your line is open. A couple of questions, please. So on hedging, can you quantify how big was the positive hedging effect in Q4? And was it clearly larger quarter over quarter? And what is the outlook for Q4? And then on pricing, were you able to increase prices in Renewable Products in Q2? And what is the conclusion from your price negotiations with customers for next year? And then finally, on the EU taxonomy, what is the current situation regarding the taxonomy? And do you expect any changes to happen? Thanks. Yes. Thank you, Iris. This is Matti. I'll answer the one on hedging and the pricing. So first, on the hedging, just reminding how our hedging philosophy works. We have, in 2020, hedged around 50 percent of our term sales volume. And that means that how we do the hedging is we are using, on one hand, vegetable oil instruments like palm oil and on the other hand, oil product related instruments like gas oil. And the hedging, if you look at how the price curves have developed over the year, you can obviously see that it has had a positive impact because the price differential, for example, palm oil and gas oil, it has clearly widened during the year. We are not quantifying the exact impact. I think if you want to, you can make some order of magnitude calculations based on this hedging policy that we have described. And looking at Q4, it, of course, depends then on the exact development of the market. The hedging volume is similar, slightly lower than what we had in the Q3. On the pricing, just perhaps a brief comment. Like I commented in my part, yes, that was part of Q3 that we were also able to have a good performance on the sales premia. Also in some markets like the U. S, the fact that the reinappreciated, of course, has an impact. What comes to next year, we are just in the process of negotiating next year's contract. So too early to comment yet. On the taxonomy here is I just had a huge amount of discussions, I mean, with commissioners and DGs during the last couple of weeks. So the latest on the taxonomy process is actually that we are expecting that the DG FISMA, who is responsible for that, will publish a draft delegated act. And that act is a draft asset, so it will be going into a feedback consultation. We don't know exactly when the delegated act draft will be published. Some members of the commission told me end of October, maybe beginning of November. Then the consultation period is 4 weeks. And then, of course, it still has to go, I mean, to the Council and European Parliament. So normally, I mean, they have a couple of months, I mean, to approve or reject. And if everything would run as currently, remember, it has been delayed, I mean, already a couple of times. If everything would run as scheduled, then the taxonomy would come into force on the 1st January 2022. A huge amount of discussions currently ongoing between the different DGs because there are quite a lot of different opinions still going on there. The we are, of course, also involved in that feedback consultation loop. And actually, one of our specialists is also on that platform that has been established to talk about what does notice so called Page 211 of the TEG reports, what does it mean this formulation of for other types of biofuels that are not advanced biofuels, but may offer substantial climate mitigation benefits, the TEG requests that the platform undertake further work the It's quite some activity ongoing, and we are involved, of course, as you can hear. Thank you very much. Thank you. We will now take our next question. And your next question comes from the line of Joshua Stone. Your line is open. Thanks. Good afternoon. I've got three questions, please. Firstly, just following up on Germany. I noticed ticket prices in that market have fallen quite sharply in the last few weeks. I was wondering, is that something that impacts your margin in Germany? And if so, to what extent are you able to move sales out of that market into other markets during Q4? And then the second question on the sales mix again. So you're looking at the U. S. Versus Europe split and looking at your U. S. Peers, I can't help but notice that your U. S. Margins tend to be higher than European margins for renewable diesel or at least that's the implication from what's reported. So is that a fair comment? And what's stopping you from selling more products into the U. S? And then my final question on Porvoo and your plan for co processing there. I wonder if you could talk about potential blend rates you see as possible. And is it possible to get blend rates as high as 20% or get up to the sort of mandate levels in Finland? Thanks. Yes. Thank you, Joshua. This is Matti. I'll take the first two questions. So on Germany, I mean, obviously, like in any market, you will have some movement on the individual market parameters. And what comes to our flexibility, of course, for term sales, we have typically already allocated the volumes to certain markets. But for the spot sales, it's, of course, something we continuously analyze and then adjust based on the market situation, also the feedstock availabilities, of course. What comes to U. S. Versus Europe, I would just make the general comment that, of course, the margin level in U. S, for example, and California as an example, will always depend on what type of feedstock is available. The whole carbon intensity plays a big role. And it is