Investor Presentation January 2019
Forward-Looking Information Advisory Regarding Forward‐Looking Statements This document contains forward‐looking statements concerning future events or the Company’s future performance, including the Company’s objectives or expectations for revenue and earnings growth, business opportunities in the Fuels, Water & Wastewater, Oil & Gas and other markets, efforts to reduce administrative and production costs, manage production levels, anticipated capital expenditure trends, activity in fuel and other industries and markets served by the Company and the sufficiency of cash flows and credit facilities available to cover normal operating and capital expenditures. Forward‐looking statements are often, but not always, identified by the use of words such as “seek,” “anticipate,” “plan,” “continue,” “estimate,” “expect,” “may,” “will,” “project,” “predict,” “potential,” “targeting,” “intend,” “could,” “might,” “should,” “believe”, “forecast” and similar expressions. Actual events or results may differ materially from those reflected in the Company’s forward‐looking statements due to a number of known and unknown risks, uncertainties and other factors affecting the Company’s business and the industries the Company serves generally. These factors include, but are not limited to, fluctuations in the level of capital expenditures in the Fuel, Water & Wastewater and Oil & Gas Markets, drilling activity and oil and natural gas prices, and other factors that affect demand for the Company’s products and services, industry competition, the need to effectively integrate acquired businesses, uncertainties as to the Company’s ability to implement its business strategy effectively, political and economic conditions, the Company’s ability to attract and retain key personnel, raw material and labour costs, fluctuations in the U.S. dollar, euro and Canadian dollar exchange rates, and other risks and uncertainties described under the heading “Risk Factors” in the Company’s most recent Annual Information Form, and elsewhere in this document and other documents filed with Canadian provincial securities authorities. These documents are available to the public at www.SEDAR.com. In addition to the factors noted above, management cautions readers that the current economic instability in the world today could have a negative impact on the markets in which the Company operates and on the Company’s ability to achieve its financial targets. Factors such as continuing global economic uncertainty, tighter lending standards, volatile capital markets, fluctuating commodity prices, and other factors could negatively impact the demand for the Company’s products and the Company’s ability to grow or sustain revenues and earnings. Fluctuations in conversion rates of the U.S. dollar to Canadian dollar and euro to Canadian dollar have the potential to impact the Company’s revenues and earnings. The Company believes that the expectations reflected in the forward‐looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward‐looking statements included in this report should not be unduly relied upon. The forward‐looking statements in this report speak only as of the date of this presentation. The Company does not undertake to update any forward‐ looking statement, whether written or oral, that may be made from time to time by the Company or on the Company’s behalf, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. The forward‐looking statements contained in this document are expressly qualified by this cautionary statement.
Mission Statement Our Mission Is "To deliver peace of mind through corrosion-resistant solutions that preserve and protect the environment."
Market Summary • TSX symbol ZCL • Basic common shares o/s 30.6M • Shares held by mgmt & directors 1.4M • Equity market capitalization $195M • Net bank indebtedness (September 30, 2018) $3.8M • Dividend per share (quarterly/annual) $0.135/$0.54 • Yield 7% • Cash‐based dividend payout ratio 83% of funds from continuing operations • Total Shareholder Return ‐ Five Year CAGR 25% (share price appreciation and dividends paid to 2017) • NCIB implemented March 2015 up to 1,500,000 shares (2018/19 approval) 530,500 shares repurchased @ $6.10 in 2015 290,500 shares repurchased @ $10.92 in 2017 391,400 shares repurchased @ $9.04 in 2018
Executive Team & Board of Directors Executive Team • President & CEO Ted Redmond • Chief Financial Officer Kathy Demuth • VP Fuel Markets Tom Tietjen • VP Water & Wastewater Markets Jan Arciszewski • VP Oil & Gas/International Markets Gerardo Zendejas • VP Human Resources Joe Santoro • VP Manufacturing Shawn Roach Board of Directors • Tony Franceschini, Chair • Ron Bachmeier • Bruce Bentley • Diane Brickner • Leonard Cornez • Joseph Gysel • Darcy Morris • Ted Redmond • Ralph Young
Brand & Market Overview Core Market Emerging Markets Fuel Water & Wastewater Oil & Gas (~80% of Revenue) (~15% of Revenue) (~5% of Revenue)
Key Competitive Advantages • People (experienced, knowledgeable, long‐term, loyal employees) • Strong global brands and reputation in Fuel markets • Customer alliances and retention – Contract renewals and pre‐buys – Strong national account customer base – majority of active buyers loyal to ZCL • Transportation challenges provide economic moats – North America – protected from foreign competition on USTs • Broad geographic presence enhances competitiveness of delivered pricing – Allows ZCL to offer customers the shortest lead times in the industry • Strong balance sheet and free cash flow generating capability with strong return on capital employed • Website as marketing resource for project designers, engineers and end user customers
North American Coverage
Fuel Markets Applications • Downstream Fuel – storage tanks at retail & commercial fuel sites • Primarily double‐wall FRP underground fuel tanks (triple‐wall available) Key Differentiators • 2,500 liters to 200,000 liters, single or multi‐compartmental • Double‐wall allows continual interstitial monitoring (liquid sensors, air pressure, vacuum or hydrostatic) – Hydrostatic most common; provides continuous monitoring (not available in steel tanks)
Fuel Markets Estimated Market Sizes 1 • $200M ‐ $250M addressable market in United States (estimated capture rate > 50%) • $25M to $35M addressable market in Canada (estimated capture rate > 85%) Competitors • Fiberglass – CSI Denali ( only other FRP provider ) • Steel – Modern Welding, Highland, Northern Steel, and many regional manufacturers Customers • Primarily retail fuel marketers (gas station, convenience store and truck stop operators) and equipment distributors Current Market Conditions • U.S. market activity strong, including distributors, "big box" retailers and larger convenience store chains • Improving Canadian market – being led by larger retail fuel marketers as well as distributors 1. Market sizes expressed in Canadian Dollars; Market sizes and capture rate estimated based on management’s knowledge of industry and historical purchasing activities of customer base
Fuel Markets Market Growth Focus • Mature market – focus on demographic shift for new to industry construction • 1980's tanks reaching end of original 30 year warranty (both steel and FRP), leads to increased rate of tank replacement – State regulatory replacement mandates increasing – Owners choosing to implement replacement plans for risk management purposes – Insurance and bank limitations on age of tanks covered • Historically high retail profits due to increasing retail fuel volumes provide capital funding for site expansion – Continued expansion by large regional C‐store chains and nontraditional fuel retailers using fuel based customer loyalty programs to grow market share • Future fuels (E15, E85, biofuels) – replacement and upgrades – Growing recognition that biofuels add to concerns about internal corrosion in steel tanks – June 2016 EPA Notice regarding internal corrosion of steel tanks storing diesel fuel (ULSD) • Diesel Exhaust Fluid (DEF) – highway, off‐road construction, marine – Bulk storage of DEF will continue to increase • Decreasing steel market share continues to provide growth opportunities • Excellent distributor network in place selling to small retailers and commercial accounts
Fuel Markets Downstream Fuel – Estimated Market Share • Management believes ZCL has gained significant market share 1 over the past 10 years – Primarily at the expense of steel with recent gains versus CSI as well • Steel accounts for <15% of new installations but is still 40% to 50% of today's installed/in‐service tank base – Represents over 275,000 in service USTs in the U.S. and Canada that are replacement targets ZCL CSI Steel 1. Market size and market share estimated based on management’s knowledge of industry and historical purchasing activities of customer base
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