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Neste renewables exceed oil products profits

25 Oct 2016 18:50 (+01:00 GMT)
Neste renewables exceed oil products profits

London, 25 October (Argus) — Finland-based biofuels producer Neste reported a larger operating profit in its renewable products segment than in oil products in the third quarter of this year.

Renewable products' operating profits reached €124mn ($135mn) in the third quarter, up from €75mn during the same period a year earlier, while the oil products segment made an operating profit of €120mn, down from €178mn last year. Operating profits in renewable products for January-September were €323 million, up from €171mn during the same period last year.

Neste said utilisation rates for renewables production reached 100pc during the third quarter, which resulted in low production costs. The firm said that their proportion of waste and residue inputs reached up to 79pc in the third quarter, with a target of 80pc by the end of the year.

Neste's third quarter financial report suggests the firm has sought to optimise between different feedstock usage. Feedstock costs have increased over the last year as both crude rapeseed oil prices and crude palm oil (CPO) prices have risen. But the costs of CPO and Palm-fatty-acid-distillate (PFAD) have been volatile and Neste renewable diesel (Nextbtl) contains large quantities of low-cost PFAD.

Sales volume totalled 544,000t, down 5pc compared with the corresponding period last year, which reflected the normalisation of inventories after the Rotterdam turnaround for nine weeks in the second quarter. During the third quarter approximately 65pc of sales volumes went to Europe and 35pc to North America, compared with 66pc and 34pc respectively a year earlier. Neste said some shipments have been delayed from the third quarter to the fourth, which has particularly affected sales volumes in the US and Canada.

For US exports, the $1/USG blender's tax credit (BTC) and high Californian carbon credits have been key to the firm's profits increase. The BTC was not in place until December 2015, when it was retroactively applied for the entire year. But Neste is uncertain whether it will continue to reap the benefits of the BTC much longer, as the tax credit expires at the end of the year and there are moves by US stakeholders to switch to a more protectionist producer-based credit system.

In the US, Soy Methyl Ester (SME) biodiesel price fell to $40/t because of weaker soybean oil (SBO) prices and margins. Neste said weakness in SME has been mitigated by stronger Renewable Identification Number (RIN) certificate prices fuelled by the ethanol blending wall and potential tightness in meeting the biofuel volume obligations for 2016.

Neste's profit was €253mn in the third quarter, up from €129mn a year earlier. January-September profit was €681mn, up from €352mn a year earlier. Revenues were stable, with higher volumes compensating for lower prices, and a fall in costs aiding its bottom line.