something that also then the market parameters affect. From our perspective, it's something we monitor continuously. And we then, of course, if there is an opportunity, we try to make some allocation changes. But wouldn't make a generic comment that one market is better than the other always. Okay. And I can take then the comment related to the part of co processing of the share of the feed. I think that when we talk about either it would be renewable or then it would be then circular feeds. With our understanding for the moment is that those would be single digit numbers or at least in the beginning or even very low in the beginning as we will get used to it and that's our situation for the timing. So very clear, Joshua. I mean, technically, I mean, 20% is completely out of the possibility. So like Marco said, I mean, it's low single digits, yes, and you start with very low percentages. And then you see how far you can go and what needs to be done in terms of the optimization of the assets to then drive it eventually, I mean, to a middle single digits. But 20% in co processing, personally don't see that happening. Yes, very clear. Thank you. Thank you. We're now ready for our next question. And your next question comes from the line of Nick Konstantikas. Your line is open. Hi, guys. Thank you for taking my questions. I mean, I'd just like to start, you have previously discussed about 1,000,000 tons of incremental demand for renewable diesel in 2021. Obviously, Sweden is now overcompliant, I guess. Germany is a bit down. So could you just give us kind of an estimate of how that has changed in your mind? And related to that and back to Iris' question, I appreciate it's quite early on to be talking about the term agreements, but is this kind of relative tiredness as we go into next year reflected in the pricing you're getting? And then if I may just go back to the something you commented on Peter about the other European revenue. It's been growing quite a lot over the last 4 or 5 quarters. Can you just give us a flavor on which are the important markets there today? What is the market conditions more broadly? How would you be thinking about the evolution of that part of the portfolio in the mix going forward? Thank you. Yes. Thank you. So I can start with the demand comment, and perhaps I'll just take a global view in a way. Of course, in 2020, like I commented earlier and also Peter commented, we have seen the market for renewable diesel still growing. You probably will going to see something like slightly over 1,000,000 ton growth globally, a bit lower than we had perhaps anticipated a year ago because of COVID, but still robust growth. If I just take a high level view on 2021, it will, of course, depend to a certain extent on the COVID recovery, but already analyzing the different regulatory changes, the ambition that is growing not only in a number of European countries, like mentioned earlier, but also if you take the example of California, where the carbon intensity again grows from 7.5 target reduction to 8.75, same in Oregon, also growing. So we do expect the demand growth to continue also in 2021. And like I said, some uncertainties, of course, relate to COVID, but I would estimate something between EUR 1,500,000 EUR 2,000,000 to be a realistic number for 2021 growth. Yes. Hi, Nick. Of course, I mean, excellent questions. And you know that I can, of course, not very explicitly give any guidance, but you fully understand that. But a couple of comments I would like to make also on demand, I mean, 2021. And that goes, I mean, more towards, I mean, the supply side from our point of view. It's very clear, I mean, that we at Neste, we have already done a huge amount of hard work in capturing 500,000 tonnes of creep nameplate capacity during the last couple of years. But it also means that if we are talking about 2021, that there is no low hanging fruit anymore. So whilst we continue to work, of course, in scratching here and there and being creative and finding some means, it also means that we will be very tight in terms of the capacity that we actually have available. In addition to that comes, of course, also and we will definitely talk about that later when we are then starting the year 2021. We have some tie ins to do already in Singapore. So we will have a major shut down in 2021 in Singapore in the existing facility. Again, don't ask for numbers. When we are ready, I mean, to disclose those numbers, we will give them. But just a little bit as heads up, so yes, demand growth in 2021 expect to be very healthy in the market, but the key question is where to get the product from. Then you're asking, I mean, for a bit more detail on the internationalization of our business model in road transportation. Maybe the only guidance that I can give you there is this is not one particular market. We have established our access and footprints in the majority of countries in Europe. We don't want to disclose too much on the details because of competitive reasons. But rest assured, I mean, we can relatively quickly shift, I mean, from one country, I mean, to the other country, especially, of course, when we're talking about the spot business. So very pleased, I mean, with that distribution that we currently have around 40% of the total external revenue that is going into these other markets that did not used to be, I mean, our home markets, we may start