Company makes 3rd cut to renewables company outlook this year
Reduces both margin and volume outlook
Weaker diesel market hits biofuel prices
(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 company for the third time this year due to falling costs and likewise reduced its anticipated sales volumes, sending out the company's share price down 10%.
Neste said 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 costs for waste and residue feedstock stayed high.
A rush by U.S. fuel makers to recalibrate their plants to diesel has developed a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to hamper the nascent market.
Neste in a statement slashed the expected average equivalent sales margin of its renewables unit to between $360-$480 per tonne of biofuel, down from $480-$580 per tonne seen in July and well below the $600-$800 seen in February.
The company now also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had anticipated given that the start of the year, it included.
A part of the volume cut came 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, down from between 500,000 and 700,000 tonnes seen previously, Neste stated.
"Renewable products' sales prices have actually been negatively impacted by a significant reduction in (the) diesel price throughout the third quarter," Neste said in a statement.
"At the exact same time, waste and residue feedstock prices have actually not decreased and renewable product market value premiums have actually stayed weak," the company included.
Industry executives and analysts have actually said rapidly expanding Chinese biodiesel producers are looking for brand-new outlets in Asia for their exports, while Shell and BP have actually revealed they are stopping briefly growth strategies in Europe.
While the cut in Neste's guidance on sales volumes of sustainable air travel fuel came as a surprise, the unfavorable impact on biodiesel margins from a lower diesel price was to be anticipated, Inderes expert Petri Gostowski said.
Neste's share price had 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
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Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
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