GALE PACIFIC LIMITED — Earnings Release 2006

Apr 12, 2006

GALE PACIFIC LIMITED (ASX: GAP)

ASX ANNOUNCEMENT

China operating delays impacting Gale earnings

13 April 2006

The Directors of Gale Pacific Limited today announced a reduction in the expected profit for the current financial year. The reduction reflects recent delays in the realisation of operating efficiencies from the Company's new China manufacturing facility and the consequent additional costs of extending Australian manufacturing operations to support the transition to China through to the end of the current financial year.

In light of the above recent developments, Directors' expectation is for a full year profit of approximately \$2.5 million (AIFRS), after absorbing one-off costs estimated at \$2.3 million after tax. Directors confirm that these previously announced one-off moving costs relating to the transfer of production to China will not be repeated. The expected result compares with last year's profit of \$5.09 million (AIFRS).

Whilst China manufacturing efficiencies have recently started to become evident, they are not yet at the rate previously anticipated for the current peak northern hemisphere selling season. This has significantly reduced the cost savings that underpinned current year profit expectations. Despite the delayed cost savings, group sales revenue should remain on track for growth of approximately 15% compared with last year, reflecting generally increased volumes and consistent selling prices (and assuming normal spring/summer weather conditions in the present northern hemisphere peak selling season).

Dividend

Given the reduction in the profit expectation, Directors consider it prudent not to pay a final dividend this financial year. Directors expect that the Company's overall dividend policy of paying out 50-55% of profit will be resumed on next financial year's profit.

Outlook for 2006/07

The positive medium and longer term outlook for the Company remains unchanged, and Directors remain confident that the Company's strategy will deliver substantial long-term sustainable benefits. In particular, Directors are satisfied with the most recent progress in building manufacturing capability in China, the strengthening of the management teams in Australia and the northern hemisphere markets, and the ongoing growth in sales revenue.

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Mr. Gary S. Gale Managing Director

For further information please contact: Mr. Gary Gale, Managing Director (03) 9518 3352 Mr Jeff Cox, Chief Financial Officer (03) 9518 3322.

Gale Pacific is the world's leading manufacturer and exporter of advanced polymer fabrics and related products with subsidiaries in the USA, Europe, UAE, New Zealand and China.