Neste Oyj (NESTE) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Q4 2022 Neste Corporation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Anssi Tammilehto. Please go ahead.

Thank you, and good afternoon, ladies and gentlemen. Welcome to this conference call to discuss Neste's fourth quarter results published this morning. I am Anssi Tammilehto, Head of IR at Neste. And here with me on the call are President and CEO, Matti Lehmus, CFO, Martti Ala-Harkonen; and the business unit heads, Karl Newbery from Renewables Platform; Markku Korvenranta of Oil Products; and Panu Kopra of Marketing & Services. We will be referring to the presentation that can be found on our website. As always, please pay attention to the disclaimer since we will be making forward-looking statements in this call. With these remarks, I would like to hand over to our President and CEO, Matti Lehmus to start with the presentation. Matti, please go ahead.

Thank you. And a very good afternoon also on my behalf. It's great to have you all participating in the call. Neste's strong performance continued in the fourth quarter. The war in Ukraine continued to have a significant impact on international energy markets, leading to volatile oil products and natural gas prices in Europe. In this turbulent market environment, Neste's operational and financial performance was very good in the fourth quarter. And I would especially like to thank the Neste personnel for making this happen. Moving now to the Page 4 and the fourth quarter 2022 in brief. We had an excellent year in all our businesses as our strong performance continued in the exceptional fourth quarter markets. The group's comparable EBITDA was EUR 894 million compared to EUR 591 million last year. Renewable Products performed well, and we were able to continue optimizing our sales mix also towards the end of the year, while benefiting simultaneously from somewhat lower feed of costs. Our comparable sales margin averaged $783 per tonne, which was higher than in the corresponding period last year and in line with our fourth quarter guidance. This was a good achievement as margin hedging continues to have a negative impact on the sales margin. Sales volumes again reached a high level of 779 kilo tonnes, approximately at the same level as in the fourth quarter of 2021, despite the scheduled maintenance at the Rotterdam refinery. Rotterdam refinery also had an unplanned shutdown at the end of the quarter, which did not impact the fourth quarter sales volumes. The share of waste and residue feedstock remained very high at 96%. The Oil Products, strong result was again driven by the exceptionally high oil product margins and particularly diesel margin was high. The use of Russian crude was 3% in the fourth quarter, total input with all remaining inventories now used by the end of the quarter. Utility costs decreased towards the end of the year, and we continue to optimize the use of propane. Sales volumes increased from the third quarter but were on a lower level than in the fourth quarter of 2021. Also, our Marketing & Services segment performed very well in the fourth quarter, and we were able to gain market share and our unit margins remain at a good level. During the fourth quarter, we took many important steps in our strategy execution, and I will come back to that later in the presentation. Let me then turn to Slide 5 on safety. Safety performance continues to be the key focus area in Neste. During 2022, we were unable to improve our total recordable incident frequency as it increased from the 21% level of 1.4 to 2. In process safety, we were able to maintain the performance with a process safety event rate of 1.4. We continue our focused efforts to ensure a continuous improvement in our safety performance. Then turning to the financial targets. I note that our financial position remains solid. We reached an after-tax ROA of 30.1% on a rolling 12-month basis, while our target is 15% minimum. At the end of December, our leverage ratio was 13.9%, well within the targeted area of below 40%. And -- this solid financial position enables the implementation of our growth strategy going forward. With these remarks, I'll hand over to Martti to discuss the financials in more detail.

