Company makes third cut to renewables organization outlook this year
Reduces both margin and volume outlook
Weaker diesel market hits biofuel rates
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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 third time this year due to falling costs and also decreased its expected sales volumes, sending the company's share rate down 10%.
Neste stated a drop in the rate of routine diesel had actually impacted 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 produce sustainable 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 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 business now likewise anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had forecasted given that 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 anticipated to sell between 350,000-550,000 tonnes this year, down from in between 500,000 and 700,000 tonnes seen previously, Neste stated.
"Renewable items' sales costs have actually been negatively affected by a substantial decrease in (the) diesel cost throughout the third quarter," Neste stated in a declaration.
"At the exact same time, waste and residue feedstock rates have actually not reduced and eco-friendly product market cost premiums have actually remained weak," the company added.
Industry executives and analysts have actually stated rapidly broadening Chinese biodiesel producers are looking for new outlets in Asia for their exports, while Shell and BP have actually announced they are stopping briefly growth strategies in Europe.
While the cut in Neste's guidance on sales volumes of sustainable aviation fuel came as a surprise, the effect on biodiesel margins from a lower diesel price was to be expected, Inderes expert Petri Gostowski said.
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
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Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop
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