Company makes 3rd cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market strikes 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 organization for the 3rd time this year due to falling rates and also reduced its expected sales volumes, sending the business's share price down 10%.

Neste said a drop in the cost of regular diesel had actually impacted what it can charge for the biofuel it makes in Europe and Singapore, while input costs for waste and residue feedstock remained high.

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

Neste in a statement slashed the anticipated typical 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 rather of the 4.4 million it had anticipated considering that the start of the year, it added.

A part of the volume cut came from the production of sustainable air travel 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 stated.

"Renewable products' prices have actually been negatively impacted by a considerable decrease in (the) diesel price throughout the 3rd quarter," Neste said in a declaration.

"At the same time, waste and residue feedstock costs have actually not decreased and sustainable product market rate premiums have stayed weak," the business added.

Industry executives and analysts have said rapidly expanding Chinese biodiesel manufacturers are seeking new outlets in Asia for their exports, while Shell and BP have announced they are pausing expansion strategies 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 rate was to be expected, Inderes expert Petri Gostowski stated.

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)