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Net sales decreased to SEK 3,813 million (4,992), as a consequence of lower crude oil prices and a weaker British pound.

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Q3 Interim Report 1 January 30 September 2016 Third quarter summary, Key figures President s comments, Market and economic conditions 1 2 Financial overview 3 Segment information 4 Cash flow 6 Nynas AB
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Q3 Interim Report 1 January 30 September 2016 Third quarter summary, Key figures President s comments, Market and economic conditions 1 2 Financial overview 3 Segment information 4 Cash flow 6 Nynas AB (Publ.), corporate re. no , Parent Company for Nynas. Nynas is a leading international group specialised in naphthenic specialty oils and bitumen. Financial position 7 Quarterly overview 8 THIRD QUARTER SUMMARY Nynas Consolidated Group Income statement and statement of comprehensive income 9 Net sales decreased to SEK 3,813 million (4,992), as a consequence of lower crude oil prices and a weaker British pound. Operating result before depreciation (EBITDA) amounted to SEK 541 million (726). Net income amounted to SEK 178 million (409). Harburg North side distillation unit in operation since the first week of August. Statement of financial position Statement of changes in equity Cash flow statement 12 Condensed financial statements, Parent Company 13 Notes 14 KEY FIGURES Jul-Sep Jan-Sep SEK million Full year Net sales 3,813 4,992 9,341 13,107 16,248 Operating result before depreciation (EBITDA) 1, ,000 1,265 Net income before tax Net income Cash flow from operating activities ,763 Cash flow after financing activities , Capital expenditures ,483 Net debt 2 5,022 3,811 3,117 Working capital 2 3,434 3,467 2,474 Return on average capital employed (12 months rolling) Equity to assets ratio, % Number of full-time employees 1, ) Excluding non-recurring items. 2) Alternative Performance Measure, refer to page 16 for definitions. 1 President s comments The third quarter was a difficult one for Nynas and financial performance remained below expectations. This is due to lower margins and the effects of the delayed Harburg refinery start-up becoming fully visible. Expensive additional purchases of intermediate feedstock and finished products led to reduced margins from increased costs as a consquence of extraordinary logistic efforts to mitigate the shortfall of production. However, these measures were needed to keep negative supply consequences for our customers at a minimum. EBITDA before non-recurring items for the third quarter amounted to SEK 541 million (726). Excluding unrealised hedge effects for the quarter, the underlying operating result was SEK 656 million (866). Total EBITDA before non-recurring items for the first nine months amounted to SEK 965 million (1,000), however, as reported earlier this includes SEK 262 million for the discontinuation of a tolling agreement. Given the seasonality of our bitumen business this shorfall will be difficult to recover, but a number of measures have been taken to improve performance in the coming months including cost savings wherever possible. Stockholm, November 2016 Gert Wendroth President and CEO, Nynas AB Market and economic conditions Nynas sales are dependent on the economic development in a broad range of industrial sectors as well as infrastructure investments. Naphthenic specialty oils are sold worldwide and used by industrial customers in both leading and lagging sectors. Bitumen sales are regional and mainly dependent on investments in road construction and maintenance. The Eurozone economy recorded a slowdown in the third quarter, with slower growth in Germany, Italy, Spain and Ireland, offsetting a mild acceleration in France. The Markit Eurozone PMI Composite Output Index averaged 52.9 in the third quarter, a slight decrease from 53.1 in the second quarter The automotive industry exhibited very positive signs, with EU passenger car registrations continuing on an upward trend throughout the third quarter, and