Consolidated Water reported a 20 per cent revenue increase and 18 per cent net income growth for the first quarter of 2012.
“We are very pleased to report an 18 per cent increase in first quarter earnings, when compared with the prior-year period, due primarily to increased profitability in our bulk water business segment and a reduction in general and administrative expenses that more than offset a loss in our services segment and significantly lower earnings from our OC-BVI affiliate,” said Rick McTaggart, chief executive officer of Consolidated Water Co. Ltd.
A 67 per cent increase in operating income to $2,433,164 was partially offset by a 90 per cent reduction in Ocean Conversion BVI’s earnings. During the first quarter of 2012, the company recognised earnings on its investment in OC-BVI of $56,938, compared with $543,494 in the comparable 2011 period.
Consolidated Water, which develops and operates seawater desalination plants and water distribution systems in areas of the world where naturally occurring supplies of potable water are scarce or nonexistent, had total revenues of $16.7 million, mainly based on a bulk water revenue growth of 41 per cent and a 34 per cent increase in the number of gallons of water sold.
Consolidated Water attributed the increase to energy pass-through charges resulting from higher energy prices and particularly the expansion of the company’s Blue Hills plant in the Bahamas during the fourth quarter of 2011. “As a result of this expansion, the Bahamas now represent the company’s largest geographic market, when measured in terms of the volume of water produced and delivered to customers,” Mr. McTaggart said. “Gross margins in the bulk segment improved to 24 per cent of bulk revenues, from 22 per cent a year earlier, primarily due to increased water production, a strict cost-control programme, and efficiency gains resulting from various operational improvement programmes that we have implemented over the past four years.”
Retail water revenues rose 3 per cent to about $6.6 million, despite a 5 per cent decline in the number of gallons of water sold. Decreasing sales were offset by an increase to the company’s base rates of about 4 per cent due to an upward movement in the consumer price indices used to determine such rate adjustments in the first quarter of each year and also higher energy price pass through rates.
Services revenues, meanwhile, declined to about $0.1 million during the three months ended 31 March, 2012, resulting from the expiration of the management services contract for the Bermuda plant on 30 June, 2011, and lower fees earned on the Consolidated Water’s management agreement with Ocean Conversion in the British Virgin Islands.
Net income increased 18 per cent to $2,342,666, or $0.16 per diluted share, for the quarter ended 31 March 1, 2012, up from $0.14 per diluted share in the previous quarter.
Mexican water project
After offering its share in Mexican affiliate NSC Agua to a third party in 2011, Consolidated Water acquired an option in February 2012 exercisable through 7 February, 2014, to purchase the shares of one of the other shareholders of NSC along with an immediate power of attorney to vote those shares. As a result, the company has effective control over NSC and is continuing its project development activities.
The project encompasses the construction, ownership and operation of a 100 million gallon per day seawater reverse osmosis desalination plant based in northern Baja California, Mexico that would deliver water to the area as well as via an accompanying pipeline to the US border.
Consolidated Water has acknowledged that the project will require significantly more funding in the future and that it will incur significant development expenses.
“Progress on our Mexico project, NSC, has been slow but steady,” Mr. McTaggart said.
“We have engaged an engineering group with extensive regional experience and have signed a memorandum of understanding with a global leader in the engineering, procurement and construction of large seawater desalination plants. Our goal is to have seawater monitoring and pilot-scale water treatment equipment operational at the project site by the end of this summer,” he added.
Consolidated Water estimates that it will take two years for NSC to complete all of the development activities, but insists it has the potential to become the largest production facility in the company’s operating portfolio.
“The NSC project is indicative of the company’s pursuit of larger revenue-generating opportunities outside of our traditional markets in the Caribbean region,” Mr. McTaggart said. “We are also devoting considerable corporate resources to potential water projects in Asia, where we hope to identify one or more specific opportunities in the current year.”