30 April 2021

March 2021 Quarterly Update

Phoslock Environmental Technologies (ASX:PET) today provided a trading update for the quarter ending 31 March 2021.

Financials

PET’s quarterly cash flow report shows $3.7m in outflows from operating activities during the period. This is slightly higher than the prior period ($3.5m) primarily due to lower collections, higher staff costs due to one-off separations and higher tax payments as we continue to resolve legacy tax issues. Q1 also had continued outflows associated with the Board investigation and audit fees to complete the year, albeit lower than the December 2020 quarter.

The Company closed the quarter with cash and cash equivalents of $26.7million.

Business Update

Given the seasonality associated with the business, this quarter is typically a relatively quiet trading period. Sales of approximately $700,000 were made in the period with the majority relating to ongoing projects in Brazil, along with Europe, China and smaller retail sales in ANZ.

The City of Rotterdam (Netherlands) issued an approval for a treatment scheduled to commence later in the year and contracts were also signed in relation to upcoming treatments in Denmark and Brazil.

The North American team continued to pursue positive leads in Florida and Texas, capitalising on the successful trial works at Morrison Lake (Michigan). The Company appointed a new US based commercial manager, Harry Knight and a US subsidiary was established.

During the quarter, a new General Manager (Del Liu) was appointed to lead the China business. This is a key appointment in the restructure of our China operations. The lease on PET’s factory and warehouse in Changxing was successfully renegotiated and production scheduling was reviewed to ensure working capital is managed efficiently.

COVID related impacts continued to restrict travel and business development activity, particularly in Europe.

Subsequent Events

Subsequent to the end of the March quarter, the Company received the Phase 1 payment ($A 0.5million) relating to works completed at Xingyun Lake in China. Given circumstances and uncertainties at the time, the receivable relating to the full payment for this work was impaired in the first half of the 2020 financial year. Although this recent part-payment is a positive outcome, it is for initial work, not the bulk of the project application. The company is yet to receive written confirmation of the receivable from the customer, or acknowledgment that it is past due, despite several requests to that effect.

Outlook

The focus of the Board and Management remains on the reset of the China business, which is progressing well, and the development of new opportunities in other markets around the world. Trial work continues in a number of regions and discussions are ongoing in relation to new projects that are expected to be secured and to commence within the current financial year.

FY2019 Financial Summary &. 31 March Balance Sheet

• 2019 Revenue: $25.1m (up 40% YoY)
• 2019 NPAT: $2.7m (loss of $1.0m: 2018)
• Strong Operating Margins: 54% Gross Profit Margin
• Net Cash from Operations for 2019: $7.6m

31st March 2020 Balance Sheet Position

• A$10m in cash
• Receivables/Inventory of $23m;
• Debt Free;
• Net Assets > $30m

China Projects:

• $40m-$55m –Forecast MaintainedoXingyun Lakes & Catchment –circa $10-15moShilongba Reservoir –circa $20m
• Dianchi Catchment Area –scope being determinedoBeijing Canals –Maintenance –circa $2m
• Beijing Wetland –Maintenance –circa $2mo20 Other Projects in China: Range of 3,000 to 6,000 tons -$9m to $18m
• (80% Chinese Government Customers , 20% subcontracting)

International Projects: >$10m –range reduced -Business likely to be impacted by CV19

• Existing Customer Projects: 10 customers –approx 2,000 tons -$6m
• New Customer Projects: 14 projects –range of 1,500 to 3,000 tons -$4.5m -$9m

China rebounding more quickly than expected

Changes in Balance Sheet , due to slower International sales

• $10m –Project Funding -Shilongba & Dianchi projects -engineering works, accelerated funding for new and existing projects , starting April 2020.
• PET Board is wanting a higher level of working capital to fund FY20 projects and accelerated growth of projects in China –short term bridge to longer term debt facilities

FY2019 Financial Summary  (5th of March Presentation)