saying that they are our home markets as well. Thank you. Thank you. And your next question comes from the line of Artem Velarski. Your line is open. Yes. Hi. This is Artem from SEB. Three questions from my side. So first starting with renewables and thinking about hedging for 2021, have you done a lot of activity already at this stage related to next year? And whether it is really attractive to do right now given the fact that the spread is quite wide between palm oil and gas oil at the moment. Then continuing with renewables, could you maybe comment on the fixed costs going forward? So we have seen quite substantial decline sequentially. Is it a good proxy for the level in upcoming quarters as well? And the last one is on oil products and thinking about kontangou opportunities in Q4. So you have been benefiting already in Q3, but is it fair to assume that Q4 will be bigger in terms of related benefits? Thank you. Matti, starting with a question on hedging for 2021. So like commented also in previous quarter, we have not actually the hedging ratios for 2021 are very low. We are still in the middle of our term negotiations. And at the same time, like you point out, also the levels in the market are not such that there is any reason to start early with that program. So very low hedging for 2021 in place. On the fixed cost, that's a comment, good observation. Like in the other parts of the company, we have also in the renewables business made a lot of effort to, let's say, identify cost saving opportunities. The Q3 fixed costs were clearly lower than in Q2. If I look forward, probably Q3 was exceptionally low. We were able to if I look also at the timing of the different cost items from different development activities. So probably that would be my comment that Q3 was probably particularly low. Yes. And this fixed cost reduction program, I mean, we started that immediately when we were developing the business continuity plans. When we started when we saw in January that COVID-nineteen was hitting in China because of our activities in China, of course, and then also in Singapore. And one may not look at that as something that is now under the cover of a Neste Excellence, so that means sustainable. A lot of these activities that we have undertaken are short term activities just to navigate through that period of time with the COVID-nineteen pandemic. So we need to continue, of course, building up our access to waste and residues, the whole network. We need to continue to build up the Renewable Aviation, Renewable Polymers and Chemicals business. We have activities, of course, that need to go on with the buildup of people to then run our Singapore facility. You don't hire the people when you have the facility already ready. You hire them in advance so that you actually can involve them in buildup of the internationalization, that means in the internationalization in the future, you need to make sure that you have, I mean, the basic functions in place that can support that. Plus, we delayed a bit in innovation, some hiring in terms of the business innovation platforms. They are now installed. And of course, next year, we will need to staff, I mean, those functions as well, so building up, I mean, the future. Now to your contango question, Marco? Yes, I can take the one. And we are like I said, some contango supported our result in Q3, and we expect them to do so also in Q4. But we don't disclose their expected results, but I'd like to highlight in that sense that we are not expecting them to compensate the low very low and weak margin market or the environment that we're seeing in front of us. Okay. Very clear. Thank you. Thank you, sir. We will now take our next question. And our next question comes from the line of Henri Patricot. Your line is open. Yes, hello everyone. Thank you for the update. I have just two questions left on Renewable Products. The first one, going back to the pricing question in the U. S, it looks like your prices to the U. S. Were a little bit lower quarter on quarter despite as you flagged the higher RIN prices sequentially. Would there be any other developments in the U. S. Expanding that kind of flattish to slightly down pricing? And then secondly, just looking at the used cooking on market, has there been any change in terms of the availability of used cooking on with the renewed restrictions that we're seeing in Europe in particular? And you mentioned there were some recovery in the Q3, but is that reversing now in the Q4? Thank you. Yes. Thank you, Henry. So brief comment on the first question. I think the pricing in the U. S, it's quite a transparent market mechanism. I think the RIN change is probably the main one that I'm at least I'm aware of from that angle. On the used cooking oil, perhaps a couple of more comments. So I did mention earlier that availability has been gradually recovering. And I mean a positive example here is that, for example, certain Asian countries like China, we have seen recovery back to a level like before the COVID outbreak. At the same time, it's clear that in other markets, in other countries, both in Europe, in North America, also in a number of Asian countries, we are still recovering and behind the availability level when the COVID outbreak happened in spring. At the moment, of course, something we are watching very closely as there is an increasing number of COVID cases and more strict