September volumes reaching the highest September total on record. Growth in business activity picked up in the US, although job creation eased to a three-and-a-half-year low in September. The Markit US Composite PMI Output Index averaged 51.7 in the third quarter, a slight increase from 51.5 in the second quarter Amongst the BRIC countries, India, China and Russia exhibited an expanding trend, and Brazil registered a slight upturn at the end of the quarter, indicating a slowing rate of contraction. Crude oil prices in the third quarter continued to be volatile. Brent crude started July at 50 USD/bbl, fell to a low of 42 USD/bbl in August and closed at quarter end back at 50 USD/bbl. The average Brent crude price of 42 USD/bbl for the period January to September was approximately 25 per cent lower than the same period last year, mirrored in similarly lower Nynas net sales. Currency impact in the third quarter was primarily reported from a continued weakening of the British pound versus the Swedish krona with a decline of approximately 15 per cent compared to last year. The US dollar and the Euro were on average only marginally stronger than the Swedish krona in the third quarter compared to last year. 2 Financial overview Net sales for the third quarter were SEK 3,813 million (4,992) as a consequence of primarily lower oil price levels and also a weaker British pound. Total product sales volumes (excluding fuels and other) increased 2 per cent compared to last year. EBITDA excluding non-recurring items amounted to SEK 541 million (726) in the third quarter, including an un realised hedge effect of SEK 115 million (140). Lower earnings are explained by lower margins on Naphthenic specialty oil products due to high value inventory lead time and lagging in market prices. Also bitumen margins were lower compared to higher than normal margins in the previous year. Net financial items for the third quarter amounted to SEK -53 million (-56), of which SEK -37 million (-40) is related to net interest expenses. This is explained by higher utilisation of credit facilities offset by lower interest rates. Non-recurring items affecting the result totaled SEK -125 million (-25). This amount is mainly related to the Harburg start-up delay, causing non-recurring costs for both bitumen deliveries and naphthenics supply and product cost from more expensive external sourcing. SEK million Jul-Sep Jan-Sep Full year Net sales 3,813 4,992 9,341 13,107 16,248 Operating result (EBITDA) ,000 1,265 Depreciation Non-recurring items incl. write-down assets EBIT Net financial items Net income before tax Tax Net income for the year/period ) Alternative Performance Measure, refer to page 16 for definitions. 3 Segment information Naphthenics Sales revenue during the third quarter showed an increase compared to the second quarter 2016, however decreased compared to the third quarter in as a consequence of lower oil price levels. The overall sales volumes were 8 per cent above the equivalent period in, and were somewhat constrained by available supply rather than sales opportunities. Strong sales volume growth was seen in Europe and AMEA (Asia, Middle East and Africa) compared to the same period in, driven by volume growth across both regions as a whole. Sales volumes in the third quarter in the Americas remained steady compared to the same period in, mainly due to supply restrictions. Sales increased in Brazil, Canada and Mexico, but decreased in the remaining countries. Third quarter external sales reached SEK 1,693 million (2,134) as a consequence of lower oil price levels. Operating result before depreciation (EBITDA) decreased to SEK 265 million (336), including an unrealised hedge effect of SEK +55 million (-49). Bitumen Sales volumes for the third quarter were unchanged compared to last year, where an increase in the Nordic area was offset by lower volumes in the UK. The Nordic region experienced reasonable demand in July and August but it was still not quite as strong as expected. In September the market picked up with strong sales in Finland, Sweden