Company makes 3rd cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits biofuel rates

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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 business for the third time this year due to falling costs and also reduced its anticipated sales volumes, sending out the company’s share price down 10%.

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

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

Neste in a statement slashed the anticipated average equivalent sales margin of its renewables system to between $360-$480 per tonne of biofuel, below $480-$580 per tonne seen in July and well listed below the $600-$800 seen in February.

The business now also anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually forecasted because the start of the year, it added.

A part of the volume cut came from the production of sustainable aviation fuel, of which it is now expected to offer between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen formerly, Neste stated.

“Renewable items’ list prices have actually been negatively impacted by a substantial reduction in (the) diesel price throughout the 3rd quarter,” Neste said in a statement.

“At the very same time, waste and residue feedstock rates have actually not reduced and eco-friendly item market cost premiums have stayed weak,” the business included.

Industry executives and experts have actually stated rapidly expanding Chinese biodiesel manufacturers 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 assistance on sales volumes of sustainable air travel fuel came as a surprise, the unfavorable impact on biodiesel margins from a lower diesel price was to be expected, Inderes analyst Petri Gostowski stated.

Neste’s share price had 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