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 service for the third time this year due to falling rates and likewise reduced its anticipated sales volumes, sending out the company's share cost down 10%.

Neste said a drop in the rate of regular diesel had affected 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 renewable diesel has created a supply glut of low-emissions biofuels, hammering earnings margins for refiners and threatening to restrain the nascent industry.

Neste in a statement slashed the expected average similar 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 forecasted considering that the start of the year, it included.

A part of the volume cut came from the production of sustainable air travel 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 products' sales costs have been adversely impacted by a substantial decrease in (the) diesel cost throughout the third quarter," Neste stated in a declaration.

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

Industry executives and experts have said quickly broadening Chinese biodiesel producers are looking for new outlets in Asia for their exports, while Shell and BP have actually announced they are pausing growth strategies 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 cost was to be expected, Inderes analyst Petri Gostowski said.

Neste's share cost had 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)