lockdown measures in a number of countries, whether that has an impact going forward, that's something we will see in the coming months, I'm sure. Okay. Thank you. Thank you. And your next question comes from the line of Sasikanth Chilukuru. Your line is open. Hi. This is Sashikanth Chilikaru from Morgan Stanley. Thanks for taking my questions. I had 2, please. The first one was related more to a longer term outlook on the renewable diesel markets. This year we've seen a flurry of U. S. Refiners looking to convert refineries into renewable diesel plants. And more recently we've seen European majors including Total and BP present an ambitious plan to ramp up their renewable diesel capacity. In this backdrop, I was just wondering I was just wanted to understand your view on these announcements and whether this has changed your approach on capacity additions and how you plan your future growth projects? Whether also any indication of what you think this might have and the impact might be on longer term margins that would be useful. The second question was more of a follow-up question related to the in both being selected as projects for FID? Can you handle 2 projects construction at one time? Or is it possible to have them staggered, locked them out and then out? Thanks. Talking about DRD, I mean, longer term, if you look at demand creation, I mean, from the other from one hand side and if you just look at what the International Energy Agency is projecting in future demands for 2nd generation biodiesel, so our renewable diesel. Then I would say this even it goes even beyond, I mean, what we have currently in our scenarios. So very strong demand creation longer term. In addition to that, I mean, good to see in the Renewable Aviation side that there is movements in terms of setting of mandates. Norway is known with a 0.5% that will continue. Sweden is very active in that regards. France, actually, if I remember well originally, they had said, I mean, together with the bailout of Air France, a mandate of 2% by 2025. They actually are now saying that they will start, I mean, earlier than that. If I'm not mistaken, it's 2022 that they will start, I mean, with the implementation of that mandate. So you see a lot of activity. I mean, the Netherlands is talking about 14% here by 2,030 on Renewable Aviation. And then in addition to that, on the Polymers and Chemicals side, demand creation, you saw the recent announcements also, the alignment of different partners along the value chain, the last one being, I mean, Borealis and Covestro for the raw material that you use, I mean, to produce polycarbonates. So these are all things in addition in terms of demand creation, in addition to, let's say, the projection on road transportation. So it continues to be that we are working on the implementation of our business model centered around, I mean, building up optionality, not just, I mean, from a regional point of view, but also from the different applications that we are building up. So that's pretty much this, I would say. We continue to look more at the demand, let's say, than at these announcements on supply. And then in addition to that, maybe also a short comment, not everything that is being announced will then eventually be billed or billed on time or it's more than just steel and iron, yes, without being arrogant here. But there is a lot, I mean, to running a business model. It's not just, I mean, retrofitting an existing an existing asset. On the other question on the parallel on the feasibility study that is ongoing in Porvoo and Rotterdam. Perhaps how I just clearly see that we are at a stage where we are comparing different alternatives, And the intent is to be able to make a prioritization and ultimately then hopefully an investment decision for one of the locations. These are, of course, very complex projects, whether you look at the resources needed, whether you look at the CapEx needed. And of course, also from a feedstock perspective, it's always important that the whole supply chain is in place when a big project like this starts up. So it makes a lot of sense to look at them one at a time. Of course, longer term, one can always look at different alternatives over a longer period of time. But remember, I mean, we are building a world scale facility with the highest optionality that the industry has ever seen in Singapore, whilst at the same time, we're doing feasibility studies. And if we will then have the decision on the location in the first half of next year. That means that we will go into quite a lot of resources that will start working on quite a lot of engineering on the selected side. So we are running 2 projects simultaneously during that period of time. Yes, it's very clear. Thank you very much. Thank you. And your next question comes from the line of Peter Low. Please go ahead. Your line is open. Hi. Thanks for taking my questions. Just a couple of follow ups. Just to go back to the hedging briefly to try and understand the high level dynamics. The hedging has contributed positively to the margin throughout 2020, but it's not in place for 2021. Does that mean it will drop out and be a headwind next year as higher feedstock costs come through? Or can you work to offset that through your pricing negotiations that are currently underway? I appreciate you can't guide specifically, but any color on those dynamics there would be