2019 Revenue: $25.1m (up 40% YoY)

2019 NPAT: $3.0m (significantly up on loss of $1.0m: 2018)

Strong Operating Margins: 54% Gross Profit Margin

2020 Forecast Revenue: $50m-70m (up 100% YoY)

Strong Balance Sheet:

• A$15m in cash
• Receivables/Inventory of $20m;
• Debt Free;
• Net Assets approx $30m
• Net Cash from Operations for 2019: $7.6m

Monday 17th February 2020

China Update – Key points:

• Beijing office now back at work
• Government approval to re-start factory
• Production to ramp up over the next month
• Inventory held outside China to last till mid-year
• No treatments in China planned until late March/April and no delays expected; no effect on FY2020 sales guidance

Brazil Project

Through its Brazilian licensee, PET has received a contract from CEDEA, to treat one of Rio de Janeiro city’s main drinking reservoirs.

The application has already commenced and will continue for the next three months, with an estimated value of over $2m.

Friday 31st January, 2020

Business Update

Key Points:

• Revenue FY 2019 : $25.1 m (up 53%on FY2018)
• Some applications carried forward to 2020
• New large factory premises secured
• Debt free,$32m cash & receivables
• 2020 Revenue forecast : $50 - 70m; (up 100% on FY2019)
• Global project pipeline now $380m (up $50m)

Wednesday 11 December 2019

Lake Dianchi – New Project Area

PET China is commencing work in early 2020 on a new project area - Lake Dianchi and its catchment.

Lake Dianchi is one of the three most important lakes in China (Dianchi, Chaohu and Taihu). It is the largest of nine Yunnan alpine lakes. It adjoins Kunming city, the capital of Yunnan province, with a population of 7 million.

The Dianchi Lake Catchment Area is 2,920 km², with Lake Dianchi being 330 km² (33,000 hectares). Lake Dianchi, is some ten times the size of Xingyun lake and around six times larger than Sydney Harbour.

PET China is currently applying 3,300 tons of Phoslock® to Xingyun’s river channels and wetlands. This current stage of the Xingyun project should be completed by or shortly after, the end of 2019.

Tuesday 3rd December 2019

Preliminary forecast: 100% sales increase for FY2020 Preliminary Sales Forecast $50-$70 million

Preliminary Sales Forecast $50-$70 million

• Phoslock® sales of 10,000-20,000 tonnes;
• Engineering & maintenance work in $10-20 million range;
• Phoslock® production capacity expanded to 40,000 tonnes annually by mid-2020.

By doubling factory capacity, PET will have significant additional tonnes of Phoslock® available for sale to meet additional anticipated demand from existing and new projects not included in the Sales Forecast range.

PET is currently on track to meet its FY2019 sales forecast of $27-30 million. However, the final numbers will depend on the status of major projects at year-end. For example,extreme weather could affect applications. Any product not applied in 2019 will be applied in early 2020

Wednesday 27 November 2019

Senior Management Appointments

Phoslock Environmental Technologies (ASX: PET) is pleased to announce two senior appointments to strengthen its management team.

Mr Lachlan McKinnon has been appointed Chief Executive Officer.

Mr. McKinnon comes to PET with a wealth of experience in both the chemical and agricultural industries. He has had a 25-year career with Nufarm Limited(ASX:NUF), a global agricultural chemical company. Lachlan’s roles have included Regional General Manager in Australia and Europe/UK to,most recently,Country Manager, Canada and Business Development Manager,North America.

Mr Chris Hui has been appointed Company Secretary.

Mr Hui hasbeen PET Group Accountant since 2017 and has an intimate knowledge of the PET corporate and financial business. He is a CPA and has been assistant Company Secretary for the last two years.