Thank you, Matti. The fourth quarter was indeed performed in very volatile market conditions like the whole year of 2022. So let's now have a little bit closer look into the group figures, and I will take some highlights from our fourth quarter and full year 2022 figures. To start with, we delivered another high revenue quarter in the fourth quarter. Our fourth quarter revenue was EUR 6.6 billion versus EUR 5 billion a year earlier. That's a revenue increasing by about EUR 1.6 billion or 32% compared to the previous year. The growth resulted mainly from higher market and sales prices, which actually had a positive impact of actually the same amount approximately EUR 1.6 billion on the revenue compared to the last year earlier. Like Matti already mentioned, what's more important, of course, is that we posted a strong comparable EBITDA of EUR 894 million in the fourth quarter. This is up by about 51% from the EUR 591 million recorded a year earlier. Our renewable products continued to perform strongly with comparable EBITDA at EUR 415 million. This was supported by a strong sales performance and an optimized sales mix. Of notice also that we were able to optimize our sales mix towards the end of the quarter, while benefiting simultaneously from somewhat lower feedstock costs, particularly at the very end of the year. Also, our oil products continue to perform strongly, contributing EUR 450 million to comparable EBITDA versus EUR 168 million a year earlier. Finally, our Marketing & Services continued its good performance with comparable EBITDA at EUR 21 million, although impacted by inventory losses in line with falling oil product prices. After the full year results for 2022, Neste's revenue reached EUR 25.7 billion versus EUR 15.2 billion a year earlier. -- up by about 70% year-on-year. Higher market and sales prices contributed about EUR 7.5 billion of the revenue increase, while higher sales volume of about EUR 2.1 billion and a stronger U.S. dollar, about EUR 1.2 billion. The group's full year comparable EBITDA reached an all-time high of EUR 3.54 billion compared to about EUR 1.92 billion in 2021. This is an improvement by about 84%. It is worth highlighting that all our businesses improved their performance last year year-on-year and actually all also made an all-time high result. The comparable EBITDA of renewable products reached EUR 1.76 billion versus EUR 1.46 billion a year. A year earlier, there's an improvement by about 21% in a year of multiple scheduled plant shutdowns. As to Oil Products, the main product margins improved significantly during the year and oil products comparable EBITDA reached EUR 1.65 billion. Also, Marketing & Services posted a record year with comparable EBITDA at EUR 126 million. And of note also that the comparable return on net assets was very high in all our businesses. A particular highlight of the fourth quarter was the clear improvement in our cash flow and the reduction in net working capital compared to the previous quarters of last year. We generated free cash flow of EUR 596 million in the fourth quarter, while succeeding well in releasing EUR 601 million from net working capital, mainly with the tight optimization of our raw material and product cargoes and inventories towards the end of the year. This is visible in our balance sheet at the lower inventory level compared to the end of the third quarter last year. Of note also that the turn rate of the group's net working capital in days outstanding was 35.4 days on a rolling 12-month basis at the end of last year. This is also a clear improvement from 43.7 days from the end of the third quarter last year. Finally, our comparable earnings per share, which is the basis for our dividend policy was EUR 0.84 per share in the fourth quarter and EUR 3.04 for the full year of 2022. This is almost double compared to the EUR 1.54 for the full year of 2021. The Board proposes to the Annual General Meeting a maximum dividend of EUR 1.52 per share versus EUR 0.82 per share year earlier, consisting of an ordinary dividend of EUR 1.2 per share an extraordinary dividend of EUR 0.25 per share and a discretionary second extraordinary dividend of EUR 0.25 per share, total in a maximum of EUR 1.167 million. That is almost EUR 1.2 billion versus EUR 630 million a year earlier. When we then turn to and look at the fourth quarter comparison bridged by business, we can see that the comparable EBITDA increased year-on-year in the fourth quarter was driven by oil products, which had a EUR 283 million positive impact. This was a result of the exceptional refining market. However, as I noted earlier, we are also very pleased with the performance achieved at both our Renewable Products and Marketing and Services businesses. When we're on the next page, look at the same fourth quarter comparison bridge by profit driver, we note that our sales margin improvement contributed in total EUR 310 million to our performance improvement in the fourth quarter. On the renewable products side, we achieved a good sales margin, while Oil Products margins were driven by the high diesel margins during the quarter. Our sales volumes in renewable products were a bit above last year's fourth quarter level at 779,000 tons and clearly above our third quarter sales volume of 698,000 tons as we had guided earlier. In Oil Products, our sales volume was somewhat lower than the previous year. The stronger U.S. dollar, excluding FX hedges, had a positive impact of EUR 96 million on the comparable EBITDA year-on-year. Our fixed costs were EUR 96 million higher in the fourth quarter of last year, mainly due to our growth in capacity projects and ramp-up preparations at the renewables side of our business. And then moving to the next page. When we look at the full year 2022 bridge by driver, it is very much the same story, particularly the sales margin improvement, but also FX changes and for the full year, with delight also sales volume improvement, these factors were all driving the improvement in the group's comparable EBITDA, while on the other hand, our growth strategy execution increased our fixed costs. Other items include also the divestment of our base oil business. To summarize and close up from my side, we are overall very pleased with both our financial as well as operational performance in the fourth quarter as well as the full year of 2022. At the same time, we made significant progress in the execution of our growth strategy during the year, thus continuing our successful transformation. Despite the volatile market conditions prevailing into the current year, this provides a very interesting starting point into this year 2023. And with these remarks, I'll hand over to Carl to discuss more closely our Renewable Products performance.

