Rio Tinto $RIO (-1,8 %) announced today that it has successfully completed the group's first biofuel trial across its network of ports, railroads and mines in Western Australia as it seeks to decarbonize its iron ore operations.

The trial, which ran for four weeks from January to February, was conducted in partnership with Finnish renewable diesel producer Neste $NESTE (-0,62 %) and Australian fuel supplier Viva Energy.

For the trial, Neste provided 10 million liters of renewable diesel made from used cooking oil. The fuel was transported by Viva Energy from Singapore to the Parker Point fuel depot in Dampier and blended with fossil diesel at the port to produce a blend of around 20% renewable diesel. It was then distributed to Rio Tinto's iron ore operations in the Pilbara for use in rail, marine, blasting, transportation vehicles, surface mining equipment and light vehicles.

The trial provided an understanding of how the use of renewable diesel could be scaled up in Rio Tinto's Australian operations in the future and provided key insights into the bulk renewable diesel supply chain, import and blending processes, Rio said.

The trial also reduced Rio Tinto's Scope 1 emissions by approximately 27,000 tons of direct greenhouse gas emissions, equivalent to the tailpipe emissions of 6,300 cars in one year, the company added.

"Diesel accounts for around 70% of total carbon emissions from our iron ore operations in the Pilbara. While electrification is the ultimate longer-term solution for repowering the majority of our fleet, we are also investigating biofuels as a complementary and short-term solution," Richard Cohen, Rio Tinto's managing director of rail, port and core services, said in a press release.

"Through this trial with Neste and Viva Energy, we have gained valuable insight into how renewable diesel can help bridge the gap to widespread electrification, and also for situations where electrification is not suitable," Cohen said.

Rio Tinto is actively exploring the potential of biofuels as part of its ongoing efforts to meet its Scope 1 and 2 emissions reduction targets of 50% by 2030 and net zero by 2050. This trial builds on the successful transition at the Boron and Kennecott operations in the US, where 11% of total fossil diesel consumption has been replaced with renewable diesel.

The world's largest iron ore producer is also developing a pongamia seed farm in North Queensland as part of a biofuel pilot project to help grow Australia's biofuel industry.

Is sustainable aviation fuel (SAF) just hype?

or are the shares really sustainable?

$GEVO (-0,95 %)
$CLMT
$WLFC (+2,37 %)
$NESTE (-0,62 %)

Air travel currently causes around two to three percent of global CO2 emissions. If non-CO2 emissions are added, its overall contribution to climate change is significantly higher - and is likely to increase further with the growing demand for air travel. The world needs a solution today to decarbonize the aviation industry.

The International Air Transport Association (IATA) has set itself the goal of achieving carbon-neutral growth from 2020 and net-zero emissions in aviation by 2050. To achieve this goal, IATA estimates that sustainable aviation fuel can deliver around 65% of the emissions reduction required to reach net zero. This has prompted many airlines and other aviation stakeholders to start using SAF and in many cases to set specific targets for the use of SAF. The uptake of SAF is also increasingly being driven by supportive policies such as mandates, as governments are now looking to take meaningful action on climate change.

https://www.neste.com/products-and-innovation/sustainable-aviation

https://aktien-mag.de/nachrichten/chart-tweets/gevo-gevo-und-calumet-clmt-nachhaltiger-flugkraftstoff-eine-vielversprechende-aber-herausfordernde-zukunft/p-129150

https://fastercapital.com/de/inhalt/Nachhaltige-Flugkraftstoffe--Ein-vielversprechender-Weg-zur-Kreditwuerdigkeit-fuer-alternative-Kraftstoffe.html

https://caphenia.tech/partnerschaft-condor/

The Finnish refinery group Neste has lowered its business outlook in the renewable energy sector for the third time this year, as prices are falling and sales figures are lower than expected.

The sales margin for renewable energy has been reduced to USD 360 to 480 per tonne, down from USD 480 to 580 in July.

In addition, Neste expects sales of renewable energy to be 3.9 million tons in 2023 instead of the previously forecast 4.4 million. Sales of sustainable aviation fuel will be particularly affected.

$NESTE (-0,62 %)

https://de.marketscreener.com/kurs/index/S-P-GSCI-BIO-FUEL-INDEX-46869729/news/Finnische-Neste-warnt-vor-schwacherem-Ausblick-fur-erneuerbare-Energien-Aktienkurs-fallt-um-10-47846838/

#stocks
#news

Good morning everyone,

After the adjustment of the forecast with regard to margin generation FY2024, I find the downgrading of the $NESTE (-0,62 %) with -30% is somewhat exaggerated.

