Company makes third cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel rates

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By 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 rates and also lowered its expected sales volumes, sending the business’s share price down 10%.

Neste stated a drop in the cost of regular diesel had impacted what it can charge for the biofuel it makes in Europe and Singapore, while input expenses for waste and residue feedstock stayed high.

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

Neste in a declaration slashed the expected typical comparable sales margin of its renewables system to 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 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 anticipated given that the start of the year, it included.

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

“Renewable products’ sales prices have actually been negatively impacted by a substantial reduction in (the) diesel cost during the 3rd quarter,” Neste stated in a statement.

“At the very same time, waste and residue feedstock prices have not decreased and eco-friendly product market price premiums have actually remained weak,” the business included.

Industry executives and experts have actually said quickly expanding Chinese biodiesel manufacturers are looking for new outlets in Asia for their exports, while Shell and BP have revealed they are pausing expansion strategies in Europe.

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

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