Company makes 3rd cut to renewables service 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 costs and also reduced its expected sales volumes, sending the business's share cost down 10%.

Neste said a drop in the price of routine 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 renewable diesel has created a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to hamper the nascent industry.

Neste in a statement slashed the anticipated typical equivalent sales margin of its renewables unit 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 company now likewise anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually anticipated considering that the start of the year, it included.

A part of the volume cut originated from the production of sustainable air travel fuel, of which it is now expected to offer between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen formerly, Neste said.

"Renewable products' list prices have been adversely affected by a significant reduction in (the) diesel rate throughout the 3rd quarter," Neste said in a declaration.

"At the exact same time, waste and residue feedstock costs have actually not reduced and eco-friendly item market cost premiums have remained weak," the business added.

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

While the cut in Neste's assistance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable effect on biodiesel margins from a lower diesel price was to be expected, Inderes analyst Petri Gostowski said.

Neste's share price had 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)