Thank you, Martti. This is Carl, and good morning, good afternoon to everyone on the line. So let me take you through the RP figures. So 22 was a record year for renewables products as we reached a comparable EBITDA of EUR 1.762 billion. I would really like to start by thanking all of our colleagues contributing towards the renewables business in reaching this excellent result. It's my belief that it's the result of our strong values, enabling CMS cooperation across the organizations as well as a very efficient end-to-end steering to drive value. If we then move to -- on to look at the fourth quarter. We again had a strong quarter in RP reaching an EBITDA of EUR 450 million, which was roughly the same as 1 year back and EUR 26 million up from the previous quarter's EBITDA of EUR 389 million. The comparable sales margin was very strong at $783 per metric ton, slightly up from the margin 1 year back and in the upper part of the guided range of $700 to $800 per metric ton. This was achieved through successful feedstock optimization with a high share of waste residue and decreasing feed of market price as well as a strong sales performance and optimization towards the end of the year. Sales volumes were high at 779 kiloton, which corresponds to the volumes in the fourth quarter 1 year back, but on the other hand, up by more than 80 kilotons quarter-on-quarter despite the long turnaround in Rotterdam. At the end of the quarter, on the 22nd of December, we also had a fire at the Rotterdam refinery, which resulted in Rotterdam being down for a month. The volume impact of this unplanned shutdown did not impact the fourth quarter, but has an impact on the first quarter volumes. Investments came down quarter-on-quarter, which remain elevated at EUR 370 million, almost 75% up year-on-year as we continue to invest in growth. Our net assets have grown over the past year by almost EUR 1.7 billion as we continue to execute our growth strategy, while our RONA remained strong at 26.6%. Our CapEx expenditure will remain high over the coming year as we continue to invest in our production capabilities and product flexibilities in Rotterdam, Singapore and Martinez. If we then move to the next slide, let me take you through the EBITDA bridge between Q3 2021 and Q3 2022. So as mentioned, volumes and margins improved marginally with the combined impact of approximately EUR 4 million compared to result 1 year back as we continue to drive strong margin management. The main changes from the result 1 year back is coming from the FX, where the strong dollar contributed towards roughly EUR 70 million stronger results year-on-year. On the other hand, our fixed costs grew significantly year-on-year as we continue to scale up our business ahead of the Singapore expansion and Martinez renewables. So year-on-year, our quarterly EBITDA ended up EUR 3 million below the Q4 EBITDA in 2021 at EUR 415 million. If we then turn to the feedstocks, let's look at how the market developed over the quarter. So the big picture is that visible oils have come down substantially from the peaks seen in Q2 and the forward market structure has weakened. The market seems to have found good support at these levels and has been trading range bond. Western residual spreads have softened over the course of the second half as the market stabilized after drop individual to complex. We, however, expect waste and residual markets to remain tight as demand growth continues to be robust. While spreads though likely will need to stay competitive compared to alternative feedstocks. If we then turn to the next page and have a look at the U.S. credit prices. So here, we continue to see a divided story. So while the RFS before in prices remain relatively strong over the course of the quarter, the LCFS prices have continued to weaken quarter-on-quarter. If you start by looking at the rent credit prices, they reached an almost EUR 200 per gallon during the quarter but dropped deeply then on the back of the announcement from the renewed RVOs by the EPA as the market was disappointed with the change. However, the market then swiftly recovered and came back to $1.70 per gallon range. The market seems relatively stable and supported these levels on the back of current been heating oil spreads and is currently trading around EUR 160 per gallon. On the other hand, LCFS prices continued to weaken quarter-on-quarter and dropped to $66 per metric ton from $86 in Q3. Low carbon credit generation continued to be robust on the back of growing credit generation from renewable natural gas and electricity as well as growing R&D capacity in the U.S. The LCFS price seems to have stabilized now and are currently trading around $0.60 per gallon. The carbon intensity target in California bill, however, continued to grow annually and similar programs are being planned in several states currently underpinning the need for more low carbon solutions. Let's then go to the sales margin before handing over to Marco and Oil Products. So the comparable sales margin average, as mentioned at $783 per metric ton, slightly up from $779 in the fourth quarter '21. This was supported by a strong sales performance, including an optimized sales mix as well as excellent performance in our feedstock supply. Also, production cost has had a positive impact on sales margin as energy costs started trending down towards the end of last year. On the other hand, we also faced a significant negative impact in our margin hedging. So while feedstock prices came off, the benefit from the wider spread between MEGAs and diesel was balanced by losses in our margin hedges. Our 100% Neste -- my renewable lease offers were up in the quarter and reached 30% of our RD sales as we continue to build our brand in market to reach our -- reach out towards the end customers. Then finally, as previously mentioned, the turnaround at our Rotterdam refinery in the early part of the quarter as well as the unplanned shutdown at the Rotterdam refinery due to the fire that occurred in December 22, drove down our utilization year-on-year. This concludes renewables products part. Thanks on my behalf, and over to you, Marko.

