PHOSLOCK ENVIRONMENTAL TECHNOLOGIES LIMITED — Interim / Quarterly Report 2021

Aug 30, 2021

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PET 2021 Half Year Unaudited Results and Business Update

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World leaders in water remediation

Driving sustainable growth

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Disclaimer

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Statements contained in this presentation, particularly
those regarding possible or assumed future performance,
estimated company earnings, potential growth of the
company, industry growth or other trend projections are
or may be forward looking statements. Such statements
relate to future events and expectations and therefore
involve unknown risks and uncertainties. Actual results
may differ materially from those expressed or implied by
.
these forward looking statements
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Key
developments
for first half
period
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Execution of strategic growth plan – additional resources/investment in geographic and product expansion

Continued implementation of improved governance, accounting and management standards – in China and across the business

Reviews progressed in following key areas:

• People, performance & culture

• Manufacturing / supply chain

• Research & development program

Ongoing project and trial work across all key regions – several trials progressing to contracted projects

Continuing to address issues that will facilitate re-listing of shares on ASX

• New auditors appointed

Legal proceedings commenced in respect of fraud and mismanagement issues

Board renewal – three new non executive directors appointed; new Chairman

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2021 Half Year Results

– Unaudited

2021 Half Year Results –Unaudited	2021 Half Year Results –Unaudited	2021 Half Year Results –Unaudited
Key financial results 6 months to 30 June 2021 6 months to 30 June 2020
Revenues	$1.3 million	$2.1 million
Gross Profit	$0.74 million	$1.1 million
Underlying EBIT1	($3.9 million)	($4.3 million)
NPAT2	($0.8 million)	($21.6 million)
Net Operating Cash Flow	($3.8 million)	($8.4 million)
Key balance sheet metrics
Cash at bank $26.3 million $30.4 million
Receivables $1.8 million $2.7 million
Inventory $4.0 million $4.0 million

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Key impacts on Half Year financials

Legal, accounting, consulting and restructuring costs associated with addressing the fraud and mismanagement issues relating to the China business

COVID-related

disruptions and delays impacting remediation projects and new business development activity

Part payment of Xingyun receivable

One-off non cash adjustment due to factory lease modification

1. Underlying EBIT (Earnings before interest and tax) is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit or loss under AAS adjusted for the add back of income tax, finance costs and certain non-cash income and expense items that are deemed to not have an ongoing affect to the underlying performance of the business. The Company believes that presenting Underlying EBIT provides a better understanding of its financial performance by facilitating a more representative comparison of financial performance between financial periods.

2. Net Profit/(Loss) after Tax

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China issues & reset

What Happened

Irregularities identified during audit of FY2020 first half accounts – investigations initiated

Investigation findings include incidents of fraud (including falsification of contracts and invoices); undisclosed related party transactions; unsubstantiated forecasts; incorrect bonus payments and share options distribution.

PET shares go into voluntary suspension – September 2020

China based non-

executive directors resign in September 2020

Major contract compliance review

Significant tax and cost impacts

Our Response

Thorough independent investigation of all matters

Additional legal, forensic accounting and business advisory / support resources retained

Continued restructure of China operations, with new appointees in key leadership roles

Independent market review

Comprehensive review of financial reporting procedures, delegated authority policies and general risk management framework

Board renewal process

Legal proceedings underway in China to recover outstanding debts; legal recourse continues to be reviewed in respect of pursuing certain individuals and recovering misappropriated funds

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1HFY21 Project update

Australia / New Zealand

China

Europe

Contract secured for City of Auckland remediation works

Permits issued for

15 projects expected to complete in the current financial year

projects in Denmark (expected completion this year) and Finland (2022 schedule)

New projects in the Gold Coast (Lake Hugh Muntz) and Perth regions

5 projects completed in the first half

Contract negotiations progressed positively for large $4m Netherlands project at Kraslingse Plas

Lake Dianchi trial work was completed, ready for review with local authorities

Trial work continued at Lake Wyangan in the Griffith area

Projects progressed in Belgium, Netherlands and Germany, with completion expected in current FY

Business development agent to be appointed in New Zealand

South America

Brazil remediation projects continued

Distributor appointed in Uruguay, now working to establish a pilot demonstration trial by December 2021

