HYR.L Regulatory News (HYR)

10 Feb 2009 12:42



HYDRODEC GROUP PLC ("Hydrodec" or the "Company")

Trading update

10 February 2009

The Board of Hydrodec Group plc ("Hydrodec" or the "Company") notes the recent share price movement.

On 3 December 2008, the Company announced in its trading statement that it was the Company's intention to have the Laurel plant part funded by debt, and that a facility for these purposes was expected to be in place by the end of January 2009. The Company has remained in advanced discussions to secure this facility, but has not as yet been able to reach agreement on terms acceptable to the Company. The reason for this is that, although well progressed, the financing is dependent upon the Company securing long term off take agreements.  Since December, the price for transformer oil in the US has approximately halved. The downward price movement has resulted from oversupply, though demand, specifically for transformer oil, has remained stable. In light of these market dynamics, the Board believes that concluding long term supply agreements at the current pricing levels would not be in the best interests of the Company. 

As the Board is unable to determine how long the current circumstances in the US market will continue, it is unable to give definitive timing on the securing of finance and therefore on the construction and operation of the Laurel plant.

The declining prices in the transformer oil market are also being experienced in the used transformer oil market, but at a less dramatic rate. This has created margin pressure in the first quarter of 2009 which is expected to continue through the first half of 2009. 

The transformer oil market in Australia has not experienced the same level of downward price pressure. Although the Board believe it unrealistic that prices in Australia will not be affected, current trends indicate that pricing will not follow US trends and that Australian operating margins have not and will not suffer the same pressure as the US operations. 

A further announcement will be made when appropriate.

Hydrodec Group plc 020 7621 5774

John Gunn, Chairman

Numis Securities Limited 020 7260 1000

Nominated Adviser: Simon Blank

Corporate Broker: David Poutney / Alex Ham

Curve PR 020 8742 1597/ 07764 197003

Emma Davis