Good day, and welcome to the Q2 2021 Neste Corporation earnings conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question please press star and one on your telephone keypad. I also must advise you that this conference is being recorded today. I would now like to hand the conference over to your first speaker today, Juha-Pekka Kekäläinen. Thank you. Please go ahead, sir. Thank you. Good afternoon, ladies and gentlemen, and welcome to this conference call to discuss Neste's second quarter and half-year results published this morning. I'm Juha-Pekka Kekäläinen, Head of Neste IR, and here with me on the call are President and CEO, Peter Vanacker, CFO Jyrki Mäki-Kala, and the business unit heads, Matti Lehmus of Renewables Platform, 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 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. Yes. Thank you very much, J.P., good afternoon to all of you, also on my behalf. It's great that you have again found the time to join this call. The COVID-19 and its variants are still around us, but the progressing vaccination schemes give us a lot of hope to be able to return to normal life. The situation naturally varies a lot globally, but our people are dealing very well with the situation. I am extremely proud of our people for how they successfully and safely managed the most complex refinery turnaround in Porvoo that we have ever conducted. We're also very pleased to be able to show our solid performance in the second quarter under these conditions. Let's now move in our presentation to page four. In the second quarter, we posted a comparable operating profit of EUR 241 million at the group level. We were slightly behind last year's numbers, mainly due to the lower sales volumes caused by the Porvoo turnarounds and a weaker U.S. dollar. Our renewable products had a solid performance, and we were able to deliver a healthy sales margin. As expected, the feedstock markets remained tight and feedstock prices continued to increase. As a result of strong sales performance, we reached a sales margin of EUR 700 per ton. This is an excellent achievement under these conditions. The sales volumes were a bit down due to the Porvoo unit maintenance and also some postponements of some June deliveries towards July. The negative EBIT impact of the Porvoo maintenance is estimated to have been EUR 40 million for renewable products. The refining market continued weaker than normal, but the Oil Products second quarter was characterized by the Porvoo major turnaround, which was safely and successfully implemented in very challenging pandemic conditions. In total, some 6,000 people took part in the turnaround, and over 1.5 million working hours were completed. Safeguarding the health and safety of our employees, contractors, and other partners was our highest priority. For example, about 61,000 corona tests were taken to prevent spreading of infections. The turnaround is a significant investment to ensure the safety, reliability, productivity, and competitiveness of the refinery. The total investment of the major turnaround was approximately EUR 630 million, of which approximately EUR 300 million is realized in 2021. The Porvoo turnaround had a negative impact of approximately EUR 100 million on the segment's comparable operating profit during the second quarter, and that mainly in the form of lost sales volume and margin. Our Marketing & Services segment performed very well, and the sales volumes in aviation and marine were still impacted by the pandemic. Roads traffic volumes and transportation fuel demand recovered. Jet fuel demand continues to be, unfortunately, at a low level. Unit margins have normalized from last year's level, and Marketing & Services has also continued to do well in managing their cost basis. As always, we continue to focus on our strategy execution, and I will come back to that at the end of the presentation. Despite the Porvoo turnaround and challenging market in the Oil Products business unit, our financial position remains solid. We reached an after-tax ROACE of 15.6% on a rolling 12 months basis, and that is exceeding the 15% target. At the end of June, our leverage ratio was 7.7%, and this solid financial position enables the implementation of our growth strategy going forward. Now, with these opening remarks, I will hand over to Jyrki to discuss the financials in more detail. Jyrki. Yeah. Thank you, Peter. Let's see the main financial items concerning the quarter two 2021. On the revenue side, I think it's funny to see the quarter two revenues because we had big swings concerning the comparison with the previous year Because our revenues increased significantly, mainly due to the higher prices in the segments, total of EUR 3 billion. On the other hand, the lower volumes mainly coming out of the Porvoo turnaround, EUR -2.5 billion. Overall, we landed then at this level of EUR 3 billion turnover in one quarter. Like mentioned already earlier, the OP sales volumes were really more than 60% lower than quarter two 2020. Basically the same reason apply also when we are comparing the half year figures with EUR 6 billion turnover versus EUR 5.8 billion on the previous year. Big swings in the top line. If we then go to the comparable EBIT, basically, if we took first the renewable products, we posted a decrease of EUR 27 million in the comparable EBIT level, and that was mainly due to the weaker U.S. dollar with a negative impact of EUR 37 million. Basically all the other elements were as a total positive compared to this impact coming from the U.S. dollar. We had the higher sales margin, meaning the healthy one. We had the improved results coming EUR 48 million of the margins, but we had slightly lower volumes. Like mentioned earlier, we have also some volumes at the end of the quarter two, which were basically postponed to the July, meaning the quarter three in this case. We had also slightly higher fixed cost because we are really still focusing on implementing the strategy and focusing on the segments or the segment in that sense in the renewable product, meaning the aviation and also the polymers and chemicals. OP's changes between these two quarters are pretty clear in many ways. OP, if we go back to the Oil Products, slightly better or let's say at the same level as 2020, the quarter two. Here we had the big impact coming out of Porvoo turnaround volumes, more than EUR 50 million. Again, the weaker U.S. dollar, some EUR 7 million. Other elements in OP were positive, like refining margin overall a positive of EUR 23 million. If you think about the big things between these two segments, yes, renewable products and Oil Products suffering off of the U.S. dollars, but then having positive things in the business performance in many ways. It was also in OP that their base oil business has performed tremendously 2021. Then MS, like discussed earlier, they deliver strong results with EUR 80 million comparable EBIT in a quarter. They have slightly lower margin, volumes basically are coming back. If we look the IFRS EBIT that has certain impact also in our P&L, it was much higher compared to the comparable one. The reason being really the gains in inventories, mostly in renewable products. We had a positive quarter free cash flow, positive of EUR 261 million. If we look the half-year figures, we still have some work to be done for the full year to get this also in a positive mode. If we look the difference in the segment level, the next slide. This is basically pretty easy to explain in this sense. Like already mentioned, Renewables was below EUR 28 million. Remember, EUR 37 already coming from the weak U.S. dollar, OP basically the same. All the others basically zero or slightly positive. The others is mainly lower fixed cost in the corporate level. EUR 40 million lower comparable EBIT in a quarter. Looking to more bridges, basically looking first the quarter two, overall, you'll see the main elements here, the five different ones. We talk about volumes, we talk about Porvoo turnaround. It was EUR -72 million overall. Most of that gain from the Porvoo turnaround, mainly in OP, EUR 51 million. The balancing is certainly the renewable products, EUR 24 million. Nothing significant concerning on the volume side, which wasn't basically already explained in our call in late June. Positive thing certainly is the margin improvement, EUR 71 million. That was in both businesses. RP had the biggest one, EUR 48 million. The FX, it hit hard in Q2, EUR 45 million, mainly in OP. Remember that also in quarter one, the impact was already EUR 56 million negative. On a year-to-date basis, it was more than EUR 100 million in comp EBIT just coming out of the FX, mainly U.S. dollar. We had a positive development in the fixed cost despite we have a strong focus on the RP growth. The others, like I mentioned already earlier, it is also coming out of a strong performance in the base oils business. Basically the same story goes on then with the half a year figures. I mentioned about the big impact coming out of the FX changes, more than EUR 100 million. The other part is certainly the volume development coming out of the turnaround in Porvoo and also COVID-19. If you take these negatives out, then we'll see the positive things coming out of this margin. It's only EUR 1 million improvement, but it has two side of the coin. RP improved by EUR 56 million, and OP had a negative of EUR 55 million. Those are basically balancing each other. Fixed cost, already EUR 43 million savings, and RP was higher, some EUR 11 million. We basically had a lower fixed cost in other businesses and functioned by more than EUR 50 million. Other items, positive things certainly coming out of the base oil business, what I mentioned, we have also slightly higher