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1 Refiner Neste Warns of Weaker Biofuel Outlook, Shares Drop

Company makes 3rd cut to renewables business 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 prices and likewise decreased its anticipated sales volumes, sending out the company's share price down 10%.

Neste said a drop in the rate of regular diesel had 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 renewable diesel has produced a supply glut of low-emissions biofuels, hammering revenue margins for refiners and threatening to hamper the nascent market.

Neste in a statement slashed the expected typical comparable sales margin of its renewables unit to in 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 company now also anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually forecasted considering that the start of the year, it included.

A part of the volume cut came from the production of sustainable aviation fuel, of which it is now anticipated to offer between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste said.

"Renewable items' prices have been adversely impacted by a substantial decline in (the) diesel cost throughout the third quarter," Neste said in a statement.

"At the very same time, waste and residue feedstock prices have not reduced and renewable product market price premiums have actually remained weak," the business added.

Industry executives and analysts have actually stated rapidly expanding Chinese biodiesel producers are looking for new outlets in Asia for their exports, while Shell and BP have actually revealed they are pausing growth strategies in Europe.

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

Neste's share rate 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