Company makes 3rd cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes 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 prices and also decreased its expected sales volumes, sending the business's share cost 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 expenses for waste and residue feedstock remained high.

A rush by U.S. fuel makers to recalibrate their plants to produce sustainable diesel has produced a supply excess of low-emissions biofuels, hammering earnings margins for refiners and threatening to restrain the nascent industry.

Neste in a declaration slashed the expected average similar sales margin of its renewables unit to 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 anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes instead of the 4.4 million it had actually anticipated because the start of the year, it added.

A part of the volume cut originated from the production of sustainable air travel fuel, of which it is now expected to sell in between 350,000-550,000 tonnes this year, down from between 500,000 and 700,000 tonnes seen previously, Neste stated.

"Renewable products' list prices have been negatively impacted by a substantial decline in (the) diesel rate throughout the 3rd quarter," Neste stated in a declaration.

"At the exact same time, waste and residue feedstock costs have actually not decreased and sustainable item market value premiums have remained weak," the business added.

Industry executives and analysts have actually said rapidly expanding Chinese biodiesel producers are seeking brand-new outlets in Asia for their exports, while Shell and BP have actually announced they are stopping briefly growth plans in Europe.

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

Neste's share price had actually 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