Company makes third cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits biofuel costs

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By Elviira Luoma and Essi Lehto

HELSINKI, Sept 11 (Reuters) - Finnish refiner Neste on Wednesday cut the margin outlook for its biofuel company for the 3rd time this year due to falling costs and also decreased its anticipated sales volumes, sending out the company’s share cost down 10%.

Neste said a drop in the rate of routine diesel had actually affected what it can charge for the biofuel it makes in Europe and Singapore, while input costs for waste and residue feedstock stayed high.

A rush by U.S. fuel makers to recalibrate their plants to produce eco-friendly diesel has created a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to impede the nascent market.

Neste in a declaration slashed the expected typical similar sales margin of its renewables unit to in between $360-$480 per tonne of biofuel, below $480-$580 per tonne seen in July and well below the $600-$800 seen in February.

The company now likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had predicted given that the start of the year, it added.

A part of the volume cut originated from the production of sustainable aviation fuel, of which it is now anticipated to offer in between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste stated.

“Renewable items’ sales rates have been negatively impacted by a substantial decrease in (the) diesel rate during the third quarter,” Neste stated in a statement.

“At the exact same time, waste and residue feedstock prices have actually not reduced and sustainable item market cost premiums have actually stayed weak,” the business included.

Industry executives and analysts have said quickly expanding Chinese are seeking brand-new outlets in Asia for their exports, while Shell and BP have revealed they are stopping briefly expansion plans in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable air travel fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel cost was to be expected, Inderes analyst Petri Gostowski said.

Neste’s share price had actually reversed some losses by 1037 GMT however remained down 5.8% on the day and 48% lower year-to-date. (Reporting by Elviira Luoma, Essi Lehto and Boleslaw Lasocki