HydroDec Group plc Q1 Trading Update (8189M)
02 May 2018 - 4:00PM
UK Regulatory
TIDMHYR
RNS Number : 8189M
HydroDec Group plc
02 May 2018
2 May 2018
Hydrodec Group plc
("Hydrodec", the "Company" or the "Group")
Q1 Trading Update
Hydrodec Group plc (AIM: HYR), the cleantech industrial oil
re-refining group, provides a trading update for the quarter ended
31 March 2018.
Highlights
-- Group sales volumes of premium quality SUPERFINE transformer
oil and base oil lower at 5.3 million litres (Q1 2017: 7.7 million
litres) - demand for end product remains strong yet feedstock
supply, particularly challenging during the period, remains the key
constraint to higher throughput and strategic initiatives continue
to secure sustainable, increased supplies going forward
-- Revenues expected to be approximately US$3.5 million (Q1
2017: US$4.5 million) as a result of lower sales volumes, offset in
part by improved pricing
-- Gross unit margins in the US materially up on prior year at
19% (Q1 2017: 10%) - driven by improved sales mix between higher
margin transformer oil and lower margin base oil
-- Superior quality of SUPERFINE transformer oil has been
further verified by independent laboratory tests and is evidenced
by higher pricing being achieved in the US relative to pricing
indices
-- The Company is pleased to confirm, post quarter end, the sale
of all of its remaining carbon credits in respect of production in
the US up to and including the 2013 vintage, generating US$190k of
proceeds - now targeting sales of more recent vintages at higher
prices
Outlook
The first quarter is historically difficult from a feedstock
perspective and Q1 in 2018 was particularly challenging. In the US
significant weather disruption impacted supplies with our partner
G&S not able to fulfil their budgeted volumes during the period
and other sources of supply being similarly impacted. In Australia
a large decommissioning contract scheduled for the first week of
February was pushed back to the end of Q2, significantly impacting
performance there. As a result, the Board expects that Group EBITDA
for Q1 will be weaker than in recent quarters with the Group
continuing to operate within current tight capital constraints and
the Board closely monitoring the Group's working capital
requirements.
However, margins in the US continued to improve in Q1, driven by
an increase in the proportion of higher margin transformer oil
sales to lower margin base oil of 66% (Q1 2017: 53%), with an
expectation that there will be further improvement throughout the
year. The Canton operation contributed materially higher EBITDA
than for the same period last year. Demand for our product
continues to be robust and the focus therefore remains on expanding
the number and value of significant feedstock contracts that in
turn will drive the utilisation of the operations and which are
expected to materially improve the Group's EBITDA and cash-flow
generation going forward.
The Board is concluding its work with Simmons & Co.,
specialists in international investment banking services for the
energy industry, in exploring options which will deliver accretive
value for shareholders. We are looking to grow our core US business
and are currently developing partnerships to significantly increase
feedstock to match the growing demand for our products in the
world's largest market.
Lord Moynihan, Executive Chairman and Interim Chief Executive
Officer of Hydrodec, commented: "Hydrodec's business continues to
offer significant upside with a strong forward order book in the
US; the first material sale of carbon credits and excellent quality
production. The management team is now focused on the central issue
of substantially increasing the availability of competitively
priced feedstock which has a direct impact on the performance of
the existing operations; a stronger balance sheet and finalisation
of the Board's review of its various growth options. These include
opportunities for internal and organic business growth as well as
strategic acquisition opportunities and partnerships if, and only
if, they are seen by the Board to add shareholder value.
Whilst feedstock conditions have impacted performance in Q1, we
see scope for new partnership arrangements this year to facilitate
increased supplies of feedstock. We were particularly pleased to
secure the sale of the balance of the historic carbon credits and
look forward to being able to report on the sale of more recent
vintages at improved prices. I look forward to updating
shareholders further at the time of our 2017 results which are
expected to be released at the end of May."
For further information, please contact:
Hydrodec Group plc hydrodec@vigocomms.com
Lord Moynihan, Executive Chairman/Interim
Chief Executive Officer
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.
In 2016 Hydrodec received carbon credit approval from the
American Carbon Registry ("ACR"), enabling its product to be sold
with a carbon offset and creating an incremental revenue stream.
The Group is now generating carbon offsets through the re-refining
of used transformer oil, which would otherwise ordinarily be
incinerated or disposed of in an unsustainable manner. This is a
highly distinctive feature for the Group, confirming (as far as the
Board is aware) Hydrodec as the only oil re-refining business in
the world to receive carbon credits for its output. This is a
significant endorsement of the Company's proprietary technology and
standing as a leader in its field.
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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