Composites Inc. Reports Third Fiscal Quarter Results

For Immediate Release

Edmonton, Alberta February 7, 2005... ZCL Composites Inc. (TSX:ZCL) today announced results for the third quarter ended December 31, 2004. Revenue in the third quarter increased by 3.1% to a record $11.1 million from $10.7 million for the quarter last year. Net income for the quarter was $1.0 million as compared to $1.1 million last year. Basic earnings per share were $0.06 and diluted earnings per share were $0.05, as compared to basic and diluted earnings per share of $0.06 for the quarter last year.

Forthe nine-month period, revenue increased by 9.0% to $28.4 million from $26.0 million last year. Net income for the nine months increased to $2.3 million from $1.5 million in 2003. Basic earnings per share increased to $0.13 and diluted earnings per share to $0.12, from basic and diluted earnings per share of $0.08 for the period last year.

The outlook for the downstream and upstream sectors of the petroleum industry, along with other traditional markets, continues to be very positive for the remaining part of this fiscal year as well as for next year. After a slow start this year, activity and the order backlog picked up during the first quarter, and remained buoyant through the second and third quarters. The fourth quarter, which historically has a lower level of activity, is also off to a strong start. The steel tank manufacturing business, acquired from Durex Steel & Alloy Industries Ltd. (“Durex”) during the first quarter, has been integrated into the overall liquid storage operations and contributed to revenue. Inventories have been maintained at higher levels to meet orders and deliveries. Historically, the second and third fiscal quarters have the highest levels of activity, corresponding to the seasonality of the installation of underground liquid storage systems in Canada.

The slight decrease in net income in the third quarter was due to reduced manufacturing margins, mainly as a result of increased raw material costs, as compared to last year. While overall margins have decreased in the quarter, ongoing margins are expected to be maintained through selling price increases and production improvements. The increase in net income in the nine-month period as compared to last year was due to the higher revenue. Last year, the $880,000 provision for impairment of the agreement receivable from ZCL Enviro Systems, Inc. decreased net income for the nine-month period by $580,000 or $0.03 per share.

Cash flows from operating activities during the third quarter this year were $3.6 million ($2.9 million for nine months), compared to $4.1 million ($5.6 million for nine months) last year. This decrease was largely due to the timing of sales (high sales later in the period with the resulting higher level of accounts receivable at December 31, 2004) and the build-up of inventories this year. The first annual dividend of $0.06 per common share was declared in the first quarter this year and dividends of $1.1 million were paid in the second quarter. The business assets of Durex were purchased for cash of $1.2 million in the first quarter this year. Last year, long-term debt of $4.3 million was repaid in the third quarter ($4.6 million in the nine-month period).

The Company continues to focus on the development and marketing of the tank lining technologies, as well as other new products. Tank lining is a very large and lucrative international market - the potential annual market in North America is estimated to be in excess of $300 million. In conjunction with customers and suppliers, the Company has developed and is testing new lining materials and processes in order to deliver a superior performing product with inherently safe installation techniques. Field trials of this product commenced during the quarter. Preliminary results of this first trial are very encouraging,and further tests will continue to evaluate performance and installation under various site and weather conditions. Product development costs of $210,000 (2003 – nil) in the third quarter and $442,000 (2003 – nil) for the nine-month period were deferred.

Following the approval of the Company’s home heating oil tank by Underwriters’ Laboratories (UL) for the USA market, marketing activities started in the New England states during the quarter. Heating or furnace oil is used for heating in about 8 million households in North America, largely Eastern Canada and North-Eastern USA. A growing concern is the environmental and liability problems resulting from leaking tanks, and the Company’s product offers a new level of security for home owners, insurance companies and lenders. Manufacturing and sales of UL-approved tanks in the USA will begin in the fourth quarter.

“ We are poised to take advantage of the tremendous tank lining marketplace with the anticipated introduction of our Prezerver+Plus+^TM lining system early in the next fiscal year,” said Ven Côté, President and CEO. “We will cautiously enter the marketplace and carefully ramp up the program as we gain field experience and train qualified applicators in all aspects of this new system.”

Mr. Côté added, “Notwithstanding the slow start in the first quarter, we achieved record revenue in the second and third quarters. With our current backlog and the robust level of activity in the upstream sector, we look forward to a strong fourth quarter and are in sight of our annual 15% to 20% growth objective.”

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.

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