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Hydrodec: 2014 Annual Report

Published by
Hydrocarbon Engineering,

Hydrodec has published its Annual Report and accounts for the year ended 31 December 2014.

Strategic highlights

  • Resolved the Canton insurance claim: Settled insurance claim arising from the incident in Canton in December 2013 for a gross value of US$20 million (US$18.75 million net of deductibles) and resulted in a profit on disposal of US$1.4 million on the written off assets.
  • De-risked proposed UK expansion: Signed exclusive licence agreement with California based Chemical Engineering Partners (CEP) to develop the CEP wiped film evaporation and hydrogenation technology in the UK as well as the basic engineering design for an initial 75 million l base oil re-refinery.
  • Secured proprietary technology: Submitted provisional patent applications to protect operating and design innovations in the company’s unique transformer oil re-refining technology and upgrade technology innovations which will enhance the re-refining of lubricant oils.
  • US business financing: Entered into a US$10 million, seven year term, asset financing facility and increased working capital line for Hydrodec of North America LLC, to fund appropriately the North American business following the rebuild and expansion of the Canton re-refinery.

Performance highlights

  • Total income for 2014 increased by 36% to US$54.7 million (2013: US$40.1 million), the tenth consecutive year of growth; revenues included a full year of OSS and in the US represent business interruption income and oil trading.
  • Group operating EBITDA1 of US$1.6 million2 in 2014 improved over the prior year (2013: US$0.2 million).
  • Total oil sales for 2014 increased by 31% to 48.6 million l (2013: 37.0 million litres); 2014 includes a full year of trading by OSS and oil sales in the US.

“Despite volatile market conditions in general and the more specific challenges posed by the rebuild of our Canton facility, Hydrodec has developed its technical and operational platform, and improved its financial base,” said Ian Smale, CEO. “As a result of the actions taken during the year, Hydrodec will emerge stronger with a more robust balance sheet and a clear sense of direction centred on our two core business streams.”

Colin Moynihan, Chairman, also commented on the company’s 2014 performance:

“Whilst 2014 will be remembered for the impact and successful resolution of the Canton insurance claim, significant progress has been made during the year in preparing Hydrodec for future growth and profitability. Indeed, I believe the fundamentals of the Group are stronger than they have been at any point during my time with Hydrodec. The Group today and the Group of three years ago are materially different. I believe Hydrodec, led by Ian Smale, is on the threshold of growth and success, through the combination of a first rate management team, market leading technology and a focused strategy for growth in the USA, Australia and the UK.

“The re-commissioning of Canton marks a substantial achievement, not only will it return us to being operational in the USA, but it will do so with in excess of a 50% increase in capacity compared to December 2013. Our technology platform has also broadened with provisional patent applications submitted in 2014 to protect operating and design innovations in our unique transformer oil re-refining technology and upgrade innovations that will enhance the re-refining of lubricant oils. The co-location of our Australian operations to the Southern Oil Refinery at Bomen, and the ongoing work to restructure the OSS business and ‘realign’ it to the customer further reposition the business for growth. Underpinned by an exclusive licence agreement with CEP to develop their technology in the UK, we also continue to make progress towards the independent development of a base oil re-refinery in the UK.

“I believe that good governance is integral to delivering growth in shareholder value. Whilst listed on AIM, our governance should strive to meet FTSE 350 standards. The Board continues to strengthen the governance of the Group and this year the Board has established a new Safety and Technology Committee, chaired by Dame Mary Archer, to reinforce its oversight of the key areas of health, safety and technology. Dame Mary brings considerable scientific and governance experience to the Board. Under her leadership, the Committee will provide rigorous oversight and a robust challenge for the Group’s technology programme.

“Long term success also requires transparency, accountability and engagement to maintain a consistent, high quality dialogue with both institutional and retail investors. In this regard, I was pleased to meet with a wide cross section of shareholders at the Group’s first retail investor meeting in January.

“In conclusion, I want to return to the Canton insurance claim. It was a long process and made 2014 a challenging and frustrating year. However, the insurance settlement obtained was, in the end, comprehensive and a good outcome for the company. Whilst special mention should be made to recognise the efforts of Chris Ellis; Michael Pitcher (the CEO of Hydrodec of North America) and their respective teams, I would like to thank Ian, his management team and all the staff at Hydrodec for their efforts in 2014 as everyone played their part in maintaining professionalism and morale in a challenging year.”

Read Hydrodec’s Annual Report 2014 in full here.

Adapted from press release by Rosalie Starling

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