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

Neste stated a drop in the rate of routine 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 sustainable diesel has developed a supply glut 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 unit 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 also anticipates renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had anticipated 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 in between 350,000-550,000 tonnes this year, below in between 500,000 and 700,000 tonnes seen formerly, Neste said.

"Renewable items' sales prices have been adversely impacted by a considerable decrease in (the) diesel rate during the 3rd quarter," Neste said in a statement.

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

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

While the cut in Neste's guidance on sales volumes of sustainable aviation fuel came as a surprise, the negative effect on biodiesel margins from a lower diesel rate was to be expected, Inderes expert Petri Gostowski stated.

Neste's share price 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; Editing by Terje Solsvik and Jan Harvey)