A slew of good news accompanies this release. The operational improvements at the Sines plant, and a surge in volumes vs. an exceptionally low base in H1 18, resulted in a very successful first half in turnover growth terms as well as the group’s first positive EBITDA. With current expansion efforts well underway, Ecoslops’ outlook for the years to come is looking bright.

  • Turnover stood at €4.6m in H1 19, a near 2x increase from last year (€2.6m). The sales of refined products contributed €3.6m to group turnover.
  • Total production was 13,360t, compared to 6,080t in H1 18. Production sold reached 12,000t, roughly in line with our estimates. ASP/t fell 7% on the back of lower Brent prices (-12%) and favourable currency effects (+5%).
  • The significant outperformance was due to an exceptionally low comparison basis, as only three months of real activity took place during H1 18, while the Sines facility underwent alterations between January and March.
  • Group EBITDA reached €125k compared to a €710k EBITDA loss in the previous year. EBITDA at the Sines plant reached €800k.

Ecoslops has closed a decidedly successful H1 19, now running at full capacity compared to H1 18, which saw the Sines plant halting operations to perform technical improvements over Q1 18. The tough decision to lose a full quarter of production to make modifications permitting it to process lighter slops has certainly paid off. The improved product mix allowed by the access to a wider range of slops has helped stomach the lower € Brent prices and capitalise on the +129% surge in volumes. As a result, sales of refined products reached €3.6m versus €1.7m the year before.

On the profitability front, the results have been equally impressive. Group EBITDA was positive for the first time, reaching €125k. A feat attained thanks to the €0.8m EBITDA generation at the Sines plant, allowing it to cover the costs of the whole structure. This has been a remarkable turnround from the €710k loss reported the year before and serves as proof of the operational improvements achieved in the Sines unit; a know-how that will certainly be leveraged once the Marseille refining unit at Total’s La Mède Complex comes online.

Management’s long-term view is maintained, with substantial investments in the Marseille project resulting in an operating loss overall. This, nonetheless, is secondary as the potential growth once this second site with 30,000t annual capacity starts operation more than offsets any short-term losses. As of now, the Marseille unit is expected to start in mid-2020, with assembly of the P2R refining unit taking place in H1 20. The €3.8m invested over the first half of the year is reflected in the group’s net debt position, which reached €2.8m, compared to €42k of net cash at the close of FY18. Moreover, the robust financing still available, including the €18m loan by the EIB yet to be drawn, demonstrates the lenders’ conviction for Ecoslops’ operational success. On future expansion endeavours

The Antwerp project is currently in the regulatory studies phase. The Belgian authorities will present their conclusions before the end of the year, and as they seem quite interested by the solution provided by Ecoslops (and its green credentials) we could expect swifter administrative approvals to get the facility up and running by 2021. Regarding the “refinery-in-a-box” concept (dubbed Mini-P2R), the pilot programme at the Sines site has concluded successfully and interested parties are being considered, with the first unit to be contracted in H2. Finally, the Suez Canal project is still in its early stages, as preliminary feasibility studies will be presented to the Egyptian authorities before the end of the year.

Following this very satisfactory release, we will just make minor adjustments to our estimates, mainly due to the later than expected entry of the Marseille refining unit (which we expected for Q1 20). Our turnover and profitability assumptions will be unchanged as the results over H1 fall in line with our already optimistic expectations. Ecoslops’ valuation is bound to remain attractive, supported by its demonstrated operational strength and a project pipeline set to benefit from the avoided carbon and circular economy trends.

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