HYR.L Regulatory News (HYR)

20 July 2016

Hydrodec Group plc

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

Trading Update

Hydrodec Group plc (AIM: HYR), the cleantech industrial oil re-refining group is pleased to provide a trading update in respect of the six month period ended 30 June 2016.

Highlights

· Increased Group sales volumes of premium quality SUPERFINE transformer oil and base oil in H1 of 16.75 million litres (H1 2015: 1.7 million litres), reflecting full commissioning of new Canton plant at the end of 2015 - record monthly sales in June of 3.2m litres

· Improving plant utilisation - Canton reaching 76% in May

· Continued successful production in Australia and improving feedstock position

· Revenues from continuing core re-refining business for H1 2016 expected to increase by approximately 130% to US$7.6 million (H1 2015: US$3.3 million)

· H1 2016 gross unit margins in continuing business higher than H1 2015 despite lower product sales prices and challenging market conditions

· Disposal of loss-making UK recycling operations in March

Update

The Board is pleased to report significant progress in delivering the Company's key objectives since the beginning of the year.

The main drivers in 2016 have been to refocus on the core transformer oil re-refining technology by optimising the performance of the Canton facility, and to increase production levels through a combination of leveraging the experience gained since fully commissioning the plant at the end of last year along with specific targeted operating improvements. These improvements have been validated by the significantly lower number of production hours lost through unscheduled stoppages and the record monthly production performance of the plant in May of 2.82 million litres of SUPERFINE transformer oil and base oil.

An additional primary objective relates to improving the sales mix between higher margin transformer oil and lower margin base oil produced at the Canton plant. At the beginning of the year, January transformer oil sales represented 19% of US volumes sold. Since then significant improvements have been made in this area and in June transformer oil represented 71% of sales, with further advances expected.

In respect of the operations in Australia, since the commissioning of the plant at the Southern Oil Refinery in May 2015 we have had to work extremely hard to re-establish our commercial position in the market. I am pleased to report that in May, the Australian business enjoyed one of its highest feedstock acquisition months since 2012 and the underlying pipeline continues to grow steadily.

Finally, there has been a key focus on the reduction of corporate costs. Significant reductions have already been realised with the expectation that the benefits from more recently implemented initiatives will filter through in H2.

Given that the Group's key operations are in the US and Australia, the Board does not expect there to be any material impact on the Group's performance as a result of the Brexit referendum.

Outlook

In summary, the information provided today confirms significant progress in the turnaround of the Company over the first half of the year. Our key objective during the rest of the year is to strengthen margins as we grow market share whilst continuing the program of cost reduction. We continue to make strong progress towards positive Group EBITDA in the second half of the year.

Chris Ellis, Chief Executive Officer of Hydrodec, commented: "I am pleased to be able to report significant progress in moving Hydrodec towards profitability and expanding its position in the transformer oil market in our key operating arenas. Whilst market conditions remain challenging, we are focused on delivering our operational plans and also primed to take advantage of the opportunities the current market may yet present to grow the business both in our existing areas of focus and in new markets."

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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. 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.