appreciated. And the second was just to clarify your comment on the shutdown at Singapore next year. Again, I know you can't quantify it. Can you just confirm what the reason for that is? Did you say it was to tie it into the new expansion in some way? Thanks. Matti has already asked answered quite a lot of questions around hedging. So let me know answer one question around the hedging. Again, as we have said also before, hedging is in the function of term deals. So we don't hedge, let's say, 50% to 60% of the overall volumes. We don't do that either and haven't done that for the year 2020. But it's taking risk out of the term deals. So that means that if you have 70%, for example, 30 term deals at 30% spot, then that hedging need to be considered always in the context of that 70% of the term deals. That's one point to remember. The second point is hedging at the current conditions without having clear visibility on the term deal negotiations would, in my opinion, be unprofessional. So whilst we have started building up a small percentage, as Matti also said, in terms of hedging, but a very small percentage for 2021. We are mainly focusing now on the term negotiations. And they have started. They are ongoing. We will not disclose any confidential information on how they are running right now. So stay with us, Peter. Need to be a little bit patient. You can imagine these are very, very intensive discussions that we have ongoing. I've said also in previous calls that quite a lot of people from our sites were involved. I'm personally also involved in that, just like Matti and Carla Newberg. So 2 members, I mean, in addition to me of the Executive Committee. That's how high it is on our radar. But nothing more at this point in time in terms of the term deal negotiations. Let us do our homework, run the negotiations, and then we'll see. And perhaps I can comment briefly on the second question, which was a follow-up on the Singapore turnaround next year. Perhaps just making the general comment that it's good to understand that there is 2 types of turnarounds. One that happens quite frequently is the so called catalyst turnaround, which is exchanging the catalyst. And that is something that, of course, also the interval depends on the optimization, but that's a relatively quick one, let's say, within a month typically can be executed. And then in a more less frequent interval, we have what we would call more major turnarounds where it's certain maintenance activities. It can also be tie ins like in this case for the expansion. And they take typically longer because there's more work to be done. And that's just, I mean, an additional comment on next year that in Singapore, we have then this more extensive turnaround upcoming next year. That's great. Thank you very much. Thank you. And you do have a few more questions. And your next question comes from the line of Michael Alsford. Your line is open. Hello. Thanks for taking my questions. I've got a couple, please. Firstly, I appreciate the volumes are pretty small at the moment, but you're selling obviously sustainable aviation fuel and feedstock for polymers. So are they being sold at the same margin as renewable diesel for road transport? And I guess taking a more medium term view, do you expect that to be the case going forward, will be my first question. Just secondly, coming back to Matti's comments on demand for renewable diesel into 2021. If I remember back to the Capital Markets Day in February and you look at the supply demand balances that you showed there, when you look at the demand outlook for renewable diesel 2020 to 2021, it looks like it's growing from about 6000000 to 7000000 tonnes to around, what, just over 10000000 tonnes. So more than the 1,500,000 to 2,000,000 tonnes that Matthew suggested. So just wondering that can't all be COVID. So is that just a conservative view that Matti just outlined there? Or am I missing something, would be my second question. And finally, just to touch on the improvement points on the cost savings. You mentioned, Peter, that it was 2.25% was your target by the end of 2022. Could you just give me a run rate of where you are at the moment, I. E, what's in the numbers currently? Thank you. Let me start, I mean, with the first question, Michael. On the new business units on the margins there, I mean, you know that we are running a the way how we are running our business is based upon, of course, margin optimization. So we are not allocating volumes to the 3 different business units and then they can sell those volumes at whatever margins they feel or appropriate, I mean, for their respective markets. So that will that has been established. I've made comments on this, and that will continue also in the future, that margin optimization. So having said that, in the Renewable Aviation, the Sustainable Aviation Fuel in a normal situation, let's say, with normal kerosene, fossil based kerosene prices, we're pricing it at 3 times the fossil based kerosene prices. So nothing has changed there. Of course, we don't yet have the economics because we don't have Singapore up and running. So here we are investing in the buildup, and we are shifting some volumes from renewable diesel to build up the market in renewable aviation. And once Singapore is up and running, then of course, we will have, I mean, the costs like it needs to be. And if we then conclude also on the RJS, the