October 24, 2024 [Reuters]- Neste has withdrawn from an investment into renewable hydrogen production at its plant in Porvoo, Finland, the oil refiner and biofuel maker said after its third-quarter core earnings missed expectations on Thursday.
The Helsinki-listed group said it would need to re-evaluate any new investments due to the challenging market conditions, and added it was seeking alternative ways to utilize renewable hydrogen in Porvoo.
Neste’s decision seems like a typical re-evaluation of investment projects during harsh times rather than a sign of some bigger changes, Inderes analyst Petri Gostowski said.
“Given their financial situation and weakened earnings outlook, this kind of rethinking of investments is what one could expect,” he added.
The Neste shares were up 1.9% by 0820 GMT.
The company, whose renewable diesel can substitute its fossil counterpart to cut emissions of existing vehicles, has been hit by falling prices for the fuel amid weak global demand and supply glut, while coping with consistently high input costs.
Its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) slumped 66% to 293 million euros ($316 million) in the third quarter, missing analysts’ average estimate of 348 million euros in a company-provided poll.
“The outlook for the global economy continues to be uncertain as a result of geopolitical and trade policy tensions,” CEO Heikki Malinen said in the statement.
Malinen, who officially took the top position last week, added that Neste had launched a group-wide potential analysis following “unsatisfactory” performance in recent quarters, including three outlook cuts so far this year.
He flagged uncertainties around the U.S. clean fuel production credit, which could lead Neste to adjust its production output, and lower-than-expected voluntary demand for sustainable aviation fuel.
Neste’s Renewable Products unit’s comparable sales margin fell to $341 per tonne in the quarter from $912 last year, while analysts on average were expecting $360 per tonne.
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