ZENON continues to make substantial gains in revenue and profit - 2001 Third Quarter

Nov. 16, 2001

Third quarter results for ZENON Environmental, Inc., a manufacturer of membrane-based water filtration technology, show a strong profit, up 87 percent from a year ago, based on increased revenue and record setting backlog.

ZENON continues to report record revenue for the three months ended Sept. 30, 2001 of $32.2 million, up 67 percent or $12.9 million for the same period last year. Revenue for 2001 of $85.1 million already has surpassed last year's year-end figure of $84.5 million and reflects the company's growth strategy.

Year-to-date net earnings for the nine months ended Sept. 30 show an 87 percent improvement to $2.5 million or $0.10 per share from $1.3 million or $0.06 per share. As a result of a one-time settlement agreement in 2000, net earnings for the quarter were reported at $5.2 million.

For the fourth consecutive quarter, ZENON has shown an increase in operating profit to $2.6 million for the quarter ended Sept. 30, 2001. This represents a year-to-date operating profit of $3.8 million, up significantly from a loss of $7.6 million a year ago.

"We are showing significant improvements across the board," said Andrew Benedek, chairman and chief executive officer of ZENON. "Our orders are increasing as we are also seeing the positive results of various cost management and efficiency initiatives undertaken during the year.

"ZENON's performance is in line with our growth strategy and this has translated into a total of $45 million in new orders being recorded during the quarter. As a result, our backlog, which was already strong at $107 million at the end of the last quarter, increased to an all time high of $120 million at the end of the third quarter."

The success of ZENON's technology is becoming increasingly evident, not only as reflected in the strong backlog, but also with orders coming in from repeat customers. For example during the quarter in North America, ZENON received a repeat order to expand a wastewater plant in California as well as an order to supply its proven technology to two additional cruise ships for Holland America Lines.

Bidding and sales activity are on the rise in all of ZENON's geographic regions, particularly in Europe where the company secured an order with a contract value of approximately $4 million. A multinational pharmaceutical company will be using ZENON's technology for the treatment of wastewater and chose ZENON because of its proven performance in producing a high water quality from difficult to treat wastewaters.

New product development is a hallmark for ZENON and the commercialization of the new ZeeWeed 1000 has also been successful, with five reference sites globally thus far. The most recent ZeeWeed 1000 success is a $4 million contract awarded to ZENON in Tennessee. After an extensive evaluation of numerous membrane products, the Duck River Utility chose the ZeeWeed 1000 for the cost savings as well as the superior water quality in the expansion of their existing drinking water treatment plant.

The inherent savings with respect to energy consumption and capital cost make this the product of choice for municipalities looking to build a new plant or retrofit and improve an existing facility. The ZeeWeed 1000 can also be used in certain industrial applications. One such company in California has already purchased this revolutionary technology for the production of electricity where ultra pure water is a key requirement.

In light of the increasing interest and market potential for ZENON's products, the company has undertaken the opening of a second manufacturing facility in Hungary. Once completed, the new plant will supply its proprietary technology to meet demand in Europe and the Middle East and will double ZENON's production capacity globally. The new plant will be located in a low tax region near ZENON's current system production facility in Hungary.

ZENON's existing manufacturing plant in Canada will continue to supply the North American market with production of the ZeeWeed 500 and ZeeWeed 1000 line of products. In addition, it is the site of the Homespring line, ZENON's latest innovation for individual homes. Ready to be launched in the near future, this new point of entry (POE) unit will provide safe, clean water to the entire house.

Source: Zenon Environmental, Inc.

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