Company makes third cut to renewables service outlook this year
Reduces both margin and volume outlook
Weaker diesel market hits biofuel costs
(Adds analyst, background, detail in paragraphs 2-3, 9-11)
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 prices and likewise decreased its expected sales volumes, sending the business's share price down 10%.
Neste said a drop in the cost of regular diesel had actually 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 renewable diesel has created a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to restrain the nascent market.
Neste in a statement slashed the anticipated average equivalent sales margin of its renewables system to in between $360-$480 per tonne of biofuel, down from $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 rather of the 4.4 million it had actually forecasted because the start of the year, it added.
A part of the volume cut originated from the production of sustainable air travel fuel, of which it is now expected to sell between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen formerly, Neste said.
"Renewable items' prices have been adversely affected by a significant decline in (the) diesel cost throughout the third quarter," Neste stated in a statement.
"At the very same time, waste and residue feedstock rates have not reduced and sustainable product market value premiums have remained weak," the company added.
Industry executives and experts have stated rapidly expanding Chinese biodiesel producers are looking for brand-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 aviation fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel rate was to be anticipated, Inderes analyst Petri Gostowski stated.
Neste's share rate had actually reversed some losses by 1037 GMT but stayed down 5.8% on the day and 48% lower year-to-date. (Reporting by Elviira Luoma, Essi Lehto and Boleslaw Lasocki; Editing by Terje Solsvik and Jan Harvey)