So thanks, Carl. Good afternoon all. First, I would like to thank my Oil Products colleagues for making these all-time high annual results possible. Let's look first at the comparable EBITDA development. We had again a strong quarter in the tight refining market. The comparable EBITDA was EUR 450 million compared to EUR 168 million the year before and EUR 537 million in Q3 2022. Sales volume this quarter was 3 million tonnes, down from 3.5 million tonnes the year before and up from 2.9 million tons in Q3. The total refining margin was USD 23.5 per barrel, up from USD 10 per barrel compared to Q4 2021 and down USD 4.5 per barrel from the previous quarter. The average Urals share of the feed was 3% in Q4 2022, reflecting our decision to stop making new contracts for Russian origin feedstocks. The last Urals cargo was delivered in July 2022, and we have now consumed all remaining Uros barrels from the inventory and thus the share will be 0 from now on. Comparable return on net asset increased from 3.2% to 48% compared to the previous 12-month period. we take the second slide. Now over to the EBITDA bridge. Total refining margin and FX changes contributed to the improved result compared to the Q4 last year, while volume and fixed cost had a negative effect. Moving over to the next slide. On this slide, you will see the development of the main market drivers. The disruption caused by the war in Ukraine and general supply and demand situation continued to drive volatility of all products. Diesel margin peaked in October after which is declined towards the year-end. Gasoline followed the same pattern with an uptick in December. Heavy fuel oil margin had a positive impact on total refining margin during Q4. Moving over to the next slide. And then about the development of refining margin. After being stable for a good part of 2021 and the first quarter of 2022 at around USD 10 per barrel, the margin shot up to USD 30 per barrel range in Q2 and stayed there over the summer. Q4 was strong but somewhat down from Q2, Q3 levels. The average refinery utilization rate was 78% compared to 93% in the fourth quarter of 2021 and 80% in the previous quarter. The utilization rate in the last quarter of 2022 was burdened by the planned unit turnarounds. Refinery production costs were $8.8 per barrel compared to $6.2 per barrel in Q4 2021 and USD 72 per barrel in comparison to the previous quarter. The volatility of production cost is mainly due to the cost of utilities. With this, I'm handing over to Panu for Marketing & Services presentation.

