Company makes 3rd cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel prices

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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 service for the third time this year due to falling costs and likewise 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 remained high.

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

Neste in a statement slashed the expected 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 company now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had forecasted since 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 expected to sell between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen formerly, Neste stated.

"Renewable products’ list prices have actually been adversely affected by a significant reduction in (the) diesel rate throughout the third quarter,” Neste stated in a statement.

"At the exact same time, waste and residue feedstock prices have actually not decreased and eco-friendly product market value premiums have remained weak,” the business added.

Industry executives and experts have said rapidly broadening Chinese biodiesel producers are looking for brand-new outlets in Asia for their exports, while Shell and BP have actually announced they are stopping briefly growth plans in Europe.

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

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