and Norway. In the UK the slow market from earlier this year continued in the third quarter with lower activity than expected. The sales of upgraded products like PMB and Emulsions continued to grow both in the Nordic area and the UK, compensating for some of the lower sales of normal grades. The supplies of polymer modified emulsions have now come to the end of their season in all markets. The Western Europe sales performance in the third quarter was seriously affected by the delay in the Harburg refinery start up, which took place in August. The Harburg bitumen truck loading facility has now been in full use since the end of September. Third quarter external sales were SEK 1,989 million (2,624) as a consequence of the lower crude oil price levels and a weaker British pound. Operating result before depreciation (EBITDA) was SEK 311 million (406), including an unrealised hedge effect of SEK +37 million (+5). 4 SEGMENT BUSINESS AREA SEK million NET SALES NAPHTHENICS Jul-Sep Jan-Sep Full year External sales 1,693 2,134 4,800 6,679 8,364 Internal sales ,064 1,277 NET SALES NAPHTHENICS 1,694 2,560 4,801 7,743 9,641 BITUMEN External sales 1,989 2,624 4,167 5,884 7,185 Internal sales NET SALES BITUMEN 2,008 2,625 4,215 5,935 7,236 OTHER/ELIMINATIONS External sales Eliminations ,115-1,328 NET SALES OTHER TOTAL NET SALES 3,813 4,992 9,341 13,107 16,248 EBITDA Naphthenics Bitumen Other/eliminations TOTAL EBITDA 2, ,000 1,265 1) Other net sales /2016 relates mainly to external crude sales in relation to Nynas supply contract in Antwerp. 2) Excluding non-recurring items. 3) Alternative Performance Measure, refer to page 16 for definitions. 5 Cash flow In the third quarter cash flow from operating activities totalled SEK 255 million (906) explained by lower earnings and unchanged working capital partly offset by lower investments. Working capital was lower as an effect of lower oil prices but this was offset by higher crude oil inventory volume for the Harburg start-up. Cash capital expenditures totalled SEK 145 million (249) for the third quarter, with the main portion relating to the Harburg conversion project including construction of a bitumen truck loading station. Cash flow from operating activities for the period January to September amounted to SEK -581 million (520). Operating cash flow last year was positively impacted by the then lower oil price compared with 2014, while operating cash flow this year follows the normal seasonal pattern with a peak in the third quarter. STATEMENT OF CASH FLOWS SEK million Jul-Sep Jan-Sep Full year Cash flow from operating activities before changes in working capital Change in working capital ,119 CASH FLOW FROM OPERATING ACTIVITIES ,763 Cash flow from investing activities ,484 CASH FLOW AFTER INVESTING ACTIVITIES , Financial position The seasonal pattern of Nynas bitumen business is reflected in the development of the financial position during the financial period. Working capital at the end of September 2016 increased by SEK 960 million since the end of last year due to seasonal impact. Working capital compared to the same period last year decreased by SEK 33 million. Management of inventories less crude payable is a focus area. Inventory less crude payable is lower compared to the same period last year by SEK 124 million, but it is SEK 340 million higher compared to the end of the year. This is a normal pattern reflecting the bitumen season. Current receivables at the end of September 2016 reached SEK 2,667 million, which is on the same level compared to last year. Net debt increased by SEK 1,211 million compared with last year, primarily reflecting the high capital expenditure level and also a higher pension obligation included in longterm interest-bearing liabilities. Long-term interest-bearing liabilities includes defined pension obligations of SEK 988 million (380). Due to the decrease in discount rates an actuarial loss has been accounted for of SEK -369 million (15) against other comprehensive income (equity) less deferred tax of SEK 95 million (-4). The remaining increase is explained by