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Fairly positive rns. Recent increase in feedstock is very positive but it is still the main issue. Loss has almost halved from previous year. Extra funding from A Black without interest. Overall not a lot already unknown but it is positive and I did not see any new bad news which is always good. Hydrodec could see a long awaited price increase from here possible back to 2.5p range.
On a first cursory pass, I'd say that it looks pretty good. The $4.3ml accounting loss is lower than the $5ml'ish, I estimated last year. With improved feedstock, things could turn around quickly. I'm trying to approximate any direct HYR impact of the new 2020 regs but need to dig up better info. Crude took a dip when the Saudi's telegraphed that they had buckled to pressure from Trump... I'm not so sure this will stop the slow uptick as we go into 2019. The proposed increase in supply, will see OPEC cuts dropping to 100% compliance, rather than the 150% today. Demand and geo political risks remain, and as mentioned, new regs will likely drive WTI... counter to this, I believe there is a supply chain bottleneck for US crude suppliers, which if fixed, may increase stock coming to the market.
Not too bad. Increasing feedstock supplies, with all six processing trains in Canton operating recently, which should improve Q2 results. No deal to secure this yet, but still working on it.
I'm hoping they're pushing it to the last day in the hope of having something good to report. Anything at all would be helpful.
Due for announcement by end of month, tomorrow then !
In oversold territory, any newsflow about feedstock would surge the price upwards....
to Arden Partners will hopefully drive some more focussed exposure for HYR. AP appear to be undergoing a turnaround of its own and, with approx 38 corporate clients (Jan 2018), may be better able to align with HYR. We still need to resolve the feedstock issue and appoint some senior full-time execs though ... guess we need to be patient, so I'll get back to watching the paint dry. GLA.
Good post Nastid and I agree. Easiest way of increasing feedstock is a partnership. I hope that next weeks RNS might update us here. I am still holding but quite a bit down although bullish
There was an interesting article regarding the shift in mood from investors who want oil companies to give concrete plans/projects to reduce carbon emissions. Shell was the main talking point but given it's size and importance in the industry, I imagine it's a wider general investor shift. Shell offer their own transformer oil range, it seems an easy win to tie up with re-refiners like Hydrodec, to move some way to towards reaching the above goals. I wouldn't assume Hydrodec were talking to the likes of Shell but the idea is less far fetched than it would once have seemed. High prices affect industry change beyond the questions of margin during the different crude cycles. I'd be surprised if they can't find a willing partner, at least for a closed loop supply, to improve matters in some way.
We just need news of a new arrangement that will improve the feedstock situation. We have the capacity, the margins are great, just need more input.
Outlook. I'm sticking a pin on post $90-100 oil, if not by end of 2018, during 2019. The US economy is still going strong without overheating. The global demand picture looks to support prices going into 2019, even at higher valuations. Further to this, Trump seems to have arrived at an accord with China concerning a trade war. Additionally, with Chavez's bus driver winning again, that all but assures Venezuela's output remains poor, and maybe more importantly, the new shipping regs are likely to drive crude prices for some years. Shale will increase output but I'm not sure they have the same spare capacity, as Saudi Arabia, and other producers might already be at near maximum.... besides I think the Saudi's want/need higher prices, to fill the coffers being drained by existing wars, new wars (Iran?), and government programs. The Italian political situation could knock an already wobbly EU but on balance, add uncertainty around Iranian sanctions, and a chance of wider conflicts, there is a bet to be had for prices on aggregate, marching one way.
Gordon's Alive!!
Boost to feedstock supplies would remove the bottleneck in efficiently utilising the US plant. Should be back to year high by year end....
Crude has been a good play so far. $70 WTI was always on the cards, and depending on Trump tomorrow a good level to temporarily reduce... I think any short term weakness will be offset by wider supply/demand dynamics. We had some recent naphthenic base oil price increases from some of the major suppliers, after an extended period of absorbing costs.
Regarding the vintage credits. I don't know the exact price they were achieving but I'm guessing an avg of $3-5 or thereabouts. The market had hit a prolonged rough patch before the crude route, though recently there has been a stark change. Today the cali carbon market, is $15.5/tonne Co2. Up from $10, and as yet below their previous $20+ high mark. I'm not sure on what basis HYR can derive their pricing but it does show that it's on an upward trend. Additionally, there are some moves by Germany and France that have pushed pricing higher. I believe the credits were for 60,000 tonnes/Co2. Using the pricing above as an example only, that's almost $1ml. ... I wonder if they have considered regions like Brazil/South America, for licensing/projects etc. They have high demand, and low domestic supply. Although, again, the problem is not the demand but establishing a reliable feedstock channel. Regarding feedstock, I did read that new legislation coming into force by 2020, will require shipping to switch to low sulphur fuel oils. What lasting impact, if any there will be, I don't know but imagine it would push prices up. Unless the industry upgrades with scrubbers, or uses alternatives, they'll be a stock pile of grades that can't be used.