depreciation as we are investing back to the business. Those are also very visible in the depreciation level. This was kind of a short version, and I hand over now to Matti Lehmus to continue to talk about the resilient renewable products. Thank you, Jyrki, and good afternoon also on my behalf. If I comment on the renewable products, I would start with a comment that the EBIT level was solid at EUR 287 million. This was approximately 9% below previous year's second quarter level, but only 2% under the first quarter that we had. I have to say, this is a good result given that it was achieved— You're back to the conference, sir. Please go ahead. This is Matti Lehmus. Apologies, the line was cut. Let's continue. I was just commenting first on the sales margin. Now on to the sales volume of the renewables. This was also relatively stable at the level of 732 kilotons, stable versus the previous quarter, and this in spite of the Porvoo turnaround. It's good to note that we also increased the share of our North American sales to 39%, which is clearly higher than a year ago and also higher than the previous quarter. This again reflecting our active geographical sales optimization. Our production volume reached 764 kilotons, and given the major Porvoo unit turnaround, this was a good achievement. It reflects good operations in both Singapore and Rotterdam. Finally, I would comment that our feedstock optimization continues. The share of waste and residue increased again by 3% versus the previous quarter, now reaching 93%. This increasing trend reflects our continued development of our global waste and residue sourcing capabilities. Overall, good quarter. A quick look at the waterfall then. It's actually when we compare the result differences versus a year ago, there is three items I would highlight. First of all, the sales volume was 41 kilotons lower. This was driven by the Porvoo major unit turnaround, but also some deliveries being shifted into the following quarter, and this explains EUR 25 million lower result contribution than Q2 last year. This is then more than compensated by the higher sales margin, which had a EUR 48 million positive impact as it was EUR 75 per ton higher. Finally, also Jyrki Mäki-Kala pointed out, in the previous quarter, the FX changes represent a third major driver, and they explain a EUR 37 million decrease year-on-year, excluding the FX hedges, as the U.S. dollar market rate weakened from 1.1 last year, second quarter, to 1.21 this year, second quarter. My final comment would be the fixed costs were slightly higher than previous year, and other items also account for an EUR 11 million difference, this mainly including higher depreciation. Let me have a quick look at the feedstock markets. In the second quarter, the feedstock markets were characterized by a steep increase of vegetable oils in the first half of the quarter, with most pronounced changes in soybean oil and also rapeseed oil, given a tight inventory situation and strong demand. As visualized in the charts, in the second half of the quarter, the veg oil markets corrected downwards. As an example for palm oil, the expectation for a seasonal production volume increase in the second half of the year was one driver. For waste and residues, the quarter was characterized by an increasing price trend, reflecting the tight market fundamentals and following, of course, also the veg oil price trend. In the chart, this trend is illustrated by the European animal fat, which increased steadily during the quarter. Looking at supply, COVID-related lockdowns continued to affect, especially used cooking oil supply, which we estimate currently to be approximately 15% lower than pre-COVID levels for used cooking oil, this is. Turning to the U.S. market, I would make a couple of highlights again. First of all, on the LCFS credit price, it averaged $185 per ton, which is slightly below the previous quarter, which was at $195 per ton. Here, of course, demand for diesel and gasoline in California continued to be affected by the COVID-related lockdown measures. The bigger change occurred in the RIN values, which increased very steeply in the first half of the quarter, reflecting the increasing soybean oil price. Although the RIN values corrected towards the end of the quarter, the quarterly average price increased clearly from $1.20 per gallon to $1.70 per gallon, thereby counteracting the impact of the increasing feedstock prices for biofuel producers. Finally, some comments on the sales margin, which was practically stable versus the previous quarter. Here I would highlight three main drivers. Firstly, the average feedstock price increased significantly as discussed in the market section. As an example, I would mention that European quarterly price average for both animal fat and used cooking oil increased by more than 20%. On the other hand, it was the good sales performance and product market increases, which were then the main drivers compensating this feedstock price increase. The sales performance included, in particular, a successful price premium optimization, supported also by a continued geographical sales mix optimization. As you could see, for example, the North American sales share increased from 35% to 39% quarter on quarter. From the product price movements, I would highlight especially the RIN price development, as it appreciated by EUR 0.50 per gallon. Final comment, it is worth mentioning that also margin hedging, which had a positive result, the impact from the margin hedging compared to the previous quarter was slightly higher. In general, it's good to note that the sales margin in the second quarter was also again supported by good operational performance. Utilization rate reached 96% in spite of the 12-week Porvoo turnaround. With these comments, I hand over to Peter Vanacker, who will comment on the oil products. Thank you very much, Matti. As you have all read from our stock exchange release early this morning, Marko Pekkola has decided to continue his career outside of Neste. He will be replaced by Markku Korvenranta latest in January 2022. Therefore, he is not joining us today. Allow me to make some comments on the performance of the oil products business during the second quarter. The most important topic during the second quarter was the scheduled, highly complex, complete turnarounds of the Porvoo refinery and the finalization of the transition of the Naantali refinery towards harbor and terminal operations. Both these strategically important projects were executed successfully, meaning safely within the announced timeframe and within the announced budget. Our Porvoo refinery is now operating again at full capacity. Unfortunately, the refinery market continued to be oversupplied and impacted by the pandemic. Market demand continued to be weak, and the reference margin during the second quarter averaged a low $2.2 per barrel. Due to the turnarounds, we had substantially lower production volumes available, and as a consequence, our sales volumes were 62% lower compared to the second quarter in 2020. The total refinery utilization during the second quarter was 20%. This resulted in a negative comparable EBIT of EUR -58 million. Looking at the EBIT bridge between the second quarter 2021 and the same quarter in 2020, the impact of this major turnaround and the weak market environment is clearly visible as lower sales volumes and margins. They had a total negative impact of EUR 33 million on the comparable operating profit year-on-year. Good fixed cost management and a very good performance of the specialty business had a positive impact of EUR 37 million compared to the second quarter of 2020. As you can see from the graphs on this page here, excellent volatility in the market remains high. The good news is that there was a slight improvement on product margins, but of course, still at a historically low level due to the unhealthy supply and demand balance. The Urals-Brent differential averaged on the level of - $2 per barrel for the second quarter. When taking a look at our own margin performance, our total refinery margin improved but was still low at $9.7 per barrel, as the additional margin was supported by currency hedging. During the quarter, refinery production costs were exceptionally high due to the turnarounds. As mentioned before, the strategy execution Oil Products is proceeding well. The scheduled 12-week turnaround was successfully and safely executed in very challenging pandemic conditions, and Naantali operates now as a terminal and harbor. We want to turn our Oil Products business into one of the most sustainable refineries globally by transforming the Porvoo refinery operations to co-processing of renewable and circular raw materials, combined with our commitment to reach carbon neutral production by 2035. With these comments on the Oil Products business, I would like to hand over to Panu to talk about Marketing & Services. Good afternoon. This is Panu Kopra speaking. Solid financial performance continued in Marketing & Services in Q2. If we look first half of the year, we are approximately EUR 8 million ahead of last year. Unfortunately, still, aviation and marine volumes are both recovering slowly. However, diesel volumes increased by 10%, and also gasoline volumes were a bit better than last year in Q2. Fixed costs were EUR 1 million lower in Q2 and EUR 5 million lower compared to first six months of last year as a result of the cost-saving program. We have expanded Neste MY availability at the station network, and now we have been active in marketing as well. The results of advertising campaigns are good, and both the awareness and the volumes of Neste MY have improved. We also launched new EV charging service with one of our B2B customer in order to expand