HCC Buys Used Oil Collector


Heritage-Crystal Clean acquired FCC Environmental for $90 million, adding 54 million gallons per year of used oil volume. Heritage officials said Friday it doesnt intend to build a rerefinery FCC was planning in Maryland.

Elgin, Ill.-based Heritage-Crystal Clean has an Indianapolis rerefinery with capacity to make 2,400 barrels per day of API Group II base oil. The company operates through 76 branches serving over 97,000 customers. In addition to collecting and rerefining used oil, Heritage-Crystal Clean provides parts cleaning and waste services.

Houston-based waste oil collector FCC Environmental was a subsidiary of FCC of Madrid, Spain. FCC Environmental provides industrial waste handling and recycling services with a focus on hydrocarbon-based waste streams, serving more than 30,000 customers throughout the eastern half of the United States.

As of October 2013, FCC had hoped to break ground on a $50 million rerefinery in Baltimore in the second quarter of this year, with plans to process about 40 million gallons of used oil annually and produce about 1,800 b/d of rerefined Group II base oil. What they have is a project they were trying to develop, Heritage-Crystal Clean Chief Operating Officer Greg Ray said during a conference call with analysts Oct. 17. They have land but nothing else, and had not put any real capital into creating the rerefinery – it was just something they hoped to do.

Joseph Chalhoub, Heritage-Crystal Cleans founder, president and CEO, said during the call that the company had viewed the Baltimore rerefinery site and the permit put forth for it. While Heritage considers the site an asset, Chalhoub said, it doesn’t intend to build the plant. We dont plan in the short term to go ahead and build a rerefining plant either in Baltimore or anywhere else, he said, adding that the current market is not favorable for such projects. The market conditions today are not only affecting rerefining but affecting anybody in the used oil management service business. We continue to have interest in maximizing our capacity in Indianapolis. Our next step in here is to realize the synergies and get the efficiencies out of this acquisition.

According to a Heritage presentation, FCC collects oil from commercial and industrial sources, and sells it into fuel oil markets or to rerefiners. Heritage also noted that acquiring FCC brings geographic overlap that creates large operational cost synergies, especially in oil collection routes across the Gulf of Mexico Coast, Southeast and Mid-Atlantic regions.

After the acquisition, Heritage expects to collect more than 100 million used gallons per year of used oil and be a very strong number two player in the U.S. The company is currently expanding its Indianapolis rerefinerys processing capacity from 65 million gallons per year to 75 million gallons per year.

We view it as weve acquired more sources of oil, and we like to be in a position where we have surplus volumes for our rerefining needs, and that we can be in the other markets, Ray explained in the call. That gives us flexibility to operate, to develop future growth strategies as market conditions change. We think that adding the customers and the cross-selling opportunities is very valuable as well. From the point of view of our oil business, having surplus volume gives us flexibility when were in volatile markets – to be more aggressive, for example, on our pricing, and not be worried about the possible impact of some amount of volume loss that could impact our plant operation.

FCCs other service offerings are considered complementary to Heritage-Crystal Cleans. They include oily water disposal, vacuum services, parts cleaning services, used antifreeze collection and recycling, used oil filter collection and recycling and other environmental field services.

The parent company in Spain said the sale of its U.S. environmental services company to Heritage shows that FCC is continuing determinedly with the divestment program under the strategic plan. Unveiled in March 2013, the plan ultimately calls for 2.2 billion euro (U.S. $2.8 billion) in divestments. The FCC Environmental sale was valued at 70 million ($89.6 million).

Before becoming part of FCC in 2008, FCC Environmental was known as Hydrocarbon Recovery Services. Spain-based FCC purchased the company from Siemens Water Technologies Corp. to form its U.S. division.

Heritage-Crystal Clean also announced its quarterly earnings last week, saying its oil business, including oil collection and rerefining, reported $36.1 million in sales for the quarter ending Sept. 6, up 16.8 percent from $30.9 million in sales in the year-earlier quarter. The oil business figures reflect sales of base oil, intermediate products and by-products from its Indianapolis rerefinery.

As a whole, Heritage-Crystal Clean posted $2.4 million in net income for its third fiscal quarter, on $77.9 million in sales or 13 cents per diluted share. That compared to $1.3 million in net income, on sales of $67.6 million, or 7 cents per diluted share in 2013s third quarter. The company doesnt break out net income for its oil business segment.

In the companys earnings news release, Chalhoub said its oil business segment experienced robust revenue growth driven by increased throughput at our rerefinery, compared to the year ago quarter, as a result of operating the plant at approximately 100 percent of our 65 million gallon nameplate capacity.