Successfully executing long-term strategy
During FY13 Hydrodec Group (LONDON:HYR) delivered on its strategic goals, partnering with industry majors in North America, Australia and the UK to strengthen the platform for re-refining both used transformer and industrial and engine oils and addressing its balance sheet. It has also generated organic growth in the core re-refining business. Management has made substantial progress on negotiating the insurance claim regarding the incident that has closed the Ohio site since December, but our estimates and valuation remain under review until this process is complete.
Re-refining sales volumes rose by 12% year-on-year to 25.2m litres. Including OSS, oil sales volumes increased by 65% to 37.0m litres. Excluding the positive contribution from OSS, Hydrodec achieved its target of a positive EBITDA run rate in September, October and November.
In FY13 management completed the strategic partnership with G&S, giving access to long-term, stable supplies of used transformer oil feedstock in the US. Hydrodec acquired OSS Group, providing a secure source of used industrial oil for a future commercial-scale facility in the UK and reached an agreement with Essar Oil on establishing a commercial transformer oil re-refining operation and a pilot industrial oil re-refining operation in the UK. It is working with Southern Oil to relocate its Australian transformer oil re-refining plant and has gained approval for its carbon credits methodology. Management is pressing forward with plans to re-open the US facility in Q414 and then to expand the US facility, open a commercial transformer oil facility in the UK and establish a semi-commercial industrial oil facility in the UK in 2015.
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