Company makes 3rd cut to renewables business outlook this year
Reduces both margin and volume outlook
Weaker diesel market strikes biofuel prices
(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 service for the 3rd time this year due to falling costs and likewise decreased its expected sales volumes, sending out the company's share price down 10%.
Neste said 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 input expenses for waste and residue feedstock remained high.
A rush by U.S. fuel makers to recalibrate their plants to produce eco-friendly diesel has actually produced a supply excess of low-emissions biofuels, hammering profit margins for refiners and threatening to hinder the nascent market.
Neste in a declaration slashed the anticipated average equivalent sales margin of its renewables system to between $360-$480 per tonne of biofuel, below $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 instead of the 4.4 million it had predicted given that the start of the year, it included.
A part of the volume cut originated from the production of sustainable aviation fuel, of which it is now expected to offer in between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen previously, Neste stated.
"Renewable items' sales costs have actually been adversely impacted by a substantial reduction in (the) diesel price throughout the third quarter," Neste stated in a statement.
"At the same time, waste and residue feedstock prices have actually not reduced and renewable item market value premiums have stayed weak," the company included.
Industry executives and experts have stated rapidly expanding Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and BP have revealed they are stopping briefly expansion strategies in Europe.
While the cut in Neste's guidance on sales volumes of sustainable aviation fuel came as a surprise, the negative impact on biodiesel margins from a lower diesel rate was to be anticipated, Inderes analyst Petri Gostowski stated.
Neste's share price had actually reversed some losses by 1037 GMT however remained 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)