Thank you, Marco. Hello, this is Panu Kopra. Solid financial performance continued in Marketing & Services in Q4. In spite of rapidly increasing supply prices, we were able to mitigate stock losses quite well and landed all almost a comparable year level. This was mainly due to excellent pricing, both in network and B2B pricing segments. EUR 126 million EBITDA is our best ever yearly result and return on net assets increased over 40 pro same time, our market shares, both in diesel and gasoline developed very well in Finland and moderately in Baltic countries as well. However, gasoline demand has been decreasing in second half of the last year, mainly due to high pump prices and high inflation. Especially in Baltics demand was decreased due to very high inflation in all 3 countries. GTA-1 volumes increased more than 35% compared to year before. LFO and Banca volumes continued healthy development as well. We have expanded net availability at station network in Finland during the last 2 years. And last year, we expanded also in the Baltics, and I'm happy that volumes have increased over 35% compared to last year. Last time I informed that we have launched new EV charging service for our fleet customers and first results are positive. In addition to it, we also opened in December 1 public high-power charging station in Mid-Finland, and it was warmly welcomed by our private customers. This was shortly about Q4 and last year in Marketing & Services. Handing back to Matti.

Thank you, Panu. So let's then move on to the current topics. First, a few words on our strategy execution during the fourth quarter as we continue to make good progress in many important areas. The Singapore renewables capacity expansion project reached mechanical completion by the end of 2022 and continues to be on schedule for start-up at the end of the first quarter 2023. The Rotterdam expansion project is progressing well. And also the SAF optionality project is on track for completion at the end of the year, increasing our SAF capacity by 0.5 million tonnes in the beginning of 2024. The joint operation with Margins Renewables is expected to start up its Phase I in early 2023, so in the very near-term future with pretreatment capabilities expected for the second half of 2023 and full production capacity of 2.1 million tonnes per year by the end of 2023. I also note that in the execution of our feedstock strategy, we made an important step by closing the acquisition of sequential in January and thereby strengthening our used cooking oil collection platform in the United States. These are just a few examples of our strategy execution that makes us closer to becoming a global leader in renewable and circular solutions. As an outlook for the first quarter, we see the following. First of all, we expect volatility in the oil products and renewable feedstock markets to remain high, making the forecasting of margins challenging in both renewable products and oil products. In Renewable Products, the sales volumes are expected to be lower than in the previous quarter. The waste and residue markets are anticipated to remain tight and volatile. Our renewable sales margin is expected to be within the range of $825 to $925 per tonne, supported by attractive waste and residue prices in the beginning of the year. Utilization rates of our renewable production facilities are forecast to remain high, except for the 1 month downtime in Rotterdam. The Rotterdam downtime is expected to have a negative impact of approximately EUR 85 million from the segment's full year comparable EBITDA based on the estimated production losses and repair costs, mainly affecting the first quarter. The market in oil products remains volatile and impacted by the war in Ukraine. Based on the current forward markets, our first quarter total refining margin is expected to remain solid, but somewhat lower compared to the fourth quarter of 2022. The first quarter sales volumes are forecast to be at approximately the same level as in the previous quarter. In Marketing & Services, the sales volumes and unit margins are expected to follow the previous year's seasonality pattern in the first quarter. The slowing economy is expected to have some negative impact on the overall demand. Let me then turn to other topics for 2023. We continue to execute our strategy and to invest in our business growth, and we estimate approximately EUR 1.8 billion in CapEx. Possible M&A is excluded from this figure, which includes as a main contributor, our growth projects in Singapore, in Martinez, and in Rotterdam. This concludes the presentation, and we would now be happy to take your questions.

