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Zenon
anticipates loss in fourth quarter OAKVILLE,
Ontario, December 21, 2005 – Zenon Environmental Inc. (TSX:
ZEN and ZEN.NV.A; OTC: ZNEVF and ZNEAF) announced that based on its sales
and production forecast at the end of November, the company expects to
report an operating loss for the fourth quarter ending December 31, 2005
and for the 2005 fiscal year-end. Due
to higher than expected costs negatively impacting the quarter, subject to
the results for December, the company is expected to report an operating
loss (before tax) of $10 million - $12 million, resulting in an operating
loss (before tax) of $12 - $14 million for the full 2005 fiscal year. The
company has made major progress toward resolving its ZeeWeed 1000 version
3 issues and has been delivering good quality product in the quarter - all
delayed orders have now been shipped. The
company’s shortfalls in the second and third quarters were due in large
part to production delays. This
issue has improved considerably in the fourth quarter, but there were
other problems that arose in the quarter, which will result in a
significant quarterly loss. These
are: ·
Subcontract
project costs coming in higher than originally anticipated ·
Reorganization
of manufacturing for ZeeWeed 500 and ZeeWeed 1000 product lines ·
Disappointing
Homespring sales ·
Movement
of revenue from certain projects from Q4 2005 to Q1 2006 “We
are taking immediate steps to improve future financial performance,”
said Andrew Benedek, Zenon Chairman and CEO.
“The fundamentals of the market for our products remain strong as
can be seen in our growing level of new orders and our backlog.” Over
the past several months, ZENON has begun a restructuring program to
improve future profitability, including: ·
Consolidation
of manufacturing in ·
Reduction
of overhead resulting from headcount reductions and reduction of selling
costs ·
Improvement
of bid project margins due to the adoption of recent technology
improvements ·
Adoption
of new risk management procedures to better control subcontracted project
costs
“We
will continue to focus on the profitability of our business,” continued
Mr. Benedek, “including strict overhead controls and improved bid
margins stemming from our technology improvements, which we can expect to
see in 2006. “I
would like to repeat our commitment to delivering long-term shareholder
growth and can assure you that we will overcome our current challenges.” ZENON
imanufactuers advanced membrane products and services for water
purification, wastewater treatment and water reuse to municipalities and
industries worldwide.
Certain
information contained in this news release contains forward-looking
statements based on the company’s estimates and assumptions, which are
subject to risks and uncertainties.
This could cause the company’s actual results to differ
materially from the forward-looking statements contained in this
discussion.
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