Tough Half Year for Hydrodec


Transformer oil rerefiner Hydrodec Group posted a $7.5 million loss for the six months ending June 30, compared to a $3 million loss during the first half of 2014.

The ramp-up of key projects has been slower than expected, Hydrodec noted in its interim results report issued Sept. 23, adding that it continues to face, and react to, oil price volatility and difficult market conditions in the United Kingdom, where the company is based.

Total sales volumes increased to 33.2 million liters for the first six months of 2015, up 30.2 percent from the same period in 2014. The company attributed the growth to its acquisition of Eco Oil Ltd. In April 2015.

Hydrodec operates transformer oil rerefineries in Canton, Ohio, and in Young, Australia. Rerefining volumes were nearly 5.3 million liters for the first six months, down 13 percent from 6.1 million liters a year earlier. Rerefining revenue fell to about $4.8 million for the period, down 52 percent from a year earlier. Rerefining refers principally to the treatment of used transformer oil and the sale of the companys Superfine brand of rerefined base oil.

While the U.S. plant remained under construction for the first half of the year, oil sales were restricted in that region to traded oil – 3.6 million liters – which was lower compared to the prior year as the business focus moved to recommissioning the plant in Canton, Ohio, the company said. In Australia, the business traded oil to maintain supply to key customers while the operations were transferred to the Southern Oil refinery; however, because of extended commissioning there was some sales disruption to the business during the transition, resulting in a decline in volumes of 20 percent.

Recycling volumes reached almost 26 million liters for the first six months, up 31 percent from 19.8 million liters. Revenue was $16.6 million, down 15 percent from $19.5 million. Recycling refers principally to the collection and treatment of waste lubricant oil and the sale of fuel oil.

Overall volumes increased due to the acquisition of Eco-Oil in April. On a like-for-like basis – not including Eco-Oils volumes – volumes declined by 16 percent due to the focus on higher margin business and the impact of the decline in oil prices on the collection cycle at the end of 2014, as suppliers retained their feedstock on the expectation of a price recovery through 2015s first quarter.

The U.K. recycling business has suffered further margin compression as a result of the recent decline in world oil prices, Hydrodec stated. The business has successfully mitigated some of this impact by pushing down feedstock acquisition costs, and following the acquisition of Eco-Oil has undertaken a significant restructuring exercise to bring down the fixed cost base for the combined business. While some of these restricting costs were incurred the first half of this year, the impact of most of the changes will materialize in the second half of 2015, and further cost reductions will continue through the third and fourth quarters of this year.

Chief Executive Ian Smale said four out of six production trains are operating at its rebuilt Canton plant, producing about 38,000 liters of naphthenic base oil per day. Previously announced issues with heat exchangers have been resolved, with repaired units now fitted to four production trains, allowing the company to plan for the plants fifth and sixth trains to be in production. We expect to switch production to transformer oil shortly, he stated. Given the delay to the ramp-up of trains 3 and 6, and based on revised internal forecasts, we have now revised our production projections for Canton for the year to 10 million liters, assuming building to full production during October.

In July, Hydrodec announced its subsidiary had leased a 9-acre site in northwest United Kingdom for use in the first phase of its planned 75 million liters per year API Group II/II+ rerefinery. In August 2014, it signed engineering, licensing and technology collaboration agreements for the rerefinery with Chemical Engineering Partners.

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