our sustainable solution offering. This was shortly about Q2 in Marketing & Services. Handing over to Peter. Thank you, Panu. Let's now move on to the current topics. The very good progress in our strategy implementation has continued, and the Singapore renewables capacity expansion project is proceeding according to our schedule. We currently have about 4,500 people working at the site and in our workshops. We continue, of course, to take all precautions and follow the development of the COVID-19 situation in Singapore very closely. The 500,000 tons SAF optionality projects in Rotterdam has been organized after the final investment decision and is now also moving ahead. This about EUR 190 million project will be completed by the end of 2023 and further strengthen our leadership position in the sustainable aviation market. The engineering phase in preparation for the possible next world-scale renewables production facility in Rotterdam is also proceeding well, and we continue to aim at decision readiness for a final investment decision late this year or early 2022. During the second quarter, several commercial agreements were signed in both renewable aviation and renewable polymers and chemicals. Sustainable aviation fuel supply has been set up in the United Kingdom at London Heathrow and Farnborough, at Zurich Airport in Switzerland, and at Cologne in Germany. The first sale of SAF to a corporate customer, Boston Consulting Group, has been agreed to enable business travel-related emissions reductions in co-collaboration with Finnair and SAS. The first Neste RE, so here we talk about polymers and chemicals, deliveries to Asia were made together with South Korean LG Chem. Now we have successfully expanded our partnership with Mitsui Chemicals and Toyota Tsusho to start Japan's first production of renewable plastics. A long-term commercial agreement was also made with LyondellBasell to ensure the availability of renewable solutions for the polymers value chain. The successfully completed Porvoo Refinery major turnarounds as well as the transformation of the Naantali facility to a harbor and terminal operations they were significant efficiency efforts during the second quarter. Our short-term cost management measures have also continued very well. In the area of innovation our clean hydrogen-related projects in Porvoo have been applied for the IPCEI, and that is Important Projects of Common European Interest status. We have also received Business Finland's circular economy investment aid for chemical recycling, and that is relating to site and laboratory investments. In feedstock pretreatment development, we found promising new purification concepts for challenging waste and residues, which will enable us to continue to expand the amount of different types of waste and residues that can be used for our NEXBTL renewable products production processes. As you all noticed, I mean, European Commission recently published its Fit for 55 proposals, which is a roadmap reflecting a higher ambition in climate change mitigation. As we have announced, we are pleased to see that SAF mandates were an important part of this package, and we expect that the proposal will drive growing demand for renewable products and solutions. However, we need to ensure access to all sustainable raw materials to meet these ambitious targets. No single solution, electrification of transport or other, will be able to solve the challenge alone. These are just some of the highlights I wanted to mention. We have a clear strategy and continue moving ahead. We will talk more about this at our Capital Markets Day in September. As an outlook for the third quarter, we see the following. Third quarter sales volumes of renewable diesel are expected to be lower than in the previous quarter due to the scheduled maintenance in Singapore that currently is ongoing. The waste and residue markets are anticipated to remain tight as their demand continues to be robust. The renewable sales margin is expected to remain healthy, but to be lower than in the second quarter. Utilization rates of our renewable production facilities are forecasted to remain high, except for the scheduled seven week maintenance turnaround at the Singapore refinery, which is estimated to have a negative impact of EUR 90 million on the segment's comparable EBIT. In the third quarter, oil products market demand will continue to be depressed as a result of the COVID-19 pandemic. The reference margin is expected to remain low and volatile, and an approximately EUR 20 million of the negative result impact of the Porvoo Refinery turnarounds that is completed in June is still expected to materialize in the third quarter. In Marketing & Services, the sales volumes and unit margins are expected to follow the previous year's seasonality pattern, and some negative impact on demand and sales volumes is still anticipated due to the COVID-19 pandemic. Our strategic project proceeds as planned with our Singapore expansion and the Porvoo turnarounds being the major projects this year. Our cash-out capital expenditure is still estimated to be approximately EUR 1.2 billion in 2021, and that excludes M&A. Regarding the renewable products, we have currently scheduled a four-week catalyst change at the Rotterdam refinery in the fourth quarter, which is estimated to have a negative impact of approximately EUR 50 million on the comparable EBITs. We will host, as you know, our annual Capital Markets Day as a webcast on September 23rd. We would, of course, have liked to see many of you in person, but unfortunately, due to the pandemic situation, this still needs to be conducted as a virtual event. At the CMD, we will also share our views on recent developments and give direction on the strategy ahead. You are, of course, all warmly welcome to join, and details will be provided by our investor relations team closer to the event. This concludes now the presentation, and we would now be happy to take your questions. Thank you. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. Once again, star and one if you wish to ask a question. We have questions that came through. The first question comes from the line of Joshua Stone. Your line is now open. Please go ahead. Thank you. Hi, and good afternoon. Two questions, please. Firstly, on the Fit for 55 and the RED II revision, there was a proposal for 1.7% cap on part of the feedstock for road and rail. I was interested to see what's your opinion on that? Are you likely to oppose that? How likely do you think that will get overturned or amended back into a soft cap? My second question on the renewable diesel margin. I was wondering if you could try and talk about how the underlying market is developing in July and stripping out anything to do with hedging or maintenance. Would it be fair to say that maybe margins are getting better because of higher prices underlying, and any opinions on that? Also how you think the underlying environmental will sort of move as we go through the second half of the year. Thank you. Yeah, thanks, Joshua, for your questions. Peter here. I will take the first one, and then Matti will take the second one on the RD margin. As you rightfully say, in the proposal, there's 1.7% cap. As I said also and alluded to a bit in my opening comments, it's clear that we are happy on one hand side with all the proposals that the Commission have made, in terms of leading to market creation of more demand for renewable diesel, but also for sustainable aviation fuel. On the other hand side, we also need to have the means that we can contribute to the greenhouse gas emission reductions. Not just the ones that were then stipulated in RED III, but also the ones that were then stipulated as greenhouse gas emission reduction targets of the member states. As such, we are in discussion, of course, and that will be intensive work, that we are asking for a broader acceptance of allowed feedstocks. That includes, of course, also removals of caps and these kind of things, because the big problem that we have, or the big issue that we have at the table is reducing greenhouse gas emissions overall. Yeah. This is Matti. I'll take the second question on the renewable diesel margin outlook. Perhaps the comments I would make, Joshua, is that I'll start with, obviously, that feedstock continues to play a very important role. You could see from the charts I showed during the second quarter, we had a clear increase in waste and residues. If you look at the third quarter, I would say that the tight waste and residue market continues. We are clearly on a high level. The vegetable oils, you could see quite a lot of volatility. We had a price correction at the end of the second quarter. There has been some recovery in the early parts of the third quarter. The high volatility clearly continues also on the veg oil side. In general, I would say it looks like, let's say waste and residue feedstocks will continue to be tight and on a high level. There has not been really a clear direction there on the waste and residues in the early part of July. The other one I would, from a Neste perspective highlight is, apart from the tight feedstock market and that we have had this ramp up in feed prices during second quarter, I would highlight the fact that we have the Singapore major turnaround. What this does, of course, is two things. It adds some costs, also variable costs are typical during a turnaround. Secondly, it also reduces our flexibility when it comes to geographical sales optimization. In practice, we have, for example, less volume that we can allocate to the North American market. These are the drivers that affect the short-term margin from our perspective. Like you could see, we were guiding that we expect sales margin to be lower