WATERCO LIMITED — Earnings Release 2012

Aug 26, 2012

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WATERCO LTD A.B.N. 62 002 070 733 36 South Street, Rydalmere NSW 2116 P.O. Box 230, Rydalmere BC NSW 1701

Ph: + 61 2 9898 8600 Fx: + 61 2 9898 1877 www.waterco.com

MEDIA RELEASE 27 AUGUST 2012

WATERCO FY RESULTS AHEAD OF PREVIOUS EXPECTATIONS

Waterco Ltd (ASX:WAT) has today announced a full year financial result that was better than previous expectations, despite a combination of adverse weather conditions across Australia, subdued consumer sentiment and the impact of the European Debt Crisis.

Highlights for the 12 months to 30 June 2012

• Sales revenue of $66.1m, representing a marginal 2% decrease from the previous corresponding period

• Net profit after tax was $2.09m, representing a 34% decrease on the previous financial year. This was largely due to the adverse weather events across Australia, reported as Australia’s wettest since records began in 1990. However, NPAT was slightly ahead of the last profit guidance and significantly better than the expectations in early May

• Earnings Before Interest and Tax was $4.54m (before foreign exchange adjustments on intercompany loans and goodwill impairment), down from $6.07m in the previous financial year

• Improved weather conditions during the final quarter of the financial year enabled sales in the Australian operations to better those of the previous corresponding period

• The Asia Division achieved a significantly improved EBIT due to the improvement of sales into local markets as well as increased manufacturing activity in Malaysia

• The Board has declared a fully franked final dividend of 4 cents per share, bringing the total to 7 cents per share for the year, a satisfactory outcome given the environment of fragile global economic conditions

Divisional EBIT performance

Divisional EBIT performance
	FY12	FY11	% change
	($000)	($000)
Australia and New Zealand	4,195	5,639	-26%
North America and Europe	(1,466)	211	-794%
Asia	1,810	220	+721%
Consolidated Reported EBIT	4,539	6,070	-25%

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Commenting on the result, Waterco CEO Soon Sinn Goh said: “This result is a satisfactory outcome, particularly in light of the challenging weather events in Australia and the difficult trading environment due to subdued local and global economic conditions. And whilst the fourth quarter results did not restore Waterco’s full year’s results to original expectation, they were nonetheless encouraging and provide a firm foundation for growth in the new financial year.”

“Despite the tough environment, Waterco is committed to innovation, growth and diversification. We have a strong knowledge base and skill sets in water treatment solutions which we are capitalising on across Australian and international markets.”

AUSTRALIA AND NEW ZEALAND

The year was defined by unfavourable weather across Australia, with the wettest weather reported since records began in 1990. Lower chemical sales to the retail sector in Australia accounted for most of the decline in sales. However, the weather conditions improved during the last quarter of the year, enabling sales of the Australian operations to better those of the previous financial year.

“Waterco has built a solid base in Australia, which has enabled the Australian division to maintain an acceptable, albeit lower, level of profitability through the difficult times of the last few years,” said Goh. “We are confident that the Group’s wealth of knowledge and experience will enable us to emerge stronger in the marketplace when the business environment and consumer confidence return to better levels.”

In addition to selling a wide range of products and equipment in the domestic swimming pool industry, Waterco is franchisor of the Swimart network of pool stores in Australia and New Zealand.

“Our capabilities have also enabled Waterco to increase sales of larger filters for public pools, aquaculture and industrial water treatment, strengthening the Group’s presence beyond the domestic swimming pool sector and cushioning the significant drop in sales in the domestic pool market,” Goh said.

A key project undertaken by Waterco during the financial year was the provision of its Air Scour Filtration System for the $41.2 million Glen Eira Sports and Aquatic Centre in Victoria. Glen Eira City Council required the very best in commercial swimming pool filtration technology to maximise water and energy savings, and chose Waterco’s solutions after an extensive selection process.

During the period Waterco also introduced a range of new products, including an expanded range of LED underwater lights, the next-generation MultiCyclone Plus (a filtration/pre-filtration device), and a robotic cleaner for domestic pools. “This enabled the Group to contain the impact on Waterco’s results,” Goh added.