26 November 2019

Exerpts:

PET Four Business Units

• International Materials
• China Materials
• Changxing Factory
• China Engineering

Financial Summary – PET now has 31 December Year End

• 2019 First Half Revenue $10.2m
• 2019 First Half NPBT $1.7m

Net Cash flow from Operations (January-September 2019): $7.3m

• 2019 Forecast Revenue $27m - $30m
• 2019 Forecast NPBT (before opt exp) $6 - 8m

Jul - Dec 2019 Sales made up of approx 5,000 tons of Phoslock Sales and $4m Engineering Works Major Sales – Yunnan Lakes; Wuhan; Beijing Canals and Wetlands; US Florida, Brazil

Strong Balance Sheet – 20 November 2019

• Cash of A$14m;
• Receivables/Work in Progress of $15m
• Inventory and Raw Materials of $5m (at cost)
• Trade Payables of $3m
• Debt Free; Net Assets $30m

31 October, 2019

As a result of your recent enquiry, Phoslock Environmental Technologies Limited (ASX: PET) has undertaken an extensive review of its forecast FY2019 Statement of Consolidated  Income to determine our forecast Net Profit before Tax before Option Expense.

This has involved taking our act ual accounts to 30 September, 2019 a nd forecasting income and expenses for the period 1 October to 31 December 2019 (“Forecast Period”). We have discussed likely Sales and associated Cost of Goods Sold for the Forecast Period with our business units to determine our most accurate forecast.

As at 30 September 2019 PET had a strong Balance Sheet:

• Cash of A$14.6m;
• Receivables/Work in Progress of $10m
• Inventory and Raw Materials of $5m (sales value - $11m);
• Trade Payables of less than $2m
• Debt Free ; Net Assets $29m

As a result of the above, PET is of the view that;

FY2019 forecast Sales will be in the range of $27 - 30 million; and

FY2019 forecast Net Profit before Tax before Option Expense will be in the range of $6-8 million.

Monday 28th October 2019

PET Chinese subsidiary granted High - Tech & reduced tax rate status

Key Points:

• China Government affirmation of PET qualifications.
• Highly sought - after accreditation.
• Additional benefit is lower tax.

PET Directors are pleased to announce our 100% owned Beijing subsidiary has been officially granted National High - Tech Enterprise Status by the Beijing government.

High - Tech Enterprise in China means a company active in the high-tech space which is supported by the Government. In order to gain this status, a company must be predominantly engaged in transformational new technology and the development of independent intellectual property rights.

PET achieved this status through a rigorous process of assessment; including examining our Research and Development programs, how our technology supports the core product and service and the maintenance of a government mandated minimum of R&D personnel as a proportion of our total workforce.

PET further benefits from a corporate tax rate reduced from 25% to 15% for an initial period of three years.

PRESENTATION

Morgan Stanley -Alpha ex-100 Conference 24 October 2019

• Water Quality is a major GLOBAL PROBLEMCauses–excess Phosphorus entering canals, rivers, lakesWhere does the Phosphorus come from:
• Run-off water from agriculture (fertilisers used to enhance production)
• Run-off water from livestock farms and processing
• Run off water from urban households
• Treated and untreated sewerage discharges into water bodies
• Illegal water discharges from industry
• Natural phosphorus inflows including bird and wildlife

Result of excess Phosphorus entering in water bodies:

• Harmful Algal Blooms
• Green Water
• Human Health problems

Environmental Friendly product that locks up Phosphorus safely and permanently

1. Invented by CSIRO (Australian GovtScience Organisation) in 1990’s;
2. Modified Bentonite Lanthanum product;
3. Environmental Friendly; safe for human and fish &aquatic plants;
4. Internationally Certified for use in Drinking Water Reservoirs;
5. Manufactured in ISOCompliantmodern factory to strictest Quality Control;
6. Supply Chain -audited by our major accreditation agencies
7. => CLEAN, GREEN, ENVIRONMENTAL FRIENDLY PRODUCT
8. Ethical Investment –PET ticks all the boxes

PRESENTATION

Morgan Stanley -Alpha ex-100 Conference 24 October 2019

• 2019 First Half Revenue $10.2m
• 2019 First Half NPBT $1.7m

Net Cash flow from Operations (January-September 2019): $7.3m

2019 Forecast Revenue $27m-$30m

Jul-Dec 2019 Sales made up of approx 5,000 tons of Phoslock Sales and $4m Engineering Works Major Sales –Yunnan Lakes; Wuhan; Beijing Canals and Wetlands; US Florida, Brazil