in the third quarter than it was in the second quarter. Okay. Thanks, Matti. Peter, could I just follow up on the first question a little bit? Maybe just share any timeline of when you think you're going to get new drafts out the door, or not you, but when the Commission or the EU gets new drafts out the door on any potential changes to the feedstock requirements? The process is that the Commission has now made all the drafts available, and they need to be discussed with the European Parliament as well as with the member states of the Council. We foresee that that will be a discussion probably ongoing somewhere 18 months, 24 months, until it is then leading to the final, let's say, legislation or legislative documents. They can be directives. They can be regulation. It's a bit like, remember taxonomy? Of course, everybody is eager to get immediately an assessment. These things do take time. There will be lots of discussions going on. Okay, fair enough. Thank you. Thanks for the information. Thank you. Thank you. The next question comes from the line of Henri Patricot. Your line is now open. Please go ahead. Yes, hello. Henri Patricot from UBS. Thank you for the presentation. I have three questions, please, on renewable products. The first one is just on the second quarter and the average selling price in Europe, which seems to have gone up quarter-on-quarter by much more than the increase in the diesel price. I was wondering if that's simply a function of you shifting less profitable sales in Europe to the U.S., or if there is some other more structural change that is supporting a higher premium versus diesel. Secondly, I just wanted to come back on the comment you made around some new concepts for pretreatment. I was wondering if you can give us a sense of which feedstocks are you working on, and what's the timeline to be able to have commercial use of these new pretreatment concepts. Finally, I just wanted to come back to an announcement you made during the quarter around renewable gasoline production. I was hoping you can give us a bit more details around how you produce that renewable gasoline and what's the potential for that product. Thank you. Thank you, Henri, for the questions. Matti here answering. I'll start with your first question on the second quarter average selling price that indeed went up. Perhaps I would first of all say that it indeed reflects the successful sales performance, the successful sales optimization. If I take a couple of main drivers that explain that trend, the first one is, of course, in general, the optimization of the sales premium. It links, of course, then also to the geographical sales mix optimization. One very clear, let's say, example is the fact that we increased the sales to North America, which of course benefited from a very high RIN price. Also within Europe, we of course continued, let's say, optimizing the segments and looking for an optimization of the sales premium, as we have created over the last years a large number of markets where we can serve the customers. These are both very important drivers. Thirdly, obviously, we have just simply the market parameters like the RIN, which of course also then are reflected in the average selling price. Your second question was on the new concepts for pretreatment. It is indeed something that we are continuously doing. I would mainly highlight here that we of course, in particular, look at pretreatment when we think of challenging feedstocks. I would give you two examples, perhaps, of where we, for example, see the need. One is continuously looking for the ability to process lower quality of waste and residue, whether it's animal fats, whether it's used cooking oils. This is clearly something where we're going. Of course, also, if I think of challenging feedstock in general, there is this category of acid oils, which is again, very low quality side products residues. That would be another example where we are developing these pretreatment for. Finally, on the renewable gasoline, I would mainly make the comment, it's a pilot. We are testing it, so time will show how we develop it further. Okay. Thank you. Thank you. The next question comes from the line of Michael Alsford. Your line's now open. Please go ahead. Hi. Good afternoon. Thanks for taking my questions. I've just got a couple, please. Just coming back to Matti's comments on the renewable products margin. I appreciate feedstock markets are clearly very volatile, but given the forward curves that we see now for some of the feedstocks, when I look at the medium-term outlook or into at least four Q for renewable product margins, it feels to me that directionally, it should move higher 3 Q into 4 Q, given the comments you made around, I guess, the impact that Singapore has on your sales optimization. You're not going to be able to sell as many volumes into the U.S. in 3 Q, but that should be clearly not the case into 4 Q. Could you maybe just talk a little bit about anything I'm missing in terms of that, I guess, profile for the margin over that period? Secondly, on feedstock optimization. Clearly, you're seeing an increasing amount of waste and residues as you saw again this quarter. I was just wondering whether you could talk a little bit more about how big the feedstock pool is now that you can access relative to your current production base. How big is it expanding given the work you've been doing on the feedstock sourcing strategy? Thank you. Yes. Thank you, Michael, for the question. First, again, on the margin outlook, and your question, I think, was mainly on then looking already into the fourth quarter. Like you correctly commented, of course, feedstock development will be one important one. I can confirm your comment, of course, we don't have the Singapore turnaround in the fourth quarter. We have a Rotterdam turnaround, which is four weeks then. Especially for this geographic sales allocation flexibility, Singapore is, of course, needed for the maximization of the U.S. volume. In that sense, I agree with your comments that in that sense, the fourth quarter is different. From the feedstock optimization work, I would probably refer to the comments we also made in last year's Capital Markets Day, that we do see that the global pool of waste and residues is growing towards 35 million tons with all the work that is being done. That is something which we continue seeing, and we'll then update in the upcoming Capital Markets Day if that number can be updated. The work, of course, continues to keep opening new feedstock sources. Thanks, Matti. If I could just squeeze in a follow-up, just on demand. I think last quarter or previously in the year, you talked about demand of renewable diesel growing by, I think, 1.5, 2 million tons in 2021 versus 2020. I'm just wondering whether you could update us as to where you see demand shaking out for this year. Thanks. Demand growth, I should say. Yes, thanks for that follow-up question on demand. Indeed, last quarter, last spring, we commented actually that we see it more towards the low end of that range, so more like 1.5 million tons. I don't see dramatic changes. Probably what we see is that with the continued impact of the COVID lockdowns in some regions, the demand this year may be slightly lower. That's probably where we see it at the moment. Again, to be then updated in the Capital Markets Day. Great. Thanks so much. Look forward to it. Thank you. The next question comes from the line of Artem Beletski. Your line's now open. Please go ahead. Yes. Hi, this is Artem from SEB. Thank you for taking my questions. I still have a couple of ones on renewables. Matti, could you maybe comment on hedging outlook for second half of this year and this type of big volatility what we have seen in vegetable oil prices, especially during June, whether you have utilized this opportunity down the road? Maybe on share of North American sales. It has been indeed close to 40% now in Q2 and pretty high also previously. Is a formula still valid that basically North America should be roughly 30% of your volumes over time? The last one is actually relating to Oil Products. A quick one, you are talking about EUR 20 million negative earnings impact in Q3. Is it purely volume related basically impact that should be visible? Basically normalizing inventories on that side. Thank you. Yes. Thanks, Artem. I'll start with the first two questions. First one on hedging. Indeed, if I look at the second half of the year, we have increased our hedging ratio versus the first half of the year. We are currently at something like 55% of total sales for the second half of the year. If you remember, in the first half of the year, we were more somewhere like 35%-40%. We have increased that ratio. Of course, it's good to note when last quarter when we commented on it, we still had quite a low hedging ratio for the second half. It was under 20% still three months ago. We have indeed during the quarter increased that hedging ratio for the second half of the year. On the other question, the U.S. share, like you have seen in the previous quarters, it is, of course, something that we continuously do, that we optimize the geographic allocation. We have been able now to go all the way up to 39% in this second quarter. There are, of course, limitations because we, for example, have also term commitments that we also need to take into account and other type of limitations. I would say there is not a fixed number we are aiming for. It's more a function of the optimization that we do. All of that, to bring it into the right context, of course. Yes, of course, we leveraged upon the hedging position. You know that we are following that extremely closely, just also from Matti, Jyrki and myself. When we saw the opportunity, of