Company makes third cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes 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 service for the third time this year due to falling rates and likewise reduced its anticipated sales volumes, sending the business’s share rate down 10%.

Neste stated a drop in the cost of regular diesel had actually affected 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 sustainable diesel has developed a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to hinder the nascent market.

Neste in a statement slashed the expected typical equivalent sales margin of its renewables unit to 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 rather of the 4.4 million it had anticipated considering that the start of the year, it included.

A part of the volume cut came from the production of sustainable air travel 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 previously, Neste stated.

“Renewable products’ sales rates have actually been negatively affected by a significant decline in (the) diesel rate throughout the 3rd quarter,” Neste said in a statement.

“At the same time, waste and residue feedstock prices have not reduced and eco-friendly item market value premiums have actually remained weak,” the company included.

Industry executives and analysts have actually stated rapidly expanding Chinese biodiesel manufacturers are looking for brand-new outlets in Asia for their exports, while Shell and BP have actually revealed they are pausing 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 impact on biodiesel margins from a lower diesel cost was to be anticipated, Petri Gostowski said.

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