July 28, 2023 [Hart Energy]- Neste’s shares dropped by a combination of missed second-quarter earnings expectations and the Singapore renewables plant expansion being delayed.

Finnish oil refiner and biofuels producer Neste missed second-quarter operating earnings expectations on July 27 and said expansion of its Singapore renewables plant was delayed by equipment repairs, sending its shares down 12%.

Renewable fuels are a cornerstone for the company, which said it expects to complete its Singapore plant expansion by the end of the year.

“We had this shutdown in the second quarter in June and the works continued in July. It’s the end of July so now we will restart,” Chief Executive Matti Lehmus told Reuters in an interview.

The company’s goal was to reach full capacity by the end of the year and one-off expenses for the repairs had already been booked, he said.

Sustainable aviation fuel (SAF) production in Singapore is scheduled to start during the third quarter, he said.

The delay resulted in a negative sales volume impact of approximately 230,000 tonnes, which JPM analysts said equated “to ~10% of our prevailing 2H sales volume forecast”.

“Consensus was expecting continued volume growth in H2 due to capacity ramp-up, but these expectations will be cut significantly due to these issues,” Inderes chief analyst Petri Gostowski said.

Neste’s April-June comparable EBITDA fell to 784 million euros ($869 million) from 1.09 billion last year, missing the 835.1 million mean estimate of 17 analysts in a poll provided by the company.

Neste’s second-quarter comparable sales margin for its renewable products stood at $800 per tonne, at the lower end of the company’s guidance range of $800–900 per tonne, while it gave a similar range for the third quarter.

At its June 20 investor day, Neste warned it expected production capacity to exceed the demand for renewable diesel, SAF and renewable hydrocarbons for polymers and chemicals in 2023-2027, sending its shares down more than 8% that day.

But some analysts said Neste was being overtly cautious, dismissing its demand estimates as “conservative”.

Lehmus defended the estimates and Neste’s strategy, pointing out that a significant amount of new renewable fuel production capacity was coming to markets in the coming years.

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