course, we did build up our hedging positions for the second half of the year, because we also saw that not like anticipated beforehand, you had some rumors in United States on droughts. That means that the soy harvest, which is normally, let's say, around September, October timeframe, could eventually be a bit lower if it doesn't start raining. That had an influence. You had some import duties that were waived for the palm oil. You had very good buying from India, from China. You had Malaysia then with, I would say, the fourth wave and a complete lockdown, not the availability of the workers. There was quite a lot of dynamics, let's say, in the last three, four weeks. From that point of view, I think it's good that we did build up that hedging position in the second half of the year. If I put it back into the context, just to bring a little bit of clarity, from today's perspective, we are estimating that our sales margin in renewables will be more around the middle of the range of being healthy in the third quarter. Of course, that may change because we are just at the first month of the third quarter, but at least that's what we believe today. Of course, as Matti said, in terms of the volumes, we believe that with the Singapore shutdown that we have, in total probably 30-50 kt, lesser volumes that we are calculating with for the third quarters, and then some EUR 20 million higher fixed costs as we continue to build up innovation, aviation business, polymers and chemicals, and all these kind of things. Just to bring a bit of clarity that could help you, of course, also. Yeah. Great. Thank you. This is very clear. Thank you. The next question comes. You have this question on OP. Sorry. You have this question on OP. Yes, [audio distortion], your estimation is good. That has to do with the ramp up of the facility. As I said in my introduction, safety first. We were very prudent in how we did step by step to ramp up of that very complex refinery. We've done quite a lot of investment also on projects and new things. Therefore, the guidance is a bit higher than what we set in Q1. The remaining EUR 20 million is mainly a volume impact in Q3. Thank you. The next question comes from the line of Nick Konstantakis. Your line is now open. Please go ahead. Good afternoon, guys. Thanks for taking the questions. I would go back to the European realizations, if you don't mind. Can you just give us an idea of what kind of differentials you see between, say, your best region and your worst region? I'm trying to understand a little bit what, given the swing even within Europe, what kind of an impact that has. Related to that, as we look into 2022, the direction of the feedstocks seem to be going one way from now. Let's see if that changes. Can you just talk to us a bit about the evolution of your pricing? I'm just trying to understand how much pricing can you pass through a bit. Maybe it would pretty much, if you talk about it, just get some comfort around how do we move into 2022 in an increasing demand environment and tight feedstock at the same time. Nick, thank you for the question. I'll start with the first one. In general, I would just state that we have obviously very systematically worked on opening a number of markets in North America, in Europe, in order to have that flexibility. It's good to note that there is different customer segments in these markets. There is different regulation. From that perspective, you will see some variation over time in the exact average selling price, for example, also the feedstock base. I can't quantify what that range is, but it's just a normal part of our optimization that we continuously follow the market and try to optimize. At the same time also, of course, making term contracts for a certain share of the volume. That leads me a bit to your second question. The normal procedure, how it has been going is that, during the autumn time, towards the end of the year. Quite a lot of the term agreements are made on an annual basis for the calendar year. This is then again, something that we will be, let's say, looking at this autumn also to then decide what volume exactly and how to build our term portfolio. Also here, Nick, as you know, one thing is the same for everything. You know that these penalty levels, they are on a local level. Yeah. This is something that a member state is defining. You may have a bit of flexibility in one country and maybe lesser flexibility, meaning distance in the price that we currently have compared to the ceiling, let's say, if you call the ceiling a penalty level. Of course, there are other things. I remember that I was talking to the authorities in Belgium, and if you look at the RED implementation, RED II implementation in Belgium, then you see there that they say, "Look, if you don't meet the requirements, you need to pay the penalty. If for the second time you don't meet the requirements, then actually, your penalty is actually going up." Yeah. It's really a very strong penalty. The reason why I'm explaining that is, you see this is not cast in stone. Yeah. If we put it in the context of the Fit for 55, then with these higher targets, then there will have to be a reflection by the member states in how will I now accomplish these key pieces of legislation, like for example, Effort Sharing Regulation, with higher percentage on greenhouse gas emission reductions that need to be accomplished if the penalty level is at the same level as it was, let's say, with the old targets. Yeah. If I just may touch on this, for the sustainable aviation fuel, the penalty level seems to be quite well-defined at the EU level. Do you think as part of the proposals or the ongoing, I guess, discussion for the revision of RED II, there could be scope to move towards a European penalty, if you want, universal? Do you think we continue to stay on a country-by-country basis? I don't know if it was discussed at all or, yeah, whatever you spoke about. Yeah. Again, this is crystal ball, of course. It's a good question, Nick. I would think road transportation is more something on a member state level. Aviation level playing field discussions that have taken place in the context of the ReFuelEU. Therefore, here you go more towards a European and every plane that is leaving an airport in Europe, it goes beyond even inter-European flights, with all these obligations and therefore also these well-defined European penalty levels. Thank you. Thank you. Yes, the next question comes from the line of Peter Low. Your line is now open. Please go ahead. Thanks. The first one was just on the new renewable refinery you're studying in Rotterdam. What has to happen for that to move forward to FID? Are you looking at whether you could secure feedstock and how policy will evolve in Europe? Or is it simply a case of go through the design and engineering work for the plant itself, as you're already confident on the demand and feedstock outlook? The second was just another one on the Fit for 55 package. Looking through the various proposed policies, it feels as though the EU's preferred long-term route to decarbonizing road transportation is through electrification and hydrogen, perhaps rather than biofuels. Would you agree with that characterization, and how can Neste ensure it's a part of helping to provide those solutions? Thanks. Yep. Matti, if you can take the first one, you're closer to the Rotterdam FID, of course. Yeah. Thanks for the question, I would say it's like for any major investment, of course, it's a technical and commercial evaluation that we are now doing at the moment. Part of the work we are doing with the more detailed engineering is to get a better understanding on the capital expenditure. That is, of course, very important. In parallel, we will obviously also be updating our view on the market, including regulation and everything. At the end of the day, these two aspects will help us make a decision on or let's say, make an evaluation on the feasibility of the project. That creates the basis for decision-making. Yeah. A couple of reflections, and of course, we will further discuss this during the CMD, I'm absolutely sure of that. On the Fit for 55, I personally had a bit of the impression with all the discussions that we had in Brussels, that the European Commission is looking at difficult to decarbonize industries and easier to decarbonize industries. If you talk about the easier to decarbonize industry, personal vehicles, for example, or small transporters, here the tendency goes towards electrification. Under the realization that electrification, of course, also takes a huge amount of investments, and therefore, biofuels will be needed as well as a solution. The more difficult to decarbonize industries, and here we're talking about definitely heavy duty transportation. We're talking about clear commitment from the European Commission on the aviation industry. Please remind that the proposal is really high. It's about 60% SAF blend by 2050. This is huge in terms of market demand that would create for renewable fuels. You see that there is this kind of a tendency, and I believe that fits very well to our strategy because as you know, we have anticipated, and that's why we are building up the SAF, flexibility production capacities in Singapore, in Rotterdam, so that we can leverage upon that. Of course, what is currently not really covered in the Fit for 55 is then what is happening in polymers and chemicals, because also there we see that there is good traction. The only way to get out of fossil-based raw materials is by going into bio-based polymers and chemicals on one hand side, or recycle the carbon from waste plastic on the other hand side. From that point of view, we see good traction in the marketplace, even if we