Neste posts deepest internet loss in a decade as biorefining bets flip bitter – S&P.
Neste reported its first adverse income since 2014 in Q2 2024 because the Finnish refiner felt the influence of a worldwide biofuels market downturn and prolonged outages at its Porvoo refinery.
In a July 25 earnings assertion, Neste reported a internet lack of Eur144 million ($156 million) in Q2, its first adverse revenue margin since This autumn 2014 and deepest losses in over a decade. This was down sharply from Eur162 million in Q1 2024, dragging returns to ranges the refiner mentioned can be the bottom on the yr.
As the biggest participant by capability within the distressed European biofuels section, a “very difficult” renewables market surroundings was a key concern for Neste. Pressured by competitors from low-cost imports, rival gamers have paused funding in giant bio-refining tasks, whereas within the US, Fulcrum BioEnergy has verged on collapse.
In July 25 earnings assertion, the corporate reported a major hit to its renewable fuels enterprise in Q2, slashing its comparable gross sales margin to $382/mt from $800/mt the earlier yr. The corporate additionally revised down its most anticipated gross sales margin for 2024 from $650/mt to $580/mt.
“Clearly decrease” returns mirrored a stoop within the European biodiesel spot costs and weaker incentives within the US, Neste mentioned, whereas rising biodiesel manufacturing pushed feedstock costs increased.
Used cooking oil feedstock costs elevated in each the EU and North America on the quarter, propping up working prices, whereas soybean and palm oil costs eased barely.
Platts assessed used cooking oil (UCO) FOB ARA prices at $1080/mt July 24, up $5/mt on the month and $127/mt on the yr. Platts is part of S&P World Commodity Insights.
Confronted with rising feedstock costs, Neste lowered its share of waste and residue inputs used for processing to 88% in Q2, down from 96% the earlier yr.
Decrease US bioticket and renewable credit score (Low Carbon Gasoline Commonplace) costs additionally resulted in a lack of round Eur36 million ($39 million) on the quarter, Neste mentioned, forecasting ranges to hover beneath 2023 costs for the second half of the yr.
SAF outlook, renewables ramp-ups
The refiner anticipated renewable diesel spot costs to additionally underperform final yr’s ranges, however recognized sustainable aviation gas (SAF) as one potential vibrant spot.
The corporate revised down its anticipated SAF gross sales volumes for the complete yr of 2024 from 500,000 – 1 million mt to 500,000 – 700,000 million mt, however remained optimistic on short-term progress.
Matti Lehmus, Neste President and CEO, within the July 25 assertion:
We count on our SAF gross sales to develop clearly within the third and fourth quarter.
In Q3, a six-week turnaround at Neste’s Singapore refinery and a four-week upkeep shutdown at its Rotterdam web site are anticipated to deplete gross sales volumes within the renewables section.
Ramp-ups at its Martinez three way partnership in California, which was broken by a fireplace final yr, ought to assist recoup gross sales. Neste has focused ramp-ups from 50% utilization at Martinez within the first half of the yr to 75% by Q3 and has eyed full utilization by the top of the yr.
Fossil refining
Within the typical refined merchandise house, Neste took a success to its gross sales volumes in Q2 as a result of a significant turnaround at its Porvoo refinery in Finland, which took the 206,000 b/d refinery offline between April and June. The deliberate upkeep took Neste’s refinery utilization ranges to 34% in Q2, down from 86% the earlier yr, it mentioned, anticipating a restoration within the second half of the yr.
The lowered gross sales volumes contributed to a Eur1.6-billion year-on-year hit to Neste’s revenues within the first six months of 2024, it mentioned within the assertion.
Falling center distillate costs offered an extra squeeze on revenues as product cracks continued to melt from post-2022 highs, although a stronger US greenback had a small optimistic influence on earnings.
Neste reported its complete refining margin in Q2 at $15.10/b, down from $20.40/b in Q1 and 10% decrease yr on yr.
Rising provide dangers within the fist half of the yr, reminiscent of Purple Sea transport assaults and Ukrainian drone strikes on Russian refineries now gave the impression to be offering much less upside for product cracks, although Neste maintained that the scenario remained unstable.
Matti Lehmus, Neste President and CEO, mentioned:
“The persevering with conflict in Ukraine and the escalated disaster within the Center East have intensified geopolitical dangers that would have a fabric influence on the worldwide and European power markets,” it mentioned in its assertion July 25, flagging Europe’s explicit publicity to power value shocks.
“We estimate the second quarter to be the weakest quarter of the yr for Neste when it comes to outcomes and money circulation to be considerably optimistic within the second half of the yr,”
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Neste posts deepest internet loss in a decade as biorefining bets flip bitter – S&P. supply
