Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
Company makes third cut to renewables company outlook this year
Reduces both margin and volume outlook
Weaker diesel market hits 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 organization for the 3rd time this year due to falling costs and also decreased its expected sales volumes, sending out the company's share rate down 10%.
Neste stated a drop in the cost 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 stayed 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 earnings margins for refiners and threatening to hinder the nascent market.
Neste in a declaration slashed the expected average comparable 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 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 actually because the start of the year, it added.
A part of the volume cut originated from the production of sustainable air travel 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 previously, Neste stated.
"Renewable items' prices have been adversely impacted by a considerable decrease in (the) diesel rate throughout the 3rd quarter," Neste stated in a declaration.
"At the exact same time, waste and residue feedstock rates have not reduced and sustainable item market price premiums have actually remained weak," the business included.
Industry executives and experts have actually stated rapidly broadening Chinese biodiesel manufacturers are seeking new outlets in Asia for their exports, while Shell and BP have revealed they are pausing growth plans in Europe.
While the cut in Neste's guidance 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 stated.
Neste's share cost had actually reversed some losses by 1037 GMT but 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)