ZCL Composites Reports Record Financial Results



    EDMONTON, March 17 /CNW/ - ZCL Composites Inc. (TSX:ZCL) reported
financial results for the fourth quarter and 12 months ended December 31,
2007, compared with the same period a year earlier.

    
    Highlights of the fourth quarter of 2007 were:
    -   Revenue of $30.0 million, more than double $14.9 million in Q4 06
    -   Record quarterly net income of $2.8 million, up 86% from $1.5 million
        in Q4 06
    -   Diluted earnings per share of $0.10, up from $0.07 in Q4 06

    Highlights for the 12 months were:
    -   Record annual revenue of $104.8 million, up 90% from $55.1 million
        for the 12 months ended December 31, 2006
    -   Record annual net income of $7.5 million, up 33% from $5.7 million
    -   Record diluted earnings per share of $0.29, up from $0.27
    

    "We have delivered strong revenue and earnings growth for a number of
consecutive years and 2007 was no exception," said Ven Côté, ZCL's President
and Chief Executive Officer. "The year was led by the acquisition of Xerxes
Corporation which doubled our sales and manufacturing base." Mr. Côté added,
"This strategic acquisition provides us with a strong presence in the
important U.S. market."
    "Looking ahead we see a number of excellent growth opportunities for our
environmentally friendly fibreglass liquid storage solutions," commented Mr.
Côté. "The opportunities include building our presence in the sizeable
water/wastewater industry and taking advantage of increasing environmental
awareness and regulations to grow revenue and market share in our largest
market, underground petroleum storage."

    EBITDA and Cash Flow

    Earnings before interest, income taxes, depreciation and amortization
("EBITDA") were $5.1 million for the fourth quarter of 2007, up 97% from
$2.6 million a year earlier. Cash generated by operations before changes in
working capital ("Cash Flow") was $3.4 million in the fourth quarter of 2007,
up 81% from $1.9 million a year earlier.
    For the year 2007, EBITDA was $14.6 million, up 52% from $9.6 million a
year earlier, and Cash Flow was $10.1 million, up 38% from $7.3 million a year
earlier.
    EBITDA and net income for 2007 would have been higher but for
approximately $1.7 million ($1.1 million after tax) of costs (manufacturing
and general and administrative) resulting from the acquisition of Xerxes.
These costs totalled $0.2 million in the fourth quarter of 2007.
    The Company also started and finished the year in a strong financial
position. At December 31, 2007, ZCL had positive working capital of
$20.6 million, $94.4 million of total assets and long-term debt of only
$8.9 million including the current portion.

    Targets

    The Company's revenue and EBITDA for 2007 were within the target ranges
disclosed in November 2007. Revenue for 2007 of $104.8 million was within the
target range of $104 million to $107 million and EBITDA of $14.6 million was
within the established range of $14 million to $16 million.
    With a number of strong growth opportunities we remain committed to our
long-term profitable growth objective of 15% to 20% per annum. For 2008, we
have established a target for revenue growth of more than 20%. This target
takes into account a full year of our U.S. operations compared to about ten
months in 2007. On the downside, it also assumes a lower U.S. to Canadian
dollar conversion rate of $1.00 in 2008, compared to an average rate of $1.05
in 2007.
    We have also developed a medium-term objective of improving the EBITDA
margin to 20% of revenue. The target for 2008 is to achieve an EBITDA margin
of 16% of revenue, compared to an actual EBITDA margin of 13.9% of revenue in
2007.
    The 2008 targets reflect our expectations for organic growth and do not
take into account growth related to potential new acquisitions. With our
strong balance sheet, we believe we are well positioned to take advantage of
strategic and accretive acquisition opportunities that may exist.