Sustainable Aviation Fuel project in Rotterdam that is still ongoing, If we do that final investment decision, then we will also have these costs coming in Rotterdam. So today, we don't have that cost position. So you can conclude that every volume that we are selling in Renewable Aviation doesn't have the same margin as compared to Renewable Road Transportation because of that market buildup. And it's a bit different, I mean, in Renewable Polymers and Chemicals because here in Renewable Polymers and Chemicals, there are different products that we are selling. But generally spoken, one can say margins are comparable because we don't have, let's say, this additional step. We have the facilities available if we sell biopropane from Rotterdam or we sell renewable diesel as renewable hydrocarbon from Rotterdam or Portfol or if we sell some renewable naphtha, then of course, I mean, that comes out of the existing assets. It's not the same like in Aviation. On the CMD, February supply and demand balance. Matti already gave a little bit of a hint to that when we were talking about 6,000,000 to 7,000,000 tonnes of demand that was, of course, pre COVID-nineteen estimation. So that has gone down. So demand has been creating, of course. But it's approximately 1,000,000 tons of additional demand globally in 2020 that has been created, so not 2,000,000 tonnes. And then going to the 10,000,000 tonnes of demand creation, it's a bit difficult to say, I mean, what will be the number. Today? I mean, we have still COVID-nineteen ongoing. We have lots of discussions around regulation ongoing. I would probably say it's going to be somewhere between globally 1,500,000 2,000,000 tons of demand creation compared to the 6,000,000 tons of 2020. On the cost savings, and here we need to differentiate. We have the COVID-nineteen related cost savings. These are just pulling the brakes and navigates, as I explained, through this pandemic situation to make sure that we have a good cash flow in 2020, to make sure that we have good EBITS, good profits in 2020. Then there is the Neste Excellence program, which includes creation of through 6 Sigma projects, creation of additional margins, EBIT to the bottom line. And here included, for example, ore the creep capacity that we have been able to create in the Renewable Products areas. In addition to that, what we also covered there were sustainable cost reductions when we are changing end to end processes, and they need to be sustainable at least and we are auditing them, of course, for 3 years in a row. So if you talk about the restructuring in OP, if we would take that final decision on that about €50,000,000 that is sustainable. So that would go into that bucket of the €225,000,000 as a sustainable EBIT improvement. I want to make sure that you understand, I mean, there are 2 different buckets here because of this COVID-nineteen that we have opened at the beginning of the year, this additional short term cost savings bucket. In terms of where are we standing with the €225,000,000 very pleased to say that actually we are extremely well on track. And we will probably, I mean, during the next months, discuss internally what is the number that we will propose during the next Capital Markets Day in 2021. Will we repeat the 225,000,000 or will we increase it, but it will not be decreased, that's clear. Okay. Next question. Thank you, sir. You have further three questions. And your next question is from the line of Henry Tarr. Your line is open. Hi there and thanks for taking my question. Two quick questions really. One is, what's the main driver for the decision as to where to locate the new facilities? And have some of the planned capacity expansions, particularly in the U. S. Influenced that decision so far? And then the second question, just the longer term opportunity within plastics. Is there any technology amongst polymers or recycling that you think could be material for the group within 5 to 10 years? Thanks. You want to go to the criteria, Matti? Yes. I can briefly comment on that. I mean like we commented after the Q2, we have focused now for the next big project after the Singapore expansion on the Rotterdam and Porvoo alternatives, so a European site. That is what we are prioritizing at the moment. The criteria, I would say, very typical for this type of decision. We are, of course, looking at things like expected CapEx level, expected operating cost level. We are also looking at feedstock availability related logistic cost. We are looking at market proximity related logistic costs. So it will be then, of course, an overall comparison with several commercial and technical criteria. And of course, I mean, we continue to look, I mean, and monitor, I mean, supply and demand. And that will, of course, also play an important role when we are then moving towards a decision on the investments. But as I said before, I mean, currently, with the visibility that we have in supply and demand, we see that to be and to continue to be very, very healthy. In terms of the plastics, we need here also again differentiates. On one hand side, we've talked already on the renewable hydrocarbons, which is a building block, I mean, to produce plastics or chemicals out of it. Very good progress here, and it comes out of the existing or future to build renewable diesel facilities Porvoo, Rotterdam and Singapore. Of course, we are working also on the full circularity. So here we talk about waste plastics that we are taking, then through a first step liquefaction, pyrolysis type of technologies and then second step, which is specialty refining to then have again a renewable hydrocarbon, which is then equal like the renewable hydrocarbon that comes out of our renewable diesel facilities and can go immediately into the polymers and chemicals processes, technical processes to produce plastics and chemicals out of it. We have made these announcements on the cooperation that we have with the Recycling Technologies. Recycling Technologies is a U. K.