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ZCL Composites Inc. Reports First Fiscal Quarter Results
ZCL Composites Inc. (TSX:ZCL) today announced results for the first quarter ended June 30, 2004. Revenue in the first quarter decreased by 14.9% to $6.3 million, from $7.4 million last year. Net income for the quarter decreased to $72,000 from $236,000 in 2003, and basic and diluted earnings per share decreased to $0.00 from $0.01 in the first quarter last year. While the outlook for the downstream and upstream sectors of the petroleum industry, as well as other traditional markets, remains strong for this fiscal year, activity in the first quarter this year started slow after a record fourth quarter last year. However, activity and the order backlog picked up during the quarter, and the second quarter is off to a strong start. Historically, the first and fourth fiscal quarters have the lowest levels of activity, corresponding to the seasonality of the installation of underground liquid storage systems in Canada. The decrease in net income and earnings per share in the first quarter as compared to last year was due to the lower revenue. Cash flows from operating activities decreased by $1.1 million, to $528,000 of cash used in operating activities, from $545,000 of cash flows from operating activities. This decrease was a result of the decrease in the level of operations, the build-up of inventories, and the timing of cash receipts and payments, during the first quarter this year. During the quarter, the Company completed the purchase of the business assets of Durex Steel & Alloy Industries Ltd. (“Durex”) for cash of $1,193,000, including related acquisition costs. The first annual dividend of $0.06 per common share was declared during the quarter. Dividends payable of $1,051,000 were included in current liabilities at June 30, 2004 and subsequently paid on August 4, 2004. The aboveground storage tank (AGST) and tank lining markets have been targeted for growth. The steel tank assets and production of Durex have been integrated into the overall liquid storage operations. A full line of products can now be offered to existing alliance customers as well as to new customers. The acquisition also provides access to the retail AGST market which has eluded the Company until now. Other products introduced in recent years – home heating oil tanks, ProtektorTM and Pinnacle oilfield tanks, filament wound pressure vessels, as well as custom storage and lining systems - continue to gain market acceptance and add to revenue. The development of the tank lining technologies is on schedule and field trials are expected to commence in the latter part of this fiscal year. Product development costs of $135,000 (2003 – nil) were deferred in the first quarter. Tank lining is a very large and lucrative international market and, at this time, there are no competitive alternative products in the marketplace. Customers are the same, and the type and level of service is the same as for other products. The lining products adapt proven technology from double wall tank manufacturing processes and leverage core competencies of the Company. “Meeting and servicing the needs of our customers is the cornerstone of our success,” said Ven Côté, President and CEO. “During the quarter, we announced two major customer contracts and the receipt of a prestigious vendor excellence award. Contracts and recognition such as these are an expression of confidence in ZCL, and reflect our ability to maintain innovation and performance.” Mr. Côté added, “We have targeted annual growth in revenue of 15% to 20%, along with a corresponding increase in income. We surpassed this goal last year. Notwithstanding the slow start in the first quarter, we are off to a good start in the second quarter and I am confident that we can reach this target again this year.” ZCL Composites Inc. trades on the Toronto Stock Exchange under the symbol “ZCL” and is Canada’s largest manufacturer of fiberglass underground storage tanks. ZCL’s complete fuel storage systems marketed under the “Prezerver” trademark carry a $2 million warranty against pollution. The unaudited consolidated financial statements of the Company are prepared in accordance with Canadian generally accepted accounting principles. Certain information in this news release may constitute forward-looking statements that are based on current expectations and are subject to risks and uncertainties. Many internal and external factors may cause actual results to differ materially from those expressed or implied. The Company disclaims any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events, or otherwise. For further information, please contact:
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