A rotary dryer (10) is provided with interacting heat transfer stator (14) and rotor (16) for improved processing capability. The stator (14) comprises a stationary row of planar heat exchange banks (64) supported within the vessel (12) of the dryer (10). The rotor (16) has a complemental number of annular heat exchange vanes (38) interleaved between the heat exchange banks (64) of the stator (14) to create desired low-level agitation of the processed material as the rotor (16) turns and to provide increased heat transfer efficiency. The vanes (38) on the rotor (16) and the banks (64) of the stator (14) each comprise an open grillwork of tubular members (44, 66) whereby the processed material may flow freely through the vanes (38) and banks (64) between an inlet (26) and an outlet (28) for additionally increased heat transfer efficiency and reduced residence time for the material.