Company makes 3rd cut to renewables company 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 service for the third time this year due to falling prices and also reduced its expected sales volumes, sending the company's share price down 10%.

Neste said a drop in the price 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 remained 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 hamper the nascent industry.

Neste in a statement slashed the expected average comparable sales margin of its renewables system 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 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 actually predicted since 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 offer between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen previously, Neste said.

"Renewable products' list prices have been negatively impacted by a significant decrease in (the) diesel cost throughout the 3rd quarter," Neste stated in a statement.

"At the very same time, waste and residue feedstock rates have actually not decreased and eco-friendly product market rate premiums have stayed weak," the business added.

Industry executives and experts have said rapidly expanding Chinese biodiesel producers are looking for brand-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 assistance on sales volumes of sustainable aviation fuel came as a surprise, the unfavorable impact on biodiesel margins from a lower diesel price was to be expected, Inderes analyst Petri Gostowski stated.

Neste's share price had actually 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)