Times online14 Mar 2007 08:58
Joe Bolger
Nearly half of the stock market value of Biofuels Corporation was wiped out yesterday after the green fuels group gave warning that rising raw materials costs and softer fuel prices would result in weak profits.
The company said its figures for the year to March 31 would be materially lower than expectations because of a squeeze on profit margins. It said it would need to borrow more from its banks for the year.
Continuing strength in the price of vegetable oils and methanol, both used to make biofuels, has combined with weakness in the price of biodiesel, which follows movements in oil prices, to result in “unsustainable” margins, the group said.
The company first cautioned of a narrowing in margins in December, when it took the decision to limit new contracts to those that offered “acceptable” margins. Yesterday the company said that output would remain low for the immediate future.
It reiterated its expectation of an improvement in margins in the run-up to April next year, when the Government will introduce the Renewable Transport Fuel Obligation. It will require fuel retailers to include a proportion of biofuels in the fuels they sell, potentially increasing demand in the sector.
The price of raw materials, including soya and rapeseed oil, has been bolstered by rising demand from the biofuels sector.
Biofuels Corporation also raised its forecast for how much money it will need to fund the group’s growth between April and D