ZCL Composites Reports Third Quarter and Nine Months 2007 Financial Results



    -Conference Call at 7 AM Mountain Time November 2-

    EDMONTON, Nov. 1 /CNW/ - ZCL Composites Inc. (TSX:ZCL) reported financial
results for the third quarter and nine months ended September 30, 2007,
compared with a year earlier.

    
    Highlights for the third quarter were:

    -   Record quarterly revenue of $31.3 million for Q3 07, up 123.9% from
        $14.0 million in Q3 06
    -   Record quarterly net income of $2.5 million for Q3 07, up 58.0% from
        $1.6 million in Q3 06
    -   Record quarterly diluted earnings per share of $0.10 for Q3 07, up
        42.9% from $0.07 in Q3 06
    

    "The third quarter gains primarily reflect the acquisition of Xerxes
Corporation on February 22, 2007, along with increased revenue from our
Canadian operations," said Ven Côté, ZCL's President and Chief Executive
Officer. "For the full year in 2007, we have revised our revenue and EBITDA
targets due in part to the strength of the Canadian dollar but we still expect
a significant improvement compared with 2006."
    The third quarter net income would have been higher but for approximately
$0.7 million of costs, which are not expected to recur in future periods,
related to the acquisition of Xerxes and the implementation of associated
financing transactions. The increase in diluted earnings per share was less
than the increase in net income due to the impact of the shares issued in
conjunction with the private placement completed on February 13, 2007 to
facilitate the acquisition of Xerxes.
    For the first nine months of 2007, revenue was $74.8 million, up 86.1%
from $40.2 million a year earlier. Net income from continuing operations was
$4.7 million, up 22.9% from $3.9 million for the corresponding nine months
period of 2006. Diluted earnings per share from continuing operations was
$0.19, up 5.6% from $0.18 for the same period a year earlier. As with the
third quarter, the increase in revenue and net income primarily reflects the
acquisition of Xerxes Corporation and the increase in diluted earnings per
share was less than the increase in net income due to the February 13, 2007
private placement.
    "While we are satisfied with the results achieved in the U.S. operations
since the acquisition of Xerxes, we believe there is significant opportunity
to further grow revenue, margins and net income in the U.S. market," said Mr.
Côté. "We see an opportunity to increase market share in the petroleum market
and believe there are developing opportunities for ZCL's technology in the
corrosion market. We also expect that the water/wastewater market will
continue to experience significant growth and we are currently in the process
of expanding and redirecting marketing and sales resources towards this
sector."

    EBITDA and Cash Flow

    Earnings before interest, income taxes, depreciation and amortization
(EBITDA) was $4.4 million for the third quarter of 2007, up 52.2% from
$2.9 million a year earlier. Cash generated by operations before changes in
working capital (cash flow) was $3.1 million in the third quarter of 2007, up
53.9% from $2.0 million a year earlier.
    For the first nine months of 2007, EBITDA was $9.5 million, up 35.5% from
$7.0 million a year earlier, and cash flow was $6.7 million, up 23.5% from
$5.4 million a year earlier.

