UPDATE 1-Neste Oil shares drop as company cuts profit outlook after weak Q1

Fri Apr 25, 2014 3:09am EDT

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HELSINKI, April 25 (Reuters) - Finnish oil refiner Neste Oil Oyj reported weaker-than-expected first-quarter profit on Friday, hit by falling refining margins, and cut its profit outlook for the year.

Its shares dropped 6.2 percent to 14.6 euros by 0702 GMT, having fallen as low as 14.35, their lowest since early February.

State-controlled Neste, which has focused on its biofuels business, said its first-quarter comparable operating profit fell to 55 million euros ($76 million) from 135 million a year earlier, was well below analysts' average forecast of 66 million.

The refiner cut its operating profit outlook to about 450 million euros this year from its previous forecast of about 500 million.

It also lowered its estimate for 2014 average reference refining margin to $4.00 per barrel from $4.50 previously. In January-March, the reference refining margin averaged $3.30 per barrel.

"The numbers were somewhat weak but I was still surprised that they downgraded the guidance, I thought they could have waited for one more quarter," said Teemu Vainio, an analyst at Pareto Securities. "The report shows how volatile the renewables business is."

Neste's biofuel business, which makes renewable diesel from sources such as palm oil and animal fats and powers more than 1 million cars a year, turned profitable in early 2013 for the first time since its launch in 2008.

While the biofuels business remained profitable, its comparable operating profit fell to 15 million euros from 26 million a year earlier. ($1 = 0.7236 Euros) (Reporting by Sakari Suoninen; Editing by Jussi Rosendahl and David Holmes)

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