m2-capital-sdn.-bhd

1 Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes third cut to renewables organization outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel costs

(Adds analyst, background, detail 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 service for the third time this year due to falling rates and also decreased its anticipated sales volumes, sending the company's share price down 10%.

Neste stated a drop in the rate of routine diesel had impacted what it can charge for the biofuel it makes in Europe and Singapore, while for waste and residue feedstock remained high.

A rush by U.S. fuel makers to recalibrate their plants to produce sustainable diesel has actually created a supply glut of low-emissions biofuels, hammering profit margins for refiners and threatening to hamper the nascent industry.

Neste in a statement slashed the anticipated average comparable sales margin of its renewables system to 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 expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually predicted considering 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, below in between 500,000 and 700,000 tonnes seen previously, Neste said.

"Renewable products' prices have actually been negatively impacted by a significant reduction in (the) diesel cost during the 3rd quarter," Neste stated in a declaration.

"At the same time, waste and residue feedstock prices have not reduced and renewable product market value premiums have actually stayed weak," the company included.

Industry executives and analysts have actually said quickly broadening Chinese biodiesel manufacturers are looking for new outlets in Asia for their exports, while Shell and BP have actually announced they are pausing growth strategies 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 rate was to be anticipated, Inderes expert Petri Gostowski said.

Neste's share cost had actually reversed some losses by 1037 GMT however stayed down 5.8% on the day and 48% lower year-to-date. (Reporting by Elviira Luoma, Essi Lehto and Boleslaw Lasocki