[Operator Instructions] The question comes from the line of Erwan Kerouredan from RBC.

Congratulations on the strong set of results this morning. I got 2 questions on margins and then one on CapEx, please. So on margins, so on the renewable product sales margin, the first quarter guidance slide in the presentation indicated includes Martin is, can you just clarify the upside or downside coming from the JV with Marathon and the ramp-up. Obviously, there's some impact on the feedstock side, but are there other elements at play in this margin assumption? -- from Martti specifically? And then maybe more broadly, what are the biggest drivers of variation within the range of $8.25 to $925 per ton that you provided, does it have to do with feedstock uncertainty hedging. That would be helpful. And then finally, on CapEx -- how much is inflation, especially in Singapore in the EUR 1.8 billion CapEx figure that you've put forward for next year? These are my questions.

Okay. Carl here, thank you for your questions. So I'll start with the margin questions. And -- and so if you look at the Q1 margin and the impact from the Martinez, so we are -- Martinez will be starting up here in the Q1. But the volumes coming from Martinez are still rather small. So the impact will be quite limited in impacting our margins. As such, as previously communicated as well, during this first phase, we will not have the pretreatment unit available. So we expect the margins to be rather modest compared to our margins and therefore, having a diluting impact in this first quarter. Then looking at the different drivers for the margin in Q1. So I would say that it is the traditional element. It's the feedstock pricing, Western residue premiums over the beds. And of course, the differential between the Veg complex and the petroleum complex has an impact. And then, of course, the diesel price in general as well has a significant impact on our margin here. Then I would say, over the course of the last few quarters, the production cost and the energy cost as such has been also a significant driver for our margin creator. So I would say that these are really the 3 main elements. So the feedstocks, the diesel price and then the cost of energy.

And I will take the second question, which was on the CapEx outlook for 2023. As a general comment, as you have followed, Neste, you know that we have a number of ongoing growth investments. So the majority of that EUR 1.8 billion CapEx is related to renewable products and especially the growth investments in that segment. Within that, you had a specific question on the Singapore expansion, the CapEx -- overall CapEx continues to be aligned with what we also disclosed at the previous quarter, so EUR 1.65 billion. The tail of that is, of course, one of the CapEx elements in this year's CapEx forecast. I also note 2, for example, other major projects that are included in this number. We have the Rotterdam capacity expansion, which is a significant driver for CapEx in 2023 and also the Martinez Phase I and II, which also then are included in this year's CapEx forecast. Of course, you will also find in the overall number than the normal maintenance for both renewable and all products...

So I understand there's no inflation, right, taking into account in this EUR 1.8 billion CapEx figure across all facilities.

This is basically our estimate at the moment of the full year's CapEx. It, of course, takes into account the CapEx forecast for this year. And in some projects, we have, of course, seen also the inflation. So that is included in the numbers.

Yes, it includes the inflation impact in the number provided.

And the question comes from the line of Pablo Cuadrado from Kepler Cheuvreux.

Yes. Just 3 quick questions from my side. The first one about -- you can share a little bit your views about the LSS credits in California. I mean, you were explaining before, and we have seen that clearly, they have been reaching 5-year lows recently. And my question is more link. If you have had an indication if local authorities there that may be thinking to intervening in the market to limit the credit surplus? Or what's either be your view there? Second question would be just quickly on the working capital. I reckon that Q4 was better as we were expecting with an inflow, but still overall 2022 was quite a relevant negative impact on working capital, EUR 1.3 billion. So the question will be more on your expectation for this year still with ongoing investments on Singapore, Martinez. And clearly, assuming that basically the commodity environment remains where we are right now either your view on the working capital performance for 2023? And the last one, quickly on the fixed cost, you are guiding EUR 10 million increase for the renewal product for Q1 versus Q4. So that will hit some kind of EUR 200 million of fixed growth for Q1. My question here, do you think that's, let's say, a good reference that we should assume for the next quarters look in 2023, assuming Singapore and Martinez, so indicating, let's say, EUR 200 million per quarter fixed cost and EUR 800 million on annual basis.

