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Hydrodec publishes preliminary 2014 results

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Hydrocarbon Engineering,

Hydrodec Group plc has announced its audited preliminary results for the year ended 31 December 2014. The results reflect the accounting treatment of the insurance proceeds received in respect of the incident at Canton. A portion of the insurance proceeds has been attributed to the capital replacement cost of the damaged equipment, the rest has been attributed to business interruption covering the period from 1 December 2013 to 31 March 2015. These insurance proceeds have been apportioned between the 2013, 2014 and 2015 financial years, and are collectively shown as 'other income'. Any comparison of the 2014 financial outcome to 2013 needs to consider the unusual impact of the business interruption settlement.

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 include a full year of OSS and in the US represent business interruption income and oil trading.
  • Total oil sales for 2014 increased by 31% to 48.6 million l (2013: 37.0 million l); 2014 includes a full year of trading by OSS and oil sales in the US.
  • Gross margin was higher than 2013 despite lower product sales prices and challenging market conditions in both the UK and Australia, and after accounting for business interruption income.
  • Group Operating EBITDA of US$1.6 million in 2014 (including US$1.5 million (less associated lease rentals) from the gain on disposal of assets in Hydrodec (UK) Limited) (2013: US$0.2 million).

Strategic highlights

  • Resolved the Canton insurance claim: Settled insurance claim arising from the incident at 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 for an initial 75 million l base oil re-refinery.
  • Secured proprietary technology: Submitted provisional patent applications to protect operating and design innovations in our unique transformer oil re-refining technology and upgrade technology innovations that 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.

Commenting on the results, Ian Smale, Chief Executive Officer of Hydrodec said: "Despite volatile market conditions in general and the very specific task of rebuilding our Canton facility, Hydrodec continues to develop and strengthen its technical and operational platform, whilst improving its financial base. As a result of the actions taken during the year, Hydrodec will emerge stronger from the 'overhang' of the Canton insurance claim in 2014, with a more robust balance sheet and a clear sense of direction centred on our two core business streams."

Adapted from press release by Rosalie Starling

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