Hydrodec reports strongest ever quarterly earnings

Industrial oil re-refining company Hydrodec Group reported its strongest quarterly EBITDA performance ever on Thursday, in a trading update for the three months to 30 September, with group EBITDA expected to exceed $0.33m.

The AIM-traded firm said that would represent an improvement of $0.62m on the comparable period last year, adding that it was driven by improved pricing and margins and reductions in corporate costs.

Revenues were expected to exceed $4.7m, up from $4.3m a year ago, while group sales volumes of premium quality SUPERFINE transformer oil and base oil dropped 7.7 million litres in the period, from 8.2 million litres at the same time last year.

It said its canton plant utilisation was consistent with the first half at 61%, with feedstock remaining a “key constraint” to higher throughput with strategic initiatives continuing to progress in securing sustainable, increased supplies going forward.

Gross unit margins were materially up on the prior year at 14%, from 7%, which the board said was driven by an improved sales mix in the US between higher margin transformer oil and lower margin base oil.

In the US business, Hydrodec also confirmed the award of a two-year agreement to supply up to 7.6 million litres annually of its SUPERFINE transformer oil to an unnamed major transformer original equipment manufacturer.

On its outlook, Hydrodec’s board said demand for its product remained “robust” with the award of a two year contract said to underline the quality of the product it produces.

The focus remained on expanding the number and value of significant feedstock contracts that in turn would drive the utilisation of its operations, and further improve group EBITDA and cash-flow generation going forward.

“I am very pleased to confirm further strong progress in positive group EBITDA in the most recent quarter of 2017, as much of the recent hard work begins to reap its reward,” said chief executive Chris Ellis.

“As indicated at the beginning of the year, I am confident that 2017 will see the group deliver full year positive EBITDA for the first time in its history, with scope for further material improvement from the existing facilities.

“While maintaining a sharp focus on the operational performance of the business, we will look for opportunities to deploy our clean-tech re-refining technology to capitalise on the large market opportunity that we see.”