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Neste's renewable fuels business posts strong revenues

Finnish refiner Neste posted strong revenue and profit growth in its renewable fuels business even as its Chief Executive flagged the long-term need for new raw materials amid growing European demand for sustainable jet fuel.

The company has bet heavily on renewable fuels but is competing in a crowded space as fossil fuel majors enter the green fuel market, pushing up costs for used cooking oil and discarded animal fat.

Neste estimates that the maximum available global capacity for waste and residue materials would be around 40 MMtpy.

Chief Executive Matti Lehmus said 20 to 30 MMt of it is being reused, while new materials and processing technologies were being studied to enable long-term growth.

He said the joint venture to produce renewable diesel with U.S.-based Marathon Petroleum Corp in Martinez, California would start production this quarter with an initial output of 750,000 t, half of it being Neste's.

"The facility is targeting to reach full Phase I capacity by the end of the first quarter of 2023," Lehmus said on converting Marathon's refinery to renewable diesel production.

The company's share will grow to more than 1 MMt by the end of 2023, he said, adding it will account for nearly 20% of Neste's total renewables capacity.

Shares of the refiner jumped 11% by the afternoon in Helsinki after posting comparable fourth-quarter core operating results that beat market expectations on higher margins and a positive currency impact.

The maker of renewable and oil-based fuels reported October-December comparable earnings before interest, tax, depreciation and amortization of 894 million euros ($960 million)o, beating a mean forecast of 858 million euro in a poll by the company.

Neste's board proposed a dividend of 1.52 euros per share, consisting of an ordinary dividend of 1.02 euros and two instalments of extraordinary payouts of 0.25 euros, up from a year-ago dividend of 0.82 euros.

The company expects its first-quarter sales margin to be within a range of $825-925/t, supported by waste and residue prices at the beginning of the year, which RBC analysts said to be "well above expectations". The consensus estimates was $739/t.

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