UK biodiesel producer, Biodiesel Corporation, saw its shares loose 55% of their value as they slumped to 10.65p at close of business yesterday (13th March). The collapse of the share price followed a profits warning from the company, issued yesterday morning in which it said; "In December 2006, the Company confirmed that trading conditions had recently been impacted by a combination of lower mineral oil prices and increased input costs, specifically vegetable oils and methanol. The decision was taken to limit production levels by only taking on contracts that provided acceptable margins or, in the absence of such contracts, to focus on reprocessing intermediate product and sales of refined glycerine.

"Current market conditions and the immediate outlook have not improved. Consequently, biodiesel production levels, which have been intentionally restricted allowing intermediate product to be reprocessed, were in January and February running at 25% of plant nameplate capacity and will remain low for the immediate future. This, together with increased manufacturing costs, arising from a number of previously advised technical issues, will lead to the results for the year to 31 March 2007 being materially worse than market expectations."

According to the statement, the technical issues are being addressed through a clearly defined remedial engineering programme focussed on the intermediate product reprocessing unit for which the board has agreed further capital expenditure of £1.5 million. Contingency has been provided in financing plans over the next 12 months for an additional £1 million to cover possible technical enhancements. The company also states thqt it has initiated a claim against its previous technology provider, Energea, for plant design failures.

However, the Biodiesel Corporation remains optimistic. In closing its statement is said; "In the lead-up to the introduction of Renewable Transport Fuel Obligation (RTFO) mandation in April 2008, the company believes that margins should recover from the current unsustainable levels and that the company, with a proven and on-stream plant, will be well placed to take advantage of such a recovery. The company believes that the current weak market conditions, which are affecting the biodiesel sector as a whole, could restrict industry capacity and supply on the introduction of the RTFO."