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I do not think we will hear details so much about feedstock. Most of it will come from G&S which is a win win situation for G&S due to their 15% stake in hyr.
The supply and demand is set to increase quite considerable in the next few years but the cost of the feedstock is also to rise. This is likely to be offset by hyr intending to increase their price per litre from approx $2.3 to $3.5.
The canton plant is well situated in the US as there is a concentration of substations in that area which helps a lot due to her having to cover the costs of transport which is expensive due to lack of hgv drivers in the states.
Canton over the last year has been running at just 50 to 55% capacity due to lack of feedstock. With improved supply though, capacity can be raised which greatly increases the margin of profit. At 70% capacity there is a 35% return on capital where at 90% capacity it is a 90% return.
Forecasts of revenues and profits are predicted to rise making hyr profitable in 2019. By 2021 forecasts for revenues is 29.3m and group EBITDA of 10.7m with an EPS of 23.8.
I guessed there would be 3m left over from last years financing which I thought would be used to pay of A Black. Instead I think it is going to be used to buy more feedstock so they can store it for quieter times of the year when feedstock is low. This will help then to supply transformer oil on demand enabling them to charge the higher price.
Debt is forecast to be paid of by 2021 with 6m cash holding.
Excellent read, thanks legobrickgirl.
This doesn’t include any potential added value from collaboration with Slickers. I’m discounting the prospect but it’ll be a nice bonus if anything concrete does happen.
Re the transport. Yes that was always a significant drag on market penetration & margin. Presumably a big reason to locate a second plant. Now with the G&S tie-up, they had more reason to locate near their partner’s supply chain.
If the US doesn’t fall into recession post 2021 (as some predict), I can see the market sustaining a second plant. Once the business model has proven it’s profitability, those new reactor designs could become a rather (nicely) expensive IP.
There is a possibility that spare cash may well be spent on improving capacity to 100%. Currently it stands at a maximum of 90% and 12m gallons.
Regarding talk of collaboration with Slickers, that is all very quiet at the moment which makes me wonder is the logistic costs are too high presently. Maybe something for the future.
What I am looking forward to hearing about is the disposal of the Australian facility. It was moved to discontinued operations half way through 2018 which will reduce losses but until sold off, there will still be costs. They are hoping to dispose of it this year.