    Review and Outlook

    2007 was highlighted by the acquisition of Xerxes, a well managed U.S.
industry leader that continues to exceed our initial high expectations. The
acquisition created a number of integration opportunities and while some have
been realized, additional technological and operational synergies remain,
including the introduction of Parabeam(R), our patented three dimensional
glass fabric into the manufacturing of the U.S. double-wall tank.
    The Xerxes acquisition also provides us with substantial opportunity to
grow revenue in the U.S. petroleum market. Increasing environmental awareness
and regulation is creating opportunities for our fibreglass tanks due to their
superior corrosion properties. An example of one opportunity is a regulation
adopted by the state of Florida that requires an estimated 10,000 to 15,000
existing single-wall underground petroleum storage tanks to be upgraded or
replaced with a secondary containment system by the end of 2009. This
represents significant short-term demand, given that demand for the entire
U.S. market is typically 12,000 to 15,000 tanks a year.
    An opportunity to increase market share in the U.S. petroleum market also
exists due to a 2007 decision by the Steel Tank Institute ("STI") to reduce
the warranty on STI licensed steel tanks to 10 years from 30 years effective
January 1, 2008. Our warranty remains intact at 30 years.
    A growing opportunity in the U.S., as well as Canada, is increasing our
presence in the multi-billion dollar water and wastewater market,
traditionally dominated by concrete products. Our structurally strong,
watertight and easy to install fibreglass tanks are an ideal alternative to
concrete. Currently, we generate about a quarter of our revenue in the U.S.
from water and wastewater, but only have a nominal share of this sizeable
market. Over the past few years, the U.S. operations have been able to
generate annual growth from this market of 30% plus, without a solely
dedicated effort. In 2008, we are expanding our sales force and dedicating
additional resources to the water and wastewater industry.
    We also continue to see a growing market for our tank lining system,
marketed under the Phoenix System(R) brand. This system is a unique UL / ULC
listed internal fibreglass system that allows "in-situ" upgrades of a single
wall tank to a corrosive resistant secondary contained storage tank using
Parabeam(R) and our proprietary state-of-the-art curing system. Our main tank
lining customer, Chevron Hong Kong Limited (Caltex), contracted with us during
2007 for tank lining installations at 11 locations, up from an initial two
locations in 2006. We see additional opportunities ahead for installations in
South East Asia. The lining system is also a unique and ideal alternative to
tank replacement in the state of Florida.

    
    Summary Financial Results
    (in thousands, except per share amounts)

                       Three months ended December 31
    -------------------------------------------------------------------------
                                                  2007       2006   % change
    -------------------------------------------------------------------------
    Revenue                                    $30,013    $14,873       102%
    -------------------------------------------------------------------------
    Net Income                                  $2,766     $1,488        86%
    -------------------------------------------------------------------------
    Net income per share (diluted)               $0.10      $0.07        43%
    -------------------------------------------------------------------------
    Average number of shares (diluted)          26,626     22,048        21%
    -------------------------------------------------------------------------



                         12 months ended December 31
    -------------------------------------------------------------------------
                                                  2007       2006   % change
    -------------------------------------------------------------------------
    Revenue                                   $104,783    $55,060        90%
    -------------------------------------------------------------------------
    Net income from continuing operations       $7,515     $5,351        40%
    -------------------------------------------------------------------------
    Net income from discontinued operations          -       $319        n/a
    -------------------------------------------------------------------------
    Net Income                                  $7,515     $5,670        33%
    -------------------------------------------------------------------------
    Net income per share, continuing
     operations (diluted)                        $0.29      $0.26        12%
    -------------------------------------------------------------------------
    Net income per share (diluted)               $0.29      $0.27         7%
    -------------------------------------------------------------------------
    Average number of shares (diluted)          25,729     21,073        22%
    -------------------------------------------------------------------------
    

    The Company's Management's Discussion and Analysis ("MD&A") as well as
the complete financial statements and notes for the year 2007 are available on
SEDAR at www.sedar.com and the Company's website at
www.zcl.com/investors/corpdisclosure.html.

