London-based transformer oil rerefiner Hydrodec Group posted a $3.2 million loss for the six months ending June 30, slightly better than the first half of 2018 as a reduced loss from discontinued Australian operations offset weaker U.S. performance.
Hydrodec in August unveiled details of the sale of its Australian hydrotreater - to Andrew Black, a non-executive director and its biggest shareholder, who will have the plant dismantled and shipped to the United Kingdom.
Total income reached $7.2 million for the first half of 2019, up almost 9 percent, which the company attributed to strong demand for its Superfine brand transformer oils.
Hydrodec reported sales volumes of 11 million liters in the first half of this year, up from 10.3 million liters in the year earlier period. Average selling prices were marginally ahead of the first half of 2018, which the company said is encouraging against a backdrop of a softer crude oil market.
The companys rerefinery in Canton, Ohio, United States, processed 10.8 million liters of used transformer oil collected at an average landed price of $1.17 per gallon, which the company said was about 50 percent higher than in the prior year period. Cost increases have been driven by macro events with [International Maritime Organization] 2020 low sulfur regulations driving up fuel prices and [by] strategic decisions taken to build relationships with new and a wider geographic network of feedstock partners, the company said in its unaudited interim results news release.
In December 2018 the company reached agreement with its long term partners, G&S Oil Recycling, to increase Hydrodecs interest in Hydrodec of North America from 58 percent to 85 percent, and to provide Hydrodec with overall operational control. G&S and Hydrodec partnered to form Hydrodec of North America in 2013. Whilst relations with G&S are strained, it is believed issues will be resolved, Hydrodec stated.
G&S provides some of the feedstock for the Canton plant. Hydrodec said in its unaudited interim results news release that feedstock volume from other sources materially increased but that overall volumes were impacted by lack of support from G&S.
Shareholder Black provided an additional $3 million to the company to supports its turnaround strategy. This funding will provide a cash runway for operational needs, mitigating G&Ss reduced support of the existing partnership since the renegotiation of its terms late last year, Hydrodec stated.
Company management expects the benefits of wider sourcing to help bring reduced feedstock prices next year, and it said it is working on further reducing feedstock costs by exchanging carbon credits for used oil and developing the ability to accept a broad range of off-spec feedstock.
Hydrodec expects its two-year turnaround program begun in 2018 to conclude in 2020. The board believes that by the completion of the second year of the turnaround strategy in March 2020, it will be in a position to report that the business will have achieved the objectives necessary to establish long-term relationships with U.S. utilities, both as the rerefiner of choice for their used transformer oil and as buyers of our Superfine product; thus delivering a market leading closed loop strategy, CEO David DInwoodie said in his report. At that point the group will have a built a sustained and sustainable platform for further expansion in the U.S.
Dinwoodie noted the company is considering the potential of blending paraffinic feedstock to extend throughput by up to 25 percent. The group has also agreed to project terms with a counterparty to blend Superfine [rerefined transformer oil] with a higher-viscosity oil to increase overall margins, he said.
The company has also announced that its former CEO, Chris Ellis - currently a non-executive director - will replace Dinwoodie as CEO.