HydroDec Group plc Pre-close Trading Update (1269D)
29 January 2018 - 6:00PM
UK Regulatory
TIDMHYR
RNS Number : 1269D
HydroDec Group plc
29 January 2018
29 January 2018
Hydrodec Group plc
("Hydrodec", the "Company" or the "Group")
Pre-close Trading Update
Hydrodec Group plc (AIM: HYR), the cleantech industrial oil
re-refining group, is pleased to provide a trading update for the
financial year ended 31 December 2017.
Unaudited Highlights for year ended 31 December 2017(1)
-- Group EBITDA approximately US$0.45 million, the first
positive full-year EBITDA in the Group's history, a significant
improvement of US$1.75 million on the prior year (2016: EBITDA loss
of US$1.3m)
-- Revenues increase by 6% to approximately US$17.8 million
(2016: US$16.8 million from continuing core re-refining business),
driven by improved pricing and sales mix
-- Gross unit margins increase substantially to 14.5% (2016: 5.2%)
-- Group sales volumes of premium quality SUPERFINE transformer
oil and base oil in 2017 lower at 29.3 million litres (2016: 33.3
million litres), reflecting feedstock constraints and higher
feedstock inventory at start of prior year due to Canton plant
recommissioning - demand for SUPERFINE products remains robust
-- Further improvement in sales mix between higher margin
transformer oil and lower margin base oil, with transformer oil
sales representing 52% of total oil sales in 2017, up from 40% in
2016 - targeting at least 60% of total sales in 2018
-- Canton plant utilisation at 61% on average for the year -
feedstock remains key constraint to higher throughput and strategic
initiatives continue to progress in securing sustainable, increased
supplies going forward, with the Group seeking to achieve
utilisation rates at the Canton facility of at least 70% in
2018
-- Further reduction in corporate costs with benefits from
initiatives implemented at the end of 2016 continuing to filter
through into 2017
-- First sale of carbon credits in respect of credits generated
by production in 2013, with a strong potential pipeline for further
sales in H1 2018 including vintage credits
-- In the US business, the award of a two year agreement to
supply up to 7.6 million litres annually of its SUPERFINE
transformer oil to a major transformer original equipment
manufacturer ("OEM")
-- Confirmation of new patent for a further 20 years in the key
US market reinforcing uniqueness and market-leading nature of
Hydrodec technology
-- Reauthorisation of the PCB treatment permit from the US EPA
for a further 5 years with enhanced operating capabilities
including unlimited PCB treatment (previously limited to 2,000
parts per million) and the ability to store PCB containers
onsite
(1) Comparisons to 2016 audited accounts
Outlook
This update confirms further significant progress in the
turnaround of the Company over the past twelve months has been
achieved. The general operating environment for oil related
businesses has improved recently, positively impacting the Group's
pricing and margins. 2018 has begun strongly in terms of sales
orders in the US and Australia but the feedstock position in both
geographies remains a constraint, in part driven by usual late
Q4/early Q1 seasonality but also specifically in the US driven by
robust demand for used transformer oil for fuels blending
particularly in Mexico. Higher margin transformer oil sales
currently represent approximately 60% of total Group oil sales,
with scope for further improvement through the year.
The focus remains on expanding the number and value of
significant feedstock contracts that in turn should drive higher
utilisation of the operations and further improve the Group's
EBITDA and cash-flow generation going forward. The recently awarded
enhanced PCB licence renewal in the US should give us the
opportunity to service customers more widely than before.
In 2018, the Group remains focused on building upon its positive
2017 performance by strengthening margins and further increasing
Group EBITDA by continuing to grow market share and leverage
product quality in key customer relationships. As well as focusing
on expanding the number and value of significant feedstock
contracts to increase throughput in our existing operations, the
Group will continue to pursue other strategic growth initiatives
that will ultimately seek to accelerate the Group's overall
profitability.
Chris Ellis, Chief Executive Officer of Hydrodec, commented: "I
am pleased for the Group to report its first positive EBITDA in its
history, a significant milestone and an important step as we
continue to build solid commercial foundations from which the
business can seek to develop further. There will continue to be
challenges particularly in respect of feedstock procurement in what
is still a volatile market, but I am confident in the Group's
ability to deliver an improved positive EBITDA in the coming years
and I look forward to reporting further progress."
For further information, please contact:
Hydrodec Group plc 01372 824750
Chris Ellis, Chief Executive
Canaccord Genuity (Nominated
Adviser and Broker) 020 7523 8000
Henry Fitzgerald-O'Connor
Richard Andrews
Vigo Communications (PR adviser
to Hydrodec) 020 7830 9700
Patrick d'Ancona
Chris McMahon
Notes to Editors:
Hydrodec's technology is a proven, highly efficient, oil
re-refining and chemical process initially targeted at the
multi-billion US$ market for transformer oil used by the world's
electricity industry. MarketsandMarkets forecasts that the global
transformer oil market is expected to grow from US$1.98 billion in
2015 to US$2.79 billion by 2020 at a CAGR of 7.14% from 2015 to
2020. Spent oil is currently processed at two commercial plants
with distinct competitive advantage delivered through very high
recoveries (near 100%), producing 'as new' high quality oils at
competitive cost and without environmentally harmful emissions. The
process also completely eliminates PCBs, a toxic additive banned
under international regulations. Hydrodec's plants are located at
Canton, Ohio, US and Bomen, New South Wales, Australia.
Hydrodec's shares are listed on the AIM Market of the London
Stock Exchange. For further information, please visit
www.hydrodec.com.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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