have not talked about it yet a lot in this call. Thank you, [audio distortion]. Thank you. The next question comes from the line of Matthew Blair. Your line is now open. Please go ahead. Hey, good afternoon, everyone. I'd like to start with a strategic question. Could you talk about how open you might be to a partnership on RD production? It looks like some of these refinery conversions appear to have pretty low CapEx relative to greenfield projects, and a company like Neste could obviously bring the edge on feed prices. Guess I'm just a little surprised that there haven't been more joint ventures in this space, and I'm just wondering how open Neste might be to such a partnership. My follow-up is on OP. Sometimes after a major turnaround, the refinery will just run better. With the Porvoo turnaround behind you, should we expect a pickup in margin capture or a structural reduction in OpEx? Thanks. Yeah, good questions, Matthew. I would say on your first question, on partnerships, we have said a couple of times at our Capital Markets Day, if that was in 2019 and also in 2020. We don't exclude anything. Of course, it needs to fit. We do believe that in terms of our NExBTL technology, we have the most advanced technology. We do believe that we have the most advanced technology when we're talking about pretreatment. In addition to that, our model is that we want to have that flexibility, both in terms of the waste and residue side, as well as on the other hand side, being able to produce the products for road transportation, aviation, and polymers and chemicals. These are very clear requirements, of course, that we do have. On the Oil Products side, we did do quite a lot of work, of course, in terms of ensuring reliability and sustainability. Also due to the fact that we exited refinery in Naantali. For example, take specialty products and solvents we were producing in Naantali. Today we are producing them in Porvoo. That was part, of course, also of the consolidation, let's say, of our work, so that we only then have to focus if we talk about refinery production on one side. A bit premature I know to say in your model, okay, that will lead into OpEx costs that are going to go down. On the other hand side, what we have said is also in our strategy. We want to make sure that we are net zero by 2035 in terms of Scope 1 and Scope 2 emissions. On the other hand side, we also want to replace crude oil streams with waste and residue streams. Also these elements, they will play an important role. Of course, if you go back to the Fit for 55, a bit premature to see, but what will that have as implications on the oil products business in terms of CO2 costs? If you compare that again with then being the most sustainable refinery, what of that can be offset? Can't give you a clear answer on that, Matthew, but that is definitely something that in our master plan for Porvoo, we're looking at all these parts that are moving and what does it then mean at the end? Very clear. Thank you. Thank you. The next question comes from the line of Erwan Kerouredan. Your line is now open. Please go ahead. Hi there. Thanks for taking my questions. Most of them have been answered actually. I've got maybe two questions on cost, one on Singapore and one on depreciation. If I'm not mistaken, you previously guided for an impact on EBIT from the third quarter of EUR 80 million, and now it is at EUR 90 million. I just wanted you to clarify the difference between the two and what drove the increase. Thanks for providing some more color on the depreciation. You mentioned that the higher depreciation was due to investing back in the business. I was just wondering if we should expect the same level of depreciation charges for the next two or three quarters. These would be my two questions. Thank you. Yes, thanks, Erwan. I'll take the first one. This was on the impact of the Singapore turnaround. Good observation. We slightly increased that impact from earlier EUR 80 million- EUR 90 million, I think mainly as a result of modeling it more in detail. At the same time, of course, good to note that, if you look, for example, at the U.S. market development with the RINs, they are clearly on a high level. Of course, there is also an element that this number captures also the margin impact of the lost volumes. That would also play into it. The second question, Jyrki. Yes. It was the question about the depreciation. You are absolutely right. It was in quarter two, we had roughly EUR 136 million depreciation, and it was roughly EUR 10 million more than last year. We are going to see depreciation varying between EUR 140 and EUR 150 million now on a quarterly basis going forward. Certainly always depending on the CapEx, what we are basically providing then. Thank you. Just to follow up, are we right in assuming a stable percentage of depreciation over CapEx? Yeah. Of course, it depends on what kind of CapEx you have. If you look just purely the depreciation figures going back, though we have now come to the level of EUR 140 million roughly on a quarterly basis. EUR 140-EUR 150 going towards the bigger CapEx since we have the Singapore coming in 2023, as an example. Between now and 2023, they will be pretty stable at these EUR 140 million-EUR 150 million levels. Okay. Thank you. That's very clear. Thank you. Thank you. The next question comes from the line of Iiris Theman. Your line is now open. Please go ahead. Good afternoon, thanks for taking my questions. I still have three questions, though. Firstly, what is your waste feedstock supply split by regions? Is Europe the largest region? Secondly, on the waste feedstock price development, are you seeing some price decreases so far in July if you compare to late June? Is it too early to say anything about the short-term trend? Thirdly, in the Q1 call, you were talking about potential capacity debottlenecking. Is the comment still relevant? Could this be visible later this year? Thanks. Yeah. Good questions, Iiris. I will give it again to Matti. Yeah. Thanks. First one on the waste feedstock split by region, we haven't really opened that one. You know, of course, that we are active globally. There is a number of important regions for waste and residues. It's Asia-Pacific, it's Europe, it's North America, it's South America. We are active in all these regions. It changes. It may change, of course, also over time. Yeah. That's the whole key of our concept, that it's a global platform, and we can also optimize that over time. Short-term development, you ask specifically on waste feedstock price development, market development, early July. It's a bit in a way, I would say I commented earlier already that there hasn't really been a clear direction in the first weeks of July. After this very clear ramp-up during second quarter, we see stable, we see some regions a bit moving up, others a bit down. It's a bit without direction the first weeks of July. We will see, of course, how it develops going forward. On the capacity bottlenecks, I would mainly comment, it's more I would look at it as part of our continuous improvement that we, of course, continue working on continuously improving our operational excellence, our operations. Capacity bottling is part of it. Of course, it is clear that if you look at how much we have debottlenecked over the last few years, that it becomes always harder and harder to find opportunities. Thank you. Thank you. The next question comes from the line of Mehdi [audio distortion]. Your line is now open. Please go ahead. Mehdi, your line is now open. Please go ahead and ask your question. Can you hear me? Yes, we can hear you. Yes, sir. Please go ahead. This is Mehdi Ennebati from Bank of America. Not sure I understood my name. Good afternoon, all. I will ask two questions, please. First one, regarding the hedging that you realized during the month of June. If I look at the price of the crude palm oil at that time and the current price of the crude palm oil, it seems that you might be able to make extremely high hedging gains. My question is, did you take this into account in the guidance that you gave us regarding your renewable product margin for the third quarter? First question. Second question, regarding the renewable product margin variation. You said EUR 700 per ton in Q2 could be mid-range around EUR 650 per ton in the third quarter, if I understood well. You highlighted that this is due to the sales mix and also the fact that the feedstock market remains tight. Just for us to understand, would you rather say that most of the decrease quarter-on-quarter is due to the sales mix, or the fact that the feedstock cost market will remain tight quarter-on-quarter? This is just for us to understand if, in Q4, you might go quickly back to EUR 700. Thank you. Thanks, Mehdi. This is Matti. I'll take your question. First of all, on the hedging, I mentioned actually earlier also, we did increase our hedging ratio for the second half of the year to roughly 55% of total sales. When we started the second quarter, we were at a clearly lower level. It was under 20%. We actually did do this hedging ratio increase over the second quarter, and, in a way, it's of course part of our estimate when we made our estimate for the sales margin development for the third quarter. That was part of it. At the same time, appreciating the uncertainties that there are always related to the market out there. That would also be the comment on the third quarter guidance. Peter commented it already earlier. Our guidance is clear that we expect it to be lower than in the second quarter, and we mentioned as main drivers the fact that the feedstock market continues to be tight. It is on a high level after the increase during second quarter. Also the second driver being the Singapore