Hydrodec Group (LON:HYR), the AIM listed chemicals group that recycles used transformer oil and turns it into Superfine oil for industry, said this morning that second quarter sales volumes had jumped by 79% on the first quarter and were up by 36% against the previous record high reached in the fourth quarter of 2009. In total, sales of Superfine hit 6.0m litres against 3.4m litres in the first quarter, triggering a record three-month revenue of US$4.7m. Shares in the company responded by rising 2.8% to 9p.

Hydrodec credited the performance to continued increasing demand for Superfine due to growing market acceptance, supported by good operational reliability at its two production facilities, in Canton, Ohio, US and Young, New South Wales, Australia. At the end of May, the company said it had picked up significant purchase orders from a major new US original equipment manufacturer customer. It said this had provided an important validation of Superfine's qualities, leading to the development of a more robust customer base that is purchasing the oil for its environmental advantages, price competitiveness and/or proven technical superiority. Improved financial controls and monitoring have also aided performance, the company said.

Both sales prices and feedstock purchase costs both rose modestly during the second quarter, meaning there was no change in margins. However, good sales volumes and strict cost control meant that cash generation during the quarter exceeded internal forecasts. As a result the group closed the quarter with a small cash surplus after paying the loan note interest in June. With the current outlook for the rest of the year for West Texas Intermediate likely to remain in the US$75-US$85 per barrel range, Hydrodec said that any increase in sales prices would largely derive from planned improvements in its customer portfolio.

The focus of the operations team for performance improvement is now turning to reducing average feedstock cost and diversifying availability for Canton. Early in July the group experienced a sudden spike in feedstock prices and reduction in availability in the US market which will mean July volumes are lower than targeted. This cost increase is already moderating and management expects that it will prove to be temporary.

Hydrodec’s chairman, Neil Gaskell, said: “I am delighted that the group is making good progress, particularly in terms of sales and operational reliability. There are early signs…

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