-based startup company. We have an equity position in that company. They are on that liquefaction step that I talked about. And we're working together with Unilever because they have high aspirations, of course, also to make their plastics, I mean, recyclable and at the same time reduce their greenhouse gas emissions. So we're working on that together with recycling technologies. We do own developments as well in that field. We have done the first ever successful specialty refinery trial in our site in Nanthali, whereby for the first time on the planet actually, these kind of renewable hydrocarbons have been produced based upon waste plastic. So we are proceeding very well. I think what I've said in the Capital Markets Day and what you said also, Henry, 5 to 10 years from now, yes, this will be feasible. Quite confident on that. And that will add, I mean, to the portfolio of renewable and circular solutions that we have in the company. Okay. Thanks. Thank you. And your next question comes from the line of Thomas Adol. Your line is open. Hi, good afternoon. A few questions for me as well, please. Just kind of going back to all the projects that are being discussed, whether it's in the U. S. Or whether it's in Europe by the European majors. Would you agree whether or not these projects will move forward, all of them, would also be a function of whether these companies can actually line up the feedstock and that the feedstock may actually be the key bottleneck in the future. And with that, depending on your answer, maybe you can also provide a bit more detail on what progress you're making on expanding the feedstock pool across different geographies, improving the access, etcetera. The second question is on the next big development where you will give the market an update in the first half, potentially within FID towards the end of next year. Just looking at the press release from end of 2018 when you launched the Singapore expansion and you've targeted a production timeline of anywhere between 3 to 3.5 years, I. E. First production in the first half of twenty twenty two. Obviously, that's delayed due to the COVID issue. For the next expansion, should we also think of a similar timeline, 3 to 3.5 years or with more experience, can you kind of narrow that range? Is that range still relevant? And then maybe just finally, and I do apologize for my final question. When I look at the group Roache of 23% today and for a number of years, you've maintained your target at 15% or you used to say at least 15%. I think when you look at 15% versus 23%, it's fair to say that renewables is doing a lot better, but you haven't changed your target. So are you indirectly implying that you don't think the advantage you have today is sustainable? Thank you. Okay. Very good questions and quite a lot of questions. We're going to try, I mean, to answer them all. On the investment projects feedstock, what I would say is focus the discussion more on what we are doing. I mean, we are currently the largest buyer, as you know, of waste and residues. We have embarked since a number of years on expanding that position on a global basis. We very successfully entered Australia for Australia and New Zealand. We're very successfully and personally very pleased, I mean, with that decision that we entered into China. That's already substantial volumes that we are collecting, aggregating, specifying, certifying, auditing and sending to our Singapore facility. And that went extremely fast despite, I mean, a COVID-nineteen pandemic. We have to postpone a little bit here going into South America. We are collecting, I mean, waste from residues, I mean, in South America. But we wanted to do one additional step there also in expanding our footprint there. But of course, I mean, with a heavy concentration of COVID-nineteen in these countries, it's clear that we had to actually delay that a little bit, but it's still very high on our agenda. And then you saw the announcements, you saw the acquisitions. Mahoney Environmental as a platform, more than 30,000 restaurants that they are covering. And I said on purpose as a platform because, of course, we continue to look at how can we expand that organically as well as through M and A. We're expanding in Europe also through our networks. We made acquisitions here. We have a joint venture with Demeter. We're now established in Poland. We go to the southern part of Europe. So all that is expanding, let's say, our leadership position that we have. So imagine what we can do in the next 5 years prior to those new announced new builds or retrofits when they come on stream. And that's, let's say, my comment that I want to make. I mean, it's up to us, I mean, to always be the world leader in the collection of waste and residue and leave a big gap, I mean, to somebody