Pablo, Carl here. I'll try to take the first question, and then I think Martti and Martin will take the follow-on. So with regards to LCFS credits, as mentioned, it seems for the time being that we might have found some kind of bottom here, but it remains, of course, to be seen how it develops. I think our understanding is that there are discussions currently in California about the appropriate level of LCFS credits. We have seen a lot of different ways of generating credits now and impacting the values to a level that maybe had not been expected. So we do not have any detailed information on that. But we know that there are some kind of discussions ongoing around this team at what is appropriate level for the LCFS credits. But as I said -- commented earlier as well, we see that the program is clear and it has a growing trajection, and we are also seeing these other LCFS programs now being developed in other parts of the United States and Canada.

Thank you, Pablo, for the question. I'll try to answer the net working capital question. First, starting with looking backwards based into 2022, and it's true in the first half, particularly after the Ukraine War program, as we explained then, we had to reinvent our supplies and logistics for the oil products, raw material for the whole product side. And we had to also pile up inventories for the Rotterdam and Singapore shutdowns. And at the same time, we saw a big increase in overall market prices. So those resulted. So at the end of the first half of last year, we were at a negative about EUR 2.3 billion. And then we started also -- of course, we knew that this was a fact of the circumstances, but we started a program to try and drive that downwards. And we succeeded quite well. I'm quite happy 900 a bit north of EUR 900 million, EUR 94 million, EUR 347 million of release in the third quarter and $61 million in the fourth quarter. So we ended up nevertheless, at a negative of EUR 1.36 billion for last year, which is a big figure, of course. Looking now into this year and a little bit also to last year. So a positive thing throughout the endeavor has been that that's why I also highlighted the turn rates, which we are following. So considering also the volume increase in our sales and so forth, we have been able to keep the turn rates at previous year's level. And now when I look into this year, we will be very much also following the turn rates. But if I think of the absolute figures, we do forecast an increase in our net working capital, particularly in the early part of the year when we will ramping up our production and we will tie more into the inventories than we can realize yet in all the sales then in the second half, we will be fully ramped up with our new capacities, and we have a better possibility to also drive the net working capital forward. So once more to summarize, I do foresee that we will have an increased overall net working capital level this year just because of our increased levels of production and capacity is coming alive and also some new business models, particularly on the aviation side, on the SAF side. However, we will try and drive it as carefully as possible, optimizing our business models and looking into the turn rates and particularly in the second half of the year after the ramp-up period to stabilize that and possibly also reduce.

And then this is Martti. I'll take the third question, Pablo, which was on fixed costs. And just in general, I'll start with a comment that obviously, fixed cost is one very big focus area. We have an operational excellence program. We are following very closely the fixed cost development. And at the same time, like we have observed over '22, especially in renewables, it has been an area where we have built up also our capabilities as we are expecting our major growth projects to start up now also end of Q1 with both Singapore expansion and also the first phase of the Martinez joint operation. So we are obviously not giving any exact guidance yet on how that will then pan out in RP. But let's say, in general, the emphasis on -- after this building up the capabilities also then to stabilize the trend going forward...

Our next question comes from the line of Artem Beletski from SEB.

