Neste shares drop on guidance cut

Investing.com -- Shares of Neste Oyj dropped on Wednesday the company’s revision of its guidance for Renewable Products. 

The updated forecasts, which include lower expected margins and sales volumes, have spurred negative sentiment in the market. 

At 6:37 am (1037 GMT), Neste Oyj was trading 5.6% lower at €16.77.

Neste has adjusted its 2024 guidance for Renewable Products, now forecasting an average comparable sales margin of $360–480 per tonne, down from the previous range of $480–580 per tonne. 

This revision is due to a decrease in diesel prices during the third quarter, while waste and residue feedstock prices have remained stable, and market premiums for renewable products have stayed weak.

The new guidance suggests a margin of about $370 per tonne for the second half of 2024, a drop from the first half’s average of $472 per tonne. 

“The new guidance will likely cause ~30% downgrades to Consensus EBITDA estimates for Renewable Products (RP), currently at €1,093m ($502/T margin and 4.1mT volumes),” said analysts at Jefferies in a note.

Neste has also lowered its sales volume expectations to around 3.9 million tonnes, including SAF volumes of 0.35–0.55 million tonnes, compared to the previous guidance of about 4.4 million tonnes and SAF volumes of 0.5–0.7 million tonnes. 

This reflects both lower SAF demand and a need to optimize production capacity amid a challenging market environment. 

“We downgraded Neste to Sector Perform earlier this summer on the back of a dramatically changed operating environment, with a much weaker RD market weighting on SAF potential,” said analysts at RBC Capital Markets in a note.

Jefferies analysts point out that the lower margin and volume forecasts have increased market concerns about a potential dividend cut, with consensus already reflecting a 27% reduction in expected dividends. 

The analysts at Jefferies emphasize that the revised guidance, combined with an oversupplied market and weak near-term demand, has led to increased caution among investors.

Source: Investing.com