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4 Segment information
Neste Oil´s business structure
The Group's operations are built around two business areas and eight common functions. Business areas act as profit centers and are responsible for their customers, products, and business development. Business areas are: Oil Products and Renewables, and Oil Retail. The common functions are: Production & Logistics, Finance, Strategy, Human Resources, Sustainability and HSEQ, Technology, Communications, Marketing and Public Affairs, and Legal Affairs. Production & Logistics is responsible for operating the production facilities of Oil Products and Renewables. The result and net assets of Production & Logistics are accounted within reporting segments Oil Products and Renewable Fuels.
Operating segments
The Group's operations are divided into four operating segments: Oil Products, Renewable Fuels, Oil Retail and Others. The performance of the reporting segments are reviewed regularly by the chief operating decision maker, Neste Oil President & CEO, to assess performance and to decide on allocation of resources
Operating segments are engaged in following key business activities:
Oil Products segment markets and sells gasoline, diesel fuel, light and heavy fuel oil, aviation fuel, base oils, liquefied petroleum gas and other oil products and services which are related to them to domestic and international wholesale markets. The Shipping business is included in the Oil Products segment.
Renewable Fuels segment markets and sells NExBTL renewable diesel based on Neste Oil's proprietary technology to domestic and international wholesale markets.
Oil Retail segment markets and sells petroleum products and associated services directly to end-users, of which the most important are private motorists, industry, transport companies, farmers, and heating oil customers. Traffic fuels are marketed through Neste Oil’s own service station network and direct sales.
Others segment consists of Group administration, shared service functions, Research and Technology, Neste Jacobs and Nynas AB.
Operating segments presented above don't include any segments which are formed from aggregating two or more smaller segments.
The segments' operating results are measured based on comparable operating profit and return on comparable net assets. The accounting policies applicable to the segment reporting are the same as those used for establishing the Group consolidated financial statements as described in 'Summary of significant accounting policies'. All inter-segment transactions are on arm's length basis and are eliminated in consolidation. Segment operating profit include realized gains and losses from foreign currency and oil derivative contracts hedging cash flows of commercial sales and purchases that have been recycled in the income statement. The 'other expenses' included in the income statement for each business segment includes the following major items:
Oil Products: maintenance, freights, rents, and other property costs and insurance premiums, change in the fair value of open oil derivative positions
Renewable Fuels: freights, repairs and maintenance, research, storage charges, rents, other property costs, change in the fair value of open oil derivative positions
Oil Retail: rents and other property costs and maintenance
Segment operating assets and liabilities comprise of assets and liabilities utilized in the segments' business operations. Assets consist primarily of property, plant and equipment, intangible assets, investment in associates and joint ventures including shareholder loans, inventories and receivables. They exclude deferred taxes, interest-bearing receivables, and derivative financial instruments designated as hedges of forecasted future cash flows. Segment operating liabilities comprise operating liabilities, pension liabilities, and provisions; and exclude items such as current and deferred taxes, interest-bearing liabilities, and derivative financial instruments designated as hedges of forecasted future cash flows.
Group's customer structure in 2013 and 2012 did not result in any major concentration in any given geographical area or operating segment.