So the first one would be actually on term agreements and the outcome of negotiations basically, I guess, which have been settled towards year-end. Could you maybe comment in general, how satisfied you have been with this new deals and also desire any meaningful impact on Q1 margin guidance. Then the second one is relating to staff and basically volume outlook for this year. I guess you should have quite good visibility on what is happening there. And maybe you could comment how big increase you are anticipating in terms of volumes versus last year. And the final one is just a housekeeping question, what comes to maintenance CapEx for the group. How does it look like as you have basically ramped up, so say, gross investments what comes to Singapore markets and also water ramp during this year.

Okay. Thanks, Artem. Carl here. So I'll take the first question on the term agreement. So I would say that we reached our objectives, our targets for the term agreements, and we have contracted a bit more than 75%. So very much in line with what we had expected and what we had planned. So we are going into the year with the portfolio that we had planned to have.

And then this is Matti. I can take the second one on the SAS. So obviously, like I commented earlier, we are now targeting to start up our Singapore expansion end of the first quarter. This is an important milestone then also, if you think of the aviation business because it increases our capabilities then the flexibility to produce larger quantities of SAF. Obviously, then it will take time to ramp up the production to also fill the inventories, et cetera. So I would say then it's in particular in the second half of the year, where we, of course, will target to grow the SAF sales. That's basically how we are looking at this year.

This is Martin. Maybe I try to answer the maintenance CapEx. So of course, always in our capital allocation, sort of first priority is to take good care of our existing assets. And last year, our maintenance investments accounted to EUR 249 million. It was down from 2021 of EUR 411 million where we have particularly the large oral turnaround in increasing this. If I look into this year, firstly, we haven't provided an exact figure, but it will be somewhat higher than last year, just for the fact that we will have a new facility for maintenance in Singapore. We are looking also, of course, into Martinez, Phase 1 and Phase 2 and the shift in Rotterdam to come live. But on the other hand, we haven't scheduled any larger turnarounds for this year. So that could be taken up. So somewhat higher than last year, put it this way, no exact figure, but no bigger turnarounds.

[Operator Instructions] We will take our next question, and the question comes from the line of Sasikanth Chilukuru from Morgan Stanley.

I had 3, please. The first was regarding the sales margin. The last guidance we got from the company on this was at the end of last year, where it was highlighted that the comparable sales margin was at the bottom half of the $700 to $800 per tonne guidance range. I was wondering what exactly changed? What was the key element that contributed to achieving this high $783 per tonne margin. Also, slightly related to this, I wanted to check if there was anything to be said regarding the sales margin seen in the U.S. versus those seen in Europe? Are they both comparable to this $783 per tonne level. Again, I wanted to see if one was distinctly different from the other. The second question I had was related to the UCO prices. It was highlighted in the earnings release that the UK prices in Europe were impacted negatively by higher imports from China, especially towards the end of the year. I was just wondering how you're seeing these imports from China into Europe right now, especially with the China reopening. And the last one was regarding this discretionary dividend. The -- I was just wondering what the second extraordinary dividend was dependent on -- are there any risks for this dividend at all?

Thank you for the questions. This is Matti, because I think I was in the pre-silent call. So first question that what sort of changed? I think I told very clearly in the presale and call, nevertheless, that outlook is fully still in force. I mean that was the main message. A little bit hypothesized that it could be somewhat lower than the midpoint. But having said that, I continue also saying that, but that can very well also change still always, when we are at the prefiling call, we still have about a of the quarter still to go. So what happened, which is also outlined in our text, for instance, in the CEO comments? So we were able to optimize our sales mix very nicely at the very end of the year. And overall, we could nicely benefit from the lower feedstock costs. And also the feedstock spreads when it comes to hedging move in our favor in the very latter part of December. And also actually the developed the production cost, they also were in our favor. So all these elements together and maybe finally to say that our sales volume, which also relates to the sales optimization sales mix was somewhat higher than we anticipated. So all that played to our favor. And partly that favoring is visible if I continue now there was an earlier question on the guidance for the first quarter, where we are commenting now on the attractive. So things, we are living in volatile markets and these issues do change.