else that wants to enter that market. And the rest, we will then see, I mean, how it plays out. So I think I tried to answer your first two questions. If we now go, Matti, I mean to the time line on the European project and then compare it to the Singapore project. Yes. Perhaps I can briefly comment on that. Like we said earlier, our target is to mature the study engineering to a point where we would have the possibility to make decisions on investment in 2021, if so decided. If that happened, it is indeed, like you can see from the Singapore expansion, quite typical what the construction time is. And we have said, I think, also in the CMD that this could then lead into 2025 target for the start up. But this is, of course, depending on the decision still to be made. But this is a very typical time line. Yes. And maybe let me again make one comment for clarification here, and I alluded already to that previously. If you look at when did we take the final investment decision for the Singapore facility, that was in December 2018, and we started the piling in January 2019. So you take a final investment decision just before you actually start deploying the site and start working on it. So that's the way one needs to look at if we say we target, if everything goes right, middle of 2025, then you calculate back on a normal period of building up. And then you come a bit with an indication on when approximately would be the final investment decision. Okay. Yes, we still have one question. Yes, ROACE, more than 15%. Of course, I mean, we always aspire to do more than 15% ROACE, and we are very pleased, I mean, that we are doing very successful investments that, as you also said, I mean, show that we have substantially higher. It's not because we are doubting, I mean, on that 23% or 18% or what it is. It also has to do, I mean, with the belief that we have, especially, I mean, if we are talking about investing in new technologies that a ROACE of about 15% is a very good and value creating target. Okay. Thank you very much. Thank you. And your next question comes from the line of Max You commented in the outlook this morning and again earlier during the call on tightness or potential tightness in waste and residue markets. Equally, when we look at recent months, we've seen this sort of a differential against vegetable oils appear to narrow. And you've also commented earlier on areas like used cooking oil in Asia appearing to trend positively from where they were earlier in the year. So I just wanted to understand better. Could you talk about that outlook, the extent to which it is precautionary in the context of a COVID influenced uncertain near term outlook or whether there are specific markets or submarkets within your feedstock pool where you see genuine concern around incremental tightness? Thank you. Thank you for the question. So this is Matti. I would say it's more making the general comment like we have had the dynamic throughout 2020 that we have a solid demand for waste and residues. That is into biofuels. It is also into all our chems. And at the same time, because of the COVID, we, of course, had some availability, let's say, impacts, especially in spring, which have now gradually recovered. For me, that doesn't change anything about the fact that the market remains tight. And it is basically something that will continue with similar dynamics, I'm sure, like we have seen in the previous quarters. Something that was also mentioned earlier, of course, it's then depending on how the COVID situation develops, it could have impact on some specific markets. But that is something we will see in the coming quarters. Thank you. Yes. Okay. If there are no more questions, and thanks a lot. I mean, a very good call with lots of questions and excellent questions further development of the COVID-nineteen pandemic, of course, and its impact on the global economy continues. Let's not fool ourselves. I mean, the pandemic is definitely not over. Of course, I mean, we remain very confident in our ability to navigate through these uncertain times. And the Renewable Products business has proven to be very resilient in a growing global market. But please also to manage your expectations on the comments that we have made in this call, we don't have a Singapore that is starting up in 2021. So 2021, if I just put a bit of a picture here, has a COVID-nineteen pandemic, has a challenging market in oil products, has no volume, so to say, yet to grow in the Renewable Products business and has a starting point that has no hedging, so is dependent on the outcome and the successes that we have in the term negotiations. Whilst at the same time, of course, we continue to build up our access to new markets like Renewable Aviation, Renewable Polymers and Chemicals as well as, of course, the investments that we are undertaking in the new innovation business platforms as well as in certain functions like public affairs. So I think it's very important also to manage a bit your expectations on the coming years. And I wanted to take already in a qualitative way, take the opportunity in this call to make those comments. Of course, we are managed, I mean, through the crisis, we have great people, as you know, we have great customers, we have great partners, and we are extremely pleased also that we have great investors. So stay safe and healthy, and thanks a lot, everybody. Goodbye.