Information about the Group's operating segments as of and for the years ended 31 December 2013 and 2012 is presented in the following tables:
MEUR
2013 Oil
Products
Renewable
Fuels
Oil
Retail
Others Eliminations Group Note
External revenue 10,680 2,235 4,519 28 - 17,462
Internal revenue 2,591 258 9 176 -3,034 0
Total revenue 13,271 2,493 4,528 204 -3,034 17,462 7
Other income 15 1 52 31 -20 79 8
Share of profit of associates and joint ventures 3 - 0 -12 - -9 19
Materials and services -12,083 -1,845 -4,246 -21 2,771 -15,424 9
Employee benefit costs -171 -27 -36 -121 2 -353 10
Depreciation, amortization and impairments -185 -98 -28 -13 1 -323 11
Other expenses -564 -272 -150 -94 280 -800 12
Operating profit 286 252 120 -26 0 632
Financial income and expense -71 13
Profit before taxes 561
Income taxes -37 14
Profit for the period 524
Comparable operating profit 280 273 76 -27 2 604
Changes in the fair value of open oil and freight derivative positions -10 14 0 - - 4
Inventory gains/losses 16 -35 - - - -19
Sales gains/losses 0 - 44 1 -2 43
Operating profit 286 252 120 -26 0 632
Capital expenditure and investments in shares 142 21 31 20 - 214 17, 18
Segment operating assets 3,690 2,043 554 224 -292 6,219
Investment in associates and joint ventures 31 - 1 193 - 225 19
Deferred tax assets 29 28
Unallocated assets 567
Total assets 3,721 2,043 555 417 -292 7,040
Segment operating liabilities 1,558 275 301 158 -290 2,002
Deferred tax liabilities 266 28
Unallocated liabilities 1,848
Total liabilities 1,558 275 301 158 -290 4,116
Segment net assets 2,163 1,768 255 259 -2 4,443
Return on net assets, % 12.1 14.0 41.2 -9.8
Comparable return on net assets, % 11.8 15.2 26.1 -10.2
MEUR
2012 Oil
Products
Renewable
Fuels
Oil
Retail
Others Eliminations Group Note
External revenue 10,991 1,938 4,888 36 - 17,853
Internal revenue 2,773 225 7 163 -3,168 0
Total revenue 13,764 2,163 4,895 199 -3,168 17,853 7
Other income 70 18 5 23 -18 98 8
Share of profit of associates and joint ventures 3 - 0 -6 - -3 19
Materials and services -12,455 -2,005 -4,627 -21 2,922 -16,186 9
Employee benefit costs -166 -26 -34 -115 2 -339 10
Depreciation, amortization and impairments -187 -99 -33 -13 0 -332 11
Other expenses -538 -234 -148 -109 262 -767 12
Operating profit 1) 491 -183 58 -42 0 324
Financial income and expense -91 13
Profit before taxes 233
Income taxes -74 14
Profit for the period 159
Comparable operating profit 396 -56 58 -43 0 355
Changes in the fair value of open oil and freight derivative positions 6 -22 0 1 - -15
Inventory gains/losses 44 -105 - - - -61
Sales gains/losses 45 - 0 0 - 45
Operating profit 1) 491 -183 58 -42 0 324
Capital expenditure and investments in shares 180 51 36 25 - 292 17, 18
1) The operating profit of Others segment includes a write-off related to an IT project amounting to EUR 14 million.
Segment operating assets 3,819 2,134 676 204 -286 6,547
Investment in associates and joint ventures 28 - 1 213 - 242 19
Deferred tax assets 46 28
Unallocated assets 563
Total assets 3,847 2,134 677 417 -286 7,398
Segment operating liabilities 1,596 274 332 154 -282 2,074
Deferred tax liabilities 340 28
Unallocated liabilities 2,444
Total liabilities 1,596 274 332 154 -282 4,858
Segment net assets 2,252 1,860 345 260 -3 4,714
Return on net assets, % 20.6 -9.3 17.3 -15.7
Comparable return on net assets, % 16.6 -2.8 17.3 -16.0
Geographical information
The Group operates production facilities in Finland, Singapore, Netherlands and Bahrain and retail selling network in Finland, North-West Russia, Estonia, Latvia and Lithuania. The following table provides information of the Group's revenue by geographical area, irrespective of the origin of the goods or services, and non-current assets and capital expenditure by geographical area.
Revenue is allocated based on the country in which the customer is located. Non-current assets and capital expenditure are allocated based on where the assets are located. Non-current assets comprise of intangible assets, property, plant and equipment and investments in associates and joint ventures including shareholder loans. 'Other Nordic countries' include Sweden, Norway, Denmark and Iceland. 'Baltic rim' includes Estonia, Latvia, Lithuania and Russia. The Group's activities in this geographical area comprise mainly of retail activities in the mentioned countries.
MEUR
2013 Finland Other Nordic countries Baltic
rim
Other
European
countries
North
and
South
America
Other
countries
Group
Revenue by destination 6,807 2,402 1,730 3,602 2,661 260 17,462
Non-current assets 2,353 193 136 673 0 673 4,028
Capital expenditure 176 0 21 8 0 9 214
2012 Finland Other
Nordic
countries
Baltic
rim
Other
European
countries
North
and
South
America
Other
countries
Group
Revenue by destination 7,524 2,687 1,844 3,952 1,465 381 17,853
Non-current assets 2,402 213 180 707 0 709 4,211
Capital expenditure 226 0 25 32 0 9 292