    Conference Call

    ZCL Composites Inc. has scheduled an investor conference call for
9:30 a.m. MT (11:30 a.m. ET) on Tuesday, March 18, 2008, to discuss its
financial and operating results for the fourth quarter and 12 months ended
December 31, 2007.
    To access the conference call by telephone, please call 416-644-3419 from
the Greater Toronto Area, or dial toll-free 1-800-731-5319 from elsewhere in
North America. An audio webcast may be accessed through the investor events
tab on the ZCL Composites website. Audio replays will be available on the ZCL
Composites website shortly after the conclusion of the conference call.

    Note on EBITDA

    While EBITDA is not a financial measure under Generally Accepted
Accounting Principles (GAAP), management uses it to make strategic decisions
and set targets. Many financial analysts also use EBITDA to make investment
decisions because it helps assess changes in ZCL's business across different
time periods. Investors should not consider EBITDA as an alternative to net
income, cash flow or other indicators of performance or liquidity which have
been determined under GAAP. EBITDA does not have any standardized meaning
prescribed by GAAP and may be different from, and therefore not comparable to,
EBITDA measures used by other companies. A table has been included in the
Company's MD&A for 2007 that reconciles net income from continuing operations
to EBITDA.

    Change in Year End

    During 2006 we changed our fiscal year end to December 31 from March 31.
As a result, our prior year audited financial results are for the nine months
ended December 31, 2006, rather than for the 12 months ended December 31.
However, in this news release we are providing annual comparisons to the
unaudited 12 month period ended December 31, 2006, as we believe a
year-over-year comparison is more meaningful.

    Advisory Regarding Forward-Looking Statements

    This document contains forward-looking statements concerning future
events or the Company's future performance, including the Company's projected
operating results for 2008 and beyond, business opportunities in the
petroleum, water/wastewater and other industries, anticipated capital
expenditure trends and activity in the petroleum and other industries and
markets served by the Company. Forward-looking statements are often, but not
always, identified by the use of words such as "seek", "anticipate", "plan",
"continue", "estimate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should", "believe" and
similar expressions. Actual events or results may differ materially from those
reflected in the Company's forward-looking statements due to a number of known
and unknown risks, uncertainties and other factors affecting the Company's
business and the industries the Company serves generally. These factors,
include, but are not limited to, fluctuations in the level of petroleum
industry capital expenditures, drilling activity and oil and natural gas
prices, and other factors that affect demand for the Company's products and
services, industry competition, the need to effectively integrate acquired
businesses, uncertainties as to the Company's ability to implement its
business strategy effectively in Canada and the United States, political and
economic conditions, the Company's ability to attract and retain key
personnel, and other risks and uncertainties described under the heading "Risk
Factors" in the Company's Annual Information Form for the year ended
December 31, 2007, and elsewhere in the Company's Management's Discussion and
Analysis for the year ended December 31, 2007 and in other documents filed
with Canadian provincial securities authorities. These documents are available
to the public at www.sedar.com. The Company believes that the expectations
reflected in these forward-looking statements are reasonable, but no assurance
can be given that these expectations will prove to be correct and such
forward-looking statements included in this report should not be unduly relied
upon. These statements speak only as of the date of this report. The Company
does not undertake to update any forward-looking statement, whether written or
oral, that may be made from time to time by the Company or on the Company's
behalf, whether as a result of new information, future events, or otherwise,
except as may be required under applicable securities laws. The
forward-looking statements contained in this document are expressly qualified
by this cautionary statement.

    About ZCL

    ZCL Composites Inc. is North America's largest underground fibreglass
tank manufacturer. ZCL's complete fuel storage systems marketed under the
"Prezerver" trademark carry an enhanced ten year warranty covering product
replacement and pollution protection up to the limits allowed under the
policy.





For further information:

For further information: Ven Côté, President & CEO, ZCL Composites Inc.,
(780) 466-6648, ven.cote@zcl.com; Darin Coutu, CFO, ZCL Composites Inc., (780)
466-6648, darin.coutu@zcl.com


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890