Consolidated Water Q1 revenue, gross profit decline; cash position improves

Consolidated Water posted total revenues of $15.3 million in the first quarter of 2018, compared to $15.7 million in the same period last year. Gross profit declined slightly to $6.6 million from $6.8 million last year.

When $700,000 in expenses related to the company’s project in Rosarito, Mexico, are included, the net income attributable to Consolidated Water shareholders during the period was $2.1 million or $0.14 per fully diluted share, down from $2.6 million and $0.18 respectively in the first quarter of 2017.

The company’s net cash provided by operating activities, in turn, improved to $0.7 million from last year’s $0.7 million of negative operating cash flow. Cash and cash equivalents stood at $43.7 million at the end of March 2018 after capital expenditures during the quarter amounted to $2.9 million.

Consolidated Water President and CEO Rick McTaggart said the company’s core desalination business, which saw flat revenues in the first quarter, remained consistent and in line with expectations.

“A highlight was the strong performance of our bulk segment, which experienced a 7 percent sales increase year-over-year due to higher volumes and energy pass-through charges in the Bahamas,” he said. The company’s retail revenues, meanwhile, remained stable year-on-year, “as slightly higher sales volumes were offset by a shift in the sales mix to larger customers in Grand Cayman with a lower effective water rate,” the Consolidated Water chief executive said.

However, manufacturing revenues declined by $827,000 in the first quarter compared to last year.

Mr. McTaggart blamed the timing of order bookings and the allocation of a portion of the company’s manufacturing capacity to internal component production for the lower first quarter results in the segment.

“Our manufacturing operations produced approximately $700,000 worth of components for the refurbishment of our Bahamas Windsor plant. This project and the expansion of our Governors Harbour plant in Grand Cayman resulted in higher capital expenditures in the first quarter, but will lead to improved efficiencies for these plants,” he said.

The Consolidated Water chief executive said the first quarter laid the groundwork for success in the rest of the year.

The company anticipates that its manufacturing segment will see year-over-year revenue growth for the remainder of 2018, due to a significant pickup in orders during the first quarter from both existing and new customers.

Mexico project

In the first quarter, NSC Agua, the Mexican subsidiary of Consolidated Water, executed a subscription agreement for the equity funding to construct and operate a desalination plant and accompanying pipeline in Rosarito, Baja California, Mexico.

NSC will acquire at least 25 percent of Aguas de Rosarito (AdR), the special-purpose company set up to own the project. Greenfield, an affiliate of a U.S. asset management firm will acquire 55 percent. A Mexican subsidiary of water treatment company Suez International has an option to buy the remaining 20 percent.

“The aggregate funding to be provided in the form of equity and subordinated shareholder loans is presently estimated at approximately 20 percent of the total cost of phase 1 of the project,” Mr. McTaggart said.

“NSC expects to generate a portion of its funding for AdR through the sale to AdR of the land it has purchased for the project. Going forward, we expect to complete the negotiation and execution of the debt financing agreements and be able to obtain all outstanding permits from the federal, state and municipal authorities,” he added.