Neste reports record renewable diesel production in Q1

By Erin Voegele | April 28, 2020

Neste Corp. released first quarter financial results on April 24. The company reported a solid start to the year considering the negative impacts caused by the COVID-19 pandemic, and said renewable diesel production was at a record high.  

During an earnings call, Peter Vanacker, president and CEO of Neste, said first quarter comparable EBIT was 408 million euros, up 8 percent when compared to the first quarter of 2019. “Renewable diesel demand was good in early 2020, but as expected…the feedstock markets remain tight,” he said. “Combined with the significant impact of the COVID-19 situation on commodity pricing, the tight feedstock market created some pressure on the sale margin.” As a result, he said Neste’s comparable sales margin averaged $685 per ton during the first quarter.

Vanacker also noted results for the company’s renewable products segment were boosted by high sales volumes, which reached 731,000 tons, up approximately 6 percent when compared the same period of last year. According to Vanacker, the growth was enabled by a new quarterly production record of 795,000 tons. He said production facilities during the quarter were operating at a utilization rate of 101 percent. “This production record would indicate a potential nameplate capacity of close to 3.2 million tons,” he added.

Vanacker noted that the COVID-19 crisis is causing significant and unprecedented uncertainty related to economic development and the demand and prices of oil products. A lot will depend on the pace, timing and geographical distribution of a possible market recovery, he added. Vanacker cited market estimates that show that oil demand will decline between 4 million and 9 million barrels per day in 2020, with the International Energy Agency expecting a 29 million barrel per day decline in oil demand for April, and a 26 million barrel per day decline in May. “Biofuel regulations and mandates are expected to continue supporting renewable diesel demand,” he said, but stressed that overall declines in fuel demand could negatively impact the sales and profitability of Neste’s renewable products business.

Matti Lehmus, executive vice president of the renewables platform at Neste, said California Low Carbon Fuel Standard credit prices remain strong, averaging $206 per ton during the first quarter of this year. There was some volatility related to COVID-19 that caused credit prices to fall under $180 per ton, but prices have since recovered and are over $190 per ton. Lehmus said the strong LCFS credit prices reflect solid demand for credits. Renewable Fuel Standard renewable identification number (RIN) prices for D4 biomass-based diesel RINs were stable during the first quarter, Lehmus said, averaging 47 cents per gallon.

Neste reported 408 million euros in comparable operating profit for the first quarter, up from 378 million euros. The renewable products segment reported comparable operating profit of 329 million euros, down slightly from 337 million euros during the first quarter of 2019. Renewable products comparable sales margin, including the blenders tax credit, was $685 per ton, down from $756 per ton.

 

 
 
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