- Email: [email protected]
Waterlink Inc, USA
October 2002
Filtration Industry Analyst
Waterlink Inc, USA
Zenon Environmental Inc, Canada
Key Figures (US$ million) Third quarter ended 30.6 2002
2001
2002
2001
Net Sales
16.1
17.2
Revenue
27.2
29.4
Cost of Sales
12.3
13.2
Cost of Sales and Services
18.7
19.7
Gross Profit
3.8
3.9
Gross Profit
8.5
9.7
Operating Income
1.2
1.1
Income/(Loss) from Continuing Operations
Operating Income/(Loss) before Income Taxes (1.5)
0.8
0.09
(0.2)
Net Earnings/(Loss)
0.6
Loss from Discontinued Operations
(0.3)
(0.1)
Loss from Disposal of Discontinued Operations Net Loss
—
—
(0.2)
(0.3)
Nine months ended 30.6
(1.1)
Six months ended 30.6 2002
2001
Revenue
57.0
52.9
Cost of Sales and Services
38.6
33.5
Gross Profit
18.4
19.4
2002
2001
Operating Income/(Loss) before Income Taxes (0.9)
1.2
Net Sales
47.1
46.4
Net Earnings/(Loss)
0.3
Cost of Sales
36.2
36.2
Gross Profit
10.9
10.2
2.9
1.8
Operating Income Income/(Loss) from Continuing Operations
(0.4)
(2.5)
Loss from Discontinued Operations
(0.5)
(0.9)
Loss from Disposal of Discontinued Operations Net Loss
—
(17.5)
(1.0)
(20.8)
COMMENT Waterlink has reported a second consecutive quarter of income from continuing operations, although the bottom line is still in the red. The company made a modest income from continuing operations of US$89 000 for the third quarter compared with a US$247 000 loss in the same period last year. Sales in the quarter fell 6% to US$16.1 million. Waterlink said the reduction was because of the Specialty Product Division’s lower
than normal domestic capital equipment orders received during the first half of 2002. These order levels are now improving. The year to date operating loss has been trimmed to US$423 000 from US$2.5 million the previous year. Waterlink sold its Pure Water Division in May 2002 to pay off debt (see Filtration Industry Analyst, July 2002). The division’s results are therefore classified above as discontinued activities. ■
(0.7)
COMMENT Zenon’s second quarter results have been impacted by its investment in a sale of membranes for the Bedok reclamation plant in Singapore, the country’s showpiece commitment to recycling. The C$2 million order tied up Zenon’s production for more than a month and will generate no profit for the company. Zenon is considering the second-quarter loss as an investment for the future, as Singapore is a huge potential market for the company. Zenon reported a net loss of C$1.1 million in the quarter compared with a net profit of C$0.6 million for the same period a year ago. “Although we are reporting a loss for the quarter, we are entering the second half of the year with the highest backlog [C$128 million as of 30 June 2002] in Zenon history,” said Andrew Benedek, Zenon’s chairman and CEO.
Zenon’s revenue of C$27.2 million for the quarter was C$2.2 million below the second quarter of 2001, and was C$2.6 million short of the strong first quarter of 2002. The production of membranes for the Singapore order prevented the company from realizing revenue on normal margin membranes and systems for the period. The slowdown in the US industrial market also affected Zenon’s revenue in the second quarter. The overall impact of these two factors was to reduce revenue by 25% in the US compared with the same period of 2001. The second-quarter gross profit margin of 31% is down on the 33% margin for the second quarter of 2001 as a result of the Singapore project and the increase in turnkey projects, which have lower overall margins. ■
9
COMPANY WATCH
Key Figures (C$ million) Second quarter ended 30.6
Filtration Industry Analyst
Waterlink Inc, USA
Zenon Environmental Inc, Canada
Key Figures (US$ million) Third quarter ended 30.6 2002
2001
2002
2001
Net Sales
16.1
17.2
Revenue
27.2
29.4
Cost of Sales
12.3
13.2
Cost of Sales and Services
18.7
19.7
Gross Profit
3.8
3.9
Gross Profit
8.5
9.7
Operating Income
1.2
1.1
Income/(Loss) from Continuing Operations
Operating Income/(Loss) before Income Taxes (1.5)
0.8
0.09
(0.2)
Net Earnings/(Loss)
0.6
Loss from Discontinued Operations
(0.3)
(0.1)
Loss from Disposal of Discontinued Operations Net Loss
—
—
(0.2)
(0.3)
Nine months ended 30.6
(1.1)
Six months ended 30.6 2002
2001
Revenue
57.0
52.9
Cost of Sales and Services
38.6
33.5
Gross Profit
18.4
19.4
2002
2001
Operating Income/(Loss) before Income Taxes (0.9)
1.2
Net Sales
47.1
46.4
Net Earnings/(Loss)
0.3
Cost of Sales
36.2
36.2
Gross Profit
10.9
10.2
2.9
1.8
Operating Income Income/(Loss) from Continuing Operations
(0.4)
(2.5)
Loss from Discontinued Operations
(0.5)
(0.9)
Loss from Disposal of Discontinued Operations Net Loss
—
(17.5)
(1.0)
(20.8)
COMMENT Waterlink has reported a second consecutive quarter of income from continuing operations, although the bottom line is still in the red. The company made a modest income from continuing operations of US$89 000 for the third quarter compared with a US$247 000 loss in the same period last year. Sales in the quarter fell 6% to US$16.1 million. Waterlink said the reduction was because of the Specialty Product Division’s lower
than normal domestic capital equipment orders received during the first half of 2002. These order levels are now improving. The year to date operating loss has been trimmed to US$423 000 from US$2.5 million the previous year. Waterlink sold its Pure Water Division in May 2002 to pay off debt (see Filtration Industry Analyst, July 2002). The division’s results are therefore classified above as discontinued activities. ■
(0.7)
COMMENT Zenon’s second quarter results have been impacted by its investment in a sale of membranes for the Bedok reclamation plant in Singapore, the country’s showpiece commitment to recycling. The C$2 million order tied up Zenon’s production for more than a month and will generate no profit for the company. Zenon is considering the second-quarter loss as an investment for the future, as Singapore is a huge potential market for the company. Zenon reported a net loss of C$1.1 million in the quarter compared with a net profit of C$0.6 million for the same period a year ago. “Although we are reporting a loss for the quarter, we are entering the second half of the year with the highest backlog [C$128 million as of 30 June 2002] in Zenon history,” said Andrew Benedek, Zenon’s chairman and CEO.
Zenon’s revenue of C$27.2 million for the quarter was C$2.2 million below the second quarter of 2001, and was C$2.6 million short of the strong first quarter of 2002. The production of membranes for the Singapore order prevented the company from realizing revenue on normal margin membranes and systems for the period. The slowdown in the US industrial market also affected Zenon’s revenue in the second quarter. The overall impact of these two factors was to reduce revenue by 25% in the US compared with the same period of 2001. The second-quarter gross profit margin of 31% is down on the 33% margin for the second quarter of 2001 as a result of the Singapore project and the increase in turnkey projects, which have lower overall margins. ■
9
COMPANY WATCH
Key Figures (C$ million) Second quarter ended 30.6