Company makes 3rd cut to renewables business outlook this year

Reduces both margin and volume outlook

Weaker diesel market hits 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 3rd time this year due to falling rates and also lowered its expected sales volumes, sending the company's share price 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 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 excess of low-emissions biofuels, margins for refiners and threatening to restrain the nascent market.

Neste in a statement slashed the anticipated typical comparable sales margin of its renewables system 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 expects renewables-based sales volumes in 2024 to be about 3.9 million tonnes rather of the 4.4 million it had actually predicted 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 between 350,000-550,000 tonnes this year, below between 500,000 and 700,000 tonnes seen formerly, Neste said.

"Renewable items' sales costs have actually been negatively affected by a substantial decline in (the) diesel rate during the third quarter," Neste said in a statement.

"At the exact same time, waste and residue feedstock prices have not decreased and renewable product market value premiums have remained weak," the business included.

Industry executives and analysts have said rapidly expanding Chinese biodiesel manufacturers are looking for brand-new outlets in Asia for their exports, while Shell and BP have revealed they are pausing expansion plans in Europe.

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

Neste's share price had actually reversed some losses by 1037 GMT however remained down 5.8% on the day and 48% lower year-to-date. (Reporting by Elviira Luoma, Essi Lehto and Boleslaw Lasocki