Of course, the weak Q1 results and the current situation on the fossil fuel market must be added to this.

How do you see the whole thing?

I'm taking advantage of the dip and buying a small tranche, as fair value for me personally is around $45.

Greetings

pastel

$NESTE (-0,62 %)

First position bought!

what do you think of the company?

What is your opinion about Neste? $NESTE (-0,62 %)

They deal with renewable energy for cars / planes and ships.

+ They own 1000 gas stations in the Baltic countries.

A very forward looking company from Europe.

In my opinion also now in a very exciting buying zone.

---𝐀𝐤𝐭𝐢𝐞𝐧𝐯𝐨𝐫𝐬𝐭𝐞𝐥𝐥𝐮𝐧𝐠---

Neste Corp

FI0009013296

Neste specializes in the production of fuels. To this end, the company relies on its core areas of refining and marketing crude oil. The company operates refineries in Sweden, Finland, the Netherlands, Bahrain and Singapore. [1] The renewable energy sector accounts for a large share of this business. Neste is thus the world's largest producer of renewable diesel and sustainable aviation fuel (SAF) from waste and residue raw materials. Since the beginning of July, for example, the Group has been successfully supplying San Francisco International Airport with sustainably produced fuels by pipeline. The company recently announced that it is putting a billion-dollar investment into a joint venture with Marathon Petroleum, which would make Neste the world's first and only producer of renewable fuels with global capacity. [2]

"About us" as per homepage [3]:

"We are the world's largest producer of renewable jet fuel and renewable diesel, as well as renewable solutions in raw materials for the plastics and chemical industries.We are also driving the development of chemical recycling to address the problem of plastic waste. Our goal is to make our oil refinery in Porvoo, Finland, the most sustainable refinery in Europe by 2030. We rely on renewable and recycled materials, such as liquefied plastic waste, as raw materials for the refinery. The company operates production facilities in Finland, the Netherlands and Singapore. We aim to become the global market leader for renewable and recycled solutions. We are committed to helping our customers reduce their greenhouse gas emissions by at least 20 million tons per year by 2030."

Operating segments:

1) Renewable Products

2) Oil Products

3) Marketing & Services

4) Others

The main component in all segments is Fuels, which are subdivided as follows:

-Light distillates (motor gasoline,gasoline components, biopropane, renewable naphtha, LPG),

-Middle distillates (diesel, jet fuels, low sulphur marine fuels, heating oil, renewable fuels, renewable jet fuels and low carbon fuels)

-heavy fuel oil

The main sales drivers are "Middle distillates" (68%) and "Light distillates" (22%). "Heavy fuel oil now accounts for only a marginal share of sales.

𝘒𝘦𝘯𝘯𝘻𝘢𝘩𝘭𝘦𝘯:

-KGV 2021: 18.9 [4]

-KGV 2022e: 18.2 [4]

-KGV 2023e: 16.9 [4]

-PEG 2022e (P/E/growth rate): 18.2/10%= 1.82 (rule of thumb: < 1 = very favorable).

-PEG 2023e: 16.9/10% = 1.69

-Revenue growth: 2020 to 2021: 28.9% ; 2021 to 2022: 25.38%; 2022 to 2023: 9.7%; 2023 to 2024: 9.16%

-EBIT growth: 2020 to 2021 -5.3%; 2021 to 2022: 16.99% ; 2022 to 2023: 31.85% ; 2023 to 2024: 15.94%.

-EBIT growth on a 10-year average according to Traderfox: 21.87% [5]

-Dividend yield 2020: 1.81% [1]

Market Averages (EU - as of 05/01/2022):

-Aver. P/E Power: 16.99 [9]

-Aver. PEG Power: 1.71 [9]

-Aver. KGV Oil & Gas: 18.09 [9]

-Aver. PEG Oil & Gas: 0.25 [9] -->Assumption for strong growth!

DCF calculation (conservative)= €26.09

-Parameters: Free cash flow from GB; WACC 8%, Growth 10%, Perpetual Growth 4%.

