Year-end 2012 trading update

18 January 2013

Hydrodec Group plc

 ("Hydrodec" or the "Group") 

Year-end 2012 trading update

The Board of Hydrodec Group plc (AIM: HYR), the clean-tech industrial oil re-refining group, is pleased to provide a trading update for the year ended 31 December 2012.

Highlights

·; Revenues expected to increase by approximately 16% to US$26 million (2011: US$22.4 million), the eighth consecutive year of growth, driven by a solid performance in the United States

·; Increased sales volumes of premium quality SUPERFINE transformer oil and base oil, up 11% on 2011 at 22.5 million litres (2011: 20.3 million litres)

·; Gross unit margins were marginally lower than previous year reflecting price compression of the ICIS Pale 60 benchmark during the second half of the year and the increased sales in the US where margins are lower

·; Significantly higher utilisation of productive capacity at 70% (2011: 63%) indicating improved access to feedstock with further upside available in 2013

·; £5 million new debt funding commitment secured in December

·; On track to complete proposed US joint venture in the first quarter of 2013

Update

The Group delivered an eighth successive year of sales volume and revenue growth despite volatile market conditions during the second half of 2012. Tight feedstock supplies and a decline in sales prices, led by the ICIS market index, were experienced during the summer and the third quarter. However, the fourth quarter saw a material increase in feedstock availability at lower cost.

The overall improvement in US feedstock procurement over the year is indicative of Hydrodec's significantly improved market profile and credibility due to its commercial momentum and endorsement of the Group's oil treatment and recovery process for polychlorinated biphenyl ("PCB") contaminated waste oil by the US Environmental Protection Agency. Year-end inventory levels were higher than the prior year.

Australian operations were more challenging than the US due to constrained feedstock availability and market demand due to a slowdown in the general economy. Supplies of Mexican feedstock have not yet been received, despite regulatory approvals from all appropriate countries, due to difficulties in procuring shipping.

Early indications for 2013 are encouraging based on a continuing improvement in US feedstock supply, lower feedstock costs and better sales prices relative to the ICIS market index.

The proposed US joint venture announced on 30 November 2012 is making good progress and we continue to expect timely completion of the transaction which will add operational scale and further feedstock assurance in the core US market.

The Group expects to release its audited results for the year ended 31 December 2012 on 19 March.

For further information please contact:

Notes to Editors

Hydrodec's technology is a proven, highly efficient oil re-refining and chemical process which is being initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. The Group takes spent oil, including polychlorinated biphenyl ("PCB") contaminated oil, as the primary feedstock, which is then processed at its two plants enabling 99 per cent or greater recovery of oil for reuse while also eliminating PCBs, a toxic additive banned under international regulations, without environmentally harmful emissions.

Hydrodec's plants are located at Canton, Ohio, US and Young, New South Wales, Australia. The Group's shares are listed on the AIM Market of the London Stock Exchange. For further information, please visit www.hydrodec.com.