the takeover of the Harburg North pension obligation. BALANCE SHEET SEK million 30 Sep Sep 31 Dec Tangible and intangible assets 5,400 4,382 4,885 Financial assets Inventory 3,144 2,841 2,311 Current receivables 2,667 2,693 2,027 Cash and bank deposit TOTAL ASSETS 12,004 10,653 10,477 Equity 3,710 3,691 3,823 Long-term interest-bearing liabilities 4,977 4, Long-term non-interest-bearing liabilities Long-term non-interest-bearing provisions Current interest-bearing liabilities ,078 Current non-interest-bearing liabilities 2,377 2,067 1,864 Short-term non-interest-bearing provisions TOTAL EQUITY & LIABILITIES 12,004 10,653 10,477 NET DEBT 1 5,022 3,811 3,117 WORKING CAPITAL 1 3,434 3,467 2,474 1) Alternative Performance Measure, refer to page 16 for definitions. 7 NYNAS CONSOLIDATED GROUP Quarterly overview SEK million Q Q Q Q4 Q3 Q2 Q1 Q Net sales 3,813 3,318 2,210 3,141 4,992 4,907 3,208 4,985 Operating result before depreciation (EBITDA) Result after financial items Net income Cash flow from operating activities , Cash flow after financing activities , Cash capital expenditures Net debt 5,022 4,758 4,194 3,117 3,811 4,454 4,404 3,421 Working capital 3,434 3,178 3,096 2,474 3,467 3,918 4,222 3,654 Return on average capital employed, % Equity to assets ratio, % Number of full-time employees 1,019 1, NYNAS CONSOLIDATED GROUP Income statement and statement of comprehensive income SEK million Jul-Sep 2016 Jul-Sep Jan-Sep 2016 Jan-Sep Full year INCOME STATEMENT Net sales 3,813 4,992 9,341 13,107 16,248 Cost of sales -2,845-3,739-6,515-9,854-12,252 GROSS RESULT 968 1,253 2,826 3,253 3,996 Other income and value changes Distribution costs ,140-2,098-2,703 Administrative expenses Share of profit/loss of joint ventures Other operating income Other operating expenses OPERATING RESULT Finance income Finance costs NET FINANCIAL ITEMS NET INCOME BEFORE TAX Tax NET INCOME FOR THE YEAR/PERIOD STATEMENT OF COMPREHENSIVE INCOME Net income for the year/period Other comprehensive income Items that will be reclassified to the income statement Translation differences Currency hedges of net investments Income tax associated with currency hedges of net investments Cash flow hedges Income tax associated with cash flow hedges TOTAL AMOUNT THAT WILL BE RECLASSIFIED TO THE INCOME STATEMENT Items that will not be reclassified to the income statement Actuarial gains/losses pensions Income tax associated with actuarial gains/losses pensions TOTAL AMOUNT THAT WILL NOT BE RECLASSIFIED TO THE INCOME STATEMENT Other comprehensive income for the year/period, net after tax COMPREHENSIVE INCOME Attributable to owners of the Parent Company NYNAS CONSOLIDATED GROUP Statement of financial position SEK million 30 Sep Sep 31 Dec Intangible assets Tangible assets 5,349 4,323 4,824 Investments in associates Derivative instruments Long-term receivables Deferred tax assets TOTAL FIXED ASSETS 5,825 4,780 5,189 Inventories 3,144 2,841 2,311 Account receivables 1,666 1,902 1,103 Derivative instruments Tax receivables Other current receivables Cash and cash equivalents TOTAL CURRENT ASSETS 6,179 5,873 5,288 TOTAL ASSETS 12,004 10,653 10,477 EQUITY 3,710 3,691 3,823 Liabilities to credit institutions 3,988 3, Provisions for pensions TOTAL LONG-TERM INTEREST-BEARING LIABILITIES 4,977 4, Other long-term liabilities Derivative instruments Deferred tax liability Provisions for pensions Other provisions TOTAL LONG-TERM NON-INTEREST-BEARING LIABILITIES Liabilities to credit institutions ,078 Accounts payable Liabilities to joint ventures Derivative instruments Tax liabilities Other current liabilities Accrued liabilities and deferred income 1, Other provisions TOTAL CURRENT LIABILITIES 2,887 2,310 5,280 TOTAL EQUITY AND LIABILITIES 12,004 10,653 10,477 10 NYNAS CONSOLIDATED GROUP Statement of changes in equity SEK million Share capital Defined benefit pension plans Cash flow hedges Currency hedge of net investments Translation reserve Retained earnings Total equity OPENING BALANCE JAN 1, ,648 3,425 Net income for the period Other comprehensive income COMPREHENSIVE INCOME DIVIDEND PAID