DCF calculation (realistic)= € 32.95

-parameters: Free cash flow from GB; WACC 7.5%, Growth 12%, Perpetual Growth 4%

Current share price: €40.25

-->Neste seems slightly overvalued based on the DCF calculation and the industry standard P/E/PEGs. A price from about 35€ seems to me interesting again for a long-term entry.

𝘙𝘶𝘣𝘳𝘪𝘬 - 𝘞𝘢𝘴 𝘸ü𝘳𝘥𝘦 𝘉𝘶𝘧𝘧𝘦𝘵 𝘴𝘢𝘨𝘦𝘯 (data from Annual Report 2021 [6]):

Criteria to be read in detail: https://app.getquin.com/activity/XcuRrJwmyP

Income Statement:

-Sales/Administration. and other overhead: 2.6% of sales -->very positive!

-Gross margin: 18.57% -->negative! (Buffet's target: min. 40%)

-Net margin: 11.7% in 2021 (6% in 2020) -->negative! (Buffet's target: >20%)

-Interest expense: 2.7% of operating profit -->extremely positive, thus hardly any credit debt! (Buffet's target: <15%)

Balance Sheet:

-Treasury Shares: 1,242 shares (no significant share buyback programs).

-Debt < 4xEBIT: 0,18 Mrd. EUR; EBIT = 2,01 Mrd. EUR -->very positive!

-Goodwill: Intangible assets represent only a small portion of 4.15% of total assets. Goodwill is therefore negligible (very positive).

Goodwill contribution to further understanding: https://app.getquin.com/activity/ymidZwhlTk

Cash Flow Statement:

Investments: 83.59% of net income (Buffet's target: <50%) -->negative!

𝘒𝘦𝘺 𝘕𝘰𝘵𝘦𝘴:

Neste is very asset-intensive, which is why property, plant &amp; equipment account for 41.5% of total assets. However, this is not particularly exceptional. At Neste, these are oil refineries, storage tanks and production facilities. For asset-intensive and project-driven companies, I therefore like to look at the development of inventories, in conjunction with sales. Both items should ideally grow together and continuously, which can indicate a good order situation. It should be mentioned, however, that due to the cyclical nature of the business, Corona had a significant impact on 2020 and 2021 sales. In addition, raw material prices can fluctuate strongly.

However, from 2017 to 2019, Neste had a very constant and positive development. However, 2020 was strongly influenced by Corona. In 2021, the market situation was able to relax again and so were Neste's sales. If they can continue the development from before 2020, I am very positive.

Turnover rate 2021: 6.81 (15,148/2,223.50)

Turnover rate 2020: 6.7 (11,751/1,753.50)

Inventory turnover rate 2019: 10.07 (15,840/ 1,572.50)

Turnover rate 2018: 9.84 (14,918/1,515)

Briefly on the inventory turnover rate: the inventory turnover rate (sales/average inventory level) tells us how often the company "turns over" its inventories within a year, or how often the inventory warehouse is "emptied", so to speak, in a year (even though in practice, of course, this happens on a rolling basis and the warehouse is never completely empty - hopefully).

Figures in EUR million

Sales 2021: 15,148

Sales 2020: 11,751

Sales 2019: 15,840

Sales 2018: 14,918

Sales 2017: 13,217

Inventories 2021: 2,618

Inventories 2020: 1,829

Inventories 2019: 1,678

Inventories 2018: 1,467

Inventories 2017: 1,563

𝘉𝘶𝘳𝘨𝘨𝘳𝘢𝘣𝘦𝘯:

The moat is difficult to interpret. As the world's first and only producer of renewable fuels with global capacity, one certainly has a certain market and power position. In addition, one is very broadly positioned with the markets of Scandinavia as well as Bahrain, Singapore and, in the future, the USA. The financial situation allows for further expansion and borrowing. Not surprising is the low margin for investment-intensive companies, so I am less concerned here, even if Buffet would like to have more ;).

𝘜𝘯𝘵𝘦𝘳𝘯𝘦𝘩𝘮𝘦𝘯𝘴𝘦𝘪𝘯𝘰𝘳𝘥𝘯𝘶𝘯𝘨 𝘯𝘢𝘤𝘩 𝘗𝘦𝘵𝘦𝘳 𝘓𝘺𝘯𝘤𝘩 [7]:

This is where I have a very hard time. Historically, I have used 10% growth to calculate the PEG ratio. This is also justified by the fact that we had two positive spikes in 2019 and 2021, which drive the average growth up but were just spikes. 2020 was an extraordinary year, which also negatively impacted Neste through Corona. I am therefore a bit more conservative and place them in the Stalwart ("Steady" -average growth of 10-12% ) and Cyclical range, as they are dependent on commodity prices.

