Company makes 3rd cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits biofuel rates

(Adds expert, 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 service for the third time this year due to falling costs and likewise lowered its anticipated sales volumes, sending out the company’s share price down 10%.

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

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

Neste in a declaration slashed the anticipated average comparable 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 business now likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually forecasted given that the start of the year, it included.

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

“Renewable items’ list prices have actually been adversely impacted by a considerable decrease in (the) diesel cost during the 3rd quarter,” Neste stated in a declaration.

“At the same time, waste and residue feedstock prices have actually not reduced and eco-friendly product market value premiums have stayed weak,” the business added.

Industry executives and analysts 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 pausing growth strategies in Europe.

While the cut in Neste’s guidance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable influence on biodiesel margins from a lower diesel cost was to be anticipated, Inderes expert Petri Gostowski stated.

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