Company makes third cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits 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 business for the third time this year due to falling rates and also lowered its anticipated sales volumes, sending the business's share rate down 10%.

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

Neste in a declaration slashed the anticipated 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 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 given that 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 expected to sell in between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen formerly, Neste stated.

"Renewable products' prices have been negatively affected by a considerable decline in (the) diesel price throughout the third quarter," Neste stated in a statement.

"At the very same time, waste and residue feedstock rates have not decreased and renewable item market price premiums have actually stayed weak," the business included.

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

While the cut in Neste's guidance on sales volumes of sustainable air travel fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel rate was to be anticipated, Inderes analyst 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)