what did the accounts show?, page-3

OPERATIONS
For the 2005/2006 financial year, Tox Free is forecasting base case sales of $8,000,000 and a base case
EBITDA of $3,000,000. This is a 16% increase in sales and an increase of 20% in EBITDA. With
successes across all business units there is significant opportunity to increase sales and profit above the
base case.
The base case model has been determined by:
• The existing production and processing abilities at its facilities (planned upgrades not included in
the forecast);
• A conservative estimate of the existing market for the facilities; and
• Expansion into new technologies and services at both facilities.
The forecast financials do not include:
• Upgrade of the kiln gas management system at Port Hedland to increase production;
• Upgrade of the front end feed system of the thermal desorption unit at Kwinana to increase
production; and
• Growth from potential acquisitions and joint venture partnerships.
Port Hedland
A number of non-capital intense modifications at the facility resulted in improved production efficiencies
and better than forecast profits in the last 6 months since the business was restructured.
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Demand for Port Hedland’s services is at an all time high and the Company expects the facility to
increase its earnings and profit above that achieved in the 6 months since restructuring.
Further to this the Company is investigating new markets for the facilities services to increase earnings.
These potential markets have not been included in the forecast FY06 financials.
Kwinana
The Kwinana site has been re-birthed with the appointment of an experienced production manager and
industrial chemist to facilitate the expansion of the sites services into new technologies, processes and
activities.
Production issues with the Thermal Desorption Unit (“TDU”) have been rectified with low capital
modifications to the front end feed system. This has resulted in the site achieving better than forecast
production in the 6 months since restructuring of the Company.
The TDU is primarily used for the remediation of contaminated soils which is a growing market in
Australia. Management is undertaking a thorough market analysis to determine the full extent of the
market for the thermal desorption services and will decide on the extent of any upgrades to the plant to
increase production. Preliminary engineering has suggested production can be increased by up to 5 times,
with minimal increases in the cost of operation, from the replacement of the vertical desorber with an off
the shelf horizontal desorber complete with manufacturers guarantees. The decision to upgrade the
desorber will only be made after the market analysis is complete and would likely coincide with a large
soil remediation campaign.
As well as the TDU operations the site has expanded its activities to provide other industrial waste
treatment services including packaged waste treatment and confidential document and sensitive material
destruction.
In the past due, to the adhoc nature of contaminated site remediation and long lead times for remediation
campaigns, the sites performance has always been dependant on the performance of the TDU. These new
activities now provide the Kwinana site with a stable base of services without total reliance on the TDU
and will increase both sales and profit for the facility.
Forecasts for Kwinana are a base case position and do not include production upgrades. The forecasts for
the TDU are conservative based on the known existing market in the plants current format.
Automated Tank Cleaning Division
No revenue has been forecast for the Automated Tank Cleaning Division and the intention is to sell the
equipment. Tox Free is negotiating with two interested parties. Tox Free hopes to conclude a sale within
the next two months. The price, terms and conditions are still subject of negotiation.
GROWTH / PROSPECTS (NOT FORECAST IN FY06 FINANCIALS)
• Expansion into eastern states markets;
• Increased production rates for the TDU with the replacement of the front end feed system and
vertical desorber;
• Increased production rates at Port Hedland with the upgrade of the kiln gas handling system;
• Acquisitions and joint venture arrangements.