Hydrodec Group (LON:HYR) , the AIM listed chemicals group that recycles used transformer oil and turns it into Superfine oil for industry, today reported that trading conditions were continuing to improve during the second quarter of 2010. The news was welcomed by the company’s shareholders, who saw the value of their shares rise by 13.5% to 8.4p during the morning. The update came ahead of Hydrodec’s AGM this afternoon where chairman Neil Gaskell will report that market acceptance of the Superfine product is gaining momentum.

Hydrodec currently operates oil reprocessing facilities in Young, New South Wales, Australia and in Canton, Ohio, US. In March this year the company warned that challenging market conditions were causing havoc with its cash flow and that it was only weeks away from significant problems. In the same month, the company went on to raise £2m in a share placing which, combined with easing market conditions, looks set to secure the working capital requirements of the company beyond the current year.

In today’s update, Hydrodec noted that it had recently taken its first orders from a new US customer, which is a major original equipment manufacturer. The order followed rigorous testing by the customer whose independent validation of Superfine's performance as a leading, high specification transformer oil is considered an important breakthrough in terms of further developing the customer portfolio across the sector.

More broadly, US market conditions are understood to be stabilising with more balanced supply and demand in the base oil market, while the company’s performance in Australia has strengthened measurably. Elsewhere, the availability of feedstock has continued to improve from the tight supply experienced earlier in the year and as a result the improvement in the company's margins since the start of the year has been maintained.

Hydrodec is also making progress on setting up an operation in Japan, where it recently signed a strategic alliance with Kobelco Eco Solutions. It said the first Japanese site has now been selected and local government approvals are well advanced. A second site, for a further Canton-size plant, has also been identified.

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