Tough 2019 for Rerefiner Hydrodec


United Kingdom-based transformer oil rerefiner Hydrodec Group posted a full-year loss for 2019 and said its revenues declined by more than 22 percent from 2018, according to its year-end trading update issued Feb. 14.

The company reported a $3.2 million loss in earnings before interest, tax, depreciation and amortization for 2019, compared to a $1.2 million EBITDA loss for 2018.

Hydrodecs revenues from its continuing core rerefining business declined 22.1 percent to $11.6 million, down from $14.9 million in 2018.

Sales volumes of its rerefined transformer oil and process oil was lower at 18.3 million liters, down 20.4 percent from 23 million liters, which the company attributed to feedstock and working capital constraints in the second half of the year, while claiming that demand for its products remains robust.

The utilization rate for its transformer oil rerefinery in Canton, Ohio, averaged 45 percent during 2019, down from 61 percent during 2018. Feedstock remains the key constraint to higher throughput, the company noted.

Working capital constraints, by necessity, have a material impact on our ability to source feedstock, which in turn drives volume, margin and overall financial performance, CEO and Interim Executive Chairman Chris Ellis said in the companys earnings news release. It is in this context that the 2019 performance should be viewed and whilst, overall, it is extremely disappointing, there are some encouraging signs of early successes with our sustainability strategy and this, together with traction with major U.S. utility companies, gives me cause for greater optimism going into 2020. Ellis stepped back into the role of CEO for Hydrodec in the fourth quarter of last year.

The company highlighted two positive developments from early 2020. One was its first direct contract with a major U.S. utility, Duke Energy, to provide Hydrodec generated carbon credits in return for Dukes used oil, which will be processed by Hydrodec. The contract is for three years, with an option to extend for a further two years. “The Duke Energy contract is a game-changer for Hydrodec and a clear signal that the environment in which the company is operating has changed significantly in our favor and that the sustainability strategy that the company has embarked upon has the potential to be successful, Ellis said.

The other development was a one-year contract extension to continue to supply up to 10 million liters annually of its Superfine transformer oil to a major transformer original equipment manufacturer.

The company provided a financing update, confirming it has agreed to headline terms with its largest shareholder, and non-executive director, Andrew Black for extension of his financial support. Black has provided $1.8 million cash to support the company since June 30 last year. The company plans to issue a further announcement about loan terms and extension of existing loans once finalized and fully documented.

Hydrodec said its working on a refinancing package for its plant in Canton, Ohio, United States, in the early part of 2020. The purpose of which is to replace the existing equipment lease, which is over-collateralized, with an extended facility to provide additional funds for feestock, approved capital expenditure and growth opportunities, the company stated in the news release, noting that in the meantime it remains reliant on Blacks ongoing support.

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