    Outlook

    ZCL's revised revenue target for 2007 is $104 million to $107 million,
compared with actual revenue of $55.1 million for the 12-month period ended
December 31, 2006. The revised target compares to the previous 2007 target of
$105 million to $115 million announced in August 2007, and as noted above, the
revision is in part due to the rising value of the Canadian dollar. ZCL
generates over half of its revenue in U.S. dollars and therefore the Canadian
dollar strengthening approximately 10% since August has contributed to a
reduction in the revenue target of almost $2.0 million. The decrease in the
upper end of the revenue target also reflects continued slower activity levels
in the Canadian oilfield services industry compared to a year ago, as well as
some customers delaying purchases normally anticipated for the fourth quarter.
ZCL has also revised its EBITDA target for 2007 to $14.0 million to
$16.0 million in 2007, compared with the previous target of $16.0 million to
$18.0 million and actual EBITDA of $9.6 million for the 12-month period ended
December 31, 2006. The revised EBITDA target reflects the new revenue target,
the Company's performance through the end of the third quarter and the
additional costs associated with the acquisition of Xerxes noted above.
    The market for ZCL's tank lining products continues to develop in the U.S
and Southeast Asia. During the third quarter of 2007, ZCL announced a
seven-year supply agreement with Tank Tech Inc. ("Tank Tech"), which replaces
a five-year, Florida-only agreement announced in 2006. Under the new
agreement, Tank Tech has the non-exclusive sales and marketing rights and the
exclusive installation rights for the PHOENIX System(R) tank liner product
throughout the U.S. ZCL and its affiliates have retained the right to market
and sell the PHOENIX System(R) directly to U.S. customers.
    During the third quarter, ZCL was also awarded two additional sites by
Chevron Hong Kong Limited (Caltex) to install its LIFELINER System(TM),
bringing the total sites awarded to ten as at September 30, 2007. The
opportunity exists for additional locations within South China and Thailand
where Chevron (Caltex) has similar operations. ZCL has also entered into
discussions with customers in North America for the installation of LIFELINER
System(TM).
    "We believe there is a large, long-term global market for an alternative
to tank replacement when upgrading existing single wall tanks to secondary
containment standards," said Mr. Côté. "This alternative to tank replacement
can minimize both site disturbance and lost revenue at service stations. With
the PHOENIX System(R) and LIFELINER System(TM) we are in a unique position to
offer our customers the option of the finest in new fibreglass tank products,
as well as a proven lining system for their upgrading needs."
    "The acquisition of Xerxes earlier this year not only provides us with
the ability to expand our market presence in the U.S., but also the potential
to realize operational, technological and financial synergies. While some
synergies are now being realized in terms of costs, we believe additional
opportunities exist by capitalizing on operational best practices."
    "Looking forward to 2008, we expect further growth in revenue and EBITDA.
The outlook assumes continued economic growth in North America, stable foreign
exchange rates and a full year of results in fiscal 2008 for ZCL's U.S.
operations, compared with approximately ten and a half months of U.S. results
in 2007. In addition, with our strong balance sheet, we believe we are well
positioned to take advantage of strategic and accretive acquisition
opportunities that may exist," said Mr. Côté.

    
    Summary Financial Results

                       Three months ended September 30
    -------------------------------------------------------------------------
                                           2007          2006      % change
    -------------------------------------------------------------------------
    Revenue                            $31,293,000   $13,974,000     123.9%
    -------------------------------------------------------------------------
    Net Income                          $2,546,000    $1,611,000      58.0%
    -------------------------------------------------------------------------
    Net income per share (diluted)           $0.10         $0.07      42.9%
    -------------------------------------------------------------------------
    Average number of shares (diluted)  26,427,057    22,410,342      17.9%
    -------------------------------------------------------------------------


                       Nine months ended September 30
    -------------------------------------------------------------------------
                                           2007          2006      % change
    -------------------------------------------------------------------------
    Revenue                            $74,770,000   $40,187,000      86.1%
    -------------------------------------------------------------------------
    Net income from continuing
     operations                         $4,749,000    $3,863,000       22.9%
    -------------------------------------------------------------------------
    Net income from discontinued
     operations                                  -      $319,000        n/a
    -------------------------------------------------------------------------
    Net Income                          $4,749,000    $4,182,000      13.6%
    -------------------------------------------------------------------------
    Net income per share, continuing
     operations (diluted)                    $0.19         $0.18       5.6%
    -------------------------------------------------------------------------
    Net income per share (diluted)           $0.19         $0.19         0%
    -------------------------------------------------------------------------
    Average number of shares (diluted)  25,063,786    21,764,994      15.2%
    -------------------------------------------------------------------------
    

    The Management's Discussion and Analysis ("MD&A") as well as the complete
financial statements and notes for the third quarter and nine months of 2007
are available on the ZCL website at this link: 
www.zcl.com/investors/corpdisclosure.html.

    Conference Call

    ZCL Composites Inc. has scheduled an investor conference call for 7 a.m.
(MT) (9 a.m. (ET)) on Friday, November 2, 2007, to discuss its financial and
operating results for the third quarter and nine months ended September 30,
2007.
    To access the conference call by telephone, please call 416-644-3417 from
the Greater Toronto Area, or dial toll-free 1-800-731-6941 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.

    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 a $2 million warranty against pollution.

    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 the third quarter that reconciles net income from
continuing operations to EBITDA.

    Advisory Regarding Forward-Looking Statements

    This document contains forward-looking statements under the heading
"Outlook" and elsewhere concerning future events or the Company's future
performance, including the Company's projected operating results for 2007 and
beyond, and anticipated capital expenditure trends and activity in the
petroleum and other industries 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" and elsewhere in the Company's Annual Information Form for the nine
month fiscal period ended December 31, 2006, under the heading "Risks and
Uncertainties" and elsewhere in the Company's MD&A for the nine month fiscal
period ended December 31, 2006 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.

    %SEDAR: 00003872E




For further information:

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


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