Phoslock share price sinks despite posting full-year profits

The Phoslock Environmental Technologies Ltd (ASX:PET) share price closed 9.45% lower today as the company released its FY19 results.

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The Phoslock Environmental Technologies Ltd (ASX: PET) share price closed 9.45% lower today as the company released its full-year FY19 results.

Phoslock is an international environmental company that specialises in engineering solutions and water treatment products to remediate polluted lakes, rivers, canals and drinking water reservoirs.

Strong revenue growth reported

For the 12 months to 31 December 2019, Phoslock reported revenue of $25.1 million, which represented a 32% increase on the prior year. Internationally, the company continues to grow its business in the Americas, especially Brazil and now Florida.

Net profit before tax and option expense grew 10% to $3.7 million for the full 2019 calendar year. The company's net profit after tax was $3.0 million. In comparison, it actually made a loss of $1.0 million during 2018.

Meanwhile, Phoslock's gross profit margin was recorded as 54.7%, up from 49.7% in FY18. The company noted it is currently debt-free, with $15 million of cash on its books as well as $17 million of debtors.

Recap of Chinese operations market update

Yesterday, Phoslock announced it had re-opened its Changxing factory in China on 15 February, with production recommencing on 17 February.

Pleasingly for shareholders, the company noted that production is currently building to back to normal levels. Last week, the company had transported four containers of its Phoslock product to the Shanghai export port which have now been loaded and are bound for Brazil.

Additionally, its Beijing sales office re-opened earlier this month on 10 February and work has now recommenced on several multi-year projects already underway.

Outlook and forecast for 2020

Phoslock is currently forecasting FY20 revenue to be in the range of $50 million to $70 million. The bottom end of this guidance would be up some 100% on FY19's revenue of $25.1 million.

The company noted that its current project pipeline to the end of 2023 currently amounts to $380 million. This total comprises $250 million in China and $130 million of international projects. The forecast includes over 40 international projects, 7 multi-year Chinese projects, and the scheduled projects in China for FY20.

Commenting on Phoslock's FY19 results, Chairman Laurence Freedman AM said:

"This year has been one of opportunity and consolidation for the Phoslock Group. Our growing business in China, despite recent headwinds, has seen PET conduct work in two new provinces and on four high profile lakes; each time delivering outstanding results on polluted water bodies."

 "2020 is shaping up as an even bigger year for PET, with expanding sales internationally and sales forecast to double," he added.

Motley Fool contributor Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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