turnaround, where we are more limited in our sales flexibility. Of course, again, impossible to give any exact numbers, but if we take the current estimate, it could then also be mid of the range, when we give our healthy margin range. Thank you. Thank you. The next question comes from the line of Jason Gabelman. Your line is now open. Please go ahead. Yeah, thanks for taking my question. I wanted to first ask on the polymers business. I was hoping for some more color on that. I know you're trying to grow that business. Can you just discuss maybe what needs to happen from a regulatory standpoint and incentive standpoint from that to contribute more and for you to grow volumes more? Or is the roadblock to growing the business more of a technology issue right now? Then my second question, just on the supply-demand outlook for renewable diesel and renewable fuels. It seems like with the EU Fit for 55 program, we have a good sense of what demand could be over the next 5- 10 years, and clearly there's a lot of capacity coming online over the next five years for renewable fuel production. If you just discuss your outlook for how those balances, how the supply-demand balance shakes out over the next five years. Then my final question, just on feedstock availability. You've mentioned a few times the tight market right now in waste oils, and given the amount of new global capacity coming online to produce renewable fuels, is that tightness a feature that you expect to remain with us for the foreseeable future? Thanks. Let me start with the first question, Jason, around the renewable polymers and chemicals business. If we talk about waste and residues of bio-based polymers and chemicals, not chemical recycling, this is a proven technology. We are supplying and we have sales contracts, it's repetitive business, both Europe, U.S., as well as in Asia Pacific. It's more, let's say, demand being created by the brand owners, the brand owners wanting to reduce their dependency in, for example, packaging on fossil-based plastics. Of course, it always helps if in addition to that, you have some regulation that is supporting that tendency. Therefore, we are in close contact also with the European Commission. There are a couple of positive things in Europe, like for example, a waste plastic tax of EUR 0.80 a kilo. All these kind of things are helping and driving that demand, in addition to the demand that is being driven by the consumers. The chemical recycling is a bit different. Here we talk about the waste plastic being chemically recycled. We've made very good progress. You remember that we have invested in this company, Alterra. We've done the first industrial scale trials, with Alterra. We will have second trials, again, in the next couple of months, and then there will be a third round of trials, of course. So far, everything did run quite well. Here, we're still talking about technology development. We know it works. We've done and produced waste plastic-based. Recycled hydrocarbons that went back into the plastic chain. From that point of view, proof of principle has been achieved. Of course, it will take a little bit of time until then the first liquefaction plants will be put in place, and so on. On the renewable diesel supply and demand, and of course, one may look at renewable diesel, I would like to look more at the combination of renewable diesel and sustainable aviation fuel. As, of course, there is these mandates that are coming, in Europe for SAF, plus also the incentives that are being discussed in United States, dedicated BTC for sustainable aviation fuel and so on. This is still on the table, and we hope to get clarity on that during the course of this year. Therefore, for us, we look at both renewable diesel as well as sustainable aviation fuel demand. If you look at the Fit for 55, it's a bit difficult to read because, in the RED III, there has been a change where in the past it was energy-based targets, and now it's greenhouse gas emission reduction targets. You can't compare it one to one with what is in RED II. If you look at the assumptions that the European Commission has taken, then their assumptions tell us that the greenhouse gas emission intensity reduction target at -13% in 2030 would equalize a 20% renewable energy target. We personally believe it's not going to be 26% if it stays like that. It's lower than the 26%, because the European Commission took an assumption that the greenhouse gas emission reduction average is 50%. As you know, we are having renewable diesel that has a greenhouse gas emission reduction potential even up to 90% based upon that calculation methodology. It's probably more somewhere, let's say, around 20%- 26%, depending on what assumptions are being taken. Therefore, what I said before, we will definitely plead for even more aggressive targets. Again, you need to take that into consideration. Again, with the other parts of the regulation, especially the Effort Sharing Regulation, which would lead to being more of a driver in terms of demand creation, and then RED III being more of a tool in how to accomplish the Effort Sharing Regulation in addition to eventually other tools. All that, we'll talk about that more on the Capital Markets Day. Just, if you look at what we have said in the past in terms of market demand creation in Europe, we see that number at least being confirmed, both on the RD side as well as on the sustainable aviation fuel side. Therefore, as a consequence, continue to say no decoupling, let's say, over time of supply and demand in the renewable fuels. I can take the third question, which was a bit on the waste and residue outlook in terms of availability. Perhaps a couple of short comments I would make. If you look at situation this year with the COVID still having impacts, animal fat availability has been relatively stable. Throughout this one, it's more used cooking oil, which has been affected. I mentioned earlier that from there, of course, we still today see that the impact of the lockdowns probably reflects that only 85% of the volume is available currently versus pre-pandemic levels. From that perspective, taking a midterm view, there is hopefully potential to come back to more normal levels over time. At the same time, it's clear that we have solid demand, whether it's in HVO, whether it's in oleochemicals feed, whether it's the first-generation biodiesel. I think it's clear that we also have, with also the new projects that are going to start also, solid demand development. I think in short, I would say it looks like it continues to be tight. Of course, the importance comes both to, if you look at from Neste perspective, continuing to work on the quality flexibility on the geographic reach, and also on the longer-term development, thinking of new sources such as could be algae, it could be novel vegetables with reduced indirect land use impact. These are very important and longer term. Thanks, guys. I appreciate the call. Thank you. The next question comes from the line of Sasikanth Chilukuru. Your line is now open. Please go ahead and ask your question. Hi. Thanks for taking my questions. I had three, please. My first question was related to the share of waste and residue feedstock in the renewable product segment, which has touched 93% in 2Q. I was just wondering if should we consider this to be the new baseline as we look into the future, or is it possible for this to revert back, say, below 90% in the future? Does this new level of waste and residue feedstocks, does this affect the way you hedge, which I believe is more towards based on the vegetable oil price differential now? My second question was related to the lower sales volumes in renewable products in 2Q relative to the guidance that you had provided with 1Q results, which was then highlighted to be stable quarter-on-quarter. You have highlighted postponement of some end June deliveries as a reason for low volumes. Does this completely explain the miss relative to that guidance? Also, can you provide some more color on the guidance for sales volumes in 3Q? How much lower than the 732 kilotons do you expect the sales volume to be in 3Q? Any guidance on that magnitude will be helpful. My third was essentially related to the net debt. Can you please comment on your expectations of net debt till year-end? I was wondering if there was any specific cash payments or proceeds or any material working capital changes that we should be aware of. Thanks. Yes, thanks for the questions. I'll start with the first two ones. First of one, on the share of waste and residue, obviously it will vary a bit from quarter to quarter. You could see we're at 90% in the first quarter. We were now at 93% in the second quarter. I think it's good to remember our feedstock strategy. We have said clearly that we are a bit longer term focused on enabling and reaching 100% waste and residue, and that target by 2025. That gives you, of course, then the trend that we are aiming for. Then, like mentioned earlier, longer term, hopefully also some novel vegetable oils and others that can then complement the mix. You asked whether it affects the hedge. Our hedging philosophy stays the same. We are using liquid instruments, and that means that we have to use as a proxy, typically palm oil, for example, even if it does not perfectly reflect, of course, waste and residues. On the other hand, we use liquid instruments on the petroleum side, such as gasoline or diesel, again, to reflect the other part of the hedge. Your second question was on the sales volume in both Q2 and Q3. I would say the fact that we delayed some deliveries into the third quarter, which is quite normal, the exact timing of the shipment, it's always depending on operational reasons, weather, et cetera. That