𝘗𝘦𝘦𝘳 𝘎𝘳𝘰𝘶𝘱/𝘒𝘰𝘯𝘬𝘶𝘳𝘳𝘦𝘯𝘻:

Verbio --&gt;see also my brief stock introduction: https://app.getquin.com/activity/dkMFQUVGgg?lang=de&utm_source=sharing

Key Facts about Verbio:

-Gross margin ca 25% (better than Neste).

-Nettomarge ca. 10,6% (similar, in the range of Verbio)

-Debt (no winner, both are hardly indebted)

-Sales/EBIT growth (EBIT 30.71% p.a. in the last 10 years; sales growth 3.13% p.a. in the last 10 years) --&gt;comparison difficult. However, it should be mentioned that Verbio is less cyclical and more continuous in its development.

-KGV 2022e: 23.4

-KGV 2023e: 28.4

Market situation Verbio: Verbio suffered heavy share price losses in recent days. This is mainly due to the planned limitation of biofuel by the German government. Due to the focus on the German market, this has a particular impact on Verbio.

In addition to Verbio, there are a number of companies in the oil and gas business. However, Verbio in particular has taken up the renewable energy sector in a comparable way. Ultimately, however, the competition could be expanded at will. Classic commodity stocks such as Shell or BP should also be mentioned.

BP, for example, wants to cut its oil and gas production by 40 percent by 2030 (measured against the level of 2019) and at the same time expand its business with renewable energies. Increased "low-carbon" investments are planned, such as in electric vehicle charging stations, hydrogen, and bioenergy, including biofuels, biogas, and sustainable aviation fuel. [8] This would make it a direct competitor of Neste!

𝘍𝘢𝘻𝘪𝘵:

Neste is a very exciting company with interesting business areas. Verbio, as the German counterpart, is in my opinion slightly better positioned financially. However, Verbio serves only part of Neste's segments. Neste is thus more broadly diversified and a somewhat bigger "fish." Especially the market of biofuels for airlines is exciting for me and allows growth fantasies. However, one should take into account that well-known oil and gas giants invest in similar business areas in the long term. The advantage of Neste, however, is that they do not have to invest first but are already fully in the business and did not have to expand this industry out of pure diversification or public pressure. Perhaps this will result in interesting M&amp;A transactions in the long run. Valuation-wise, I see Neste a bit too expensive right now. A price &lt;35€ seems interesting to me for an entry, with a long-term strategy.

As usual, you can also find my collected analyses under the following link:

https://app.getquin.com/activity/YyIXcpDduz?lang=de&utm_source=sharing

As always, no investment advice!

#theaccountant

#aktienanalyse

#analyse

#stocks

Sources:

[1] https://traderfox.de/aktien/1753682-neste-corp

[2] https://aktien-mag.de/aktien/FI0009013296/neste-corp/seite-1/

[3] https://www.neste.de/ueber-neste/wer-wir-sind/unternehmenszweck

[4] https://de.marketscreener.com/kurs/aktie/NESTE-OYJ-1412495/fundamentals/

[5] https://aktie.traderfox.com/visualizations/FI0009013296/EI/neste-corp

[6]https://www.neste.com/sites/neste.com/files/attachments/corporate/investors/corporate_governance/neste_annual_report_2021.pdf

[7] https://diyinvestor.de/peter-lynch-6-kategorien-fuer-die-einordnung-von-unternehmen/

[8] https://www.manager-magazin.de/unternehmen/energie/oelkonzerne-investieren-in-erneuerbare-energie-bp-und-shell-bauen-um-fuer-zukunft-ohne-oel-a-fb7006d8-318e-4664-a17c-398f5cf613c8

[9] https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datacurrent.html

[10] https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/Betas.html

[11] https://ycharts.com/indicators/10_year_treasury_rate

Graphs Source:

Key Figures: https://www.neste.com/sites/neste.com/files/attachments/corporate/investors/corporate_governance/neste_annual_report_2021.pdf

Company homepage:

https://www.neste.de/

Share presentation at the request of @HB

Biofuels manufacturer- exciting 🧐