North America

Remediation work

continued at Kitsap Lake, Washington State and Morrison Lake, Michigan

Work commenced at Ladybird Lake, Texas and Prima Vista Waterway near Port St Lucie, Florida

Prospects in Minnesota, California and Indiana being developed

Continued to address regulatory issues in Canada

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People, Research & Manufacturing Performance & Development & Supply Chain Culture

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People, Performance & Culture review

Capability Culture Networks Structure

We earn our customer’s confidence by combining our expertise to solve their problems

Customers can expect tailored water management solutions based on science with excellence in application and project management

While we will adapt according to the market conditions, . our customer promise will be common in every region

PET’s Operating Model

• Trusted partner of choice

• Working together

• Help customers learn about PET’s points of difference

• Confidence and operational excellence

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R&D Rapid Review

Focused R&D program Priority new growth opportunities

• Scored and ranked more than 30 R&D projects

• Prioritised 5 within the portfolio to address key customer drivers

• Hiring for new Group Executive Product Solutions role

• Initiated new research collaboration with a leading university

Adjacent

Transformative

Core

2 projects that, if successful, would enable phosphorous and other nutrients to be removed from flowing water.

2 projects to enhance Phoslock effectiveness, affordability and ease of use and expand to new / underserved markets

1 project to cross-sell products and services that address a key customer pain-point — harmful algal blooms.

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Phoslock
Enhancement
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Mechanical
Restoration Remedies
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ZEEP
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New Technology
Contaminant Binder
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Phoslock
Market Expansion
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Manufacturing review

A review is underway to determine preferred options for locating a second manufacturing plant.

The review is considering:

• Site and plant establishment costs

• Raw material access – key cost driver

• Customer transportation considerations

• Potential government incentives and tariff implications

• Other supply chain risks

• Short list of options has been completed

Review recommendations will be considered by PET Board In third quarter of CY2021.

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Phoslock is currently manufactured in an ISO compliant factory in Changxing, China

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Canada

Working through complex regulatory process

Europe

Projects ready to commence in Quebec, Ontario and Alberta – exploring R&D permit as interim step

City of Rotterdam contract – most significant project to be undertaken in Europe

Ongoing discussions with several other provinces

Several projects complete in Netherlands, Belgium and Germany

USA

Permits issued for Denmark, Finland

Work continues in Kitsap (Washington) and Morrison (Michigan )

Ongoing projects in Germany, Netherlands

Began Lady Bird Lake (Texas) and Prima Vista (Florida)

South America

Other projects at early development in Minnesota , California and Indiana

Several contracted projects underway in Brazil (Pampulha, RDJ, Salvador)

Discussions ongoing with SePRO

Distribution partner, Frecoes Frutlaes app Uruguay – first project locked in for 2021

Current and prospective activity

China

5 projects completed (end August 21 )

10 projects underway in various provinces, varying size

Australia & NZ

Projects secured in Australia , treated Lake Hugh Muntz and contracted two further projects in WA

Secured City of Auckland Project , appointing NZ distributor

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2021 project status summary

Contracted sales[1]

Heads of agreement[1]

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11% of forecast tonnes

60% of forecast tonnes

High probability[1]

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29% of forecast tonnes

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ANZ China Europe South America United States

1As at August 2021

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Outlook FY21 – Key priorities for second half

The full year operating result will be dependant on currently forecast projects being contracted and/or completed during the period, along with the ongoing impact of COVID-related interruptions, delays and cost implications. Those cost implications include significantly higher international freight charges and shipping availability.

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Continue to secure additional sales opportunities across target geographies

Execute on currently contracted projects

Continue to address issues pertaining to resumption of trading on ASX

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Conclude and implement review recommendations re People & Culture; R&D; Manufacturing/supply chain

Continue to address regulatory issues in Canada

Build the strength and capability of China team

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Strong Funding Position

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Cash / cash equivalents (as at 31 June 2021): $26 million

Lower working capital and increased margins due to inventory write-down

Debt free

Abnormal costs associated with China investigations and audit reducing in FY21 but ongoing as matters continue to be addressed and pursued

Lower fixed cost base following review of overheads

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ASX Code – PET

Level 16 T +61 3 91100002 1 Collins St W www.phoslock.com.au Melbourne , 3000 Vic , AUSTRALIA Greg Slade - Investor Relations E ir@phoslock.com.au

Lachlan McKinnon – CEO E lmckinnon@phoslock.com.au