Company makes third cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes 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 service for the third time this year due to falling rates and likewise lowered its expected sales volumes, sending the business's share price down 10%.

Neste stated a drop in the rate of regular 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 eco-friendly diesel has created a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to hamper the nascent market.

Neste in a declaration slashed the anticipated 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 listed 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 rather of the 4.4 million it had anticipated because the start of the year, it added.

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, below in between 500,000 and 700,000 tonnes seen formerly, Neste stated.

"Renewable items' prices have actually been adversely affected by a significant decrease in (the) diesel rate 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 cost premiums have actually stayed weak," the business added.

Industry executives and analysts have actually said rapidly broadening Chinese biodiesel producers are seeking new outlets in Asia for their exports, while Shell and BP have actually announced they are stopping briefly expansion plans in Europe.

While the cut in Neste's guidance on sales volumes of travel fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel price was to be anticipated, Inderes analyst Petri Gostowski stated.

Neste's share cost had 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)