explains most of that small difference that we had versus the earlier guidance. Then into the third quarter, Peter mentioned earlier that we expect at the moment that reduction versus the second quarter could be in the range of 30-50 kilotons. That is our current estimate of the third quarter volume. Again, of course, depending always on these short-term operational variations. I wouldn't read too much into that. Slippage that we had from June into July, this is not market demand driven. It was just that one cargo, and then we had one issue with one of our partners. They had an incident in their facility, and they were not able to get the material out. Otherwise, they would have been booked in that quarter. Nothing, let's say, underlying in terms of market demand of any concern. Market demand continues to be very healthy. Yeah. It was a question about the net debt. If you look the first half of the year, our CapEx is pretty stable. We are expecting a little bit higher CapEx for the second half. We did have the one acquisition in Rotterdam that will certainly not be there in second half. That is kind of the positive, basically replacing kind of the CapEx versus the first quarter. Certainly we have one of the dividend payment taking place in October, but no major situation, no changes in the position with the second half, meaning the year-end. It will be still a very good cash position and pretty low net debt at the end of the day. Thank you. Thank you. The next question comes from the line of Matt Lofting. Your line is now open. Please go ahead. Hi, gents. Thanks for taking the questions. Two, please. First, just sort of, I guess, taking a step back and consolidating the observations you've made around feedstock markets. It seemed in some ways that three months ago when you presented Q1s, that at the time you had perhaps a cautiously optimistic view that waste and residue market tightness would ease, not in Q2, but through the second half of the year. My sense today is that perhaps that process is taking longer than you'd previously anticipated. I wonder your observations there in terms of whether that perception is fair, what changed, and how you perhaps think about the fourth quarter relative to the third quarter from that perspective in terms of operations and margins. Secondly, just coming back to the previous point on sales volumes and in the region of 30,000-50,000 tons lower quarter-on-quarter in Q3. It's noticeable, I guess, looking at the first half of the year, that sales volumes have been materially lower than production volumes. I'm just a bit surprised that you're not perhaps catching up on that during Q3 or the second half of the year as the maintenance kicked in. I wonder if you could share any observations on that. Thanks. Thanks, Matt. Couple of comments. First question on the feedstock market and how we saw it last quarter. If I remember from spring, what we probably commented at the time is that vegetable oils, which were already at a high level at the time, were at the time the forward markets were backwardated. What actually has happened, if you see what has happened in the vegetable markets, the strength has rolled. Yes, there has been this volatility, but in a way that we continue to have a situation where it's very high in the front end. The forward markets are still backwardated, that is probably the main change. I think on waste and residue, it's like I commented also on the medium-term outlook, it continues to look tight. I don't think that has changed. On the sales volume, correct observation. If you look at our first half production volume and sales volume, we have been building some inventories. This is quite normal in anticipation of the big turnaround that we now have in Singapore. You could also see from the guidance that although our sales volume is lower or expected to be lower in the third quarter, it's not the full volume impact of the Singapore turnaround, which lasts for seven weeks. Indeed, that is exactly what we are doing, that we are a bit smoothening the impact of the turnarounds. Okay, thanks, Matti. Thank you. The next question comes from the line of Henry Tarr. Your line is now open. Please go ahead. Hi there, and thanks for continuing to take the questions. I'll just be brief. 1 question on the U.S. and RINs, and do you have any views on, you mentioned it recently, but regulations there, and I saw the recent U.S. Supreme Court decision around the biofuel waiver dispute, et cetera. Is there anything for you to add on that side? Thanks. We don't see that the environment is changing a lot, Henry, in the United States. You have this ruling on the Supreme Court. Since then, nothing really has happened. I would also be a bit more careful maybe than what I have said in the past with regards to when do we expect to hear about the volumes in the RFS program. Today, I don't believe we will get any clarity on that during the course of this year. If at all, it will be towards the end of the year. Maybe we will see a bit more on the so-called small refinery exemptions, but still the atmosphere continues to be that the Biden administration, the EPA, not a lot of exemptions will be granted. The atmosphere continues to be supportive. As I said before, in terms of these proposals with regards to incentives dedicated, for example, blender's tax credit for sustainable aviation fuel, we think and hope, of course, that we will get some clarity on that during the course of this year. I would give this definitely above 50% that this will go through. Okay, great. Thanks. Thank you. The last question comes from the line of Giacomo Romeo. Your line is now open. Please go ahead. Yeah, good afternoon. Thank you for taking all the questions. I have just one last. Just wondering as we, well, in fall, we start getting into the period when you typically renegotiate your term contracts. I'm just wondering whether you have any concern that lower than expected demand growth this year and potentially a still pressure on the feedstock front could put some pressure on the pricing level of these term contracts. Just interested to hear your thoughts around that. If you look at demand creation, yes, maybe there is a little bit lesser, but still it's demand creation this year. If you look at all the key countries and states in terms of demand creation, higher greenhouse gas emission reduction targets starting 2022, then we continue to see that there will be a demand creation of around 2 million tons. To give you a couple of examples, Sweden is moving from 26%-30.5% of greenhouse gas emission reduction for diesel. The movement in 2021 was 21%-26%. Germany is going up, the Netherlands, France is going up, Finland is going up. Possibly even in the southern part of Europe, percentages are going up because RED II is still in certain member states being discussed in how will it be turned into legislation. That legislation, it's enforceable as of the middle of this year, that means that they have to have higher targets. The same is also valid, of course, in United States with the higher percentages as communicated, as known in the key states like California, Oregon, British Columbia. We continue to look at about 2 million tons of demand creation on a global basis for 2022. Thank you. Just perhaps following on that. Just to clarify, you don't think that the existing pressure you're seeing on the feedstock market could have any pressure in terms of pricing negotiation and the demand growth you expect will still be sufficient to keep pricing at a healthy level as you enter renegotiations of those contracts? Well, we are at an early stage. Same comments as I made around this period of time last year. We are at an early stage now at looking at where do we believe feedstocks will go, where do we believe the differential between palm oil and gas oil will go next year, where do we see the penalty levels in the different member states are. Based upon that, we will then develop what is our term strategy with regard to prices, price increase, et cetera. Today, too early to say. We are at the end of July. This would be premature for us to define a strategy because you have so many moving parts. I have to say the same, like last year, this is going to take a couple of months. We need to have a clearer picture on what we believe the scenarios will happen in 2022, and then only based upon that, we will then start with the term deal negotiations with our key strategic customers. Perfect. Thank you. Thank you. No further questions obtained through sir. Please continue. Very good. Lots of questions. Thank you very much. We try to be as clear as possible with our guidance for Q3. It's a bit a special year, this year with lots of these big turnarounds that we have, lots of moving parts, but the underlying business continues to do and perform very well. Let me conclude also by saying that, of course, the pandemic is not over yet, but I also believe that gradually we have learned how to live with it. For us, the third quarter will be another turnaround quarter as we have discussed today, with the focus, of course, of Singapore. Lots of attention to do that within the communicated timeframe, in a safe way, and then, of course, within the budgets. Otherwise, we continue to move forward with our chosen strategy, and that is to become a global leader in renewable and circular solutions. We will talk about that more in our Capital Markets Day, really looking forward to talking to you even, of course, if it unfortunately, as I said at the beginning, is in a virtual way. Thanks a lot for your continued interest in our company. Stay safe and for all, healthy. Thanks. Goodbye. Thank you. That concludes our conference for today. Thank you all for participating. You may now disconnect.