NORTH AMERICA AND EUROPE

In the United States, sales were flat in local currency terms, with expected improvements from the commercial water treatment market not occurring in the financial year. Waterco USA recorded a higher loss this financial year compared with the previous period, as a result of this shortfall in the water treatment industry.

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“However, sales of water treatment products are considered promising, and Waterco USA currently has a large quote register, which is expected to result in some sales being realised in the new financial year,” Goh said.

Of significance is a small desalination plant project which requires a special, high pressure filter, which is expected to be delivered in the new financial year. This supply contract was awarded following a successful commissioning of another small desalination plant in Vladivostok, Russia, which used a high pressure, seven-bar Waterco filter.

Waterco Canada (WCI)

During the past financial year, sales in WCI declined as a result of customers clearing inventory held over from the previous season. WCI had a change in management during the year, and it is expected that this will contribute to improved sales in the new financial year.

Waterco Europe and Waterco France

Sales in Waterco Europe and Waterco France for the financial year were around the same level as the previous corresponding period, despite extremely tough trading conditions. This was achieved through various strategic efforts, including improved sales in the commercial pool sector, particularly in Eastern Europe.

ASIA

Waterco’s manufacturing facility in Malaysia delivered several new products during the year, notably new LED underwater lights and the MultiCyclone Plus, which helped the Australian operation cushion the decline of the market in general. The facility also manufactured the commercial filtration equipment installed in the Glen Eira Sports and Aquatic Centre in Victoria.

Overall, Waterco’s Asia Division achieved a significantly improved EBIT, through the improvement of sales into local markets, as well as increased manufacturing activity through intercompany demands.

PRODUCT DEVELOPMENT AND WATER TREATMENT

Waterco continued to put resources into research and development, expanding further into high pressure filters suitable for water treatment. During the financial year, a set of high pressure horizontal filters were successfully commissioned for a desalination plant in Vladivostok, Russia, extending the acceptance of Waterco filters for use in desalination plants. “This is particularly encouraging and signifies progress in Waterco’s thrust into this relatively new market,” Goh said.

Other highlights during the year included:

• Waterco made a breakthrough with its range of nozzle plate filters, employing unique manufacturing techniques to further strengthen its nozzle plate design. Waterco is currently patenting the process internationally, ensuring that it will be in the unique position of being able to manufacture the world’s largest fibreglass-wound nozzle plate filters, giving the Group’s filters a distinct advantage over steel filters

• Introducing various energy-efficient and water conserving products

• Investing in a new patent for measuring Hydrogen Peroxide in pool water, thus automating the process for using a non-chlorine method for sanitising water for both the swimming pool industry and the water treatment industry

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OUTLOOK

Whilst it is recognised that profitability has yet to return to normal levels, with the North America and Europe divisions incurring an EBIT loss, Waterco has been working hard to mitigate the effects of adverse conditions and remains profitable.

“We remain confident that the trading conditions globally and the weather conditions in Australia will improve, facilitating better performance ahead,” Goh said.

Waterco’s sales of water treatment products are also expected to provide a platform for growth.

The Board will provide a profit guidance at a later stage for the financial year ended 30 June 2013 as more information becomes available during the year.

-ends-

About Waterco Ltd – www.waterco.com

Established in 1981 and listed on the ASX in 1989, Waterco (ASX: WAT) manufactures and distributes a diverse range of products for the international swimming pool and water treatment markets. Waterco is also the franchisor of Swimart, Australia and New Zealand's largest network of pool and spa retail outlets, and is also the distributor of Zane Pool Heating solutions via a network of Australian dealerships.

Waterco delivers high quality, innovative products at exceptional value in over 40 countries. This includes a comprehensive range of swimming pool & spa equipment and chemicals as well as domestic and industrial water treatment equipment.

The company’s head office is in Sydney, Australia with international offices, manufacturing plants and warehouses located in Australia, New Zealand, Malaysia, Indonesia, Singapore, China, US, Canada and the UK.

For further information, please contact:

Soon Sinn Goh CEO 612 9898 8600

Lisa Llewellyn Principal Llewellyn Communications 0419 401 362

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