Company makes third cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits biofuel costs

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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 rates and likewise reduced its expected sales volumes, sending out the company's share cost down 10%.

Neste said a drop in the cost of routine diesel had 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 produce eco-friendly diesel has actually produced a supply excess of low-emissions biofuels, hammering revenue margins for refiners and threatening to restrain the nascent market.

Neste in a statement slashed the anticipated average comparable sales margin of its renewables system 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 business now likewise expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had anticipated because the start of the year, it added.

A part of the volume cut originated from the production of sustainable aviation 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 products' sales rates have been negatively affected by a substantial decrease in (the) diesel price throughout the 3rd quarter," Neste stated in a declaration.

"At the exact same time, waste and residue feedstock costs have actually not reduced and renewable product market rate premiums have actually remained weak," the company added.

Industry executives and experts have actually said quickly broadening Chinese biodiesel manufacturers are seeking brand-new outlets in Asia for their exports, while Shell and BP have revealed they are pausing expansion strategies in Europe.

While the cut in Neste's assistance on sales volumes of sustainable aviation fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel cost was to be expected, Inderes expert Petri Gostowski said.

Neste's share price had 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; Editing by Terje Solsvik and Jan Harvey)