CLOSING BALANCE SEP 30, ,993 3,691 OPENING BALANCE JAN 1, ,994 3,822 Net income for the period Other comprehensive income COMPREHENSIVE INCOME DIVIDEND PAID CLOSING BALANCE SEP 30, ,204 3,710 11 NYNAS CONSOLIDATED GROUP Cash flow statement SEK million Jul-Sep 2016 Jul-Sep Jan-Sep 2016 Jan-Sep Full year OPERATING ACTIVITIES Net income before tax Adjustment for items not included in the cash flow: - Depreciation, amortisation and write-down of assets Provisions Unrealised exchange differences Other Taxes paid/received CASH FLOW FROM OPERATING ACTIVITIES BEFORE CHANGES IN WORKING CAPITAL Cash flow from changes in working capital ,119 CASH FLOW FROM OPERATING ACTIVITIES ,763 INVESTMENT ACTIVITIES - Acquisition of intangible assets Acquisition of tangible fixed assets ,460 - Investment in financial assets and environmental liabilities - Disposal/reduction of financial assets CASH FLOW FROM INVESTMENT ACTIVITIES ,484 FINANCING ACTIVITIES Change in pension liability Proceeds from borrowings , CASH FLOW FROM FINANCING ACTIVITIES , CASH FLOW FOR THE YEAR/PERIOD CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR/PERIOD Exchange differences CASH & CASH EQUIVALENTS AT END OF YEAR/PERIOD ) Alternative Performance Measure, refer to page 16 for definitions. 12 NYNAS PARENT COMPANY Condensed financial statements, Parent Company SEK million Jul-Sep 2016 Jul-Sep Jan-Sep 2016 Jan-Sep Full year CONDENSED INCOME STATEMENT Net sales 3,254 4,158 8,060 11,064 13,662 OPERATING RESULT Finance income Finance costs NET FINANCIAL ITEMS Appropriations 321 NET INCOME BEFORE TAX Tax NET INCOME FOR THE YEAR/PERIOD SEK million 30 Sep Sep 31 Dec CONDENSED BALANCE SHEET Fixed assets 5,967 4,928 5,560 Inventories 2,451 2,185 1,701 Current receivables 1,970 2,475 1,757 Cash and cash equivalents and short-term investments TOTAL ASSETS 10,476 10,100 9,558 Equity 1,784 2,188 1,733 Untaxed reserves Long-term interest-bearing liabilities 4,155 3, Long-term non-interest-bearing liabilities Current interest-bearing liabilities 2,125 1,647 5,042 Current non-interest-bearing liabilities 1,867 1,363 1,438 TOTAL EQUITY AND LIABILITIES 10,476 10,100 9,558 13 NYNAS PARENT COMPANY Notes to the financial statements Note 1. Company information Nynas Group comprises the Parent Company Nynas AB (publ), its subsidiaries and holdings in joint ventures. The Parent Company is incorporated in Sweden and its registered office is in Stockholm. The address of the head office is Lindetorpsvägen 7, SE Johanneshov. Nynas AB is per cent owned by Neste AB, reg. no , registered office in Stockholm, Sweden, and per cent by PDV Europa B.V., reg. no , registered office in The Hague, Netherlands. Neste AB is part of a group in which Neste Oyj, reg. no. FI with registered office in Espoo, Finland, is the ultimate parent. PDV Europa B.V, is part of a group in which Petróleos de Venezuela S.A., reg. no , registered office in Caracas, Venezuela, is the ultimate parent. Note 2. Accounting and valuation policies As in the annual accounts for, Nynas consolidated financial statements 2016 have been prepared in accordance with International Financial Reporting Standards (IFRS) and, given the nature of Nynas transactions, with IFRS as adopted by the European Union. The Parent Company Nynas AB s financial statements have been prepared in accordance with the Swedish Annual Reports Act as well as standard RFR 2 Accounting for Legal Entities and other statements issued by the Swedish Financial Reporting Board. This report has been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies adopted are consistent with those of the previous financial year. The Group s operations are organised in two business areas, Bitumen and Naphthenics. The market organisation also reflects this structure. In accordance with IFRS 8, segment information is presented only on the basis of the consolidated financial statements. Group staff functions and group-wide functions are allocated based on those items that are directly attributable to the segment and the relevant portion
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