Strong Balance Sheet–30 September 2019

• Cash of A$14.6m;
• Receivables/Work in Progress of $10m
• Inventory and Raw Materials of $5m (sales value -$11m);
• Trade Payables of $2m
• Debt Free; Net Assets $29m

Phoslock Environmental Technologies Limited (ASX: PET) is an international environmental company specialising in engineering solutions and water treatment products to remediate pollutedlakes, rivers, canals and drinking water reservoirs.

PET has its headquarters in Sydney, Australia with offices in Brisbane, Beijing & Changxing, China; and Manchester, UK. PETis represented by licensees, distributors and agents in ten other countries including SePRO Corporation in the United Statesand HidroScience in Brazil. PET has a number of marketing and co-operation agreements in China with various environmental companies and government agencies.

In 2017 Phoslock (Beijing) was formedto help remediate the massive Chinese algae and water pollution problem. This 100% owned subsidiary undertakes design, engineering, and implementation ofrivers, canals, reservoirs and lakes,along with construction of wetland areas. The significant broadening of the historical PET business allows for work on a greatly increased array of projects both in China and else where.

PET owns the patent for Phoslock®,a unique water treatment product that permanently binds excess phosphorus in the water column and sediments. This in turn inhibits the growth of Harmful Algal Blooms (HAB) that lead to detrimental effects to both aquatic and human life.

Phoslock®is certified to be used in drinking water in North America, Europe, UK, Brazil, Australia and China.

Along with Phoslock®PET also supplies:

1) Zeolites -a porous, natural material that can be applied to heavily polluted water to absorb nutrients such as nitrogen. Nitrogen is an important food source for the growth of harmful algae.

2) Bacteria. -Specialisedtypes of bacteria can break down contaminants and organic matter that pollute water and cause human and water-borne diseases.

PET has a large multi-purpose factory in Changxing, Zhejiang province, China, 150km inland from Shanghai, which manufactures its patented technology, Phoslock®, along with nutrient binding materials zeolitesand bacteria. It also has an engineering and physical water management division.

The Changxing Factory recently received ISO accreditation from TUV Rheinland, a German engineering accreditation agencyfor:ISO9001 –Quality Control and Documentation Certification; ISO 14000 –Environmental Management Standards Certification; andOSHA 18000 -Health and Safety Management Systems.

PET has secured the exclusive global licence to manufacture, sell and distribute a unique new product which, after removing phosphorus from polluted water, can be reused. PET has established a development team to advance the product to full commercialisation. It is anticipated that commercial quantities of the new product will be available by mid-2020.

Wednesday 16th October 2019

Business Update

Key Points:

• FY2019 Revenue guidance reaffirmed at $27-30 million.
• Changxing Factory now producing at 20,000 tpa.
• Second production line to be completed by May 2020.
• PET debt free and Cash of $14.6 million.
• Global project pipeline now greater than $330million.

FY2019 Revenue Guidance

The Company reaffirms its previous guidance of revenue at $27-30 million for 2019.

PET currently holds some3,000 tons of Phoslock®in inventory (sales value $9 million) in China and at international warehouses. Expected sales for October to December 2019 are in the range of 4,000-5,000 tons.

The Company remains debt free and held $14.6 million in cash as at 30 September 2019.

Wednesday 9th October2019

PET secures initial $1.3m order for Florida Wetlandand Lake Remediation Projects

Key Points:

• Initial $1.3m order from our US Licensee to begin active remediation as part of the Florida State Four Year plan.
• Successful trials with Phoslock® have demonstrated its ability to mitigate the effects of Phosphorusin local water bodies.
• Phosphorusis an increasing threat to sensitive Eco-systems in Southern Florida with large budgets now allocated to their remediation.
• This order is the first part of a process to use Phoslock® as part of a Florida Wetland solution