Refiner Neste Warns Of Weaker Biofuel Outlook Shares Drop

Company makes third cut to renewables business outlook this year


Reduces both margin and volume outlook


Weaker diesel market strikes biofuel costs


(Adds expert, background, information 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 business for the 3rd time this year due to falling rates and also lowered its expected sales volumes, sending the company's share price down 10%.


Neste said a drop in the price 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 eco-friendly diesel has created a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to impede the nascent industry.


Neste in a statement slashed the expected average equivalent sales margin of its renewables unit to in 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 instead of the 4.4 million it had actually forecasted considering that the start of the year, it added.


A part of the volume cut originated from the of sustainable aviation fuel, of which it is now expected to sell in between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen formerly, Neste said.


"Renewable items' prices have been negatively impacted by a considerable reduction in (the) diesel price throughout the third quarter," Neste stated in a declaration.


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


Industry executives and experts have actually stated quickly expanding Chinese biodiesel manufacturers are seeking 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 air travel fuel came as a surprise, the unfavorable impact on biodiesel margins from a lower diesel rate was to be anticipated, Inderes expert Petri Gostowski stated.


Neste's share rate had actually 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)