Company makes third cut to renewables service outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes biofuel prices

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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 organization for the third time this year due to falling rates and also reduced its expected 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 stayed high.

A rush by U.S. fuel makers to recalibrate their plants to produce eco-friendly diesel has created a supply excess of low-emissions biofuels, hammering revenue margins for refiners and threatening to hinder the nascent market.

Neste in a statement slashed the expected average similar sales margin of its renewables system to 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 also expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually anticipated since the start of the year, it added.

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

"Renewable items’ list prices have actually been adversely affected by a significant decrease in (the) diesel price throughout the 3rd quarter,” Neste said in a statement.

"At the exact same time, waste and residue feedstock rates have not reduced and eco-friendly product market value premiums have remained weak,” the added.

Industry executives and analysts have actually stated quickly broadening Chinese biodiesel manufacturers are seeking new outlets in Asia for their exports, while Shell and BP have revealed they are pausing expansion plans in Europe.

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

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