Great work, thank you for posting, look forward to part 2..
This paragraph was cut short in the first post... There are execution risks (as with all small companies) and it�s down to the execution of the board, but I see much stronger underlying business trends in the making and underpinned by demand for the superior & higher margin superfine product as evidenced by the 2-year sales order with the US OEM.
Some thoughts on yesterdays update. There is clearly a �headline� disappointment with the revenues for Q1 which they say was �weather related� but there are also a number of underlying positive trends that need to be considered here. Firstly, despite the revenue drop, I calculate that the Gross Profit for Q1 will be ahead of Q1 2017 and also it will produce a higher EBITDA than Q1 2017 (although lower. than the recent quarters of Q3 & Q4 2017), but still EBITDA positive at company level, driven by (as the company states) materially higher Canton EBITDA than the same period last year. By way of example: Gross Profit Margins in Q1 2017 were 10% and revenue was $4.5m so Gross Profit would have been $450K We don�t get that breakdown of Gross profit each quarter so looking at the H1 2017 results, margins had increased to 13% and based on revenues of $8.962m, they made a Gross Profit of $1,254m which ties in with their Gross Profit Margin so we know Q1 figures (above) are correct. Coming back to Q1 2018, based on a revenue of $3.5m and a gross margin of 19%, overall Gross Profit will have been $665K, so despite the weather-related setbacks, still ahead of $450K Q1 2017. We know they were EBITDA positive in Q1 2017 (from the Q1 2017 trading update) so assuming most other expenditure in the P&L statement are constant (should be as the main variable costs are within the Gross Profit section) then they will have produced a higher EBITDA than Q1 2017. To support with the working capital requirements, Andrew black recently lent another $500K and also the vintage credits receipt of $190K will help too. That brings us to the future. It�s now becoming clear that margins are trending up particularly in the US as they improve the sales mix and also raise prices due to the quality of the product. These underlying trends are actually very positive and we can see from their commentary that they are focused on growing the core US business, where there is a strong demand for their product. If they manage to obtain a strategic deal/partnership to secure increased sustainable feedstock (especially in the US) then the underlying trends of the business will shine through which will have a sharper, more significant impact. The Canton utilisation was 61% last year, so there is huge scope for ramp up of utilisation. The work �concluding with Simmonds & Co� signals they are closing in on something and also, they see �scope for new partnership arrangements� to facilitate increased supplies of feedstock. For these reasons, I remain invested, topped up some yesterday and will buy more on weakness. There are execution risks (as with all small companies) and it�s down to the execution of the board, but I see much stronger underlying business trends in the making and underpinned by demand for the superior & higher margin superfine product as evidenc
Patience required but on receipt of a Feedstock deal/partnership, the underlying business will, as the board say in the RNS �materially improve the Group EBITDA and cash-flow generation going forward� We are trading at over 15% below net asset value in the balance sheet (after the debt it taken off the net assets) so there is comfort that we have net assets worth more than the current MCAP. Let�s see where the coming weeks take us�.
I wonder if Hydrodec have ever considered crowd funding... An independent brewer crowd funded and received �10 million to build a plant. I imagine the supporters get a discount in beer sales, so wouldn't know how it could apply to Hydrodec. Although it could be put forward that every carbon credit sale due to new funding raised, is put towards charity or some other entity or return. In all honesty, some of the cr*p that gets funded, the Hydrodec proposition of virtually zero waste re-refining, beats them a by a mile.
Taking a page out of John Bercow's book of denials. �I have made a public statement, to which I have nothing to add.�
You mean, someone who already owns a collection of waste materials company bought for a pound?
Agree. The initial headline may have disappointed but to reiterate the operational improvements. We expected margins to continue upwards, or at least I did, and they have done just that, and not by a small amount. This is not only due to an improving crude market, it's also due to Superfine gaining further industry accreditation. The order book is strong, presumably as much to do with Superfine's reputation, as it is the better conditions. The sale of the historic carbon credits, with newer awards likely to achieve improved pricing. The board see opportunities for partnership deals for feedstock later this year. That is by no means concrete but reading between the lines, the last sections suggests they have a number of specific but as yet unrealised plans. My one real concern is that with the company's improving operational level, now purely being held back by feedstock, is that some larger player (or individual) with access to other feedstock channels, ultimately benefits from what is essentially a good business model. With the previous rout in the crude market, I could see the lack of incentive for re-refining but with a functioning market, would others think, as I do, that Hydrodec's IP becomes more attractive.
Hi all, in the rns they state they are currently developing partnerships to significantly increase feedstock, Also state talks with Simmons are concluding, maybe by end of May they might have some good news,will hang on in here for a little while
At the operations level, they look to be doing really very well. None of that matters of course, if they can't find enough to feed the reactors. My hope is that given the operational efficiency, if they do source a deal (closed loop etc) for feedstock, then you get a rapid change in revenue.