HYR.L Regulatory News (HYR)

26 October 2017

Hydrodec Group plc

("Hydrodec", the "Company" or the "Group")

Q3 Trading Update

Hydrodec Group plc (AIM: HYR), the cleantech industrial oil re-refining group, is pleased to provide a trading update for the quarter ended 30 September 2017.

Highlights

· Strongest quarterly EBITDA performance in Group's history, with Group EBITDA expected to exceed US$330,000, representing an improvement of US$605,000 on the comparable period last year (Q3 2016: loss of US$275,000), driven by improved pricing and margins and reductions in corporate costs

· Revenues expected to exceed US$4.7 million (Q3 2016: US$4.3 million)

· Group sales volumes of premium quality SUPERFINE transformer oil and base oil of 7.7 million litres (Q3 2016: 8.2 million litres)

· Canton plant utilisation consistent with H1 2017 at 61% - feedstock remains key constraint to higher throughput and strategic initiatives continue to progress in securing sustainable, increased supplies going forward

· Gross unit margins materially up on prior year at 14% (Q3 2016: 7%) - driven by improved sales mix in the US between higher margin transformer oil and lower margin base oil - and further improvement on H1 (H1 2017: 13%)

· In the US business, the Company is pleased to confirm the award of a two year agreement to supply up to 7.6 million litres annually of its SUPERFINE transformer oil to a major transformer original equipment manufacturer ("OEM")

Outlook

This update confirms the progress over the past 12 months, with Q3 demonstrating further improvement over the recent half year results. Demand for our product remains robust and the award of a two year contract from a major OEM in the US underlines the quality of the product the Company produces. The focus remains on expanding the number and value of significant feedstock contracts that in turn will drive the utilisation of the operations and further improve the Group's EBITDA and cash-flow generation going forward.

Chris Ellis, Chief Executive Officer of Hydrodec, commented: "I am very pleased to confirm further strong progress in positive Group EBITDA in the most recent quarter of 2017, as much of the recent hard work begins to reap its reward. As indicated at the beginning of the year, I am confident that 2017 will see the Group deliver full year positive EBITDA for the first time in its history, with scope for further material improvement from the existing facilities. While maintaining a sharp focus on the operational performance of the business, we will look for opportunities to deploy our clean-tech re-refining technology to capitalise on the large market opportunity that we see."

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Notes to Editors:

Hydrodec's technology is a proven, highly efficient, oil re-refining and chemical process initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. MarketsandMarkets forecasts that the global transformer oil market is expected to grow from US$1.98 billion in 2015 to US$2.79 billion by 2020 at a CAGR of 7.14% from 2015 to 2020. Spent oil is currently processed at two commercial plants with distinct competitive advantage delivered through very high recoveries (near 100%), producing 'as new' high quality oils at competitive cost and without environmentally harmful emissions. The process also completely eliminates PCBs, a toxic additive banned under international regulations.

In 2016 Hydrodec received carbon credit approval from the American Carbon Registry ("ACR"), enabling its product to be sold with a carbon offset and creating an incremental revenue stream. The Group is now generating carbon offsets through the re-refining of used transformer oil, which would otherwise ordinarily be incinerated or disposed of in an unsustainable manner. This is a highly distinctive feature for the Group, confirming (as far as the Board is aware) Hydrodec as the only oil re-refining business in the world to receive carbon credits for its output. This is a significant endorsement of the Company's proprietary technology and standing as a leader in its field.

Hydrodec's plants are located at Canton, Ohio, US and Bomen, New South Wales, Australia. 

Hydrodec's shares are listed on the AIM Market of the London Stock Exchange. For further information, please visit www.hydrodec.com.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.