Innovative biodiesel company D1 Oils has given an upbeat assessment of its prospects, less than two months after warning it was scaling back production.

The company founded by high profile North-East entrepreneur Karl Watkin published its annual results yesterday but, with production of the jatropha oil which it turns into fuel not yet in full swing, the main focus was on the future.

Chief executive Elliott Mannis said the firm was performing as expected, and was confident D1 was in pole position to benefit when the UK biodiesel market gets going in April next year.

It is then the Government will start ensuring 5% of all transport fuel sold in the UK will have to be biodiesel under what is known as the Renewable Fuel Transport Obligation (RTFO).

Despite D1 saying in February that its original target of producing 320,000 tonnes of fuel (from soya, ahead of jatropha becoming available) by end of 2007 would not be met, Mr Mannis was optimistic, saying the firm had deliberately slowed down production as it was not yet economic.

He said D1 would nonetheless meet its contractual obligations to distributor Petroplus and would be ramping up production to the 320,000 tonnes level in 2008. He also expected the firm to double the amount of jatropha trees it is growing around the world over the next 12 months from 145,000 hectares to nearly 300,000.

D1 raised more than £49m at the end of last year to support its investment needs and meet production targets.

Mr Mannis said: "The business is absolutely on track, delivering against key strategic milestones. We have a fundamentally different business model to our rivals, as we are vertically integrated and focused on feedstock."

The chief executive said D1's decision to reduce the amount of fuel it was producing was sensible. He said: "We're not making money from the fuel at the moment so we have very purposefully touched the brake. We will now have capacity of 320,000 tonnes by the end of 2008.

"We get our first supply of jatropha in 2008 and that will transform our economics - and the RTFO in April will create a demand floor, and then it increases in 2009 and 2010."

Turnover for D1 reached £1.6m in 2006, up from £500,000 in 2005, and the company made a pre-tax loss of £800,000.

D1 employs 45 staff at its production site on Teesside, and another 25 at Bromborough on Merseyside, with more to come as production levels rise.

The company employs around 250 staff operating its plantations in Zambia, Swaziland, India, China and Indonesia.